Protagonist Therapeutics, Inc 10-Q

ITEM 1. FINANCIAL STATEMENTS PROTAGONIST THERAPEUTICS, INC. Condensed Consolidated Balance Sheets (Unaudited) (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ December 31, ​ 2022 2021 Assets ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 120,237 ​ $ 123,665 Marketable securities ​ ​ 171,653 ​ ​ 203,235 Receivable from collaboration partner and contract asset - related party ​ ​ 43 ​ ​ 1,566 Research and development tax incentive receivable ​ ​ 2,648 ​ ​ 2,792 Prepaid expenses and other current assets ​ ​ 9,721 ​ ​ 9,478 Total current assets ​ ​ 304,302 ​ ​ 340,736 Property and equipment, net ​ ​ 1,962 ​ ​ 1,798 Restricted cash - noncurrent ​ ​ 225 ​ ​ 225 Operating lease right-of-use asset ​ ​ 4,023 ​ ​ 4,936 Total assets ​ $ 310,512 ​ $ 347,695 Liabilities and Stockholders’ Equity ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ Accounts payable ​ $ 1,412 ​ $ 1,600 Payable to collaboration partner - related party ​ ​ 80 ​ ​ 899 Accrued expenses and other payables ​ ​ 36,244 ​ ​ 37,716 Deferred revenue - related party ​ ​ — ​ ​ 1,601 Operating lease liability - current ​ ​ 2,352 ​ ​ 2,200 Total current liabilities ​ ​ 40,088 ​ ​ 44,016 Operating lease liability - noncurrent ​ ​ 2,446 ​ ​ 3,658 Total liabilities ​ ​ 42,534 ​ ​ 47,674 Commitments and contingencies ​ ​ ​ ​ ​ ​ Stockholders’ equity: ​ ​ ​ ​ ​ ​ Preferred stock, $ 0.00001 par value, 10,000,000 shares authorized; no shares issued and outstanding ​ ​ — ​ ​ — Common stock, $ 0.00001 par value, 90,000,000 shares authorized; 48,683,931 and 47,838,330 shares issued and outstanding as of June 30, 2022 and December 31, 2021, respectively ​ ​ — ​ ​ — Additional paid-in capital ​ ​ 740,027 ​ ​ 709,682 Accumulated other comprehensive loss ​ ​ ( 720 ) ​ ​ ( 299 ) Accumulated deficit ​ ​ ( 471,329 ) ​ ​ ( 409,362 ) Total stockholders’ equity ​ ​ 267,978 ​ ​ 300,021 Total liabilities and stockholders’ equity ​ $ 310,512 ​ $ 347,695 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 1 Table of Contents PROTAGONIST THERAPEUTICS, INC. Condensed Consolidated Statements of Operations (Unaudited) (In thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, ​ 2022 2021 2022 2021 License and collaboration revenue - related party ​ $ 859 ​ $ 2,265 ​ $ 26,581 ​ $ 8,454 Operating expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ ​ 34,611 ​ ​ 26,432 ​ ​ 70,929 ​ ​ 50,677 General and administrative ​ 7,691 ​ 6,715 ​ 18,206 ​ 12,680 Total operating expenses ​ 42,302 ​ 33,147 ​ 89,135 ​ 63,357 Loss from operations ​ ( 41,443 ) ​ ( 30,882 ) ​ ( 62,554 ) ​ ( 54,903 ) Interest income ​ 484 ​ 97 ​ 652 ​ ​ 199 Other expense, net ​ ​ ( 78 ) ​ ​ ( 57 ) ​ ​ ( 65 ) ​ ​ ( 136 ) Net loss ​ $ ( 41,037 ) ​ $ ( 30,842 ) ​ $ ( 61,967 ) ​ $ ( 54,840 ) Net loss per share, basic and diluted ​ $ ( 0.84 ) ​ $ ( 0.69 ) ​ $ ( 1.27 ) ​ $ ( 1.23 ) Weighted-average shares used to compute net loss per share, basic and diluted ​ 49,049,902 44,864,637 ​ 48,902,047 44,546,172 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 2 Table of Contents PROTAGONIST THERAPEUTICS, INC. Condensed Consolidated Statements of Comprehensive Loss (Unaudited) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, ​ 2022 2021 2022 2021 Net loss ​ $ ( 41,037 ) ​ $ ( 30,842 ) ​ $ ( 61,967 ) ​ $ ( 54,840 ) Other comprehensive loss: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Loss on translation of foreign operations ​ ( 209 ) ​ ( 34 ) ​ ( 114 ) ​ ( 67 ) Unrealized (loss) gain on marketable securities ​ ( 39 ) ​ 8 ​ ( 307 ) ​ ( 20 ) Comprehensive loss ​ $ ( 41,285 ) ​ $ ( 30,868 ) ​ $ ( 62,388 ) ​ $ ( 54,927 ) ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 3 Table of Contents PROTAGONIST THERAPEUTICS, INC. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) (In thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ Total ​ ​ Common ​ Paid-In ​ Comprehensive ​ Accumulated ​ Stockholders' ​ ​ Stock ​ Capital ​ (Loss) Gain ​ Deficit ​ Equity Three months ended June 30, 2022 Shares Amount ​ ​ ​ ​ ​ ​ ​ Balance at March 31, 2022 48,552,102 $ — ​ $ 732,542 $ ( 472 ) ​ $ ( 430,292 ) $ 301,778 Issuance of common stock under equity incentive and employee stock purchase plans 131,829 — ​ 655 — ​ — 655 Stock-based compensation expense — — ​ 6,805 — ​ — 6,805 Issuance costs related to prior period common stock offering ​ — — ​ ​ 25 ​ ​ — ​ ​ — ​ ​ 25 Other comprehensive loss — — ​ — ( 248 ) ​ — ( 248 ) Net loss — — ​ — — ​ ( 41,037 ) ( 41,037 ) Balance at June 30, 2022 48,683,931 $ — ​ $ 740,027 $ ( 720 ) ​ $ ( 471,329 ) $ 267,978 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ Total ​ ​ Common ​ Paid-In ​ Comprehensive ​ Accumulated ​ Stockholders' ​ ​ Stock ​ Capital ​ (Loss) Gain ​ Deficit ​ Equity Three months ended June 30, 2021 Shares Amount ​ ​ ​ ​ ​ ​ ​ Balance at March 31, 2021 ​ 43,939,246 ​ $ — ​ $ 567,176 ​ $ ( 33 ) ​ $ ( 307,809 ) ​ $ 259,334 Issuance of common stock pursuant to public offering, net of issuance costs ​ 3,503,311 ​ ​ — ​ ​ 123,798 ​ ​ — ​ ​ — ​ ​ 123,798 Issuance of common stock under equity incentive and employee stock purchase plans ​ 83,003 — ​ 1,247 — ​ — 1,247 Stock-based compensation expense — — ​ 3,936 — ​ — 3,936 Other comprehensive loss — — ​ — ( 26 ) ​ — ( 26 ) Net loss — — ​ — — ​ ( 30,842 ) ( 30,842 ) Balance at June 30, 2021 47,525,560 $ — ​ $ 696,157 $ ( 59 ) ​ $ ( 338,651 ) $ 357,447 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ 4 Table of Contents ​ ​ PROTAGONIST THERAPEUTICS, INC. Condensed Consolidated Statements of Stockholders’ Equity (Unaudited) (In thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ Total ​ ​ Common ​ Paid-In ​ Comprehensive ​ Accumulated ​ Stockholders' ​ ​ Stock ​ Capital ​ (Loss) Gain ​ Deficit ​ Equity Six months ended June 30, 2022 Shares Amount ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2021 47,838,330 $ — ​ $ 709,682 $ ( 299 ) ​ $ ( 409,362 ) $ 300,021 Issuance of common stock pursuant to at-the-market offering, net of issuance costs ​ 422,367 ​ ​ — ​ ​ 14,553 ​ ​ — ​ ​ — ​ ​ 14,553 Issuance of common stock under equity incentive and employee stock purchase plans 430,960 — ​ 3,213 — ​ — 3,213 Shares withheld for net settlement of tax withholding upon vesting of restricted stock units ​ ( 7,726 ) ​ ​ — ​ ​ ( 186 ) ​ ​ — ​ ​ — ​ ​ ( 186 ) Stock-based compensation expense — — ​ 12,740 — ​ — 12,740 Issuance costs related to prior period common stock offering ​ — — ​ ​ 25 ​ ​ — ​ — ​ ​ 25 Other comprehensive loss — — ​ — ( 421 ) ​ — ( 421 ) Net loss — — ​ — — ​ ( 61,967 ) ( 61,967 ) Balance at June 30, 2022 48,683,931 $ — ​ $ 740,027 $ ( 720 ) ​ $ ( 471,329 ) $ 267,978 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ Total ​ ​ Common ​ Paid-In ​ Comprehensive ​ Accumulated ​ Stockholders’ ​ ​ Stock ​ Capital ​ (Loss) Gain ​ Deficit ​ Equity Six months ended June 30, 2021 Shares Amount ​ ​ ​ ​ ​ ​ ​ Balance at December 31, 2020 ​ 43,745,465 ​ $ — ​ $ 563,389 ​ $ 28 ​ $ ( 283,811 ) ​ $ 279,606 Issuance of common stock pursuant to public offering, net of issuance costs ​ 3,503,311 ​ ​ — ​ ​ 123,798 ​ ​ — ​ ​ — ​ ​ 123,798 Issuance of common stock under equity incentive and employee stock purchase plans 283,844 — ​ 2,563 — ​ — 2,563 Shares withheld for net settlement of tax withholding upon vesting of restricted stock units ​ ( 7,060 ) ​ ​ — ​ ​ ( 189 ) ​ ​ — ​ ​ — ​ ​ ( 189 ) Stock-based compensation expense — — ​ 6,596 — ​ — 6,596 Other comprehensive loss — — ​ — ( 87 ) ​ — ( 87 ) Net loss — — ​ — — ​ ( 54,840 ) ( 54,840 ) Balance at June 30, 2021 47,525,560 $ — ​ $ 696,157 $ ( 59 ) ​ $ ( 338,651 ) $ 357,447 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ ​ 5 Table of Contents ​ PROTAGONIST THERAPEUTICS, INC. Condensed