What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-08 compared with 2022-08-04 · 105 added, 84 removed, 255 unchanged (43% of the section changed)

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in the United States and other jurisdictions.

We are a biopharmaceutical company with peptide-based new chemical entities rusfertide, PN-943 and PN-235 in different stages of development, all derived from the Company’s proprietary discovery technology platform.

We are a biopharmaceutical company with peptide-based new chemical entities rusfertide and PN-235 in different stages of development, all derived from the Company’s proprietary discovery technology platform.

Our clinical programs fall into two broad categories of diseases;

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● REVIVE, a Phase 2 proof of concept (“POC”) trial, was initiated in the third quarter of 2019.

We completed enrollment of patients in the ongoing REVIVE Phase 2 clinical trial of rusfertide in PV in the first quarter of 2022 with a target of approximately 50 patients to be enrolled through the end of the randomization portion of the trial.

● PACIFIC, another Phase 2 trial for rusfertide patients diagnosed with PV and with routinely elevated hematocrit levels (>48%), was initiated during the first quarter of 2021.

● A Phase 2 POC trial in hereditary hemochromatosis (“HH”) was initiated in January 2020 and was completed during the fourth quarter of 2021.

Data from the PACIFIC study presented at the 2022 American Society of Clinical Oncology (“ASCO”) Annual Meeting demonstrate the effects of dosing interruption and resumption.

Rusfertide dosing and interruption led to loss of effect, including increased phlebotomy rate and increases in hematocrit and red blood cells.

Rusfertide restart restored therapeutic benefits.

Based on ongoing end of Phase 2 feedback provided by the FDA’s Division of Nonmalignant Hematology and written comments from the European Medicines Agency (“EMA”), we activated sites and initiated patient screening for VERIFY, a global Phase 3 clinical trial of rusfertide in PV for approximately 250 patients, in the first quarter of 2022.

It is our objective to complete enrollment in VERIFY by the end of the first half of 2023, notwithstanding a slower than

anticipated pace of initial enrollment.

We have activated 35 sites globally to date and continue to implement measures to increase patient recruitment, screening and enrollment.

While significant efforts have been taken toward the goal of full enrollment and a high degree of interest has been observed from physicians and patient communities, operational challenges, including site staff shortages, have continued to delay initial recruitment activities.

We expect enrollment completion in the second half of 2023.

On September 16, 2021, the U.S.

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The FDA correspondence relating to the Breakthrough Therapy designation does not address the rusfertide Fast Track Designation, which remains active.

Our alpha-4-beta-7 (“α4β7”) antagonist PN-943 and our Interleukin-23 receptor (“IL-23R”) antagonist compound PN-235 are orally delivered investigational drugs that are designed to block biological pathways currently targeted by marketed injectable antibody drugs.

In keeping with our organizational prioritization of rusfertide in PV, plans to initiate trials of rusfertide in additional disease indications have been paused.

This decision was influenced in part by the recent enactment of the Inflation Reduction Act in the United States and includes previously planned trials of rusfertide in the subset of hereditary hemochromatosis patients with chronic arthropathy.

Our Interleukin-23 receptor (“IL-23R”) antagonist compound PN-235 is an orally delivered investigational drug that is designed to block biological pathways currently targeted by marketed injectable antibody drugs.

Our orally stable peptide approach may offer a targeted therapeutic approach for GI and systemic compartments as needed.

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.

PN-943 is an investigational, orally delivered, gut-restricted α4β7 specific integrin antagonist for inflammatory bowel disease (“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 IDEAL, a 159 patient Phase 2 trial evaluating the safety, tolerability and efficacy of PN-943 in patients with moderate to severe UC.

This trial includes a 12-week induction period and a 40-week extended treatment period.

Enrollment in IDEAL was completed during the first quarter of 2022.

Patients were randomized to either twice daily (“BID”) with 150 mg or 450 mg PN-943, or placebo, for 12 weeks and analyzed for outcome measures.

