What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-04 compared with 2020-11-04 · 160 added, 190 removed, 153 unchanged (70% of the section changed)

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We are a clinical-stage biopharmaceutical company that utilizes a proprietary technology platform to discover and develop novel peptide-based drugs to address significant unmet medical needs and transform existing treatment paradigms for patients.

We have three assets in various stages of clinical development derived from this platform.

We have multiple clinical assets derived from this platform in development for multiple indications.

Our clinical programs fall into two broad categories of diseases;

(i) hematology and blood disorders, and (ii) inflammatory and immunomodulatory diseases.

Our Product Pipeline

Our most advanced clinical asset, PTG-300, is an injectable hepcidin mimetic in development for the potential treatment of erythrocytosis, iron overload and other blood disorders.

*Subject to Covid-19 related delays

Our most advanced clinical asset, rusfertide (generic name for PTG-300) is an injectable hepcidin mimetic in development for the potential treatment of erythrocytosis, iron overload and other blood disorders.

Hepcidin is a key hormone in regulating iron equilibrium and is critical to the proper development of red blood cells.

PTG-300 mimics the effect of the natural hormone hepcidin, but with greater potency, solubility and stability.

We initiated a Phase 2 study in polycythemia vera (“PV”) in the third quarter of 2019 and a Phase 2 study in hereditary hemochromatosis (“HH”) in January 2020.

Preliminary and early results from our initial Phase 2 PV efficacy data from a small number of patients demonstrates the ability of PTG-300 to eliminate the need for phlebotomy by controlling hematocrit levels below 45% on an individual patient basis.

The American Society for Hematology has accepted four posters and one oral presentation

relating to PTG-300 for its virtual annual meeting to be held in December 2020, including updated Phase 2 results for PTG-300 in PV.

PTG-300 has a unique mechanism of action in the potential treatment of PV, which allows it to decrease and maintain hematocrit levels within the range of recommended clinical guidelines without causing the iron deficiency that may occur with frequent phlebotomy.

We have announced the selection of PV as our first indication for a potential pivotal study to begin in 2021.

Rusfertide mimics the effect of the natural hormone hepcidin, but with greater potency, solubility and stability.

We initiated Phase 2 proof of concept (“POC”) studies in the blood disorders polycythemia vera (“PV”) in the third quarter of 2019 and hereditary hemochromatosis (“HH”) in January 2020.

In December 2020, we presented four posters and one oral presentation relating to rusfertide at the American Society for Hematology’s virtual annual meeting, including updated interim Phase 2 results for rusfertide in PV.

We believe these interim results provide evidence regarding the potential of rusfertide to eliminate the need for phlebotomy by controlling hematocrit levels below 45% on an individual patient basis.

Rusfertide has a unique mechanism of action in the potential treatment of PV, which may enable it to decrease and maintain hematocrit levels within the range of recommended clinical guidelines without causing the iron deficiency that may occur with frequent phlebotomy.

We selected PV for potential pivotal study in rusfertide and completed patient enrollment in this ongoing Phase 2 clinical trial in April 2021.

In June 2020, the U.S.

Food and Drug Administration granted orphan drug designation for PTG-300 for the treatment of PV.

In October 2020, the European Medicines Agency granted orphan drug designation for PTG-300 for the treatment of PV.

We discontinued development of PTG-300 for anemia associated with beta-thalassemia and myelodysplastic syndromes during the first quarter of 2020 and are redirecting the majority of our PTG-300 efforts to the PV indication, while also continuing our exploration of PTG-300 in HH.

Our clinical assets PTG-200 and PN-943 are orally delivered drugs currently in development for inflammatory bowel disease (“IBD”), a gastrointestinal (“GI”) disease consisting primarily of ulcerative colitis (“UC”) and Crohn’s disease (“CD”), that block biological pathways currently targeted by marketed injectable antibody drugs.

Our orally stable peptide approach offers targeted delivery to the GI tissue compartment.

Food and Drug Administration (“FDA”) granted orphan drug designation for rusfertide for the treatment of PV.

In October 2020, the European Medicines Agency granted orphan drug designation for rusfertide for the treatment of PV.

In December 2020, the FDA granted Fast Track designation for rusfertide for the treatment of PV.

Based on feedback provided by the FDA’s Division of Nonmalignant Hematology and written comments from the European Medicines Agency (“EMA”) received during the first quarter of 2021, we expect to initiate a global Phase 3 clinical trial of rusfertide in PV in early 2022.

During the first quarter of 2021, we initiated another Phase 2 study for rusfertide in up to 20 patients diagnosed with PV and with routinely elevated hematocrit levels (>48%).

In addition, we expect to disclose preliminary data from our Phase 2 POC study in HH, our second indication, in the second half of 2021.

Our clinical assets PTG-943 and PTG-200 are orally delivered investigational drugs currently in development for inflammatory bowel disease (“IBD”), a gastrointestinal (“GI”) disease consisting primarily of ulcerative colitis (“UC”) and Crohn’s disease (“CD”), that are designed to block biological pathways currently targeted by marketed injectable antibody drugs.

Our orally stable peptide approach may offer targeted delivery to the GI tissue compartment.

We believe that, compared to antibody drugs, these product candidates have the potential to provide improved safety due to minimal exposure in the blood, increased convenience and compliance due to oral delivery, and the opportunity for the earlier introduction of targeted oral therapy.

As a result, if approved, they may transform the existing treatment paradigm for IBD.

PTG-200 (also referenced as JNJ-67864238) is an orally delivered gut-restricted Interleukin-23 receptor (“IL-23R”) antagonist for the treatment of IBD.

As a result, if successfully developed and approved, we believe they may transform the existing treatment paradigm for IBD.

PN-943 is an investigational, orally delivered, gut-restricted alpha-4-beta-7 (“α4β7”) specific integrin antagonist for IBD.

We submitted a U.S.

Investigational New Drug application with the FDA for PN-943 in December 2019, which took effect in January 2020.

During the second quarter of 2020 we initiated a 150-patient Phase 2 study evaluating the safety, tolerability and efficacy of PN-943 in patients with moderate to severe UC.

This ongoing study is expected to be completed in 2022, subject to delays related to the COVID-19 pandemic.

PTG-200 (also referenced as JNJ-67864238) is an investigational, orally delivered, gut-restricted Interleukin-23 receptor (“IL-23R”) antagonist for the treatment of IBD.

In May 2017, we entered into a worldwide license and collaboration agreement with Janssen Biotech, Inc.

(“Janssen”), a Johnson & Johnson company, to co-develop and co-detail PTG-200 and certain related compounds for all indications, including IBD.

The agreement with Janssen was amended in May 2019 to expand the collaboration by supporting efforts towards second-generation IL-23R antagonists, triggering a $25.0 million milestone payment to us.

The agreement with Janssen was amended in May 2019 to expand the collaboration by supporting efforts towards second-generation IL- 23R antagonists.

In January 2020, as part of the expanded research collaboration, we announced the identification and nomination of an orally delivered IL-23R antagonist peptide as a second-generation development candidate, triggering a $5.0 million milestone payment to us.