Consolidated Statements of Cash Flows (Unaudited) (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Six Months Ended ​ ​ June 30, ​ 2022 2021 Cash Flows from Operating Activities ​ ​ ​ Net loss ​ $ ( 61,967 ) ​ $ ( 54,840 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ ​ ​ ​ Stock-based compensation ​ ​ 12,740 ​ ​ 6,596 Operating lease right-of-use asset amortization ​ ​ 1,168 ​ ​ 887 Net amortization of premium on marketable securities ​ ​ 454 ​ ​ 821 Depreciation ​ ​ 508 ​ ​ 365 Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ Research and development tax incentive receivable ​ ​ — ​ ​ ( 1,682 ) Receivable from collaboration partner - related party ​ ​ 1,523 ​ ​ ( 4,651 ) Prepaid expenses and other assets ​ ​ ( 255 ) ​ ​ ( 1,421 ) Accounts payable ​ ​ ( 184 ) ​ ​ 4,874 Payable to collaboration partner - related party ​ ​ ( 819 ) ​ ​ 8,664 Accrued expenses and other payables ​ ​ ( 1,553 ) ​ ​ 1,386 Deferred revenue - related party ​ ​ ( 1,601 ) ​ ​ ( 12,468 ) Operating lease liability ​ ​ ( 1,315 ) ​ ​ ( 987 ) Net cash used in operating activities ​ ​ ( 51,301 ) ​ ​ ( 52,456 ) Cash Flows from Investing Activities ​ ​ ​ ​ ​ ​ Purchase of marketable securities ​ ​ ( 102,121 ) ​ ​ ( 163,460 ) Proceeds from maturities of marketable securities ​ ​ 132,942 ​ ​ 165,080 Purchases of property and equipment ​ ​ ( 563 ) ​ ​ ( 640 ) Net cash provided by investing activities ​ ​ 30,258 ​ ​ 980 Cash Flows from Financing Activities ​ ​ ​ ​ ​ ​ Proceeds from at-the-market offering, net of issuance costs ​ ​ 14,553 ​ ​ 123,995 Proceeds from issuance of common stock upon exercise of stock options and purchases under employee stock purchase plan ​ ​ 3,213 ​ ​ 2,563 Tax withholding payments related to net settlement of restricted stock units ​ ​ ( 186 ) ​ ​ ( 189 ) Issuance costs related to prior period common stock offering ​ ​ 25 ​ ​ — Net cash provided by financing activities ​ ​ 17,605 ​ ​ 126,369 Effect of exchange rate changes on cash, cash equivalents and restricted cash ​ ​ 10 ​ ​ ( 74 ) Net (decrease) increase in cash, cash equivalents and restricted cash ​ ​ ( 3,428 ) ​ ​ 74,819 Cash, cash equivalents and restricted cash, beginning of period ​ 123,890 ​ 117,818 Cash, cash equivalents and restricted cash, end of period ​ $ 120,462 ​ $ 192,637 Supplemental Disclosure of Non-Cash Financing and Investing Information: ​ ​ ​ ​ ​ ​ Purchases of property and equipment in accounts payable and accrued liabilities ​ $ 122 ​ $ 63 Issuance costs related to common stock offering included in accrued liabilities and other payables ​ $ — ​ $ 197 ​ The accompanying notes are an integral part of these unaudited condensed consolidated financial statements. ​ ​ ​ 6 Table of Contents PROTAGONIST THERAPEUTICS, INC. Notes to Unaudited Condensed Consolidated Financial Statements Note 1. Organization and Description of Business Protagonist Therapeutics, Inc. (the “Company”) is headquartered in Newark, California. The Company is a biopharmaceutical company with peptide-based new chemical entities rusfertide, PN-943 and PN-235 in different stages of clinical development, all derived from the Company’s proprietary technology platform. The Company’s clinical programs fall into two broad categories of diseases; (i) hematology and blood disorders, and (ii) inflammatory and immunomodulatory diseases. Protagonist Pty Limited (“Protagonist Australia”) is a wholly-owned subsidiary of the Company and is located in Brisbane, Queensland, Australia. Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the Company’s chief operating decision maker in deciding how to allocate resources and assessing performance. The Company operates and manages its business as one operating segment. The Company’s Chief Executive Officer, who is the chief operating decision maker, reviews financial information on an aggregate basis for allocating and evaluating financial performance. Liquidity As of June 30, 2022, the Company had cash, cash equivalents and marketable securities of $ 291.9 million. The Company has incurred net losses from operations since inception and had an accumulated deficit of $ 471.3 million as of June 30, 2022. The Company’s ultimate success depends upon the outcome of its research and development and collaboration activities. The Company expects to incur additional losses in the future and anticipates the need to raise additional capital to continue to execute its long-range business plan. Since the Company’s initial public offering in August 2016, it has financed its operations primarily through proceeds from offerings of common stock and payments received under license and collaboration agreements. Risks and Uncertainties The Company is subject to risks and uncertainties as a result of the ongoing COVID-19 pandemic. The impact of the COVID-19 pandemic on the Company’s activities depends on a number of factors, including, but not limited to, the duration and severity of the pandemic; the development and spread of COVID-19 variants, the timing, extent, effectiveness and durability of COVID-19 vaccine programs or other treatments; and new or continuing travel and other restrictions and public health measures. The Company has experienced delays in its existing and planned clinical trials due to the worldwide impacts of the pandemic. The Company’s future results of operations and liquidity could be adversely impacted by further delays in existing and planned clinical trials, continued difficulty in recruiting patients for these clinical trials, delays in manufacturing and collaboration activities, supply chain disruptions, and the ongoing impact on its operating activities and employees. The extent of the impact of the COVID-19 pandemic remains difficult to predict as this event is ongoing and information continues to evolve. As of the date of issuance of these condensed consolidated financial statements, the extent to which the COVID-19 pandemic may materially impact the Company’s future financial condition, liquidity or results of operations remains uncertain. The Company is currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by domestic and global monetary and fiscal policy, geopolitical instability, an ongoing military conflict between Russia and Ukraine, and historically high domestic and global inflation. In particular, the conflict in Ukraine has exacerbated market disruptions, including significant volatility in commodity prices, as well as supply chain interruptions, and has contributed to record inflation globally. The U.S. Federal Reserve and other central banks may be unable to contain inflation through more restrictive monetary policy and inflation may increase or continue for a prolonged period of time. Inflationary factors, such as increases in the cost of clinical supplies, interest rates, overhead costs and transportation costs may adversely affect the Company’s operating results. The Company continues to monitor these events and the potential impact on its business. Although the Company does not believe that inflation has had a material impact on its financial position or results of operations to date, it may be adversely affected in the future due to domestic and global monetary and fiscal policy, supply chain constraints, consequences associated 7 Table of Contents with COVID-19 and the ongoing conflict between Russia and Ukraine, and such factors may lead to increases in the cost of manufacturing for and initiation of studies in the Company’s product candidates. Note 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the SEC regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted, and accordingly the condensed consolidated balance sheet as of June 30, 2022 has