Topline data from the 12-week induction period reported in April 2022 demonstrated that while the higher 450 mg BID dose arm did not meet the prespecified primary endpoint, the lower 150 mg BID dose arm achieved 27.5% clinical remission with a delta of 13% versus placebo, with strong concordance across several key proxies including histological and endoscopic endpoints for efficacy.

Consistent with the goals of a Phase 2 study and based on the safety and efficacy data from the 150 mg BID arm, IDEAL achieved clinical POC and validation for an oral, gut-restricted approach for UC via blockade of the α4β7 pathway.

We are currently finalizing the study design for a registrational Phase 3 trial anchored around the 150 mg BID dose of PN-943, pending regulatory guidance.

We intend to pursue further clinical development in collaboration with a large pharmaceutical partner and have engaged an advisory firm to identify and evaluate such partnering opportunities.

We believe that, compared to antibody drugs, PN-235 has 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.

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 our IL-23R antagonist compounds, including PTG-200 (JNJ-67864238) and certain related compounds for all indications, including IBD.

PTG-200 was a first-generation investigational, orally delivered, IL-23R antagonist for the treatment of IBD.

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A PN-235 Phase 1 trial was completed in the fourth quarter of 2021.

Janssen initiated FRONTIER 1, a 240-patient Phase 2b clinical trial of PN-235 in moderate-to-severe plaque psoriasis, in February 2022.

Other studies of PN-235 that Janssen has initiated or planned include the SUMMIT study of PN-235 for the treatment of moderate-to-severe plaque psoriasis, FRONTIER 2, a long-term extension study, and a Phase 1 study of PN-235 in healthy Japanese and Chinese volunteers.

In February 2022, Janssen initiated FRONTIER 1, a 240-patient Phase 2b clinical trial of PN-235 in moderate-to-severe plaque psoriasis expected to be completed in the first quarter of 2023.

Other studies of PN-235 that Janssen has initiated or planned include the SUMMIT study of PN-235 for the treatment of moderate-to-severe plaque psoriasis

expected to be completed in the second quarter of 2023, FRONTIER 2, a long-term extension study, and a Phase 1 study of PN-235 in healthy Japanese and Chinese volunteers.

Janssen is expected to initiate a separate Phase 2 trial of PN-235 in IBD in 2023 .

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In April 2022, we received a $25.0 million milestone payment in connection with the dosing of a third patient in FRONTIER 1 during the first quarter of 2022.

We will be eligible to receive a $10.0 million milestone payment in connection with the dosing of a third patient in the second Phase 2 trial of a second-generation candidate.

We will be eligible to receive a $10.0 million milestone payment in connection with the dosing of a third patient in the second Phase 2 trial of a second-generation candidate, and a $50 million milestone upon dosing of a third patient in a Phase 3 trial for a second-generation compound for any indication .

We remain eligible for up to approximately $855.0 million in future development and sales milestone payments, in addition to the $112.5 million in milestone payments already received.

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

During the second quarter of 2020 we initiated IDEAL, a 159 patient Phase 2 trial evaluating the safety, tolerability and efficacy of PN-943 in patients with moderate to severe UC.

Enrollment in IDEAL was completed during the first quarter of 2022.

The trial includes a 12-week induction period, which has been completed, and a 40-week extended treatment period.

With the exception of completing the 40-week extended treatment period for eligible patients in the IDEAL trial, expected to be completed in the first quarter of 2023, we do not intend to dedicate further internal resources to clinical development or contract manufacturing activities for our PN-943 clinical program.

We will continue to explore out-licensing opportunities globally.

De-prioritization of our PN-943 clinical program and streamlining of certain discovery programs is part of our ongoing commitment to optimize and focus resources toward the rusfertide program in PV.

Discovery Platform

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

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Our 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 our operating activities and employees.

In addition, a recession or market correction resulting from the spread of COVID-19 could materially affect our business.

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 our future financial condition, liquidity or results of operations remains uncertain.

We are 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.

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.

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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 $41.0 million and $62.0 million for the three and six months ended June 30, 2022, respectively.

Our net loss was $30.8 million and $54.8 million for the three and six months ended June 30, 2021, respectively.

