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Item 7. Management’s Discussion and Analysis

2023-03-15 compared with 2022-02-28 · 236 added, 235 removed, 229 unchanged (67% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

We are a biopharmaceutical company with multiple peptide-based new chemical entities in different stages of development, all derived from the Company's proprietary technology platform.

Our clinical programs address two broad categories of diseases;

We are a biopharmaceutical company with peptide-based new chemical entities rusfertide and JNJ-2113 (formerly known as PN-235) in different stages of development, all derived from our proprietary discovery technology platform.

Our clinical programs fall into two broad categories of diseases;

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

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

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

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

We initiated REVIVE, a Phase 2 proof of concept (“POC”) study in the blood disorder polycythemia vera (“PV”), in the third quarter of 2019.

We initiated a Phase 2 POC study in hereditary hemochromatosis (“HH”) in January 2020, which was completed during the fourth quarter of 2021.

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

In June 2021, we presented updated Phase 2 data supporting the long-term efficacy of rusfertide in PV during an oral presentation at the European Hematology Association (“EHA”) 2021 Virtual Congress.

A n abstract highlighting positive preliminary data from our Phase 2 study of rusfertide in HH was orally presented at The Liver Meeting® 2021, hosted by the American Association for the Study of Liver Diseases (“AASLD”), which took place virtually in November 2021.

In December 2021, two abstracts highlighting positive updated data from our REVIVE and PACIFIC Phase 2 studies of rusfertide in PV were orally presented at the American Society of Hematology (“ASH”) 2021 Annual Meeting, in addition to three poster presentations on rusfertide in PV and HH.

These results provided evidence regarding the potential of rusfertide for managing hematocrit, reducing thrombotic risk and improving iron deficiency symptoms.

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

On September 16, 2021, the FDA placed a clinical hold on our rusfertide clinical studies following our submission to the FDA of findings in a 26-week rasH2 transgenic mouse carcinogenicity study.

Data from our rusfertide Phase 2 clinical trials presented at medical conferences in 2021 and 2022 provided evidence regarding the potential of rusfertide for managing hematocrit, reducing thrombotic risk and improving iron deficiency symptoms.

Rusfertide has a unique mechanism of action in the potential treatment of the blood disorder polycythemia vera (“PV”), which may enable it to specifically decrease and maintain hematocrit levels within the range of recommended clinical guidelines without causing the iron deficiency that can occur with frequent phlebotomy.

Our rusfertide Phase 2 clinical trials include the following:

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

We completed enrollment of patients 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, which was completed during the first quarter of 2023, and will continue in open label extension.

● 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 and completion of the 52-week trial is expected during the second quarter of 2023.

At the June 2022 American Society of Clinical Oncology (“ASCO”) Annual Meeting, we presented updated interim results for REVIVE and PACIFIC demonstrating the effects of dosing interruption and resumption.

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

Rusfertide restart restored therapeutic benefits.

Following the brief clinical hold described below, over 90% of patients in the REVIVE trial provided reconsent and returned to rusfertide treatment after dosing interruption and reinitiation.

At the June 2022 European Hematology Association Congress, we presented interim data as of May 2022 showing that rusfertide treatment interruption reverses hematologic gains and re-initiation of treatment restores therapeutic benefits in patients with PV.

At the December 2022 American Society of Hematology meeting, we presented data as of October 2022 related to rusfertide, including a subgroup of analyses of the adverse event profile from the REVIVE trial.

These preliminary results indicated that 84% of treatment-emergent adverse events (“TEAEs”) were Grade 2 or below.

16% of patients experienced Grade 3 TEAEs and there were no Grade 4 TEAEs.

On March 15, 2023, we announced positive topline results from the blinded, placebo-controlled, randomized withdrawal portion of the REVIVE trial.

Subjects receiving rusfertide achieved statistically significant improvements versus placebo in the trial’s primary endpoint.

The double-blind, placebo-controlled, 12-week randomized withdrawal portion was included as Part 2 of the REVIVE trial study to evaluate rusfertide in PV patients with frequent phlebotomy requirements.

In the REVIVE trial, subjects were initially enrolled in the 28-week open label dose-titration and efficacy evaluation Part 1 of the study, followed by 1:1 randomization of 53 subjects to placebo versus rusfertide therapy for a subsequent duration of 12 weeks.

More subjects receiving rusfertide during the blinded randomized withdrawal portion of the REVIVE trial were responders compared with placebo (69.2% versus 18.5%, p=0.0003).

A study subject was defined as a responder if the subject completed 12 weeks of double-blind treatment while maintaining hematocrit control without phlebotomy eligibility and without phlebotomy.

During the 12 weeks of the blinded randomized withdrawal, only 2 of 26 subjects on rusfertide were phlebotomized.

VERIFY, a global Phase 3 clinical trial of rusfertide in PV for approximately 250 patients, was initiated in the first quarter of 2022.

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.

We expect enrollment completion in the fourth quarter of 2023.

On September 16, 2021, the U.S.

Food and Drug Administration (“FDA”) placed a clinical hold on our then ongoing rusfertide clinical trials following our submission to the FDA of findings in a 26-week rasH2 transgenic mouse carcinogenicity study.

In October 2021, we submitted a Complete Response to the FDA related to the clinical hold, and the FDA removed the clinical hold on October 8, 2021.

In our Complete Response, we provided the individual patient clinical safety reports the FDA requested for human cancers observed in rusfertide clinical trials, updated the investigator brochure and patient informed consent forms for ongoing rusfertide trials, proposed new safety and stopping rules in clinical study protocols of our ongoing rusfertide clinical trials, and performed a comprehensive review of our rusfertide safety database.

In our Complete Response, we provided the individual patient clinical safety reports the FDA requested for human cancers observed in rusfertide clinical trials, updated the investigator brochure and patient informed consent forms for ongoing rusfertide trials, proposed new safety and stopping rules in trial protocols for our ongoing rusfertide clinical trials, and performed a comprehensive review of our rusfertide safety database.

Dosing of patients and enrollment in ongoing clinical trials with rusfertide resumed in the fourth quarter of 2021.

We enrolled 63 patients in the ongoing REVIVE Phase 2 clinical trial of rusfertide in PV prior to the clinical hold, and we are currently enrolling approximately 20 patients to target approximately 50 patients enrolled through the end of a three-year open label extension.

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 expect to initiate VERIFY, a global Phase 3 clinical trial of rusfertide in PV in the first quarter of 2022.

Patient enrollment into VERIFY is expected to be completed in the first half of 2023.

In addition, we completed our Phase 2 POC study in HH, our second indication, during the fourth quarter of 2021 .

To date we have received the following designations for rusfertide in PV:

● The FDA granted orphan drug designation for rusfertide for the treatment of PV in June 2020;

● The EMA granted orphan drug designation for rusfertide for the treatment of PV in October 2020;

● The FDA granted Fast Track designation for rusfertide for the treatment of PV in December 2020;

The FDA granted orphan drug designation for rusfertide for the treatment of PV in June 2020, and Fast Track designation for rusfertide for the treatment of PV in December 2020.