been derived from the Company’s audited consolidated financial statements at that date but does not include all of the information required by GAAP for complete consolidated financial statements. These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of the Company’s condensed consolidated financial statements. The results of operations for the three and six months ended June 30, 2022 are not necessarily indicative of the results to be expected for the year ending December 31, 2022 or for any other interim period or for any other future year. The accompanying condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2021 included in the Company’s Annual Report on Form 10-K, filed with the SEC on February 28, 2022. Principles of Consolidation The accompanying unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany transactions and balances have been eliminated upon consolidation. Use of Estimates The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, accruals for research and development activities, stock-based compensation, income taxes, marketable securities and leases. Estimates related to revenue recognition include actual costs incurred versus total estimated costs of the Company’s deliverables to determine percentage of completion in addition to the application and estimates of potential revenue constraints in the determination of the transaction price under its license and collaboration agreements. Management bases these estimates on historical and anticipated results, trends, and various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to forecasted amounts and future events. Actual results could differ materially from these estimates. Due to the ongoing COVID-19 pandemic, military conflict between Ukraine and Russia and inflationary pressures, there has been uncertainty and disruption in the global economy and financial markets. The Company has taken into consideration any known impacts in its accounting estimates to date and is not aware of any additional specific events or circumstances that would require any additional updates to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the date of issuance of this report. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions. 8 Table of Contents Cash as Reported in Condensed Consolidated Statements of Cash Flows Cash as reported in the condensed consolidated statements of cash flows includes the aggregate amounts of cash and cash equivalents and the restricted cash as presented on the condensed consolidated balance sheets. Cash as reported in the condensed consolidated statements of cash flows consists of (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ 2022 2021 Cash and cash equivalents ​ $ 120,237 ​ $ 192,412 Restricted cash - noncurrent ​ 225 ​ 225 Total cash reported on condensed consolidated statements of cash flows ​ $ 120,462 ​ $ 192,637 ​ Significant Accounting Policies ​ There have been no material changes to the Company’s significant accounting policies during the three and six months ended June 30, 2022 as compared to those disclosed in Note 2. Significant Accounting Policies included in our Annual Report on Form 10-K for the year ended December 31, 2021. ​ Recently Issued Accounting Pronouncements Not Yet Adopted as of June 30, 2022 In June 2016, the FASB issued ASU No. 2016-13, Financial Instruments - Credit Losses (Topic 326) , which is intended to provide financial statement users with more useful information about expected credit losses on financial assets held by a reporting entity at each reporting date. The new standard replaces the existing incurred loss impairment methodology with a methodology that requires consideration of a broader range of reasonable and supportable forward-looking information to estimate all expected credit losses. This guidance was originally effective for fiscal years and interim periods within those years beginning after December 15, 2019, with early adoption permitted for fiscal years and interim periods within those years beginning after December 15, 2018. In November 2019, the FASB issued ASU No. 2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842): Effective Dates , which amended the mandatory effective date of ASU No. 2016-13 for smaller reporting companies. Based on the Company’s status as a smaller reporting company as of November 15, 2019, ASU 2016-13 is effective for the Company for fiscal years and interim periods beginning after December 15, 2022. The Company does not expect the adoption of this new guidance to have a material impact on its condensed consolidated financial statements and disclosures. Note 3. License and Collaboration Agreement Agreement Terms On July 27, 2021, the Company entered into an amended and restated License and Collaboration Agreement (“Restated Agreement”) with Janssen Biotech, Inc., a Pennsylvania corporation (“Janssen”). The Restated Agreement amends and restates the License and Collaboration Agreement, dated May 26, 2017, by and between the Company and Janssen (as amended by the First Amendment thereto, effective May 7, 2019, the “Original Agreement”). Janssen is a related party to the Company as Johnson & Johnson Innovation - JJDC, Inc., a significant stockholder of the Company, and Janssen are both subsidiaries of Johnson & Johnson. The Original Agreement became effective on July 13, 2017. Upon the effectiveness of the Original Agreement, the Company received a non-refundable, upfront cash payment of $ 50.0 million from Janssen. Upon the effectiveness of the First Amendment, the Company received a $ 25.0 million payment from Janssen in 2019. The Company also received a $ 5.0 million payment triggered by the successful nomination of a second-generation oral Interleukin (“IL”)-23 receptor antagonist development compound (“second-generation compound”) during the first quarter of 2020 and a $ 7.5 million payment triggered by the completion of data collection activities for the first Phase 1 clinical trial of a second-generation compound during the fourth quarter of 2021. In April 2022, the Company received a $ 25.0 million milestone payment in connection with the dosing of the third patient in the first Phase 2 clinical trial for a second-generation compound during the first quarter of 2022. 9 Table of Contents The Restated Agreement relates to the development, manufacture and commercialization of oral IL-23 receptor antagonist drug candidates. The candidates nominated for initial development pursuant to the Restated Agreement include PTG-200 (JN-67864238), PN-232 (JNJ-75105186) and PN-235 (JNJ-77242113). PTG-200 is an oral IL-23 receptor antagonist that was in Phase 2a development for the treatment of Crohn’s disease (“CD”). During the fourth quarter of 2021, following a pre-specified interim analysis criteria, a portfolio decision was made by Janssen to stop further development of both PTG-200 and PN-232 in favor of advancing PN-235, based on its superior potency and overall pharmacokinetic and pharmacodynamic profile. Janssen is primarily responsible for the conduct of all future trials, including these anticipated Phase 2 trials, and the Company is primarily responsible for the conduct of the second-generation Phase 1 trials. ​ Pursuant to the Restated Agreement, the parties: ● amended development milestones to reflect Janssen’s expected development of collaboration compounds for multiple indications in the IL-23 pathway; ● limited the Company’s further development and related expense obligations under the Restated Agreement to the PTG-200 Phase 2a trial and the ongoing Phase 1 trials in PN-232 and PN-235; Janssen is responsible for all other future development and related expenses under the Restated