As of June 30, 2022, we had an accumulated deficit of $471.3 million.

Our net loss was $31.2 million and $93.2 million for the three and nine months ended September 30, 2022, respectively.

Our net loss was $33.8 million and $88.6 million for the three and nine months ended September 30, 2021, respectively.

As of September 30, 2022, we had an accumulated deficit of $502.6 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.

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Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

There have been no material changes to our critical accounting policies during the three and six months ended June 30, 2022, 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 for the year ended December 31, 2021 filed with the SEC on February 28, 2022.

There have been no material changes to our critical accounting policies during the three and nine months ended September 30, 2022, 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 for the year ended December 31, 2021 filed with the SEC on February 28, 2022.

Components of Our Results of Operations

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

(Dollars in thousands)

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Pre-clinical and drug discovery research expense

Milestone payment obligation to former collaboration partner

Grants and tax incentives expense reimbursement, net

Total research and development expenses

We expect our research and development expenses will increase as we progress our product candidates into later stage clinical trials and prepare for the commercialization of our product candidates.

We expect our research and development expenses will increase as we progress our rusfertide program into later stage clinical trials and prepare for commercialization.

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

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Our research and development programs are subject to change from time to time as we evaluate our priorities and available resources.

Most recently, with the exception of completing the 40-week extended treatment period for eligible patients in the Phase 2 IDEAL trial, expected to be completed in the first quarter of 2023, we do not intend to dedicate further internal resources to clinical development or contract manufacturing activities for our PN-943 clinical program.

We will continue to explore out-licensing opportunities globally.

De-prioritization of PN-943 and streamlining of certain discovery programs is part of our ongoing commitment to optimize and focus resources toward the rusfertide program in PV.

General and Administrative Expenses

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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, audit fees, professional services and general overhead and administrative costs.

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, audit fees, professional services and general overhead and administrative costs.

Interest Income

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Results of Operations

Comparison of the Three Months Ended June 30, 2022 and 2021

Comparison of the Three Months Ended September 30, 2022 and 2021

Three Months Ended

September 30,

(Dollars in thousands)

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Other expense, net

(1) Includes $4.1 million and $2.2 million of non-cash stock-based compensation expense for the three months ended June 30, 2022 and 2021, respectively.

(2) Includes $2.7 million and $1.8 million of non-cash stock-based compensation expense for the three months ended June 30, 2022 and 2021, respectively.

*Percentage not meaningful

(1) Includes $3.9 million and $2.6 million of non-cash stock-based compensation expense for the three months ended September 30, 2022 and 2021, respectively.

(2) Includes $2.1 million and $2.2 million of non-cash stock-based compensation expense for the three months ended September 30, 2022 and 2021, respectively.

License and Collaboration Revenue

License and collaboration revenue decreased $1.4 million, or 62%, from $2.3 million for the three months ended June 30, 2021 to $0.9 million for the three months ended June 30, 2022.

The decrease was primarily related to a decrease in services provided under the Restated Agreement with Janssen, with associated revenue recognized based on proportional performance.

The level of services we provided has decreased as we completed our performance obligation pursuant to the collaboration as of June 30, 2022.

We determined that 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.

License and collaboration revenue decreased $10.3 million, or 100%, from $10.3 million for the three months ended September 30, 2021 to zero for the three months ended September 30, 2022.

The decrease was primarily related to a decrease in services provided under the Restated Agreement with Janssen, with associated revenue recognized based on proportional performance, because we completed our performance obligation pursuant to the collaboration as of June 30, 2022.

We determined that the final transaction price of the initial performance obligation under the Restated Agreement was $131.7 million as of June 30, 2022.

In order to determine the transaction price, we 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 includes $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 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.

Research and Development Expenses

Three Months Ended

September 30,

(Dollars in thousands)

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Pre-clinical and drug discovery research expense

Milestone payment obligation to former collaboration partner

Grants and tax incentives expense reimbursement, net

Total research and development expenses

Research and development expenses increased $8.2 million, or 31%, from $26.4 million for the three months ended June 30, 2021 to $34.6 million for the three months ended June 30, 2022.