The EMA granted orphan drug designation for rusfertide for treatment of PV in October 2020.

The FDA granted Breakthrough Therapy Designation for rusfertide for the treatment of PV in June 2021.

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.

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 150 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 open label extension.

Patient enrollment in IDEAL was completed during the first quarter of 2022, and topline data from the study, including the 12-week induction period, is expected in the second quarter of 2022.

In April 2022, we received a letter from the FDA indicating the FDA’s intent to rescind Breakthrough Therapy Designation for rusfertide in PV.

In June 2022, we voluntarily withdrew our Breakthrough Therapy Designation following correspondence with FDA and based on our internal analysis of the relative utility of Breakthrough Therapy Designation for Phase 3 trials and beyond.

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

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 enactment of the Inflation Reduction Act (“IRA”) in the United States and includes previously planned trials of rusfertide in the subset of hereditary hemochromatosis patients with chronic arthropathy.

JNJ-2113 (formerly known as PN-235)

Our partnered Interleukin-23 receptor (“IL-23R”) antagonist compound JNJ-2113 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 gastrointestinal (“GI”) and systemic compartments as needed.

We believe that, compared to antibody drugs, JNJ-2113 has the potential to provide clinical improvement in an oral medication with increased convenience and compliance 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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and in July 2021 to, among other things, enable Janssen to independently research and develop collaboration compounds for multiple indications in the IL-23 pathway and further align our financial interests.

In October 2020, we and Janssen announced the selection of two second-generation IL23-R antagonists for advancement into clinical development, PN-232 (JNJ-75105186) and PN-235 (JNJ-77242113).

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 favor of advancing PN-235, based on its superior potency and overall pharmacokinetic and pharmacodynamic profile.

A PN-235 Phase 1 study was completed in Q4 2021.

Janssen initiated FRONTIER 1, a Phase 2b clinical study of PN-235 in moderate-to-severe plaque psoriasis, in early 2022, and is expected to initiate a separate Phase 2 study of PN-235 in IBD in the second half of 2022 .

During the fourth quarter of 2021, we received a $7.5 million milestone payment from Janssen triggered by the completion of data collection for PN-235 Phase 1 activities.

We expect to earn a $25.0 million milestone in connection with the dosing of a third patient in the first Phase 2 study of a second-generation candidate, and a $10.0 million milestone in connection with the dosing of a third patient in the second Phase 2 study of a second-generation candidate.

We remain eligible for up to approximately $900.0 million in development-related milestone payments, in addition to the $87.5 million in milestones already received.

During the fourth quarter of 2021, following a pre-specified interim analysis criteria, a portfolio decision was made by Janssen to advance second-generation product candidate JNJ-2113 (JNJ-77242113) based on its superior potency and overall pharmacokinetic and pharmacodynamic profile.

A JNJ-2113 Phase 1 trial was completed in the fourth quarter of 2021.

In February 2022, Janssen initiated FRONTIER1, a 255-patient Phase 2b clinical trial of JNJ-2113 in moderate-to-severe plaque psoriasis, which was completed in December 2022.

FRONTIER1 was a randomized, multicenter, double-blind, placebo-controlled study that evaluated three once-daily dosages and two twice-daily dosages of JNJ-2113 taken orally.

The primary endpoint of the study is the proportion of patients achieving PASI-75 (a 75% improvement in skin lesions as measured by the Psoriasis Area and Severity Index) at 16 weeks.

In March 2023, we announced positive topline results from the trial.

JNJ-2113 achieved the study's primary efficacy endpoint, with a statistically significant greater proportion of patients who received JNJ-2113 achieving PASI-75 responses compared to placebo at Week 16 in all five of the study’s treatment groups.

A clear dose response was observed across an eight-fold dose range.

Treatment was well tolerated, with no meaningful difference in frequency of adverse events across treatment groups versus placebo.

It is our expectation that JNJ-2113 will progress into a Phase 3 registrational study in plaque psoriasis on the strength of the FRONTIER1 data.

Advancement of JNJ-2113 into a Phase 3 study and meeting the primary endpoint in that study would qualify us for milestone payments of $50 million and $115 million, respectively.

Data will be presented from various pre-clinical and clinical studies on JNJ-2113 at medical conferences beginning in the second quarter of 2023.

Other Phase 2 studies of JNJ-2113 that Janssen has initiated include the SUMMIT study of JNJ-2113 for the treatment of moderate-to-severe plaque psoriasis expected to be completed in the second quarter of 2023 and FRONTIER2, a long-term extension study.

A Phase 1 trial of an immediate release formulation of JNJ-2113 in healthy Japanese and Chinese adult participants is currently recruiting.

Following the completion of Phase 2 studies of JNJ-2113 in plaque psoriasis, we expect Janssen to initiate a separate Phase 2 trial of JNJ-2113 in a second indication.

Additional indications may include any or all of psoriatic arthritis, UC and CD.

During the fourth quarter of 2021, we received a $7.5 million milestone payment from Janssen triggered by the completion of data collection for JNJ-2113 Phase 1 activities.

In the second quarter of 2022, we received a $25.0 million milestone payment in connection with the dosing of a third patient in FRONTIER1 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, a $50 million milestone upon dosing of a third patient in a Phase 3 trial for a second-generation compound for any indication , and a $115.0 million milestone payment upon a Phase 3 clinical trial for a second-generation compound for any indication meeting its primary clinical endpoint .

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 nonrefundable payments from Janssen received to date.

We also remain eligible to receive tiered royalties on net product sales at percentages ranging from mid-single digits to ten percent.

PN-943 is a wholly owned, 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, which is 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.

Discovery Platform

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

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

COVID-19 Business Impact

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

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

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

Capital markets and economies worldwide have been significantly impacted by the COVID-19 pandemic and may be further impacted in the future.

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

Policymakers around the globe have responded with fiscal policy actions to support the healthcare industry and economy as a whole.

The magnitude and overall effectiveness of these actions remains uncertain.

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

the development and spread of COVID-19 variants;

For example, we have a pre-clinical stage program to identify an orally active hepcidin mimetic, which we believe will be complementary to the injectable rusfertide for offering the best treatment options for PV, hereditary hemochromatosis and other potential erythropoietic and iron imbalance disorders.

Business Outlook

We are subject to risks and uncertainties as a result of the prolonged nature of the COVID-19 pandemic and emergent variants with increased transmissibility, even in those who are fully vaccinated.

Some of the workforce trends starting during the pandemic have continued to lead to staffing shortages in settings such as clinical trial sites and healthcare offices.

The future impact of COVID-19 on our activities will depend on a number of factors, including, but not limited to, the scope and magnitude of any resurgences in the outbreak and the 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, such as social distancing, business closures or disruptions.

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

and new travel and other restrictions and public health measures.

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

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

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

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 related to or amplified by COVID-19 could materially affect our business.

We are currently operating in a period of economic uncertainty and capital markets disruption, which has been impacted by domestic and global monetary and fiscal policy, geopolitical instability, the ongoing military conflict between Russia and Ukraine and the rising tensions between China and Taiwan, a recessionary environment 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.

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 our operating results.