Agreement; and ● concluded the parties’ two-year research collaboration, while enabling Janssen to continue conducting additional research through July 2024 on compounds developed pursuant to the Original Agreement. The Restated Agreement enables Janssen to develop collaboration compounds for multiple indications. Under the Restated Agreement, Janssen is required to use commercially reasonable efforts to develop at least one collaboration compound for at least two indications. The Company’s development cost obligations in the Original Agreement for the period following the effective date of the Original Agreement were as follows: (a) up to $ 20.0 million of costs related to up to three Phase 1 trials of second-generation compounds; (b) up to $ 20.0 million of costs related to Phase 2a and 2b costs for PTG-200 (i.e., 20 % of the first $ 100.0 million in costs); and (c) up to $ 25.0 million in costs related to up to two Phase 2 trials evaluating second-generation compounds. The Company’s continuing development expense obligations under the Restated Agreement are as follows: (a) the Company funded 20 % of the costs related to the Phase 2a trial evaluating PTG-200 for the treatment of CD (subject to a $ 20.0 million cap); (b) the Company was responsible for 50 % of agreed-upon costs related to the ongoing Phase 1 trial evaluating PN-235 incurred through January 4, 2021; and (c) the Company was responsible for 100 % of agreed-upon costs related to the Phase 1 trial evaluating PN-232. Certain of the Company’s previous development expense obligations under the Original Agreement were limited or eliminated as follows: (a) the Company’s previous $ 25.0 million obligation for 20 % of costs related to Phase 2 trials for second-generation products was eliminated; (b) the Company’s previous $ 5.0 million obligation for 50 % of the costs of a potential third Phase 1 trial evaluating a second-generation compound was eliminated; and (c) the Company had no obligation to fund any portion of any Phase 2b or other trial evaluating PTG-200 beyond the Phase 2a trial in CD. One milestone for second-generation Phase 2 development was reduced from $ 50.0 million to $ 25.0 million in the Restated Agreement; otherwise, the various milestone payment amounts in the Restated Agreement remain substantially the same as in the Original Agreement. To reflect parallel development of multiple indications in the IL-23 pathway, milestone payments under the Restated Agreement generally now correspond to the achievement of specified milestones in: (a) any initial indication (rather than CD, as in the Original Agreement); (b) any second indication (rather than ulcerative colitis (“UC”), as in the Original Agreement); and (c) any third indication. With respect to second-generation compounds, milestone payments for second and third indications may be triggered by any second-generation 10 Table of Contents compound (i.e., not necessarily the second-generation compound that triggered the initial payment for any indication, or the payment for a second indication). In addition, the opt-in payments contemplated by the Original Agreement related to the scope of Janssen’s license rights have been converted into development milestones in the Restated Agreement. Upcoming potential development milestones for second-generation compounds include: ● $ 10.0 million for dosing of the third patient in the first Phase 2 clinical trial for any second-generation compound for a second indication (i.e., an indication different than the indication which triggered the $ 25.0 million milestone described above); ● $ 50.0 million for dosing of the third patient in a Phase 3 clinical trial for a second-generation compound for any indication; ● $ 15.0 million for dosing of the third patient in a Phase 3 clinical trial for a second-generation compound for a second indication; and ● $ 115.0 million for a Phase 3 clinical trial for a second-generation compound for any indication meeting its primary clinical endpoint. Development milestones for PTG-200 were unchanged under the Restated Amendment, except that milestone achievement is generally no longer indication-specific. Pursuant to the Restated Agreement, the Company remains eligible to receive tiered royalties on net product sales at percentages ranging from mid-single digits to ten percent. The sales milestone payments in the Original Agreement also remain the same in the Restated Agreement. Pursuant to both the Original and Restated Agreements, payments to the Company for research and development services are generally billed and collected as services are performed or assets are delivered, including research activities and Phase 1 and Phase 2 development activities. Janssen bills the Company for its share of the PTG-200 Phase 2a development costs as expenses are incurred by Janssen. Milestone payments are received after the related milestones are achieved. Janssen retains exclusive, worldwide rights to develop and commercialize IL-23 receptor antagonist compounds derived from the research collaboration conducted under the Original Agreement, or Janssen’s further research under the Restated Agreement. Any further research and development will be conducted by Janssen. The Company will have the right to co-detail (for CD and UC indications) up to two of the IL-23 receptor antagonist compounds under the collaboration in the U.S. market. The Restated Agreement remains in effect until the royalty obligations cease following patent and regulatory expiry, unless terminated earlier. Upon a termination of the Restated Agreement, all rights revert back to the Company, and in certain circumstances, if such termination occurs during ongoing clinical trials, Janssen would, if requested, provide certain financial and operational support to the Company for the completion of such trials. Revenue Recognition The Restated Agreement contains a single performance obligation for the development license; Phase 1 development services for PTG-200, PN-232 and PN-235; the Company’s services associated with Phase 2a development for PTG-200 in CD; the initial year of second-generation compound research services; and all other such services that the Company may perform at the request of Janssen to support the development of PTG-200 through Phase 2a and PN-232 and PN-235 through Phase 1. Under the Restated Agreement, development services performed by the Company for PTG-200 beyond Phase 2a and PN-232 and PN-235 beyond Phase 1 are no longer required. 11 Table of Contents The Company determined that the license was not distinct from the revised development services within the context of the agreement because the revised development services did not change the utility of the intellectual property. The Company also concluded that the remaining development services are not distinct from the partially delivered combined promise comprised under the agreement prior to the Restated Agreement of the development license and PTG-200, PN-232 and PN-235 services, including compound supply and other services. Therefore, the Restated Agreement is treated as if it were part of the Original Agreement. The Restated Agreement was accounted for as if it were a modification of services under the Original Agreement by applying a cumulative catch-up adjustment to revenue. As of the effective date of the Restated Agreement, the Company calculated the adjusted cumulative revenue under the Restated Agreement with primary updates to the transaction price, including the release of and update of prior constraints and fewer remaining services to be provided, resulting in a cumulative adjustment that increased revenue by $ 8.0 million for the