The increase was primarily due to an increase of $5.9 million in PN-943 contract manufacturing costs and clinical expenses related to the Phase 2 IDEAL trial in UC initiated in 2020 and an increase of $2.0 million in rusfertide clinical and contract manufacturing expenses primarily for VERIFY, the global Phase 3 clinical trial in PV initiated in the first quarter of 2022.

We had 101 and 81 full-time equivalent research and development employees as of June 30, 2022 and 2021, respectively.

Research and development expenses for the three months ended June 30, 2022 included increases of $2.0 million in stock-based compensation expense and $1.6 million in other personnel-related expenses compared to the three months ended June 30, 2021.

Research and development expenses decreased $11.6 million, or 31%, from $37.0 million for the three months ended September 30, 2021 to $25.4 million for the three months ended September 30, 2022.

The decrease was primarily due to (i) a decrease of $6.6 million relating to the PN-943 program, which has been paused in order to optimize and focus resources toward our rusfertide program in PV, (ii) a decrease of $4.0 million in expenses related to milestone payments and obligations incurred under the Zealand Agreement for rusfertide pursuant to the resolution of related arbitration during the third quarter of 2021, and (iii) a decrease in expenses relating to PN 232 and PN-235 due to the completion of Phase 1 clinical trials that began in 2021.

We had 99 and 92 full-time equivalent research and development employees as of September 30, 2022 and 2021, respectively.

Research and development expenses for the three months ended September 30, 2022 included increases of $1.2 million in stock-based compensation expense and $0.7 million in other personnel-related expenses compared to the three months ended September 30, 2021.

General and Administrative Expenses

General and administrative expenses increased $1.0 million, or 15%, from $6.7 million for the three months ended June 30, 2021 to $7.7 million for the three months ended June 30, 2022 primarily due to an increase of $1.2 million in personnel expenses, partially offset by a $0.2 million decrease in legal and other expenses.

The increase in personnel expenses was primarily due to increases of $0.9 million in stock-based compensation expense and $0.3 million in wages and benefits.

We had 26 and 20 full-time equivalent general and administrative employees as of June 30, 2022 and 2021, respectively.

General and administrative expenses decreased $0.4 million, or 5%, from $7.3 million for the three months ended September 30, 2021 to $6.9 million for the three months ended September 30, 2022 due primarily to a decrease of $0.1 million in personnel-related expenses and $0.2 million in consulting, legal and other costs.

We had 23 and 24 full-time equivalent general and administrative employees as of September 30, 2022 and 2021, respectively.

Interest Income

Interest income increased $0.4 million from $0.1 million for the three months ended June 30, 2021 to $0.5 million for the three months ended June 30, 2022.

Interest income increased $1.0 million from $0.1 million for the three months ended September 30, 2021 to $1.2 million for the three months ended September 30, 2022.

This increase was due primarily to higher yields on invested balances during a period of increasing interest rates compared to the prior year period.

Comparison of the Six Months Ended June 30, 2022 and 2021

Six Months Ended

Comparison of the Nine Months Ended September 30, 2022 and 2021

Nine Months Ended

September 30,

(Dollars in thousands)

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Other expense, net

(1) Includes $7.4 million and $3.6 million of non-cash stock-based compensation expense for the six months ended June 30, 2022 and 2021, respectively.

(2) Includes $5.3 million and $3.0 million of non-cash stock-based compensation expense for the six months ended June 30, 2022 and 2021, respectively.

(1) Includes $11.3 million and $6.3 million of non-cash stock-based compensation expense for the nine months ended September 30, 2022 and 2021, respectively.

(2) Includes $7.4 million and $5.1 million of non-cash stock-based compensation expense for the nine months ended September 30, 2022 and 2021, respectively.

License and Collaboration Revenue

License and collaboration revenue increased $18.1 million, or 214%, from $8.5 million for the six months ended June 30, 2021 to $26.6 million for the six months ended June 30, 2022.