Also, the failure of Silicon Valley Bank and other banks in the United States in March 2023 has given rise to uncertainty in the security of amounts in deposit accounts uninsured by the Federal Deposit Insurance Corporation.

We continue to monitor these events and the potential impact on our business.

Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may be adversely affected in the future due to domestic and global monetary and fiscal policy, supply chain constraints, consequences associated with COVID-19 and the ongoing conflict between Russia and Ukraine, and such factors may lead to increases in the cost of manufacturing our product candidates and delays in initiating trials.

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

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

We expect to continue to incur significant research, development and other expenses related to our ongoing operations, product development, and pre-commercialization activities.

We expect to continue to incur significant research and development expenses and other expenses related to our ongoing operations, product development, and pre-commercialization activities.

As a result, we expect to continue to incur losses in the future as we continue our development of, and seek regulatory approval for, our product candidates.

Janssen License and Collaboration Agreement

On July 27, 2021, we entered into an amended and restated License and Collaboration Agreement (“Restated Agreement”) with Janssen.

The Restated Agreement amends and restates the License and Collaboration Agreement, dated May 26, 2017, by and between us and Janssen (as amended by the First Amendment thereto, effective May 7, 2019, the “Original Agreement”).

On July 27, 2021, we entered into the Restated Agreement with Janssen, which amends and restates the Original Agreement, as amended by the First Amendment.

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

The Original Agreement became effective on July 13, 2017.

Upon the effectiveness of the Original Agreement, we received a non-refundable, upfront cash payment of $50.0 million from Janssen.

Upon the effectiveness of the First Amendment, we received a $25.0 million payment from Janssen in 2019.

We received a $5.0 million payment triggered by the successful nomination of a second-generation IL-23R antagonist development compound during the first quarter of 2020.

In the fourth quarter of 2021, we received a $7.5 million milestone payment from Janssen triggered by data collection activities for the first Phase 1 clinical trial of a second-generation compound during the fourth quarter of 2021.

In the first quarter of 2020, we received a $5.0 million payment triggered by the successful nomination of a second-generation IL-23R antagonist development compound.

In the fourth quarter of 2021, we received a $7.5 million milestone payment from Janssen triggered by completion of the data collection for JNJ-2113 Phase 1 activities.

In the second quarter of 2022, we received a $25.0 million milestone payment in connection with the dosing of a third patient in FRONTIER1 during the first quarter of 2022.

See Note 3 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information.

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Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles.

The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the consolidated financial statements, as well as the reported revenue generated, and expenses incurred during the reporting periods.

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.

Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, and 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.

Actual results may differ from these estimates under different assumptions or conditions.

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Use of Estimates

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

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

The preparation of the 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period.

On an ongoing basis, we evaluate our 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 our 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.

We base these estimates on historical and anticipated results, trends and various other assumptions that we believe are reasonable under the circumstances, including assumptions as to forecasted amounts and future events.

Due to the COVID-19 pandemic, military conflict between Ukraine and Russia, rising tensions between China and Taiwan and inflationary pressures, among other factors, there has been uncertainty and disruption in the global economy and financial markets.

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

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

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Revenue Recognition

Under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”), we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services.

consideration which we expect to receive in exchange for those goods or services.

To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps:

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Under the expected value method, an entity considers the sum of probability-weighted amounts in a range of possible consideration amounts.

Under the most likely amount method, an entity considers the single most likely amount in a range of possible

consideration amounts.

Whichever method is used, it should be consistently applied throughout the life of the contract;

Under the most likely amount method, an entity considers the single most likely amount in a range of possible consideration amounts.

Whichever method is used should be consistently applied throughout the life of the contract;

however, it is not necessary for us to use the same approach for all contracts.

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Any potential milestone payments that we determine are not associated with performance obligations as defined under the contract are excluded from the transaction price and are recognized as the triggering event occurs.

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

For arrangements that include sales-based royalties, including milestone payments based on the level of sales, where the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

Upfront payments and fees are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until we perform our obligations under these arrangements.

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In such case the effect that the contract modification has on the transaction price, and on the entity’s measure of progress toward complete satisfaction of the performance obligation, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification (the adjustment to revenue is made on a cumulative catch-up basis).

The period between when we transfer control of promised goods or services and when we receive payment is expected to be one year or less, which is consistent with our historical experience.

Upfront payment contract liabilities resulting from our license and collaboration agreements do not represent a financing component as the payment is not financing the transfer of goods and services, and the technology underlying the licenses granted reflects research and development expenses already incurred by us.

As such, we do not adjust our revenues for the effects of a significant financing component.

Research and Development Costs

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We accrue for estimated costs of research and development activities conducted by third-party service providers, which include the conduct of pre-clinical studies and clinical trials, and contract manufacturing activities.

We record the estimated costs of research and development activities based upon the estimated services provided but not yet invoiced and includes these costs in accrued expenses and other payables in the consolidated balance sheets and within research and development expense in the consolidated statements of operations.

We accrue for these costs based on factors such as estimates of the work completed and in accordance with agreements established with its third-party service providers.

We record the estimated costs of research and development activities based upon the estimated services provided but not yet invoiced and we include these costs in accrued expenses and other payables in our consolidated balance sheets and within research and development expense in our consolidated statements of operations.

We accrue for these costs based on various factors such as estimates of the work completed and in accordance with agreements established with our third-party service providers.

As actual costs become known, we adjust our accrued liabilities.

We have not experienced any material differences between accrued liabilities and actual costs incurred.

However, the status and timing of actual services performed, number of patients enrolled, the rate of patient enrollment and number and location of sites activated may vary from our estimates, resulting in adjustments to expense in future periods.

However, the status and timing of actual services performed, number of patients enrolled, the rate of patient enrollment and the number and location of sites activated may vary from our estimates and may result in adjustments to our research and development expenses in future periods.

Changes in these estimates that result in material changes to our accruals could materially affect our results of operations.

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● facilities and other allocated expenses, which include expenses for rent and maintenance of facilities, information technology, depreciation and amortization expense and other supplies.

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

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

We recognize the amounts related to our Australian research and development refundable cash tax incentive that are not subject to refund provisions as a reduction of research and development expenses.

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

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We may alternatively be eligible for a taxable credit in the form of a non-cash tax incentive.

We allocate direct costs and indirect costs incurred to product candidates when they enter clinical development.

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

We allocate direct and indirect costs incurred to product candidates when they enter clinical development.

For product candidates in clinical development, direct costs consist primarily of clinical, pre-clinical, and drug discovery costs, costs of supplying drug substance and drug product for use in clinical and pre-clinical studies, including clinical manufacturing costs, contract research organization fees, and other contracted services pertaining to specific clinical and pre-clinical studies.

Indirect costs allocated to our product candidates on a program-specific basis include research and development employee salaries, benefits, and stock-based compensation, and indirect overhead and other administrative support costs.

Program-specific costs are unallocated when the clinical expenses are incurred for our early-stage research and drug discovery projects;

our internal resources, employees and infrastructure are not tied to any one research or drug discovery project and are typically deployed across multiple projects.