year ended December 31, 2021. The contract duration is defined as the period in which parties to the contract have present enforceable rights and obligations. For revenue recognition purposes, the duration of the Restated Agreement for the identified single initial performance obligations began on the Original Agreement effective date of July 13, 2017 and ended upon the completion of Phase 1 clinical trials for PN-232 and PN-235. Final activities related to these trials were completed as of June 30, 2022. The Company uses the most likely amount method to estimate variable consideration included in the transaction price. Variable consideration after the effective date of the Restated Agreement consists of future milestone payments and cost sharing payments for agreed upon services offset by development costs reimbursable to Janssen. Cost sharing payments from Janssen relate to the agreed upon services for development activities that the Company performs within the duration of the contract are included in the transaction price at the Company’s share of the estimated budgeted costs for these activities, including primarily internal full-time equivalent effort and third-party contract costs. Cost sharing payments to Janssen related to agreed-upon services for activities that Janssen performs within the duration of the contract are not a distinct service that Janssen transfers to the Company. Therefore, the consideration payable to Janssen is accounted for as a reduction in the transaction price. The transaction price of the initial performance obligation under the Restated Agreement was $ 131.7 million as of June 30, 2022, an increase of $ 0.2 million from the transaction price of $ 131.5 million as of March 31, 2022. In order to determine the transaction price, the Company evaluated all payments to be received during the duration of the contract, net of development costs reimbursement expected to be payable to Janssen. The transaction price as of June 30, 2022 included $ 112.5 million of nonrefundable payments received to date, $ 17.9 million of reimbursement from Janssen for services performed for IL-23 receptor antagonist compound research costs and other services, and variable consideration consisting of $ 8.2 million of development cost reimbursement from Janssen, partially offset by $ 6.9 million of net cost reimbursement due to Janssen for services performed. The Company concluded that the variable consideration constraint is appropriately reflected in the estimated transaction price as of June 30, 2022, and that the achievement of future milestones is subject to additional development and/or regulatory uncertainty and therefore it is not probable at June 30, 2022 that a material reversal of such revenues would not occur. Janssen also opted in for certain additional services to be performed by the Company that are outside the initial performance obligation. Revenue for these additional services is recognized as these services are performed. The Company utilizes a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize. In applying the cost-based input methods of revenue recognition, the Company uses actual costs incurred relative to expected costs to fulfill the combined performance obligation. These costs consist primarily of internal full-time equivalent effort and third-party contract costs. Revenue is recognized based on actual costs incurred as a percentage of total estimated costs as the Company completes its performance obligations. A cost-based input method of revenue recognition requires management to make estimates of costs to complete the Company’s performance obligations. The Company believes this is the best measure of progress because other measures do not reflect how the Company transfers its performance obligation to Janssen. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete the Company’s performance obligations will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods. 12 Table of Contents For the three and six months ended June 30, 2022, the Company recognized license and collaboration revenue of $ 0.9 million and $ 26.6 million, respectively. License and collaboration revenue for the three and six months ended June 30, 2022 was primarily related to the transaction price under the Restated Agreement recognized based on proportional performance. The Company completed its performance obligation under the collaboration as of June 30, 2022. For the three and six months ended June 30, 2021, the Company recognized license and collaboration revenue of $ 2.1 million and $ 7.7 million, respectively, which was primarily related to the transaction price under the Restated Agreement recognized based on proportional performance. In addition, the Company recognized $ 0.2 million and $ 0.8 million in revenue for the three and six months ended June 30, 2021, respectively, related to additional services provided by the Company under the agreement. The following tables present changes in the Company’s contract assets and liabilities during the periods presented (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at ​ ​ ​ ​ ​ Balance at ​ ​ Beginning of ​ ​ ​ ​ ​ End of Six Months Ended June 30, 2022 Period ​ Additions Deductions Period Contract assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Receivable from collaboration partner - related party ​ $ 1,566 ​ $ 25,165 ​ $ ( 26,688 ) ​ $ 43 Contract liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred revenue - related party ​ $ 1,601 ​ $ 25,757 ​ $ ( 27,358 ) ​ $ — Payable to collaboration partner - related party ​ $ 899 ​ $ 30 ​ $ ( 849 ) ​ $ 80 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Balance at ​ ​ ​ ​ ​ ​ ​ Balance at ​ ​ Beginning of ​ ​ ​ ​ ​ End of Six Months Ended June 30, 2021 Period ​ Additions Deductions Period Contract assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Receivable from collaboration partner - related party ​ $ 2,426 ​ $ 4,651 ​ $ — ​ $ 7,077 Contract liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Deferred revenue - related party ​ $ 14,477 ​ $ 3,924 ​ $ ( 16,392 ) ​ $ 2,009 Payable to collaboration partner - related party ​ $ 2,732 ​ $ 8,664 ​ $ — ​ $ 11,396 ​ During the three and six months ended June 30, 2022, the Company recognized revenue of $ 0.9 million from amounts included in the deferred revenue contract liability balance at the beginning of each period. During the three and six months ended June 30, 2021, the Company recognized revenue of $ 0.4 million and $ 1.5 million, respectively, from amounts included in the deferred revenue contract liability balance at the beginning of each period. None of the costs to obtain or fulfill the contract were capitalized. Note 4. Fair Value Measurements Financial assets and liabilities are recorded at fair value. The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows: Level 1 —Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date. Level 2— Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life. 13 Table of Contents Level 3 —Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. In determining fair value, the Company utilizes quoted market prices, broker or dealer quotations, or valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value. The following table presents the fair value of the Company’s financial assets determined using the inputs defined above (in thousands). ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ Level 1 Level 2 Level 3 Total Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market funds ​ $ 38,082 ​ $ — ​ $ — $ 38,082 Commercial paper ​ — ​ ​ 136,054 ​ — 136,054 Corporate debt securities ​ ​ — ​ ​ 16,493 ​ ​ — ​ ​ 16,493 U.S. Treasury and agency securities ​ ​ — ​ ​ 94,505 ​ ​ — ​ ​ 94,505 Total financial assets ​ $ 38,082 ​ $ 247,052 $ — $ 285,134 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ Level 1 Level 2 Level 3 Total Assets: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money market funds ​ $ 39,854 ​ $ — ​ $ — $ 39,854 Commercial paper ​ — ​ 157,141 ​ — 157,141 Corporate debt securities ​ — ​ 75,548 — 75,548 U.S. Treasury and agency securities ​ ​ ​ ​ ​ 40,017 ​ ​ — 40,017 Supranational and sovereign government securities ​ — ​ 6,010 — 6,010 Total financial assets carried at fair value ​ $ 39,854 ​ $ 278,716 $ — $ 318,570 ​ The Company’s commercial paper, corporate debt securities, U.S. Treasury and agency securities, including U.S. Treasury bills, and supranational and sovereign government securities are classified as Level 2 as they were valued based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets. The carrying amount of our remaining financial assets and liabilities, including cash, receivables and payables, approximates their fair value due to their short-term nature. 14 Table of Contents Note 5. Cash Equivalents and Marketable Securities ​ Cash equivalents and marketable securities consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, 2022 ​ ​ Amortized ​ Gross Unrealized ​ ​ Cost Gains Losses Fair Value Money market funds ​ $ 38,082 ​ $ — ​ $ — ​ $ 38,082 Commercial paper ​ 136,089 ​ ​ — ​ ​ ( 35 ) ​ 136,054 Corporate debt securities ​ ​ 16,540 ​ ​ — ​ ​ ( 47 ) ​ ​ 16,493 U.S. Treasury and agency securities ​ ​ 94,873 ​ ​ — ​ ​ ( 368 ) ​ ​ 94,505 Total cash equivalents and marketable securities ​ $ 285,584 ​ $ — $ ( 450 ) ​ $ 285,134 Classified as: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash equivalents ​ ​ ​ ​ ​ ​ ​ $ 113,481 Marketable securities - current ​ ​ ​ ​ ​ ​ ​ 171,653 Total cash equivalents and marketable securities ​ ​ ​ ​ ​ ​ ​ $ 285,134 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ Amortized ​ Gross Unrealized ​ ​ Cost Gains Losses Fair Value Money market funds ​ $ 39,854 ​ $ — $ — ​ $ 39,854 Commercial paper ​ 157,157 ​ — ( 16 ) ​ 157,141 Corporate debt securities ​ 75,598 ​ — ( 50 ) ​ 75,548 U.S. Treasury and agency securities ​ ​ 40,093 ​ ​ — ​ ​ ( 76 ) ​ ​ 40,017 Supranational and sovereign government securities ​ 6,011 ​ — ( 1 ) ​ 6,010 Total cash equivalents and marketable securities ​ $ 318,713 ​ $ — $ ( 143 ) ​ $ 318,570 Classified as: ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash equivalents ​ ​ ​ ​ ​ ​ ​ $ 115,335 Marketable securities - current ​ ​ ​ ​ ​ ​ ​ 203,235 Total cash equivalents and marketable securities ​ ​ ​ ​ ​ ​ ​ $ 318,570 ​ Marketable securities – current of $ 171.7 million and $ 203.2 million held at June 30, 2022 and December 31, 2021, respectively, had contractual maturities of less than one year . The Company does not intend to sell its securities that are in an unrealized loss position, and it is not more likely than not that the Company will be required to sell its securities before recovery of their amortized cost basis, which may be at maturity. There were no realized gains or realized losses on marketable securities for the periods presented. Factors considered in determining whether a loss is temporary include the length of time and extent to which the fair value has been less than the amortized cost basis and whether the Company intends to sell the security or whether it is more likely than not that the Company would be required to sell the security before recovery of the amortized cost basis. ​ ​ Note 6. Balance Sheet Components Prepaid Expenses and Other Current Assets Prepaid expenses and other current assets consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ December 31, ​ ​ 2022 ​ 2021 Prepaid clinical and research related expenses ​ $ 6,387 ​ $ 5,242 Prepaid insurance ​ ​ 876 ​ ​ 1,746 Other prepaid expenses ​ 1,786 ​ 1,515 Other receivable ​ ​ 672 ​ ​ 975 Prepaid expenses and other current assets ​ $ 9,721 ​ $ 9,478 ​ 15 Table of Contents Property and Equipment, Net Property and equipment, net consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ December 31, ​ ​ 2022 ​ 2021 Laboratory equipment ​ $ 4,659 ​ $ 4,156 Furniture and computer equipment ​ 1,141 ​ 1,023 Leasehold improvements ​ 898 ​ 877 Total property and equipment ​ 6,698 ​ 6,056 Accumulated depreciation ​ ( 4,736 ) ​ ( 4,258 ) Property and equipment, net ​ $ 1,962 ​ $ 1,798 ​ ​ Accrued Expenses and Other Payables Accrued expenses and other payables consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ December 31, ​ 2022 ​ 2021 Accrued clinical and research related expenses ​ $ 29,407 ​ $ 27,950 Accrued employee related expenses ​ 4,389 ​ 7,125 Accrued professional service fees ​ ​ 688 ​ ​ 734 Accrued payment to former collaboration partner ​ ​ 1,500 ​ ​ 1,500 Other ​ 260 ​ 407 Total accrued expenses and other payables ​ $ 36,244 ​ $ 37,716 ​ ​ ​ Note 7. Research Collaboration and License Agreement The Company and Zealand Pharma A/S (“Zealand”) entered into a collaboration agreement in June 2012. In October 2013, Zealand abandoned the collaboration, and the collaboration agreement was terminated in 2014. The agreement provides for certain post-termination payment obligations to Zealand with respect to compounds related to the collaboration that meet specified conditions set forth in the collaboration agreement and which the Company elects to further develop following Zealand’s abandonment of the collaboration. The Company has the right, but not the obligation, to further develop and commercialize such compounds. The agreement provides for payments to Zealand for the achievement of certain development, regulatory and sales milestone events that occur prior to a partnering arrangement related to such compounds between the Company and a third party. The Company previously determined that rusfertide is a compound for which the post-termination payments described above are required under the collaboration agreement and has made three development milestone payments for an aggregate amount of $ 1.0 million under the agreement. However, upon reevaluation, the Company concluded in 2019 that rusfertide is not a compound requiring post-termination payments under the agreement and initiated an arbitration proceeding in January 2020. On August 4, 2021, the Company and Zealand agreed to resolve the dispute and entered into an Arbitration Resolution Agreement. See Note 9. Commitments and Contingencies – Legal Proceedings for additional information on the results of arbitration proceedings related to this research and collaboration agreement Milestone payments to collaboration partners are recorded as research and development expense in the period that the expense is incurred. No research and development expense was recorded under the Zealand collaboration agreement for the three and six months ended June 30, 2022 and 2021. 