The increase in revenue was primarily due to an increase in transaction price and proportional performance resulting from the $25.0 million milestone payment we received in April 2022 upon the dosing of the third patient in the Janssen Phase 2b FRONTIER 1 trial of PN-235 for moderate-to-severe plaque psoriasis in March 2022.

License and collaboration revenue increased $7.8 million, or 42%, from $18.7 million for the nine months ended September 30, 2021 to $26.6 million for the nine months ended September 30, 2022.

The increase in revenue includes an increase in transaction price and proportional performance resulting from the $25.0 million milestone payment we received in April 2022 upon the dosing of the third patient in the Janssen Phase 2b FRONTIER 1 trial of PN-235 for moderate-to-severe plaque psoriasis in March 2022.

We completed our performance obligation pursuant to the collaboration as of June 30, 2022.

We determined that the transaction price of the initial performance obligation under the Restated Agreement was $131.7 million as of June 30, 2022, an increase of $25.2 million from the transaction price of $106.5 million as of December 31, 2021.

We determined that the final transaction price of the initial performance obligation under the Restated Agreement was $131.7 million as of June 30, 2022, an increase of $25.2 million from the transaction price of $106.5 million as of December 31, 2021.

In order to determine the transaction price, we 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 includes the $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 increase in transaction price from December 31, 2021 to June 30, 2022 was due primarily to the $25.0 million milestone payment we received in April 2022 upon the dosing of the third patient in the Janssen Phase 2b FRONTIER 1 trial of PN-235 for moderate-to-severe plaque psoriasis in March 2022.

Research and Development Expenses

Six Months Ended

Nine Months Ended

September 30,

(Dollars in thousands)

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Clinical and development expense — PTG-100

Preclinical and discovery research expense

Pre-clinical and discovery research expense

Milestone payment obligation to former collaboration partner

Grants and tax incentives expense reimbursement, net

Total research and development expenses

*Percentage not meaningful

Research and development expenses increased $20.3 million, or 40%, from $50.7 million for the six months ended June 30, 2021 to $70.9 million for the six months ended June 30, 2022.

The increase was primarily due to an increase of $13.9 million in PN-943 contract manufacturing costs and clinical expenses related to the Phase 2 IDEAL trial in UC initiated in 2020 and an increase of $5.3 million in rusfertide clinical and contract manufacturing expenses primarily for VERIFY.

We had 101 and 81 full-time equivalent research and development employees as of June 30, 2022 and 2021, respectively.

Research and development expenses for the six months ended June 30, 2022 included increases of $3.8 million in stock-based compensation expense and $4.2 million in other personnel-related expenses compared to the three months ended June 30, 2021.

Research and development expenses increased $8.7 million, or 10%, from $87.6 million for the nine months ended September 30, 2021 to $96.3 million for the nine months ended September 30, 2022.

The increase was primarily due to (i) an increase of $7.2 million in PN-943 contract manufacturing costs and clinical expenses related to the Phase 2 IDEAL trial for which we announced top line data in April 2022, (ii) an increase of $6.3 million in rusfertide clinical and contract manufacturing expenses primarily for the Phase 3 VERIFY clinical trial, and (iii) a decrease of $2.2 million in grant and tax incentives expense reimbursement.

These increases were partially offset by a decrease of $4.0 million in expenses related to milestone payments and obligations under the Zealand Agreement for rusfertide pursuant to the resolution of related arbitration incurred during the third quarter of 2021 and decreases in PN-235 and PN-232 expenses related to the completion of Phase 1 clinical trials that began in 2021.

We do not intend to dedicate further internal resources to clinical development or contract manufacturing expenses for our PN-943 clinical program as part of our ongoing commitment to optimize and focus resources toward our rusfertide program in PV.

We had 99 and 92 full-time equivalent research and development employees as of September 30, 2022 and 2021, respectively.

Research and development expenses for the nine months ended September 30, 2022 included increases of $5.0 million in stock-based compensation expense and $4.9 million in other personnel-related expenses compared to the nine months ended September 30, 2021.