Program-specific costs are unallocated when the clinical expenses are incurred for our early-stage research and drug discovery projects as our internal resources, employees and infrastructure are not tied to any one research or drug discovery project and are typically deployed across multiple projects.

As such, we do not provide financial information regarding the costs incurred for early stage pre-clinical and drug discovery programs on a program-specific basis prior to the clinical development stage.

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

Year Ended December 31,

Clinical and development expense — rusfertide (PTG-300)

Clinical and development expense — PN-943

Clinical and development expense — PN-235

Clinical and development expense — PN-232

Clinical and development expense — PTG-200

Clinical and development expense — PTG-100

Preclinical 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, add to the number of ongoing clinical trials, advance our discovery research projects into the pre-clinical stage, continue our early-stage research and prepare for the commercialization of our product candidates.

We expect our research and development expenses to decrease in the near term as we continue to de-prioritize our PN-943 clinical program and streamline certain discovery programs to focus our resources toward progressing our rusfertide program into later stage clinical trials and preparing 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.

We may never succeed in achieving marketing approval for our product candidates regardless of our costs and efforts.

The probability of success of our product candidates may be affected by numerous factors, including pre-clinical data, clinical data, competition, manufacturing capability, our cost of goods to be sold, our ability to receive, and the timing of, regulatory approvals, market conditions, and our ability to successfully commercialize our products if they are

approved for marketing.

As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates.

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

With the exception of completing the 40-week extended treatment period for eligible patients in the Phase 2 IDEAL trial, which we expect 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.

General and Administrative Expenses

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

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

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

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

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

Interest Income

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Results of Operations

Comparison of the Year ended December 31, 2021 and 2020

Year Ended December 31,

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Interest income

Interest expense

Loss on early repayment of debt

Other expense, net

Loss before income tax expense

Income tax expense

(1) Includes $14.7 million and $9.0 million of non-cash stock-based compensation expense for the years ended December 31, 2022 and 2021, respectively.

(2) Includes $9.5 million and $7.4 million of non-cash stock-based compensation expense for the years ended December 31, 2022 and 2021, respectively.

*Percentage not meaningful

License and Collaboration Revenue

License and collaboration revenue decreased $0.8 million, or 3%, from $27.4 million for the year ended December 31, 2021 to $26.6 million for the year ended December 31, 2022.

The decrease in license and collaboration revenue was primarily related to a decrease in services provided under the Janssen License and Collaboration Agreement recognized based on proportional performance, partially offset by an $8.0 million cumulative catch-up amount recognized during the year ended December 31, 2021 following the amendment of our collaboration agreement for the development of IL-23R assets with Janssen.

This cumulative catch-up was primarily the result of an acceleration of our cumulative performance completed under our obligation, following the amendment to the collaboration which reduced the remaining services that we are responsible to provide.

Revenue for the year ended December 31, 2020 included an update in the amounts forecast for future services remaining to be performed under the Janssen License and Collaboration Agreement which correspondingly increased our overall cumulative percentage of completion of our performance obligation during year ended December 31, 2020, coupled with continued performance and delivery of services under the Janssen License and Collaboration Agreement.

We have determined that the transaction price of the initial performance obligation under the Restated Janssen License and Collaboration Agreement was $106.5 million as of December 31, 2021, an increase of $7.9 million from the transaction price of $98.6 million as of December 31, 2020 under the Original Agreement.

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

We determined that the transaction price includes $87.5 million of nonrefundable payments received to date, $17.9 million of reimbursement from Janssen for services performed for IL-23R antagonist compound research costs and other services and estimated variable consideration consisting of $8.2 million of development cost reimbursement receivable from Janssen, partially offset by $7.1 million of net cost reimbursement due to Janssen for services performed.

The increase in transaction price from December 31, 2020 to December 31, 2021 was due primarily to reductions in both the remaining services to be performed by the Company under the agreement and the Company’s remaining shared development costs following the Second Amendment to the Janssen License and Collaboration Agreement.

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

The decrease in revenue was primarily due to a decrease in services under the Janssen License and Collaboration Agreement recognized based on proportional performance.

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 is $131.7 million as of December 31, 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 December 31, 2022 includes $112.5 million of nonrefundable payments received as of June 30, 2022, $17.9 million of reimbursement from Janssen for services performed for IL-23 receptor antagonist compound research 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

Year Ended December 31,

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Clinical and development expense — PN-943

Clinical and development expense — PN-235

Clinical and development expense — JNJ-2113 (PN-235)

Clinical and development expense — PN-232

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Clinical and development expense — PTG-100

Preclinical and discovery research expense

Preclinical and drug discovery research expense

Milestone payment obligation to former collaboration partner

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Total research and development expenses

*Percentage not meaningful

Research and development expenses increased $51.5 million, or 69%, from $74.5 million for the year ended December 31, 2020 to $126.0 million for the year ended December 31, 2021.

The increase was primarily due to an increase of $23.0 million in rusfertide clinical trial and development costs as clinical trials have enrolled and progressed, including the ongoing REVIVE and PACIFIC Phase 2 trials in PV, which began in December 2019 and the first quarter of 2021, respectively, and HH, which began in early 2020, and clinical and contract manufacturing activities incurred in 2021 in support of the REVIVE and PACIFIC Phase 2 trials and planned VERIFY global Phase 3 clinical trial of rusfertide in PV;

$14.3 million in PN-943 clinical trial and development costs and contract manufacturing costs primarily related to the Phase 2 IDEAL trial in UC initiated during the second quarter of 2020;

an increase of $6.5 million in preclinical and drug discovery research expenses;

$4.5 million of clinical trial and development costs for the Phase 1 PN-235 initiated in December 2020;

$4.0 million of expenses related to milestone payments and obligations under the Zealand Agreement for rusfertide pursuant to the resolution of related arbitration;

and $2.0 million of clinical trial and development costs for the Phase 1 PN-232 study initiated in May 2021.

These increases were partially offset by a $1.7 million increase in grant and accrued refundable cash tax incentives and a decrease of $0.9 million in PTG-200 clinical trial and development expenses under the Janssen License and Collaboration Agreement due to our delivery of substantially all agreed-upon services for the PTG-200 Phase 2 clinical trial prior to 2021.

We had 92 and 59 full-time equivalent research and development employees at December 31, 2021 and 2020, respectively.

We had 82 and 92 full-time equivalent research and development employees as of December 31, 2022 and 2021, respectively.

Research and development expenses for the year ended December 31, 2022 included increases of $5.7 million in stock-based compensation expense and $4.7 million of other personnel-related expenses compared to the year ended December 31, 2021.

General and Administrative Expenses

$1.6 million in consulting expenses, $0.9 million in market research expenses, $0.5 million in recruiting expenses to support the growth of our business;

and $0.3 million increase in insurance expense.

The increase in personnel-related expenses was primarily due to an increase of $3.6 million in stock-based compensation expense and $1.6 million in wages and salaries.

General and administrative expenses increased $4.5 million, or 17%, from $27.2 million for the year ended December 31, 2021 to $31.7 million for the year ended December 31, 2022, primarily due to increases of $2.2 million in personnel-related expenses and $2.3 million in other expenses to support the growth of our business.