See Note 3 to the condensed consolidated financial statements included elsewhere in this report for additional information.

Janssen initiated a global Phase 2 clinical study for PTG-200 in moderate-to-severe Crohn’s disease in the fourth quarter of 2019.

Because of the COVID-19 pandemic, we have suspended guidance on a timeline for PTG-200 Phase 2 study completion.

Janssen initiated a global Phase 2 POC clinical study for PTG-200 in moderate-to-severe CD in the fourth quarter of 2019.

Due to the uncertain effect on the timing of clinical trials caused by the COVID-19 pandemic, we have suspended guidance on a timeline for completion of the PTG-200 Phase 2 study.

In October 2020, we announced the selection of two second-generation IL-R antagonists for advancement into clinical development, PN-235 (also referenced as JNJ-77242113) and PN-232 (also referenced as JNJ-75105186).

We expect to initiate a Phase 1 study of PN-235 in the fourth quarter of 2020.

A Phase 1 study was initiated for PN-235 in December 2020 and is expected to be completed in 2021.

PN-232 is in the late preclinical stage and we expect to initiate and complete a Phase 1 study for PN-232 in 2021.

The advancement of three different oral co-development candidates provides us with several strategic options for development in multiple indications.

We are also continuing our joint research efforts to identify additional IL-23R antagonists.

PN-943 is an orally delivered, gut-restricted, alpha-4-beta-7 (“α4β7”) specific integrin antagonist.

We developed PN-943 as a potentially more potent orally delivered, gut-restricted α4β7 backup compound to PTG-100, our first-generation orally delivered gut-restricted α4β7 inhibitor that was being developed for treatment of IBD.

In 2019, we completed a Phase 1 single ascending dose (“SAD”) and multiple ascending dose (“MAD”) clinical study of PN-943 in healthy volunteers to evaluate safety, pharmacokinetics and pharmacodynamics.

The pharmacodynamic results indicated that the administration of PN-943 was well tolerated with results of target engagement that were supportive of the higher potency of PN-943 as compared to PTG-100.

We submitted a U.S.

IND for PN-943 in December 2019, which took effect in January 2020, and have initiated a Phase 2 proof of concept study in UC.

In light of the COVID-19 pandemic, we are continuing to review all aspects of the planned Phase 2 study and are suspending guidance on a timeline for study progress and completion.

Our clinical assets are all derived from our proprietary discovery platform.

Our platform enables us to engineer novel, structurally constrained peptides that retain key advantages of both orally delivered small molecules and injectable antibody drugs, while overcoming many of their limitations as therapeutic agents.

Importantly, constrained peptides can be designed to alleviate the fundamental instability inherent in traditional peptides to allow different delivery forms, such as oral, subcutaneous, intravenous, and rectal.

Our platform enables us to engineer novel, structurally constrained peptides that are designed to retain key advantages of both orally delivered small molecules and injectable antibody drugs in an effort to overcome many of their limitations as therapeutic agents.

Importantly, constrained peptides can be designed to potentially alleviate the fundamental instability inherent in traditional peptides to allow different delivery forms, such as oral, subcutaneous, intravenous, and rectal.

We continue to use our peptide technology platform to discover product candidates against targets in disease areas with significant unmet medical needs.

Impact of COVID-19 on Our Business

We are subject to risks and uncertainties as a result of the COVID-19 pandemic.

We are continuing to closely monitor the impact of the COVID-19 pandemic on our business and have taken and continue to take proactive efforts to protect the health and safety of our patients, clinical research staff and employees, and to maintain business continuity.

The extent of the impact of the COVID-19 pandemic on our activities is highly uncertain and difficult to predict, as the pandemic and the response to the pandemic continue to rapidly evolve.

Capital markets and economies worldwide have also been negatively impacted by the COVID-19 pandemic, and the pandemic has contributed to a global economic recession.

COVID-19 Business Impact

We are subject to risks and uncertainties as a result of the ongoing COVID-19 pandemic.

We are continuing to closely monitor the impact of the COVID-19 pandemic on our business and have taken and continue to take proactive efforts to protect the health and safety of our patients, study investigators, clinical research staff and employees, and to maintain business continuity.

The extent of the impact of the COVID-19 pandemic on our activities is highly uncertain and difficult to predict, as the pandemic and the response to the pandemic continue to evolve.

Capital markets and economies worldwide have been significantly impacted by the COVID-19 pandemic, and the pandemic has contributed to a global economic recession.

Such economic disruption could have a material adverse effect on our business.

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The magnitude and overall effectiveness of these actions remains uncertain.

The severity of the impact of the COVID-19 pandemic on our activities will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic, including the severity of any additional periods of increases or spikes in the number of cases in the areas we and our suppliers operate and areas where our clinical trial sites are located.

Accordingly, the extent and severity of the impact on our existing and planned clinical trials and collaboration activities, all of which are uncertain and cannot be predicted.

The severity of the impact of the COVID-19 pandemic on our activities will depend on a number of factors, including, but not limited to, the duration and severity of the pandemic, including the severity of any additional periods of increases or spikes in the number of cases in the areas we, our suppliers and our manufacturers operate and areas where our clinical trial sites are located;

the timing, extent, effectiveness and durability of vaccine programs or other treatments;

and new or continuing travel and other restrictions and public health measures, such as social distancing, business closures or disruptions.

Accordingly, the extent and severity of the impact on our existing and planned clinical trials, manufacturing, collaboration activities and operations is uncertain and cannot be fully predicted.

We have experienced delays in our existing and planned clinical trials due to the worldwide impacts of the pandemic.

Our future results of operations and liquidity could be adversely impacted by further delays in existing and planned clinical trials and collaboration activities, difficulty in recruiting patients for these clinical trials, supply chain disruptions, the ongoing impact on operating activities and employees and the ongoing impact of any initiatives or programs that we may undertake to address financial and operational challenges.

Our future results of operations and liquidity could be adversely impacted by further delays in existing and planned clinical trials and collaboration activities, continued difficulty in recruiting patients for these clinical trials, delays in manufacturing and collaboration activities, supply chain disruptions, the ongoing impact on operating activities and employees, and the ongoing impact of any initiatives or programs that we may undertake to address financial and operational challenges.

As of the date of issuance of this Quarterly Report on Form 10-Q, the extent to which the COVID-19 pandemic may materially impact our future financial condition, liquidity or results of operations is uncertain.

We have incurred net losses in each year since inception and we do not anticipate achieving sustained profitability in the foreseeable future.

Our net loss was $7.8 million and $47.3 million for the three and nine months ended September 30, 2020, respectively.

Our net loss was $16.4 million and $59.7 million for the three and nine months ended September 30, 2019, respectively.

As of September 30, 2020, we had an accumulated deficit of $264.9 million.

Our net loss was $24.0 million and $20.1 million for the three months ended March 31, 2021 and 2020, respectively.

As of March 31, 2021, we had an accumulated deficit of $307.8 million.

Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

We expect to continue to incur significant research, development and other expenses related to our ongoing operations and product development, including clinical development activities under our worldwide license and collaboration agreement with Janssen, and, as a result, we expect to continue to incur losses in the future as we continue our development of, and seek regulatory approval for, our product candidates.

We expect to continue to incur significant research, development, commercialization and other expenses related to our ongoing operations and product development, including clinical development activities under our worldwide license and collaboration agreement with Janssen, and, as a result, we expect to continue to incur losses in the future as we continue our development of, and seek regulatory approval for, our product candidates.

Janssen License and Collaboration Agreement

On May 26, 2017, we and Janssen, one of the Janssen Pharmaceutical Companies of Johnson & Johnson, entered into an exclusive license and collaboration agreement for the clinical development, manufacture and potential commercialization of PTG-200 worldwide for the treatment of CD and UC (the “Janssen License and Collaboration Agreement”), which was subsequently amended effective May 7, 2019 (the “First Amendment”).

The First Amendment expanded the scope of the Janssen License and Collaboration Agreement by supporting efforts toward identifying and developing second-generation compounds.

Janssen is a related party to us as Johnson & Johnson Innovation - JJDC, Inc., a significant stockholder of ours, and Janssen are both subsidiaries of Johnson & Johnson.

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During the second quarter of 2019, we received a non-refundable cash payment of $25.0 million upon execution of the First Amendment.

During the fourth quarter of 2019, we became eligible to receive a cash payment of $5.0 million upon the successful nomination of a second-generation development candidate, which we received during the first quarter of 2020.

During the first quarter of 2020, we received a cash payment of $5.0 million upon the successful nomination of a second-generation development candidate.

See Note 3 to the condensed consolidated financial statements included elsewhere in this report for additional information.

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Use of Estimates

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets.

We have taken into consideration any known COVD-19 impacts in our accounting estimates to date and are not aware of any additional specific events or circumstances that would require any additional updates to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q.

Due to the ongoing COVID-19 pandemic, there has been uncertainty and disruption in the global economy and financial markets.

We have taken into consideration any known COVID-19 impacts in our accounting estimates to date and are not aware of any additional specific events or circumstances that would require any additional updates to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of the date of issuance of this Quarterly Report on Form 10-Q.

These estimates may change as new events occur and additional information is obtained.

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We estimate the fair value, and the resulting stock-based compensation expense, using the Black-Scholes option-pricing model.

The estimated fair value of the stock-based awards is generally recognized on a straight-line basis over the requisite service period, which is generally the vesting period of the respective awards.

The estimated fair value of the stock-based awards is generally recognized over the requisite service period, which is generally the vesting period of the respective awards.

The Black-Scholes option-pricing model requires the use of subjective assumptions which determine the fair value of stock-based awards.

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Prior to January 1, 2020, our expected volatility was estimated based on the average volatility for comparable publicly traded biopharmaceutical companies over a period equal to the expected term of the stock option grants.

Beginning January 1, 2020, our expected volatility was estimated based upon a mix of 75% of the average volatility for comparable publicly traded biopharmaceutical companies over a period equal to the expected term of the stock option grants and 25% of the volatility of our own stock price since our initial public offering in August 2016.

For the year ended December 31, 2020, our expected volatility was estimated based upon a mix of 75% of the average volatility for comparable publicly traded biopharmaceutical companies over a period equal to the expected term of the stock option grants and 25% of the volatility of our own stock price since our initial public offering in August 2016.

Beginning January 1, 2021, our expected volatility is estimated based upon a mix of 50% of the average volatility for comparable publicly traded biopharmaceutical companies over a period equal to the expected term of the stock option grants and 50% of the volatility of our own stock price since our initial public offering in August 2016.

These comparable companies are chosen based on their similar size, stage in the life cycle, or area of specialty.

We will continue to apply this process until a longer period of historical information regarding the volatility of our own stock price becomes available.

There have been no other material changes in our critical accounting policies during the three and nine months ended September 30, 2020, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 10, 2020.

In February 2021, we granted performance share units (“PSUs) to certain of our executives.

Stock-based compensation expense associated with PSUs is based on the fair value of our common stock on the grant date, which equals the closing price of our common stock on the grant date.

We recognize compensation expense over the vesting period of the awards that are ultimately expected to vest when the achievement of the related performance obligation becomes probable.

There have been no other material changes in our critical accounting policies during the three months ended March 31, 2021, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 10, 2021.

Components of Our Results of Operations

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Research and development expenses represent costs incurred to conduct research, such as the discovery and development of our product candidates.

We recognize all research and development costs as they are incurred, unless there is an alternative future use in other research and development projects or otherwise.

We recognize all research and development costs as they are incurred, unless

there is an alternative future use in other research and development projects or otherwise.

Non-refundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when payment has been made.

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We recognize the funds from grants under government programs as a reduction of research and development expenses when the related research costs are incurred.

In addition, we recognize the funds related to our Australian research and development tax incentive that are not subject to refund provisions as a reduction of research and development expenses.

In addition, we recognize the funds related to our Australian research and development refundable cash tax incentive that are not subject to refund provisions as a reduction of research and development expenses.

The research and development tax incentives are recognized when there is reasonable assurance that the incentives will be received, the relevant expenditure has been incurred and the amount of the consideration can be reliably measured.

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The following table summarizes our research and development expenses incurred during the periods indicated:

Three Months Ended

Nine Months Ended

September 30,

(In thousands)

Clinical and development expense — PTG-300

Three Months Ended March 31,

(Dollars in thousands)

Clinical and development expense — rusfertide (PTG-300)

Clinical and development expense — PN-943

Clinical and development expense — PN-235

Clinical and development expense — PTG-200

Clinical and development expense — PTG-100

Pre-clinical and drug discovery research expense

Grants and incentives (reimbursement) expense, net

Preclinical and drug discovery research expense

Grants and tax incentives expense reimbursement, net

Total research and development expenses

We expect our clinical development expenses will increase as we progress our product candidates into later stage clinical trials, expand the number of ongoing clinical trials, advance development activities under the Janssen License and Collaboration Agreement, advance our discovery research projects into the pre-clinical stage and continue our early stage research.

We expect our research and development expenses will increase as we progress our product candidates into later stage clinical trials, expand the number of ongoing clinical trials, advance development activities under the Janssen License and Collaboration Agreement, advance our discovery research projects into the pre-clinical stage and continue our early-stage research.

The process of conducting research, identifying potential product candidates and conducting pre-clinical and clinical trials necessary to obtain regulatory approval is costly and time intensive.

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General and Administrative Expenses

General and administrative expenses consist of personnel costs, allocated facilities costs and other expenses for outside professional services, including legal, human resources, audit and accounting services.

Personnel costs consist of salaries, benefits and stock-based compensation.

Allocated expenses consist of expenses for rent and maintenance of facilities, information technology, depreciation and amortization expense and other supplies.

We expect to continue to incur expenses to support our continued operations as a public company, including expenses related to existing and future compliance with rules and regulations of the SEC and those of the national securities exchange on which our securities are traded, insurance expenses, investor relations, professional services and general overhead and administrative costs.