General and Administrative Expenses

General and administrative expenses increased $5.5 million, or 44%, from $12.7 million for the six months ended June 30, 2021 to $18.2 million for the six months ended June 30, 2022 due primarily to an increase of $3.3 million in personnel expenses and $2.2 million in expenses to support the growth of our business and other costs.

The increase in personnel expenses was primarily due to increases of $2.3 million in stock-based compensation expense and $0.9 million in wages and benefits.

We had 26 and 20 full-time equivalent general and administrative employees as of June 30, 2022 and 2021, respectively.

General and administrative expenses increased $5.2 million, or 26%, from $19.9 million for the nine months ended September 30, 2021 to $25.1 million for the nine months ended September 30, 2022 due primarily to an increase of $3.2 million in personnel-related expenses and $2.0 million in expenses to support the growth of our business and other costs.

The increase in personnel-related expenses was primarily due to increases of $2.3 million in stock-based compensation expense and $0.9 million in wages and benefits.

We had 23 and 24 full-time equivalent general and administrative employees as of September 30, 2022 and 2021, respectively.

Interest Income

Interest income increased $0.5 million from $0.2 million for the six months ended June 30, 2021 to $0.7 million for the six months ended June 30, 2022.

Interest income increased $1.5 million from $0.3 million for the nine months ended September 30, 2021 to $1.8 million for the nine months ended September 30, 2022.

This increase was due primarily to higher yields on invested balances during a period of increasing interest rates compared to the prior year period.

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In October 2019, we 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 us of up to a maximum aggregate

offering price of $250.0 million of our common stock, preferred stock, debt securities and warrants (the “2019 Form S-3”).

333-234414) that was declared effective as of November 22, 2019 and permits the offering, issuance, and sale by us of up to a maximum aggregate offering price of $250.0 million of our 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 we entered into on November 27, 2019.

In January 2022, we issued 422,367 shares of our common stock under our ATM financing facility for net proceeds of $14.6 million, after deducting issuance costs.

As of June 30, 2022, a total of $79.3 million of common stock 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.

As of September 30, 2022, a total of $79.3 million of common stock 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 expired in October 2022.

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

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The Form S-3ASR expires in December 2023.

In August 2022, we filed a registration statement on Form S-3 (File No.

333-266595) that was declared effective as of August 16, 2022, and permits the offering, issuance, and sale by us of up to a maximum aggregate offering price of $300.0 million of its common stock, preferred stock, debt securities and warrants (the “2022 Form S-3”).

Up to a maximum of $100.0 million of the maximum aggregate offering price of $300.0 million may be issued and sold pursuant to an at-the-market (“ATM”) financing facility under a sales agreement we entered into on August 5, 2022 (the “2022 Sales Agreement”).

As of September 30, 2022, no offering, issuance or sale of common stock, preferred stock, debt securities or warrants was made under the 2022 Form S-3 or the 2022 Sales Agreement.

We have received $112.5 million in non-refundable payments from Janssen since the inception of the Restated Agreement in 2017 through the date of this report as follows:

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Capital Requirements

As of June 30, 2022, we had $291.9 million of cash, cash equivalents and marketable securities and an accumulated deficit of $471.3 million.

Our capital expenditures for the six months ended June 30, 2022 were $0.7 million.

As of September 30, 2022, we had $267.4 million of cash, cash equivalents and marketable securities and an accumulated deficit of $502.6 million.

Our capital expenditures for the nine months ended September 30, 2022 were $0.7 million.

Our capital expenditures for the years ended December 31, 2021 and 2020 were $1.1 million and $0.5 million, respectively.

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We have based this estimate on assumptions that may prove to be wrong.

We could utilize our available capital resources sooner than we currently expect if our planned pre-clinical and clinical trials are successful or expanded, our product candidates enter new and more advanced stages of clinical development, or our newer product clinical trials advance beyond the discovery stage.

We expect that our cash burn will approximate current levels for the remainder of the year but will reduce in 2023.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 could utilize our available capital resources sooner than we currently expect if our planned pre-clinical and clinical trials are successful or expanded, our product candidates enter new and more advanced stages of clinical development, we experience significant delays or difficulties in commencing, enrolling or completing clinical studies, or our newer product clinical trials advance beyond the discovery stage.