The increase in personnel-related expenses was primarily due to an increase of $2.1 million in stock-based compensation expense.

We had 23 and 26 full-time equivalent general and administrative employees as of December 31, 2022 and 2021, respectively.

Interest Income

Interest income decreased $0.5 million, or 51%, from $0.9 million for the year ended December 31, 2020 to $0.4 million for the year ended December 31, 2021.

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

Interest Expense

Interest expense of $0.6 million for the year ended December 31, 2020 was comprised of interest expense on our long-term debt under our term credit facility.

We prepaid our outstanding long-term debt under our term credit facility during the second quarter of 2020.

We executed a payoff letter to release all obligations under the term credit facility during the third quarter of 2021.

Loss on Early Repayment of Debt

Loss on early repayment of debt of $0.6 million for the year ended December 31, 2020 was comprised of prepayment and final payment fees paid in connection with the early repayment of our term loan in June 2020.

We had no debt outstanding as of December 31, 2021.

Other Expense, Net

Other expense, net was $0.1 million for the year ended December 31, 2021 compared to zero for the year ended December 31, 2020.

The change was due primarily to an increase in foreign exchange losses.

Income Tax Expense

Income tax expense decreased $1.3 million, or 100%, from $1.3 million for the year ended December 31, 2020 to zero for the year ended December 31, 2021.

Our effective income tax rate was 0% for the year ended December 31, 2021 as compared to 2.0% for the year ended December 31, 2020.

Our effective income tax rate differs from our federal statutory rate of 21% primarily because our losses cannot be benefited due to our full valuation allowance position.

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

entity, and the U.S.

entity reimbursed the Australia subsidiary for certain direct development costs.

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

Income tax expense for year ended December 31, 2020 reflects this sale of intellectual property rights, cost reimbursements and related adjustments to the deferred tax asset, establishing a valuation allowance and certain uncertain tax position liabilities.

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

Interest income increased $3.6 million, from $0.4 million for the year ended December 31, 2021 to $4.1 million for the year ended December 31, 2022.

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

Comparison of the Years Ended December 31, 2021 and 2020

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Other expense, net

Loss before income tax (expense) benefit

Income tax (expense) benefit

Loss before income tax expense

Income tax expense

(1) Includes $9.0 million and $4.1 million of non-cash stock-based compensation expense for the years ended December 31, 2021 and 2020, respectively.

(2) Includes $7.4 million and $3.8 million of non-cash stock-based compensation expense for the years ended December 31, 2021 and 2020, respectively.

*Percentage not meaningful

License and Collaboration Revenue

License and collaboration revenue increased $28.4 million from $0.2 million for the year ended December 31, 2019 to $28.6 million for the year ended December 31, 2020.

The increase in license and collaboration revenue was primarily due to an update in the amounts forecast for future services remaining to be performed under the Janssen License and Collaboration Agreement, correspondingly increasing our overall cumulative percentage of completion of our performance obligation during year ended December 31, 2020, coupled with continued performance and delivery of services under the ongoing Janssen License and Collaboration Agreement.

The increase in license and collaboration revenue for the year ended December 31, 2020 also included the impact of a one-time cumulative adjustment related to the application of revenue recognition principles following the May 2019 amendment of the Janssen License and Collaboration Agreement that reduced 2019 revenue by $9.4 million.

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

We determined that the transaction price of the Janssen License and Collaboration Agreement was $98.6 million as of December 31, 2020, a decrease of $14.3 million from the transaction price of $112.9 million at December 31, 2019.

License and collaboration revenue decreased $1.3 million, or 4%, from $28.6 million for the year ended December 31, 2020 to $27.4 million for the year ended December 31, 2021.

This cumulative catch-up was primarily the result of an

acceleration of our cumulative performance completed, following the execution of the Restated Agreement, which reduced our remaining performance obligation.

Revenue for the year ended December 31, 2020 included an update in the amounts forecasted for future services remaining to be performed under the Janssen License and Collaboration Agreement which correspondingly increased our overall cumulative percentage of completion of our performance obligation during year ended December 31, 2020, along with continued performance and delivery of services under the Janssen License and Collaboration Agreement.

We determined that the transaction price of the initial performance obligation under the Restated Agreement was $106.5 million as of December 31, 2021, an increase of $7.9 million from the transaction price of $98.6 million as of December 31, 2020, under the Original Agreement.

We determined that the transaction price includes the $50.0 million upfront payment, the $25.0 million payment received upon the effectiveness of the First Amendment, the $5.0 million payment triggered by the successful nomination of a second-generation compound, $17.9 million of reimbursement from Janssen for services performed for PTG-200 Phase 2 and for second-generation compound research costs and other services, and estimated variable consideration consisting of a $7.5 million milestone payment subject to the completion of a Phase 1 study for a second-generation compound, offset by $6.8 million of net cost reimbursement to Janssen for services performed.

The decrease in transaction price from December 31, 2019 to December 31, 2020 was due primarily to a decrease in the forecast of remaining services to be provided under the initial performance obligation.

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

We determined that the transaction price included $87.5 million of nonrefundable payments received as of December 31, 2021, $17.9 million of reimbursement from Janssen for services performed for IL-23 receptor antagonist compound research and other services and estimated variable consideration consisting of $8.2 million of development cost reimbursement from Janssen, partially offset by $7.1 million of net cost reimbursement due to Janssen for services performed.

The increase in transaction price from December 31, 2020 to December 31, 2021 was due primarily to reductions in both the remaining services to be performed by us under the Restated Agreement and the remaining shared development costs under the Restated Agreement.

Research and Development Expenses

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Clinical and development expense — PN-943

Clinical and development expense — JNJ-2113 (PN-235)

Clinical and development expense — PN-232

1 unchanged sentence

Clinical and development expense — PTG-100

Preclinical and drug discovery research expense

Pre-clinical and drug discovery research expense

Milestone payment obligation to former collaboration partner

Grants and tax incentives expense reimbursement, net

2 unchanged sentences

Research and development expenses increased $51.5 million, or 69%, from $74.5 million for the year ended December 31, 2020 to $126.0 million for the year ended December 31, 2021.

The increase included a $14.3 million increase in pre-clinical and discovery research expenses, including pre-clinical costs related to our second-generation research collaboration efforts with Janssen, a $2.4 million increase in PN-943 clinical trial and development expenses following the initiation of the Phase 2 trial in UC in 2020, a $2.1 million increase in rusfertide clinical trial and development expenses, including the ongoing Phase 2 trials in PV and HH, and $0.3 million of Phase 1 clinical trial and development expenses for PN-235.

These increases were partially offset by a decrease of $8.5 million for PTG-200 clinical trial and development expenses under the Janssen License and Collaboration Agreement due to timing of deliverables and related cost sharing arrangements, and the impact of a $1.3 million reversal of previously recorded reductions to research and development expenses in connection with the tax incentive from Australia in 2019.