We expect to continue to incur expenses to support our continued operations, including expenses related to existing and future compliance with rules and regulations of the SEC and those of the national securities exchange on which our securities are traded, insurance expenses, investor relations, professional services and general overhead and administrative costs.

Interest Income

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Interest Expense

Interest expense consists of interest recognized on our long-term debt, which is comprised of contractual interest, amortization of origination fees and other issuance costs, and accretion of final payment fees.

Loss on Early Repayment of Debt

Loss on early repayment of debt consists of prepayment and final payment fees paid upon the early repayment of our long-term debt.

Interest expense consists of interest recognized on borrowings under our term loan facility, which is comprised of contractual interest, amortization of origination fees and other issuance costs, and accretion of final payment fees.

Other Income (Expense), Net

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Results of Operations

Comparison of the Three Months Ended September 30, 2020 and 2019

Three Months Ended

September 30,

Comparison of the Three Months Ended March 31, 2021 and 2020

Three Months Ended March 31,

(Dollars in thousands)

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Other expense, net

Loss before income tax benefit

Income tax benefit

(1) Includes $1.0 million and $1.1 million of non-cash stock-based compensation expense for the three months ended September 30, 2020 and 2019, respectively.

(2) Includes $0.9 million and $1.1 million of non-cash stock-based compensation expense for the three months ended September 30, 2020 and 2019, respectively.

Loss before income tax expense

Income tax expense

(1) Includes $1.5 million and $1.0 million of non-cash stock-based compensation expense for the three months ended March 31, 2021 and 2020, respectively.

(2) Includes $1.2 million and $1.0 million of non-cash stock-based compensation expense for the three months ended March 31, 2021 and 2020, respectively.

License and Collaboration Revenue

License and collaboration revenue increased $9.0 million, or 217%, from $4.1 million for the three months ended September 30, 2019 to $13.1 million for the three months ended September 30, 2020.

The increase in license and collaboration revenue was primarily due to an update in the amounts forecast for future services remaining to be performed under the Janssen License and Collaboration Agreement, correspondingly increasing our overall cumulative percentage of completion of our performance obligation during the third quarter of 2020, combined with continued performance and delivery of services under the ongoing Janssen License and Collaboration Agreement.

We have determined that the transaction price of the initial performance obligation under the Janssen License and Collaboration Agreement was $99.4 million as of September 30, 2020, a decrease of $14.5 million from the transaction price of $113.9 million as of June 30, 2020.

License and collaboration revenue increased $2.5 million, or 70%, from $3.6 million for the three months ended March 31, 2020 to $6.2 million for the three months ended March 31, 2021, which was primarily related to services provided under the Janssen License and Collaboration Agreement recognized based on proportional performance.

We have determined that the transaction price of the initial performance obligation under the Janssen License and Collaboration Agreement was $96.3 million as of March 31, 2021, a decrease of $2.3 million from the transaction price of $98.6 million as of December 31, 2020.

In order to determine the transaction price, we evaluated all payments expected to be received during the duration of the contract, net of development costs reimbursement expected to be payable to Janssen.

We determined that the transaction price of the initial performance obligation includes the $50.0 million upfront payment, the $25.0 million payment received upon the effectiveness of the First Amendment, the $5.0 million payment triggered by the successful nomination of a second-generation compound, $18.4 million of reimbursement from Janssen for services performed for PTG-200 Phase 2 and for second-generation compound research costs and other services, and estimated variable consideration consisting of a $7.5 million milestone payment subject to the completion of a Phase 1 study for a second-generation compound, offset by $6.5 million of net cost reimbursement to Janssen for services performed.

The decrease in transaction price from June 30, 2020 to September 30, 2020 was due primarily to a decrease in the forecast of remaining services to be provided under the initial performance obligation.

We determined that the transaction price includes the $50.0 million upfront payment, the $25.0 million payment received upon the effectiveness of the First Amendment, the $5.0 million payment triggered by the successful nomination of a second-generation compound, $17.9 million of reimbursement from Janssen for services performed for PTG-200 Phase 2 and for second-generation compound research costs and other services, and estimated variable consideration consisting of a $7.5 million milestone payment subject to the completion of a Phase 1 study for a second-generation compound, offset by $9.1 million of net cost reimbursement to Janssen for services performed.

The decrease in transaction price from December 31, 2020 to March 31, 2021 was due primarily to a decrease in the forecast of remaining services to be provided under the initial performance obligation.

We re-evaluate the transaction price each reporting period and as uncertain events are resolved or other changes in circumstances occur.

Research and Development Expenses

Research and development expenses decreased $1.3 million, or 8%, from $17.3 million for the three months ended September 30, 2019 to $16.0 million for the three months ended September 30, 2020.

The decrease was primarily due to a $3.3 million decrease in costs related to PTG-200 where Janssen is responsible for 80% of Phase 2 development costs, a $1.3 million decrease in PTG-300 clinical trial and development costs due primarily to the discontinuation of PTG-300 activities for beta-thalassemia, and a decrease of $0.9 million in PN-943 clinical trial and development costs.

These decreases were partially offset by a $3.0 million increase in pre-clinical and discovery research expense, including pre-clinical costs related to our second-generation research collaboration efforts with Janssen, a $0.9 million increase in costs related to PTG-100 due to credit adjustments related to the winding down of activities recognized during the third quarter of 2019, and a $0.3 million increase in grant and incentive reimbursements.

General and Administrative Expenses

General and administrative expenses increased $0.9 million, or 22%, from $4.0 million for the three months ended September 30, 2019 to $4.9 million for the three months ended September 30, 2020 primarily due to increases of $0.8 million in legal expenses, $0.2 million in insurance costs and $0.2 million in salaries expense to support the growth of our operations, partially offset by a $0.3 million decrease in accounting fees.

Interest Income

Interest income decreased $0.7 million, or 89%, from $0.8 million for the three months ended September 30, 2019 to $0.1 million for the three months ended September 30, 2020.

This decrease was due primarily to the declining interest rate environment and a change in the mix of marketable securities compared to the prior year period, despite higher interest-earning asset balances.

Income Tax Benefit

Income tax benefit decreased $0.1 million, or 100%, from $0.1 million for the three months ended September 30, 2019 to zero for the three months ended September 30, 2020.

Our effective income tax rate was 0% for the three months ended September 30, 2020 as compared to (0.6)% for the three months ended September 30, 2019.

Comparison of the Nine Months Ended September 30, 2020 and 2019

Nine Months Ended

Three Months Ended March 31,

(Dollars in thousands)

License and collaboration revenue - related party

Operating expenses:

Research and development (1)

General and administrative (2)

Total operating expenses

Loss from operations

Interest income

Interest expense

Loss on early repayment of debt

Other expense, net

Loss before income tax (expense) benefit

Income tax (expense) benefit

(1) Includes $3.1 million and $3.2 million of non-cash stock-based compensation expense for the nine months ended September 30, 2020 and 2019, respectively.