16 Table of Contents Note 8. Research and Development Tax Incentive The Company did no t recognize any research and development cash tax incentive from Australian Tax Office (“ATO”) during the three and six months ended June 30, 2022. During the three and six months ended June 30, 2021, the Company recognized AUD 1.3 million ($ 1.0 million) and AUD 2.3 million ($ 1.7 million), respectively, as a reduction of research and development expenses in connection with the research and development cash tax incentive from the ATO. As of June 30, 2022 and December 31, 2021, the research and development cash tax incentive receivable was AUD 3.8 million ($ 2.6 million) and AUD 3.8 million ($ 2.8 million), respectively. ​ ​ ​ Note 9. Commitments and Contingencies ​ Legal Proceedings ​ The Company recognizes accruals for legal actions to the extent that it concludes that a loss is both probable and reasonably estimable. The Company accrues for the best estimate of a loss within a range; however, if no estimate in the range is better than any other, it accrues the minimum amount in the range. If the Company determines that a material loss is reasonably possible and the loss or range of loss can be estimated, it discloses the possible loss. ​ On January 23, 2020, the Company initiated arbitration proceedings with the International Court of Arbitration of the International Chamber of Commerce against Zealand related to a collaboration agreement the Company and Zealand entered into in 2012 and terminated in 2014. The agreement provides for certain post-termination payment obligations to Zealand with respect to compounds related to the collaboration that the Company elects to further develop and meet specified conditions. ​ On August 4, 2021, the Company and Zealand agreed to resolve the dispute and reached an Arbitration Resolution Agreement. Under the Arbitration Resolution Agreement, (1) the Company is required to make an additional payment of $ 1.5 million to Zealand in August 2022 with respect to rusfertide, (2) all development milestones with respect of rusfertide were reduced by 50 %, except that the Company agreed to pay in full within two (2) business days after the effective date of the Agreement (and timely paid): (i) a $ 1.0 million milestone for initiation of a Phase 2b clinical trial; and (ii) a $ 1.5 million milestone for initiation of a Phase 3 clinical trial; (3) the royalty rates payable by the Company on net sales of rusfertide were reduced by 50 %; (4) all sales milestone payments on net sales of rusfertide were reduced by 50 %; (5) the parties agreed that each party will retain all payments previously made by the other party in connection with the original collaboration agreement; and (6) the parties released claims related to the original collaboration agreement, the abandonment agreement and the arbitration. In addition to the payments specified in items (1) and (2) above, the Company may also be required to pay Zealand up to $ 2.75 million in future development milestone payments relating to rusfertide. Those payments include up to $ 1.0 million in the aggregate for registrational proposals and up to $ 1.75 million in the aggregate for commercial launch in the three geographic territories specified in the original collaboration agreement. The Company considered the outcome of these arbitration proceedings as being related to its research and development project; therefore, payments or milestone payments were recorded as research and development expenses. ​ Note 10. Stockholders’ Equity In August 2018, the Company entered into a Securities Purchase Agreement with certain accredited investors (each, an “Investor” and, collectively, the “Investors”), pursuant to which the Company sold an aggregate of 2,750,000 shares of its common stock at a price of $ 8.00 per share, for aggregate net proceeds of $ 21.7 million, after deducting offering expenses payable by the Company. In a concurrent private placement, the Company issued the Investors warrants to purchase an aggregate of 2,750,000 shares of its 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 the Company’s common stock have an exercise price of $ 10.00 per share and Warrants to purchase 1,375,000 shares of the Company’s 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 17 Table of Contents 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, the Company 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 June 30, 2022, none of the Warrants have been exercised. In December 2018, the Company entered into an exchange agreement (the “Exchange Agreement”) with an Investor and its affiliates (the “Exchanging Stockholders”), pursuant to which the Company exchanged an aggregate of 1,000,000 shares of the Company’s 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 the Company’s common stock, subject to certain exceptions. In accordance with Accounting Standards Codification Topic 505, Equity , the Company 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. The Company 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. As of June 30, 2022, 400,000 of the Exchange Warrants remain unexercised. In October 2019, the Company filed a registration statement on Form S-3 (File No. 333-234414) that was declared effective as of November 22, 2019 and permits the offering, issuance, and sale by the Company of up to a maximum aggregate offering price of $ 250.0 million of its common stock, preferred stock, debt securities and warrants (the “2019 Form S-3”). 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 at-the market (“ATM”) financing facility under a sales agreement entered into by the Company on November 27, 2019 (the “2019 Sales Agreement”). In January 2022, the Company sold 422,367 shares of its common stock under its ATM financing facility pursuant to the 2019 Sales Agreement for net proceeds of $ 14.6 million, after deducting issuance costs. As of June 30, 2022, a total of $ 79.3 million of securities remained available for sale under the 2019 Form S-3, $ 17.0 million of which remained available for sale under the ATM financing facility. The 2019 Form S-3 expires in October 2022. In December 2020, the Company filed an automatic registration statement on Form S-3ASR and an accompanying prospectus (File No. 333-251254). In June 2021, pursuant to this Form S-3ASR, the Company completed an underwritten public offering of 3,046,358 shares of its common stock at a public offering price of $ 37.75 per share and issued an additional 456,953 shares of common stock at a price of $ 37.75 per share following the underwriters’ exercise of their option to purchase additional shares. Net proceeds, after deducting underwriting commissions and offering costs paid by the Company, were $ 123.8 million. The Form S-3ASR expires in December 2023. ​ Note 11. Equity Plans Equity Incentive Plan In July 2016, the Company’s board of directors and stockholders approved the Company’s 2016 Equity Incentive Plan (the “2016 Plan”) to replace the 2007 Stock Option Plan. The 2016 Plan is administered by the board of directors, or a committee appointed by the board of directors, which determines the types of awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule. Awards granted under the 2016 Plan expire no later than ten years from the date of grant. As of June 30, 2022, 817,303 shares were available for issuance under the 2016 Plan. 18 Table of Contents Inducement Plan In May 2018, the Company’s board of directors approved the 2018 Inducement Plan, as subsequently amended. The 2018 Inducement Plan is a non-stockholder approved stock plan, under which the Company awards options and restricted stock unit awards to persons that were not previously employees or directors of the Company, or following a bona fide period of non-employment, as an inducement material to such persons entering into employment with the Company, within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. The 2018 Inducement Plan is administered by the board of directors or the Compensation Committee of the board, which determines the types of awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule. Awards granted under the 2018 Inducement Plan expire no later than ten years from the date of grant. As of June 30, 2022, 601,042 shares were available for issuance under the 2018 Inducement Plan, as amended. Stock Options Stock option activity under the Company’s equity incentive and inducement plans is set forth below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ Weighted- ​ ​ ​ ​ ​ ​ Average ​ Average ​ ​ ​ ​ ​ ​ Exercise ​ Remaining ​ Aggregate ​ ​ Options ​ Price Per ​ Contractual ​ Intrinsic ​ Outstanding Share Life (years) Value (1) ​ ​ ​ ​ ​ ​ ​ ​ ​ (in millions) Balances at December 31, 2021 5,890,540 $ 17.66 7.47 $ 102.7 Options granted 1,444,600 ​ ​ 25.47 ​ ​ Options exercised ( 297,317 ) ​ ​ 8.71 ​ ​ ​ Options forfeited ​ ( 212,702 ) ​ ​ 23.42 ​ ​ ​ ​ ​ Balances at June 30, 2022 6,825,121 $ 19.53 7.31 ​ $ 1.7 Options exercisable – June 30, 2022 ​ 3,660,098 $ 15.36 6.05 ​ $ 1.6 Options vested and expected to vest – June 30, 2022 ​ 6,825,121 ​ $ 19.53 7.31 ​ $ 1.7 (1) The aggregate intrinsic values were calculated as the difference between the exercise price of the options and the closing price of the Company’s common stock on June 30, 2022. The calculation excludes options with an exercise price higher than the closing price of the Company’s common stock on June 30, 2022. The estimated weighted-average grant-date fair value of common stock underlying options granted to employees during the six months ended June 30, 2022 was $ 19.92 per share. Stock Options Valuation Assumptions The fair value of employee stock option awards was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, ​ ​ 2022 ​ 2021 ​ 2022 ​ 2021 Expected term (in years) 5.50 - 6.08 5.27 - 6.08 ​ 5.27 - 6.08 5.27 - 6.08 Expected volatility 96.3 % - 99.9 % ​ 88.0 % - 88.8 % ​ 96.3 % - 99.9 % ​ 88.0 % - 90.2 % Risk-free interest rate 2.71 % - 2.93 % ​ 0.85 % - 1.11 % ​ 1.64 % - 2.93 % ​ 0.11 % - 1.11 % Dividend yield — — ​ — — ​ In determining the fair value of the options granted, the Company uses the Black-Scholes option-pricing model and assumptions discussed below. Each of these inputs is subjective and generally requires judgment to determine. 19 Table of Contents Expected Term —The Company’s expected term represents the period that the Company’s options granted are expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting date and the end of the contractual term). The Company has limited historical exercise information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants. Expected Volatility —For the year ended December 31, 2021, the Company’s expected volatility was 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 the Company’s stock price since its initial public offering in August 2016. Beginning January 1, 2022, the Company’s expected volatility is estimated based upon a mix of 25 % of the average volatility for comparable publicly traded biopharmaceutical companies over a period equal to the expected term of the stock option grants and 75 % of the volatility of the Company’s stock price since its initial public offering in August 2016. Risk-Free Interest Rate —The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option. Expected Dividend —The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock. Therefore, the Company used an expected dividend yield of zero. Restricted Stock Units Restricted stock unit (“RSU”) activity under the Company’s equity incentive plans is set forth below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ Number of ​ Grant Date ​ Shares Fair Value Unvested RSUs at December 31, 2021 ​ 405,972 ​ $ 20.13 Granted ​ 495,250 ​ ​ 21.65 Vested ​ ( 104,712 ) ​ ​ 14.73 Forfeited ​ ( 30,420 ) ​ ​ 25.17 Unvested RSUs at June 30, 2022 ​ 766,090 ​ $ 19.88 ​ Performance Stock Units Performance stock unit (“PSU”) activity under the Company’s equity incentive plans is set forth below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ Average ​ ​ Number of ​ Grant Date ​ Shares Fair Value Unvested PSUs at December 31, 2021 ​ 105,500 ​ $ 23.57 Granted 121,000 ​ ​ 8.76 Vested ​ — ​ ​ — Forfeited ​ ( 7,500 ) ​ ​ 23.57 Unvested PSUs at June 30, 2022 ​ 219,000 ​ $ 15.39 ​ The terms of the unvested PSUs provide for 100 % of shares to be earned based on the achievement of certain pre-determined performance objectives, subject to the participant’s continued employment. The PSUs will vest, if at all, upon certification by the Compensation Committee of the Company’s Board of Directors of the actual achievement of the related performance objective, subject to specified change of control exceptions. ​ Stock-based compensation expense associated with PSUs is based on the fair value of the Company’s common stock on the grant date, which equals the closing price of the Company’s common stock on the grant date. The 20 Table of Contents Company recognizes compensation expense over the vesting period of the awards that are ultimately expected to vest when the achievement of the related performance objectives becomes probable. The total grant date fair value of unvested PSUs as of June 30, 2022 was $ 3.4 million. As of June 30, 2022, the achievement of the related performance objective was deemed not probable and, accordingly, no stock-based compensation for the PSUs has been recognized as expense as of June 30, 2022. Employee Stock Purchase Plan ​ The 2016 Employee Stock Purchase Plan (“2016 ESPP”) allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15 % of their eligible compensation. At the end of each offering period, eligible employees are able to purchase shares at 85 % of the lower of the fair market value of the Company’s common stock at the beginning of the offering period or at the end of each applicable purchase period. During the six months ended June 30, 2022, a total of 28,931 shares of common stock were issued under the 2016 ESPP, and 1,285,068 shares remain available for issuance as of June 30, 2022. Stock-Based Compensation ​ Total stock-based compensation expense was as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, ​ 2022 2021 2022 2021 Research and development ​ $ 4,106 ​ $ 2,155 ​ $ 7,432 ​ $ 3,630 General and administrative ​ 2,699 ​ 1,781 ​ 5,308 ​ 2,966 Total stock-based compensation expense ​ $ 6,805 ​ $ 3,936 ​ $ 12,740 ​ $ 6,596 ​ As of June 30, 2022, total unrecognized stock-based compensation expense was approximately $ 69.0 million, which the Company expects to recognize over a weighted-average period of approximately 2.7 years. ​ ​ 21 Table of Contents Note 12. Net Loss per Share As the Company had net losses for the three and six months ended June 30, 2022 and 2021, all potential weighted average dilutive common shares were determined to be anti-dilutive. The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Six Months Ended ​ ​ June 30, ​ June 30, ​ 2022 2021 2022 2021 Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net loss ​ $ ( 41,037 ) ​ $ ( 30,842 ) ​ $ ( 61,967 ) ​ $ ( 54,840 ) Denominator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average shares used to compute net loss per common share, basic and diluted ​ 49,049,902 ​ 44,864,637 ​ 48,902,047 44,546,172 Net loss per share, basic and diluted ​ $ ( 0.84 ) ​ $ ( 0.69 ) ​ $ ( 1.27 ) ​ $ ( 1.23 ) ​ The following outstanding shares of potentially dilutive securities have been excluded from diluted net loss per share computations for the periods presented because their inclusion would be anti-dilutive: ​ ​ ​ ​ ​ ​ ​ ​ June 30, ​ 2022 2021 Options to purchase common stock ​ 6,825,121 5,961,336 Common stock warrants ​ 2,750,000 ​ 2,750,000 Restricted stock units ​ 766,090 ​ 423,504 Performance stock units ​ 219,000 ​ 110,500 ESPP shares ​ 19,103 ​ 15,617 Total 10,579,314 9,260,957 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Note 13. Subsequent Event On July 1, 2022, Exchange Warrants to purchase 400,000 shares of the Company’s common stock were net exercised, resulting in the issuance of 399,997 shares of common stock. There were no outstanding Exchange Warrants following this transaction. 22 Table of Contents