Research and development expenses for the year ended December 31, 2020 included increased personnel costs due to an increase in research and development headcount from 54 full-time equivalent employees at December 31, 2019 to 59 full-time equivalent employees at December 31, 2020.

an increase of $14.3 million in PN-943 clinical trial and development costs and contract manufacturing costs primarily related to the Phase 2 IDEAL trial in UC initiated during the second quarter of 2020;

an increase of $6.5 million in preclinical and drug discovery research expenses;

an increase of $4.5 million of clinical trial and development costs for the Phase 1 JNJ-2113 initiated in December 2020;

an increase of $4.0 million of expenses related to milestone payments and obligations under the Zealand Agreement for rusfertide pursuant to the resolution of related arbitration;

and an increase of $2.0 million of clinical trial and development costs for the Phase 1 PN-232 study initiated in May 2021.

and Collaboration Agreement due to our delivery of substantially all agreed-upon services for the PTG-200 Phase 2 clinical trial prior to 2021.

We had 92 and 59 full-time equivalent research and development employees as of December 31, 2021 and 2020, respectively.

Research and development expenses for the year ended December 31, 2021 included increases of $4.9 million in stock-based compensation expense and $5.3 million of other personnel-related expenses compared to the year ended December 31, 2020.

General and Administrative Expenses

General and administrative expenses increased $2.9 million, or 18%, from $15.7 million for the year ended December 31, 2019 to $18.6 million for the year ended December 31, 2020 primarily due to increases of $1.4 million in compensation-related expenses to support the growth of our operations, $1.3 million in legal expenses and $0.8 million in insurance expense, partially offset by a $0.6 million decrease in other expenses, including accounting fees, market research, recruiting fees and travel expense.

General and administrative expenses increased $8.6 million, or 46%, from $18.6 million for the year ended December 31, 2020 to $27.2 million for the year ended December 31, 2021, primarily due to increases of $5.2 million in personnel-related expenses, $1.6 million in consulting expenses, $0.9 million in market research expenses, $0.5 million in recruiting expenses to support the growth of our business, and $0.3 million in insurance expense.

The increase in personnel-related expenses was primarily due to an increase of $3.6 million in stock-based compensation expense and $1.6 million in wages and salaries.

We had 26 and 20 full-time equivalent general and administrative employees as of December 31, 2021 and 2020, respectively.

Interest Income

Interest income decreased $0.5 million, or 51%, from $0.9 million for the year ended December 31, 2020 to $0.4 million for the year ended December 31, 2021.

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

This decrease was primarily due to the low interest rate environment in 2021 and a change in the mix of marketable securities compared to the prior year period, despite higher interest-earning asset balances.

Interest Expense

Interest expense increased $0.4 million, or 254%, from $0.2 million for the year ended December 31, 2019 to $0.6 million for the year ended December 31, 2020.

Interest expense reflects contractual interest, amortization of origination fees and other issuance costs, and accretion of final payment fees on our term loan that funded in October 2019 and was repaid in full in June 2020.

Interest expense of $0.6 million for the year ended December 31, 2020 was comprised of interest expense on our long-term debt under our term credit facility.

We prepaid our outstanding long-term debt under our term credit facility during the second quarter of 2020.

We executed a payoff letter to release all obligations under the term credit facility during the third quarter of 2021.

Loss on Early Repayment of Debt

We had no debt outstanding at December 31, 2021.

Other Expense, Net

Other expense, net was $0.1 million for the year ended December 31, 2021 compared to zero for the year ended December 31, 2020.

The change was due primarily to an increase in foreign exchange losses.

Income Tax Expense

Income tax expense increased by $2.0 million, or 289%, from an income tax benefit of $0.7 million for the year ended December 31, 2019 to income tax expense of $1.3 million for the year ended December 31, 2020.

Income tax expense decreased $1.3 million, or 100%, from $1.3 million for the year ended December 31, 2020 to zero for the year ended December 31, 2021.

Our effective income tax rate was 0% for the year ended December 31, 2021 as compared to 2.0% for the year ended December 31, 2020.

Our effective income tax rate differs from our federal statutory rate of 21% primarily because our losses cannot be benefited due to our full valuation allowance position.

Our effective income tax rate differed from our federal statutory rate of 21% primarily because our losses could not be benefited due to our full valuation allowance position.

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

1 unchanged sentence

entity reimbursed the Australia subsidiary for certain direct development costs.

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

Income tax benefit for the year ended December 31, 2019 included a discrete tax benefit of approximately $1.1 million for the 2017 Australia refundable R&D tax offset.

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

Income tax expense for the year ended December 31, 2020 reflected the sale of intellectual property rights, cost reimbursements and related adjustments to the deferred tax asset, establishment of a valuation allowance and certain uncertain tax position liabilities.

We maintained a full valuation allowance on our tax position at December 31, 2021.

Liquidity and Capital Resources

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Sources of Liquidity

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

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

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

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

In June 2021, pursuant to the Form S-3ASR (File No.

333-251254), we completed an underwritten public offering of 3,046,358 shares of common stock at a public offering price of $37.75 per share and issued an additional 456,953 shares of common stock at a public offering price of $37.75 per share following the underwriters’ exercise of their option to purchase additional shares.

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

In August 2022, we entered into an Open Market Sale Agreement SM (the “Sales Agreement”), pursuant to which we may offer and sell up to $100.0 million of shares of our common stock from time to time in “at-the-market” offerings (the “2022 ATM Facility”).

As of December 31, 2022, no sales were made under the 2022 ATM Facility.

In June 2021, we completed an underwritten public offering of 3,046,358 shares of common stock at a public offering price of $37.75 per share and issued an additional 456,953 shares of common stock at a public offering price of $37.75 per share following the underwriters’ exercise of their option to purchase additional shares.

Net proceeds, after deducting underwriting commission and offering costs paid by us, were $123.8 million.

This Form S-3ASR expires in December 2023.

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”).

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

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

In December 2020, we completed an underwritten public offering of 4,761,904 shares of common stock at a public offering price of $21.00 per share and issued an additional 714,285 shares of our common stock at a price of $21.00 per share following the underwriters’ exercise of their option to purchase additional shares.

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

During the year ended December 31, 2020, we issued 2,483,719 shares under our ATM facility for net proceeds of $41.9 million.

No shares were issued under the ATM facility during the year ended December 31, 2021.

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

This Form S-3 expires in October 2022.

We have received $87.5 million in non-refundable payments from Janssen since the inception of the Janssen License and Collaboration Agreement in 2017 through December 31, 2021, as follows:

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

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

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

In November 2019, we entered into an Open Market Sale Agreement SM (the “Prior Sales Agreement”), pursuant to which we could offer and sell up to $75.0 million of shares of our common stock from time to time in “at-the-market” offerings (the “2019 ATM Facility”).

During the year ended December 31, 2020, we sold 2,483,719 shares under the 2019 ATM Facility for net proceeds of $41.9 million.

No shares were sold under the 2019 ATM Facility during the year ended December 31, 2021.

During the year ended December 31, 2022, we sold 422,367 shares of our common stock under the 2019 ATM Facility for net proceeds of $14.6 million.

The Prior Sales Agreement was terminated in connection with and replaced by the Sales Agreement in August 2022.