(2) Includes $2.8 million and $3.0 million of non-cash stock-based compensation expense for the nine months ended September 30, 2020 and 2019, respectively.

License and Collaboration Revenue

License and collaboration revenue increased $25.5 million, or 1,024%, from ($2.5) million for the nine months ended September 30, 2019 to $23.0 million for the nine months ended September 30, 2020.

The increase in license and collaboration revenue was primarily due to an update in the amounts forecast for future services remaining to be performed under the Janssen License and Collaboration Agreement, correspondingly increasing our overall cumulative percentage of completion of our performance obligation during the third quarter of 2020, coupled with continued performance and delivery of services under the ongoing Janssen License and Collaboration Agreement.

The increase in license and collaboration revenue also included the impact of a previously reported one-time cumulative adjustment related to the application of revenue recognition principles following the May 2019 amendment of the Janssen License and Collaboration Agreement that reduced revenue by $9.4 million for the nine months ended September 30, 2019.

The contract modification resulted in an increase in the transaction price and additional deliverables under the initial performance obligation, leading to an overall corresponding decrease in the cumulative percentage of completion of our performance obligation for the Janssen License and Collaboration Agreement during the second quarter of 2019.

In addition, revenue increased during the nine months ended September 30, 2020 due to an increase in services provided under the initial performance obligation, as well as additional services performed outside of the initial performance obligation.

Research and Development Expenses

Research and development expenses increased $5.9 million, or 12%, from $49.1 million for the nine months ended September 30, 2019 to $55.0 million for the nine months ended September 30, 2020.

The increase was primarily due to an increase of $10.6 million in pre-clinical and discovery research expense, including pre-clinical costs related to our second generation research collaboration efforts with Janssen and an increase of $2.9 million in PN-943 clinical trial and development costs including Phase 2 trial costs.

These increases were partially offset by a decrease of $6.2 million in costs related to PTG-200 where Jansen is responsible for 80% of Phase 2 development costs, a $1.0 million increase in grant and incentive reimbursements and a decrease of $0.5 million in PTG-300 clinical trial and development costs due primarily to the discontinuation of PTG-300 activities for beta-thalassemia.

Clinical and development expense — rusfertide (PTG-300)

Clinical and development expense — PN-943

Clinical and development expense — PN-235

Clinical and development expense — PTG-200

Clinical and development expense — PTG-100

Preclinical and drug discovery research expense

Grants and tax incentive expense reimbursement, net

Total research and development expenses

Research and development expenses increased $5.5 million, or 29%, from $18.8 million for the three months ended March 31, 2020 to $24.2 million for the three months ended March 31, 2021.

The increase was primarily due to an increase of $3.3 million in rusfertide clinical trial and development costs, including the ongoing Phase 2 trials in PV, which began in December 2019, and HH, which began in early 2020, and clinical and contract manufacturing activities in preparation for a planned global Phase 3 clinical trial of rusfertide in PV;

$1.8 million of Phase 1 clinical trial and development costs for PN-235;

an increase of $1.1 million in preclinical and drug discovery research expenses, including pre-clinical costs related to our research collaboration efforts with Janssen;

and an increase of $0.7 million in PN-943 clinical trial and development costs following the initiation of the Phase 2 trial in UC in 2020.

These increases were partially offset by a decrease of $0.9 million in PTG-200 clinical trial and development expenses under the Janssen License and Collaboration Agreement due to our delivery of substantially all agreed-upon services for the PTG-200 Phase 2 clinical trial, and a $0.4 million increase in grant and accrued refundable cash tax incentives.

General and Administrative Expenses

General and administrative expenses increased $2.0 million, or 17%, from $11.6 million for the nine months ended September 30, 2019 to $13.6 million for the nine months ended September 30, 2020 primarily due to increases of $1.1 million in legal expenses, $0.7 million in insurance costs and $0.6 million in salaries expense to support the growth of our operations, partially offset by a $0.3 million decrease in accounting fees.

General and administrative expenses increased $1.4 million, or 30%, from $4.6 million for the three months ended March 31, 2020 to $6.0 million for the three months ended March 31, 2021 primarily due to an increase of $0.6 million in personnel expenses, $0.2 million in recruiting expenses and $0.2 million in market research expenses to support the growth of our operations, and a $0.4 million increase in legal fees due primarily to an arbitration matter with a former research and collaboration partner.

The increase in personnel expenses includes $0.3 million in wages and salaries and $0.2 million in stock-based compensation expense.

Interest Income

Interest income decreased $1.3 million, or 62%, from $2.1 million for the nine months ended September 30, 2019 to $0.8 million for the nine months ended September 30, 2020.

Interest income decreased $0.4 million, or 81%, from $0.5 million for the three months ended March 31, 2020 to $0.1 million for the three months ended March 31, 2021.

This decrease was due primarily to the recent record low interest rate environment and a change in the mix of marketable securities compared to the prior year period, despite higher interest-earning asset balances.

Interest Expense

Interest expense of $0.5 million for the nine months ended September 30, 2020 reflects contractual interest, amortization of origination fees and other issuance costs, and accretion of final payment fees on our term loan that funded in October 2019 and was repaid in full in June 2020.

We had no debt outstanding during the nine months ended September 30, 2019.

Loss on Early Repayment of Debt

Loss on early repayment of debt of $0.6 million for the nine months ended September 30, 2020 reflects prepayment and final payment fees paid incurred in connection with the repayment of our term loan that was funded in October 2019 and was repaid in full in June 2020.

We had no debt outstanding during the nine months ended September 30, 2019.

Interest expense decreased $0.2 million, or 100%, from $0.2 million for the three months ended March 31, 2020 to zero for the three months ended March 31, 2021.

The decrease in interest expense was due to the prepayment of our outstanding long-term debt under our term credit facility during the second quarter of 2020.

We had no debt outstanding under our term loan facility as of March 31, 2021.

Income Tax Expense

Income tax expense increased $2.8 million, or 184%, from an income tax benefit of $1.5 million for the nine months ended September 30, 2019 to income tax expense of $1.3 million for the nine months ended September 30, 2020.

Our effective interest rate was 2.8% for the nine months ended September 30, 2020 as compared to (2.5)% for the nine months ended September 30, 2019.

During the second quarter of 2020, our Australia subsidiary sold beneficial rights to discovery intellectual property to our U.S.

Income tax expense decreased $0.2 million, or 100%, from $0.2 million for the three months ended March 31, 2020 to zero for the three months ended March 31, 2021.

Our effective income tax rate was 0% for the three months ended March 31, 2021 as compared to (0.9)% for the three months ended March 31, 2020.

During the second quarter of

2020, our Australia subsidiary sold beneficial rights to discovery intellectual property to our U.S.

entity, and the U.S.

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Upon completion of the sale, we analyzed tax planning strategies and future income and concluded that a valuation allowance is necessary for our Australia subsidiary.

Income tax expense for the nine months ended September 30, 2020 reflects this sale of intellectual property rights, cost reimbursements and related adjustments to the deferred tax asset, establishing a valuation allowance and certain uncertain tax position liabilities.