We expect that our cash burn will approximate current levels for the remainder of the year but will reduce in 2023.

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.

Such additional funding may come from raising additional capital, seeking access to 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.

As has been widely reported, we are 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, and geopolitical instability.

A future recession or market correction resulting from the spread of COVID-19 or other significant geopolitical events could materially affect our business.

There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur.

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The following table summarizes our cash flows for the periods indicated:

Six Months Ended

Nine Months Ended

September 30,

Condensed Consolidated Statements of Cash Flows Data:

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Cash used in operating activities

Cash provided by investing activities

Cash provided by (used in) investing activities

Cash provided by financing activities

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Cash Flows from Operating Activities

Cash used in operating activities for the six months ended June 30, 2022 was $51.3 million, consisting primarily of our net loss of $62.0 million and a net change of $4.2 million in net operating assets and liabilities, partially offset by certain non-cash items, including $12.7 million of stock-based compensation expense.

The $1.2 million decrease in cash flow used in operating activities during the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, was primarily due to a $6.1 million increase in stock-based compensation expense and a $2.1 million increase related to change in net operating assets and liabilities, partially offset by a $7.1 million increase in our net loss.

Cash used in operating activities for the nine months ended September 30, 2022 was $76.5 million, consisting primarily of our net loss of $93.2 million and a net change of $4.9 million in net operating assets and liabilities, partially offset by certain non-cash items, including $18.7 million of stock-based compensation expense.

The $4.4 million increase in cash flow used in operating activities during the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, was primarily due to a $7.3 million increase in stock-based compensation expense and $2.0 million related to net change in net operating assets and liabilities, partially offset by a $4.6 million increase in our net loss.

Cash Flows from Investing Activities

Cash provided by investing activities for the six months ended June 30, 2022 was $30.3 million, consisting of proceeds from maturities of marketable securities of $132.9 million, partially offset by purchases of marketable securities of $102.1 million and purchases of property and equipment of $0.6 million.

The $29.3 million increase in cash provided by investing activities for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, was primarily related to a decrease of $61.3 million in purchases of marketable securities, partially offset by a decrease of $32.1 million in proceeds from maturities of marketable securities.

Cash provided by investing activities for the nine months ended September 30, 2022 was $87.5 million, consisting of proceeds from maturities of marketable securities of $222.5 million, partially offset by purchases of marketable securities of $134.3 million and purchases of property and equipment of $0.7 million.

The $131.3 million increase in cash provided by investing activities for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, was primarily related to a decrease of $121.6 million in purchases of marketable securities and an increase of $9.5 million in proceeds from maturities of marketable securities.

Purchases of property and equipment were primarily related to purchases of laboratory and computer equipment.

Cash Flows from Financing Activities

Cash provided by financing activities for the six months ended June 30, 2022 was $17.6 million, consisting primarily of net cash proceeds from ATM sales of $14.6 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 $3.2 million.

The $108.8 million decrease in cash provided by financing activities for the six months ended June 30, 2022, as compared to the six months ended June 30, 2021, was primarily due to a $109.4 million decrease in net cash proceeds from ATM sales, partially offset by a $0.7 million increase in proceeds from issuances 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 nine months ended September 30, 2022 was $18.3 million, consisting primarily of net cash proceeds from ATM sales of $14.6 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 $3.9 million.

The $109.5 million decrease in cash provided by financing activities for the nine months ended September 30, 2022, as compared to the nine months ended September 30, 2021, was primarily due to a $109.4 million decrease in net cash proceeds from ATM sales.

Contractual Obligations and Other Commitments

During the three and six months ended June 30, 2022, there were no material changes to our material cash requirements, including commitments for capital expenditures, 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, 2021 filed with the SEC on February 28, 2022.

During the three and nine months ended September 30, 2022, there were no material changes to our material cash requirements, including commitments for capital expenditures, 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, 2021 filed with the SEC on February 28, 2022.

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