We have received a total of $112.5 million in non-refundable payments from Janssen since the inception of the Janssen License and Collaboration Agreement in 2017 through December 31, 2022, as follows:

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

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

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

● During the fourth quarter of 2021, we received $7.5 million milestone payment from Janssen triggered by completion of the data collection for PN-235 Phase 1 activities.

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

Pursuant to the amended and restated License and Collaboration Agreement with Janssen executed July 27, 2021 (the “Restated Agreement”), we will be eligible to receive clinical development, regulatory and sales milestones, if and as achieved.

● In October 2021, we became eligible to receive $7.5 million milestone payment from Janssen triggered by completion of the data collection for JNJ-2113 (formerly known as PN-235) Phase 1 activities, which was received during the fourth quarter of 2021;

● In March 2022, we became eligible to receive a $25.0 million milestone payment in connection with the dosing of the third patient in the Phase 2b clinical trial of JNJ-2113 in moderate-to-severe plaque psoriasis during the first quarter of 2022, which was received during the second quarter of 2022.

We also expect to receive payments for services provided under the collaboration agreement and we may make in-kind payment reimbursements to Janssen for certain costs they have incurred pursuant to the cost sharing terms of the agreement.

Pursuant to the Restated Agreement, we may be eligible to receive clinical development, regulatory and sales milestones, if and when achieved.

Upcoming potential development milestones for second-generation products include:

● $25.0 million for dosing of the third patient in the first Phase 2 clinical trial for any second-generation product for any indication;

● $10.0 million for dosing of the third patient in the first Phase 2 clinical trial for any second-generation product for a second indication.

● $10.0 million upon the dosing of the third patient in the first Phase 2 clinical trial for any second-generation product for a second indication (i.e., an indication different than the indication which triggered the $25.0 million milestone payment received during the first quarter of 2022 described above);

● $50.0 million upon the dosing of the third patient in a Phase 3 clinical trial for a second-generation compound for any indication;

● $15.0 million upon the dosing of the third patient in a Phase 3 clinical trial for a second-generation compound for a second indication;

● $115.0 million upon a Phase 3 clinical trial for a second-generation compound for any indication meeting its primary clinical endpoint.

Capital Requirements

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Our capital expenditures were $0.8 million, $1.1 million and $0.5 million for the years ended December 31, 2022, 2021 and 2020, respectively.

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

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

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

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

Cash used in operating activities is impacted by the timing of when we pay these expenses.

As of the date of this filing, we believe, based on our current operating plan and assumptions that our existing cash, cash equivalents and marketable securities will be sufficient to meet our anticipated operating and capital expenditure requirements for at least the next 12 months.

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 or advance beyond the discovery stage.

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.

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

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

● the costs of and ability to obtain clinical and commercial supplies and any other product candidates we may identify and develop;

We could utilize our available capital resources sooner than we currently expect if, for instance, 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, our newer product clinical trials advance beyond the discovery stage, or various other factors.

We expect that our cash burn will be lower in 2023 due to our research and development expenses decreasing in the near term as we continue to de-prioritize our PN-943 clinical program and streamline certain discovery programs to focus our resources toward progressing our rusfertide program into later stage clinical trials and preparing for commercialization.

We anticipate that we will need to raise substantial additional funding to advance rusfertide through clinical development and toward potential regulatory approval and to develop, acquire, or in-license other potential product candidates.

Our future funding requirements will depend on many factors, including:

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

● the costs of and our ability to obtain clinical and commercial supplies and any other product candidates we may identify and develop;

● our ability to successfully commercialize the product candidates we may identify and develop;

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

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

● the timing, receipt and amount of royalties under the Janssen License and Collaboration Agreement on worldwide net sales of IL23-R antagonists upon regulatory approval or clearance, if any;

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

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

● the timing, receipt and amount of royalties under the Restated Agreement on worldwide net sales of IL-23 receptor antagonist compounds, upon regulatory approval or clearance, if any;

● the amount and timing of sales and other revenues from our current product candidates and any other product candidates we may identify and develop, including the sales price and the availability of adequate third-party reimbursement;

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

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

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

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

● the extent to which we may acquire or in-license other product candidates and technologies;

● costs necessary to attract, hire and retain qualified personnel;

● the costs necessary to attract, hire and retain qualified personnel;

● the costs of maintaining, expanding and protecting our intellectual property portfolio;

● the costs of ongoing general and administrative activities to support the growth of our business.

Adequate additional funding may not be available to us on acceptable terms, or at all.

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

As discussed in Part I, Item1A.“Risk Factors”, 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, among other factors.

A future recession or market correction related to COVID-19 or due to other factors, including significant geopolitical or macroeconomic events, could materially affect our business and our access to credit and financial markets.

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

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

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

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

If we do raise additional capital through public or private equity offerings or convertible debt securities, the ownership interest of our existing stockholders could be diluted, and the terms of these securities

could include liquidation or other preferences that could adversely affect our stockholders’ rights.

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

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

For additional information, see Part I, Item 1A, Risk Factors—“Risks Related to our Financial Position and Capital Requirements”.

The following table includes our cash flow data for the periods indicated (in thousands):

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Consolidated Statements of Cash Flows Data:

(Dollars in thousands)

Cash used in operating activities

Cash used in investing activities

Cash provided by (used in) investing activities

Cash provided by financing activities

Stock-based compensation

(Decrease) increase in deferred revenue - related party

Cash Used in Operating Activities

Cash used in operating activities during the year ended December 31, 2022, was $108.1 million, consisting primarily of our net loss of $127.4 million and a net change of $7.8 million in net operating assets and liabilities, partially offset by certain non-cash items, including $24.2 million of stock-based compensation expense.

The $0.3 million increase in cash flow used in operating activities during the year ended December 31, 2022, as compared to the year ended December 31, 2021, was primarily due to a $1.8 million increase in our net loss, a $4.5 million net change in net operating assets and liabilities, and a $1.8 million net change in other non-cash items, partially offset by a $7.8 million increase in stock-based compensation expense.

Cash used in operating activities during the year ended December 31, 2021, of $107.9 million consisted primarily of our net loss of $125.6 million, partially offset by certain non-cash items including $16.4 million of stock-based compensation expense.

The $35.4 million increase in cash flow used in operating activities during the year ended December 31, 2021, as compared to the year ended December 31, 2020, was primarily due to a $59.4 million increase in our net loss, partially offset by certain non-cash items including an increase of $8.5 million of stock-based compensation expense, and a $14.2 million change in decrease in deferred revenue.

Cash used in operating activities for the year ended December 31, 2020 of $72.5 million consisted primarily of our net loss of $66.2 million and net changes of $19.0 million in net operating assets and liabilities, partially offset by certain non-cash items including $7.9 million of stock-based compensation expense and a $1.4 million decrease in deferred tax asset.

Changes in net operating assets and liabilities included a $27.1 million decrease in deferred revenue, partially offset by a $5.8 million increase in accrued expenses and other payables and a $4.3 decrease in receivable from collaboration partner.