Income tax benefit for the nine months ended September 30, 2019 included a discrete tax benefit of approximately $1.1 million for the 2017 Australia refundable R&D tax offset.

We maintained a full valuation allowance on our tax position as of March 31, 2021.

Liquidity and Capital Resources

As of September 30, 2020, we had $200.0 million of cash, cash equivalents and marketable securities and an accumulated deficit of $264.9 million.

Our operations have been financed by net proceeds from the sale of shares of our common stock, payments under the Janssen License and Collaboration Agreement and proceeds from our long-term debt.

During the third quarter of 2017 we received a non-refundable, upfront payment of $50.0 million from Janssen.

During the second quarter of 2019, we received a nonrefundable $25.0 million payment from Janssen upon execution of the First Amendment.

During the first quarter of 2020, we received a nonrefundable $5.0 million payment from Janssen.

In 2017, we filed a registration statement on Form S-3 with the Securities and Exchange Commission (File No.

333-220314) that was declared effective as of October 5, 2017 and permits the offering, issuance, and sale by us of up to a maximum aggregate offering price of $200.0 million of our common stock, preferred stock and certain debt securities (the “2017 Form S-3”).

Up to a maximum of $50.0 million of the maximum aggregate offering price of $200.0 million may be issued and sold pursuant to an ATM financing facility under a sales agreement (the “2017 Sales Agreement”).

The 2017 Sales Agreement was terminated in 2019.

We sold 1,924,957 and 2,846,641 shares of our common stock pursuant to the 2017 Sales Agreement during the three and nine months ended September 30, 2019, respectively, for net proceeds of $23.9 million and $34.5 million, respectively, after deducting issuance costs.

As of September 30, 2020, $72.0 million of common stock remained available for sale under the 2017 Form S-3, which subsequently expired in October 2020.

In August 2018, we entered into a Securities Purchase Agreement with certain accredited investors (each, an “Investor” and, collectively, the “Investors”), pursuant to which we sold an aggregate of 2,750,000 shares of our common stock at a price of $8.00 per share, for aggregate net proceeds of $21.7 million, after deducting offering expenses payable by us.

In a concurrent private placement, we issued the Investors warrants to purchase an aggregate of 2,750,000 shares of our common stock (each, a “Warrant” and, collectively, the “Warrants”).

Each Warrant is exercisable from August 8, 2018 through August 8, 2023.

Warrants to purchase 1,375,000 shares of our common stock have an exercise price of $10.00 per share and Warrants to purchase 1,375,000 shares of our common stock have an exercise price of $15.00 per share.

The exercise price and number of shares of common stock issuable upon the exercise of the Warrants (the “Warrant Shares”) are subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrants.

Under certain circumstances, the Warrants may be exercisable on a “cashless” basis.

In connection with the issuance and sale of the common stock and Warrants, we granted the Investors certain registration rights with respect to the Warrants and the

Warrant Shares.

The common stock and Warrants are classified as equity in accordance with Accounting Standards Codification Topic 480 , Distinguishing Liabilities from Equity (“ASC 480”) , and the net proceeds from the transaction were recorded as a credit to additional paid-in capital.

As of September 30, 2020, none of the Warrants have been exercised.

In December 2018, we entered into an exchange agreement (the “Exchange Agreement”) with an Investor and its affiliates (the “Exchanging Stockholders”), pursuant to which we exchanged an aggregate of 1,000,000 shares of our common stock, par value $0.00001 per share, owned by the Exchanging Stockholders for pre-funded warrants (the “Exchange Warrants”) to purchase an aggregate of 1,000,000 shares of common stock (subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Exchange Warrants), with an exercise price of $0.00001 per share.

The Exchange Warrants will expire ten years from the date of issuance.

The Exchange Warrants are exercisable at any time prior to expiration except that the Exchange Warrants cannot be exercised by the Exchanging Stockholders if, after giving effect thereto, the Exchanging Stockholders would beneficially own more than 9.99% of our common stock, subject to certain exceptions.

In accordance with Accounting Standards Codification Topic 505, Equity , we recorded the retirement of the common stock exchanged as a reduction of common stock shares outstanding and a corresponding debit to additional paid-in-capital at the fair value of the Exchange Warrants on the issuance date.

The Exchange Warrants are classified as equity in accordance with ASC 480 , and fair value of the Exchange Warrants was recorded as a credit to additional paid-in capital and is not subject to remeasurement.

We determined that the fair value of the Exchange Warrants is substantially similar to the fair value of the retired shares on the issuance date due to the negligible exercise price for the Exchange Warrants.

During second quarter of 2019, Exchange Warrants to purchase 600,000 shares were net exercised, resulting in the issuance of 599,997 shares of common stock.

As of September 30, 2020, 400,000 of the Exchange Warrants remain unexercised.

Sources of Liquidity

Historically, we have funded our operations primarily from net proceeds from the sale of shares of our common stock and payments under collaboration agreements.

In October 2019, we filed a registration statement on Form S-3 (File no.

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Up to a maximum of $75.0 million of the maximum aggregate offering price of $250.0 million may be issued and sold pursuant to an ATM financing facility under a sales agreement we entered into on November 27, 2019 (the “2019 Sales Agreement”).

In May 2020, we completed an underwritten public offering of 7,000,000 shares of common stock at a public offering price of $14.00 per share, and issued an additional 1,050,000 shares of our common stock at a price of $14.00 per share following the underwriters’ exercise of their option to purchase additional shares.

In May 2020, we completed an underwritten public offering of 7,000,000 shares of common stock at a public offering price of $14.00 per share, and we issued an additional 1,050,000 shares of our common stock at a price of $14.00 per share following the underwriters’ exercise of their option to purchase additional shares.

Net proceeds, after deducting underwriting commissions and offering costs paid by us, were $105.3 million.

We sold 333,047 and 1,565,840 shares of common stock pursuant to the 2019 Sales Agreement during the three and nine months ended September 30, 2020, respectively, for net proceeds of $6.4 million and $23.0 million, respectively, after deducting issuance costs.

As of September 30, 2020, a total of $113.5 million of common stock remained available for sale under the 2019 Form S-3, $51.2 million of which remained available for sale under the ATM financing facility.

In October 2019, we entered into a credit and security agreement pursuant to which the lenders party thereto agreed to make term loans available to us for working capital and general business purposes, in a principal amount of up to $50.0 million, including a $10.0 million term loan which was funded at closing (October 30, 2019), with the ability to access the remaining $40.0 million in two additional tranches of $20.0 million, subject to specified availability periods, the achievement of certain clinical development milestones, minimum cash requirements and other customary conditions.

During June 2020, the Company prepaid the outstanding $10.0 million balance on the term loan as well as $0.6 million for related prepayment and final payment fees.

Additional information about this credit facility and our long-term debt is presented in Note 9 to the condensed consolidated financial statements included elsewhere in this report.

Our primary uses of cash are to fund operating expenses, primarily our research and development expenditures.