The $31.0 million increase in cash flow used in operating activities during the year ended December 31, 2020, as compared to the year ended December 31, 2019, was primarily due to a $60.4 million change in decrease in deferred revenue, partially offset by an $11.0 million decrease in our net loss, a $15.2 million net increase due to changes in other operating assets and liabilities, and a $2.2 million change in decrease in deferred tax asset.

Cash Used in Investing Activities

Cash Provided by (Used in) Investing Activities

Cash provided by investing activities for the year ended December 31, 2022, was $91.5 million, consisting of proceeds from maturities of marketable securities of $307.1 million, partially offset by purchases of marketable securities of $214.9 million and purchases of property and equipment of $0.8 million.

The $107.3 million increase in cash provided by investing activities for the year ended December 31, 2022, as compared to the year ended December 31, 2021, was primarily related to a decrease of $71.7 million in purchases of marketable securities and an increase of $35.3 million in proceeds from maturities of marketable securities.

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

Cash used in investing activities for the year ended December 31, 2021, was $15.9 million, consisting of purchases of marketable securities of $286.6 million and purchases of property and equipment of $1.1 million, partially offset by proceeds from maturities of marketable securities of $271.8 million.

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

Cash used in investing activities for the year ended December 31, 2020 was $91.0 million, consisting of purchases of marketable securities of $280.0 million and purchases of property and equipment of $0.5 million, partially offset by proceeds from maturities of marketable securities of $189.5 million.

The $37.3 million increase in cash used in investing activities for the year ended December 31, 2020, as compared to the year ended December 31, 2019, was primarily due to an increase of $113.0 million in purchases of marketable securities, partially offset by an increase of $75.3 million of proceeds from maturities of marketable securities.

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

Cash Provided by Financing Activities

Cash provided by financing activities for the year ended December 31, 2021 was $129.9 million, consisting primarily of cash proceeds from our public offerings of common stock of $123.8 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 $6.3 million.

The $117.7 million decrease in cash provided by financing activities for the year ended December 31, 2021, as compared to the year ended December 31, 2020, was primarily due to an $89.5 million decrease in cash proceeds from our public offerings of common stock, a $42.1 million decrease in cash proceeds from ATM sales, and a $3.5 million decrease in proceeds from the issuance of common stock upon exercise of stock options and purchases of common stock under our employee stock purchase plan.

These decreases were partially offset by $10.5 million related to the early repayment of long-term debt in 2020.

Cash provided by financing activities for the year ended December 31, 2020 was $247.6 million, consisting primarily of cash proceeds from our public offerings of common stock of $213.3 million, cash proceeds from ATM sales of $42.1 million, and proceeds from the issuance of common stock upon exercise of stock options and purchases of common stock under our employee stock purchase plan of $2.8 million, partially offset by early repayment of long-term debt of $10.5 million.

The $201.6 million increase in cash provided by financing activities for the year ended December 31, 2020, as compared to the year ended December 31, 2019, was primarily due to an increase of $213.3 million in cash

proceeds from our public offerings of common stock and a $7.6 million increase in cash proceeds from ATM sales, and a decrease of $9.8 million in proceeds received from the issuance of long-term debt, partially offset by $10.5 million related to the repayment of long-term debt in 2021.

Cash provided by financing activities for the year ended December 31, 2022, was $18.8 million, consisting primarily of net cash proceeds from sales of $14.6 million under the 2019 ATM Facility and proceeds from the issuance of common stock upon the exercise of stock options and purchases of common stock under our employee stock purchase plan of $4.4 million.

The $111.1 million decrease in cash provided by financing activities for the year ended December 31, 2022, as compared to the year ended December 31, 2021, was primarily due to a $123.8 million decrease in cash proceeds from our public offerings of common stock, and a $1.8 million decrease in proceeds from the issuance of common stock upon exercise of stock options and purchases of common stock under our employee stock purchase plan.

These decreases were partially offset by $14.6 million increase in cash proceeds from ATM sales.

Cash provided by financing activities for the year ended December 31, 2021, was $129.9 million, consisting primarily of cash proceeds from our public offerings of common stock of $123.8 million and proceeds from the issuance of common stock upon the exercise of stock options and purchases of common stock under our employee stock purchase plan of $6.3 million.

These decreases were partially offset by $10.5 million related to the early repayment of long-term debt in 2020 and a $3.5 million increase in proceeds from the issuance of common stock upon exercise of stock options and purchases of common stock under our employee stock purchase plan.

Contractual Obligations and Other Commitments

In the normal course of business, we enter into agreements with contract service providers to assist in the performance of our R&D and clinical and commercial manufacturing activities.

In the normal course of business, we enter into agreements with contract service providers to assist in the performance of our research and development activities and clinical and commercial manufacturing activities.

Subject to required notice periods and our obligations under binding commitments, we can elect to discontinue the work under these agreements at any time.

We expect to enter into additional clinical development, contract research, clinical and commercial manufacturing, supplier and collaborative research agreements in the future, which may require upfront payments and long-term commitments of capital resources.

We expect to enter into additional clinical development, contract research, clinical and commercial manufacturing, supplier agreements and collaborative research agreements in the future, which may require upfront payments and long-term commitments of capital resources.

Our contractual obligations include minimum lease payments under our operating lease obligations.

On July 2, 2021, we entered into an amendment to our facility lease agreement dated as of March 2017, as amended, to lease approximately 15,000 square feet of additional office space in Newark, California.

On July 2, 2021, we entered into a second amendment to our facility lease agreement dated as of March 2017, to lease approximately 15,000 square feet of additional office space in Newark, California.

See Note 10 to the Consolidated Financial Statements elsewhere in this Annual Report on Form 10-K for additional information.

On July 27, 2021, we entered into an amended and restated License and Collaboration Agreement with 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).

Under the Janssen License and Collaboration Agreement, we share with Janssen certain development, regulatory and compound supply costs.

The actual amounts that we pay Janssen or that Janssen pays us will depend on numerous factors, some of which are outside of our control and some of which are contingent upon the success of certain development and regulatory activities.

Under the Restated Agreement, we share with Janssen certain development, regulatory and compound supply costs.

See Note 3 to the Consolidated Financial Statements elsewhere in this Annual Report on Form 10- K for additional information.

In June 2012, we entered into a Research Collaboration and License Agreement with Zealand Pharma A/S to identify, optimize and develop novel disulfide-rich peptides to discover a hepcidin mimetic.

We amended this agreement on February 28, 2014, at which point Protagonist assumed responsibility for the development program.

On January 23, 2020, we initiated arbitration proceedings with the International Court of Arbitration of the International Chamber of Commerce against Zealand Pharma A/S.

In June 2012, we entered into the Zealand Agreement to identify, optimize and develop novel disulfide-rich peptides to discover a hepcidin mimetic.

We amended the Zealand Agreement on February 28, 2014, at which point we assumed responsibility for the development program.

On January 23, 2020, we initiated arbitration proceedings with the International Court of Arbitration of the International Chamber of Commerce against Zealand.

On August 4, 2021, we and Zealand agreed to resolve the dispute and reached an Arbitration Resolution Agreement.

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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-K

Item 7. Management’s Discussion and Analysis