Cash used to fund operating expenses is impacted by the timing of when we pay these expenses, as reflected in the change in our outstanding accounts payable and accrued expenses.

We believe, based on our current operating plan and expected expenditures, that our existing cash, cash equivalents and marketable securities and access to our debt facility will be sufficient to meet our anticipated operating

and capital expenditure requirements for at least the next 12 months from the date of this filing.

During the year ended December 31, 2021, we issued 2,483,719 shares under our ATM facility for net proceeds of $41.9 million.

No shares were issued under the ATM facility during the three months ended March 31, 2021.

As of March 31, 2021, a total of $94.2 million of common stock remained available for sale under the 2019 Form S-3, $31.9 million of which remained available for sale under the ATM financing facility.

In December 2020, we filed an automatic registration statement on Form S-3ASR and an accompanying prospectus (Registration Statement No.

333-251254), pursuant to which we completed an underwritten public offering of 4,761,904 shares of common stock at a public offering price of $21.00 per share and issued an additional 714,285 shares of our common stock at a price of $21.00 per share following the underwriters’ exercise of their option to purchase additional shares.

Net proceeds, after deducting underwriting commissions and offering costs paid by us, were $107.6 million.

This Form S-3ASR expires in December 2023.

We have received $80.0 million in non-refundable payments from Janssen since the inception of the Janssen License and Collaboration Agreement in 2017 through March 31, 2021, as follows:

● Upon effectiveness of the agreement, we received a non-refundable, upfront cash payment of $50.0 million from Janssen;

● Upon effectiveness of the First Amendment, we became eligible to receive a $25.0 million payment from Janssen, which was received during the second quarter of 2019;

● In December 2019, we became eligible to receive a $5.0 million payment triggered by the successful nomination of a second-generation development compound, which was received during the first quarter of 2020.

We also receive payments for services provided under the collaboration agreement and in-kind reimburses Janssen for certain costs they have incurred based on the cost sharing terms of the agreement.

Pursuant to the First Amendment, we will be eligible to receive clinical development, regulatory and sales milestones, if and as achieved, and/or payments relating to Janssen’s elections to maintain or expand its license rights.

The next possible milestone or opt-in election events based on a Phase 2 clinical trial in CD are as follows:

● Janssen can elect to advance PTG-200 into Phase 2b following receipt of the top line results of the CD Phase 2a clinical trial for PTG-200 by paying a $50.0 million maintenance fee (the “Amended First Opt-in Election”);

● Janssen would make a $50.0 million milestone payment following dosing of the third patient in the first Phase 2b clinical trial for CD for a second-generation product.

Janssen can also then elect to receive exclusive, worldwide commercial rights for both PTG-200 and second-generation products following the Phase 2b completion date for PTG-200 or a second-generation product by paying a $50.0 million payment (the “Amended Second Opt-in Election”).

We will also be eligible for certain additional milestone payments including a potential payment of either $100.0 million upon a Phase 3 CD clinical trial meeting a primary clinical endpoint with respect to PTG-200 or $115.0 million upon a Phase 3 CD clinical trial meeting a primary clinical endpoint with respect to a second-generation compound.

We will be eligible to receive a $7.5 million milestone payment at the completion of a Phase 1 study for the first second-generation compound.

Pursuant to the First Amendment, we will be eligible to receive tiered royalties on net product sales at percentages ranging from mid-single digits to ten percent.

$20.0 million remains available under this term loan facility subject to the satisfaction of certain conditions, including the achievement of certain clinical development milestones.

We had no outstanding debt balance as of March 31, 2021.

Additional information about this credit facility is presented in Note 9 to the condensed consolidated financial statements included elsewhere in this report.

Capital Requirements

As of March 31, 2021, we had $279.7 million of cash, cash equivalents and marketable securities and an accumulated deficit of $307.8 million.

Our capital expenditures for the years ended December 31, 2020 and 2019 were $0.5 million and $1.0 million, respectively.

Our primary uses of cash are to fund operating expenses, primarily our research and development expenditures and pre-commercialization costs.

Cash used to fund operating expenses is impacted by the timing of when we pay these expenses.

We believe, based on our current operating plan and expected expenditures, that our existing cash, cash equivalents and marketable securities and access to our term loan facility will be sufficient to meet our anticipated operating and capital expenditure requirements for at least the next 12 months from the date of this filing.

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

If our planned pre-clinical and clinical trials are successful, or our other product candidates enter clinical trials or advance beyond the discovery stage, we will need to raise additional capital as well as seek additional collaborative or other arrangements with corporate sources in order to further advance our product candidates towards potential regulatory approval.

We will continue to require additional financing to advance our current product candidates through clinical development, to develop, acquire or in-license other potential product candidates and to fund operations for the foreseeable future.

We will continue to seek funds through equity or debt financings, collaborative or other arrangements with corporate sources, or through other sources of financing, but such financing may not be available at terms acceptable to us, if at all.

We anticipate that we will need to raise substantial additional capital, the requirements of which will depend on many factors, including:

If our planned pre-clinical and clinical trials are successful, or our other product candidates enter clinical trials or advance beyond the discovery stage, we will need to raise additional funding.

Such additional funding may come from raising additional capital, seeking access to additional debt, and additional collaborative or other arrangements with corporate sources, but such funding may not be available at terms acceptable to us, if at all.

We expect to require additional financing to advance our product candidates through clinical development and toward potential regulatory approval and to develop, acquire or in-license other potential product candidates.

We anticipate that we will need to raise substantial additional funding, the requirements of which will depend on many factors, including:

● the progress, timing, scope, results and costs of our pre-clinical studies and clinical trials for our product candidates, including the ability to enroll patients in a timely manner for our clinical trials;

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● the selling and marketing costs associated with our current product candidates and any other product candidates we may identify and develop, including the cost and timing of expanding our sales and marketing capabilities;

● the achievement of development, regulatory and sales milestones resulting in payments to us from Janssen under the Janssen License and Collaboration Agreement, and the timing of receipt of such payments, if any;

● the achievement of development, regulatory and sales milestones resulting in payments to us from Janssen under the Janssen License and Collaboration Agreement or other such arrangements that we may enter into, and the timing of receipt of such payments, if any;

● the timing, receipt and amount of royalties under the Janssen License and Collaboration Agreement on worldwide net sales of PTG-200, including any second-generation compounds, upon regulatory approval or clearance, if any;

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● the cash requirements of any future acquisitions or discovery of product candidates;

● additional costs or delays we may incur related to the ongoing COVID-19 pandemic;

● the time and cost necessary to respond to technological and market developments;

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Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies.

Further, our operating plans may change, and we may need additional funds to meet

operational needs and capital requirements for clinical trials and other research and development activities.

Further, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials, other research and development activities and pre-commercialization costs.

If we do raise additional capital through public or private equity offerings or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights.

If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated product development programs.

Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to fully estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated product development programs.

The following table summarizes our cash flows for the periods indicated (in thousands):

Nine Months Ended September 30,

Three Months Ended March 31,

(In thousands)

Cash used in operating activities

Cash used in investing activities

Cash (used in) provided by investing activities

Cash provided by financing activities

Cash Flows from Operating Activities

Cash used in operating activities for the nine months ended September 30, 2020 was $53.6 million, consisting of our net loss of $47.3 million and a net change of $16.0 million in net operating assets, partially offset by $9.7 million in non-cash charges.

Non-cash charges were primarily comprised of $5.9 million of stock-based compensation, a $1.4 million change in net deferred tax asset, $1.3 million of operating lease ROU asset amortization, a $0.6 million loss on early prepayment of long-term debt and $0.6 million of depreciation and amortization, partially offset by $0.2 million of net accretion of discount on marketable securities.

The change in net operating assets and liabilities was primarily due to a decrease of $20.7 million in deferred revenue related to the Janssen License and Collaboration Agreement, a $1.6 million increase in prepaid expenses and other assets, a $1.5 million decrease in operating lease liability, and a $0.5 million increase in Australia research and development incentive receivable, partially offset by a decrease of $4.0 million in receivable from collaboration partner, an increase of $3.1 million in accrued expenses and other liabilities, an increase of $0.8 million in accrued expenses and other payables, and an increase of $0.2 million in other liability.

Cash used in operating activities for the nine months ended September 30, 2019 was $27.2 million, consisting of our net loss of $59.7 million, partially offset by a net change of $26.4 million in net operating assets and non-cash charges of $6.1 million.

The change in net operating assets and liabilities was primarily due to a net increase of $30.5 million in deferred revenue related to the Janssen License and Collaboration Agreement, a decrease of $2.6 million in receivable from collaboration partner and a decrease of $1.2 million in research and development tax incentive receivable, net, partially offset by a decrease of $4.2 million in accounts payable, an increase of $1.6 million in prepaid expenses and other current assets, a decrease of $1.4 million in operating lease liability and a decrease of $0.8 million in accrued expenses and other payables.

Noncash charges were primarily comprised of $6.2 million of stock-based compensation, $1.3 million of operating lease ROU asset amortization and $0.5 million of depreciation and amortization, partially offset by $1.5 million of deferred tax benefit and $0.4 million of net accretion of discount on available-for-sale securities.

Cash used in operating activities for the three months ended March 31, 2021 was $28.8 million, consisting of our net loss of $24.0 million and a net change of $8.4 million in net operating assets and liabilities, partially offset by $3.6 million in non-cash charges.

Non-cash charges were primarily comprised of $2.7 million of stock-based compensation, $0.4 million of operating lease right-of-use asset amortization, $0.3 million of net amortization of discount on marketable securities, and $0.2 million of depreciation and amortization.

The change in net operating assets and liabilities was primarily due to a decrease of $8.7 million in deferred revenue related to the Janssen License and Collaboration Agreement, an increase of $1.6 million in receivable from collaboration partner, an increase of $0.8 million in research and development tax incentive receivable, a decrease of $0.7 million in accrued expenses and other payables, a decrease of $0.5 million in operating lease liability, and a decrease of $0.3 million in accounts payable, partially offset by an increase of $4.1 million in payable to collaboration partner.

Cash used in operating activities for the three months ended March 31, 2020 was $15.8 million, consisting of our net loss of $20.1 million, partially offset by $3.3 million in non-cash charges and a net change of $0.9 million in net operating assets.

Non-cash charges were primarily comprised of $2.0 million of stock-based compensation, a $0.5 foreign currency measurement loss, $0.4 million of operating lease right-of-use asset amortization, $0.2 million of depreciation and amortization and a $0.2 million change in deferred tax asset, partially offset by $0.2 million of net accretion of discount on marketable securities.

The change in net operating assets and liabilities was primarily due to a decrease of $3.2 million in receivable from collaboration partner, an increase of $0.9 million in accounts payable and a decrease of $0.8 million in prepaid expenses and other current assets, partially offset by a decrease of $2.5 million in deferred revenue related to the Janssen License and Collaboration Agreement, a decrease of $0.7 million in accrued expenses and other payables, a decrease of $0.5 million in operating lease liability, an increase of $0.2 million in research and development tax incentive receivable and a decrease of $0.1 million in payable to collaboration partner.

Cash Flows from Investing Activities

Cash used in investing activities for the nine months ended September 30, 2020 was $16.6 million, consisting of purchases of marketable securities of $147.6 million and purchases of property and equipment of $0.3 million, partially offset by proceeds from maturities of marketable securities of $131.4 million.

Cash used in investing activities for the nine months ended September 30, 2019 was $41.2 million, consisting of purchases of available-for-sale securities of $117.8 million and purchases of property and equipment of $0.8 million, partially offset by proceeds from maturities of available for sale securities of $77.4 million

Cash used in investing activities for the three months ended March 31, 2021 was $6.8 million, consisting of purchases of marketable securities of $87.2 million and purchases of property and equipment of $0.1 million, partially offset by proceeds from maturities of marketable securities of $80.5 million.

Cash provided by investing activities for the three months ended March 31, 2020 was $42.7 million, consisting of proceeds from maturities of marketable securities of $63.8 million, partially offset by purchases of marketable securities of $20.9 million and purchases of property and equipment of $0.1 million.

Cash Flows from Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2020 was $120.6 million, consisting primarily of cash proceeds from our public offering of common stock of $105.5 million, cash proceeds from ATM sales of $23.2 million, and proceeds from the issuance of common stock upon exercise of stock options and purchases of common stock under our employee stock purchase plan of $2.5 million, partially offset by early repayment of long-term debt of $10.5 million.

Cash provided by financing activities for the nine months ended September 30, 2019 was $36.3 million, consisting of $34.5 million of net proceeds from the sale of common stock under our ATM financing facility and $1.8 million of proceeds from the issuance of common stock upon exercise of stock options and purchases of common stock under our employee stock purchase plan.

Cash provided by financing activities for the three months ended March 31, 2021 was $1.0 million, consisting of $1.3 million from the issuance of common stock upon exercise of stock options and purchases of common stock under our employee stock purchase plan, partially offset by $0.2 million tax withholding payments related to net settlement of restricted stock units and $0.1 million of offering costs.

Cash provided by financing activities for the three months ended March 31, 2020 was $0.4 million, consisting primarily of proceeds from the issuance of common stock upon exercise of stock options and purchases of common stock under our employee stock purchase plan.

Contractual Obligations and Other Commitments

During the three and nine months ended September 30, 2020, with the exception of early repayment of debt during the three months ended June 30, 2020, there were no material changes to our contractual obligations and commitments described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2019 filed with the SEC on March 10, 2020.

Off-Balance Sheet Arrangements

We have not entered into any off-balance sheet arrangements, as defined under SEC rules, including the use of structured finance, special purpose entities or variable interest entities.

During the three months ended March 31, 2021, there were no material changes to our contractual obligations and commitments described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2020 filed with the SEC on March 10, 2021.

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-Q

Item 2. Management’s Discussion and Analysis