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Item 1A. Risk Factors

2023-05-04 compared with 2022-11-08 · 97 added, 147 removed, 473 unchanged (34% of the section changed)

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Summary of Risk Factors

The following is a summary of the principal risks that could adversely affect our business, results of operations, and financial condition.

Under “ Risks Related to Clinical Development ” we describe risks related to on our ongoing clinical development efforts.

They include, among others, the following:

● We have no approved products and no historical product revenue, which makes it difficult to assess our future prospects and financial results.

Below is a summary of the principal factors that make an investment in our common stock speculative or risky.

This summary does not address all of the risks that we face.

Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Item 1A.

Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the SEC, before making an investment decision regarding our common stock.

● We have no approved products and no historical commercial revenue, which makes it difficult to assess our future prospects and financial results.

● We are heavily dependent on the success of our product candidates in clinical development.

● Clinical development is a lengthy and expensive process with an uncertain outcome, and failure can occur at any stage of clinical development.

● Our product candidates may cause undesirable side effects or have other properties adversely impacting safety that delay or prevent their regulatory approval, restrict their approved labeling, or otherwise limit their commercial opportunity, including being required by an independent data monitoring committee or regulatory authorities to, delay or halt or clinical trials, or if such side effects or adverse events are sufficiently severe or prevalent, order us to suspend or cease altogether further development of our product candidates.

Under “ Risks Related to our Financial Position and Capital Requirements ” we describe risks associated with our financial position and future capital requirements.

They include, among others, the following:

regulatory authorities to, delay or halt or clinical trials, or if such side effects or adverse events are sufficiently severe or prevalent, order us to suspend or cease altogether further development of our product candidates.

● We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.

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● Raising additional capital may cause dilution to our existing stockholders.

Under “ Risks Related to our Reliance on Third Parties ” we describe risks related to our reliance on third parties.

They include, among others, the following:

● We rely on Janssen Biotech, Inc.

(“Janssen”) to continue the development of product candidates subject to our license and collaboration with Janssen, and to successfully commercialize any resulting products.

● We rely on Janssen to continue the development of product candidates subject to our license and collaboration with Janssen, and to successfully commercialize any resulting products.

● Our existing or future collaborations with third parties may not be successful.

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● We rely on third-party contract manufacturers to manufacture our drug substance and clinical drug product.

Under “ Risks Related to Regulatory Approval ” we describe risks related to the potential regulatory approval required to market our product candidates in the United States or other jurisdictions.

If we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

Under “ Risks Related to Commercialization of our Product Candidates ” we describe risks related to the commercialization of any of our product candidates that are eventually approved for marketing.

● If we are ultimately unable to obtain regulatory approval for our product candidates in the United States or other jurisdictions, our business will be substantially harmed.

● We have no marketing and sales organization and may not be able to effectively market and sell any products or generate product revenue if any of our product candidates are approved for marketing.

Also, if we commercialize our product candidates abroad, we will be subject to the risks of doing business outside of the United States.

Under “ Risks Related to our Business and Industry ” we describe risks related to our business in general, and to our company in the biotechnology and pharmaceutical industry.

They include, among others, the following:

● If we commercialize our product candidates abroad, we will be subject to the risks of doing business outside of the United States.

● We face significant competition from other biotechnology and pharmaceutical companies.

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● Our headquarters is located near known earthquake fault zones.

Under “ Risks Related to our Intellectual Property ” we describe risks related to the intellectual property that is critical to the success of our business.

They include, among others, the following:

● If we are unable to obtain or protect intellectual property rights related to our product candidates and technologies, we may not be able to compete effectively in our markets.

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● Third party claims of intellectual property infringement may prevent or delay our drug discovery and development efforts.

Under “ Risks Related to Ownership of our Common Stock ” we describe risks associated with owning our common stock.

They include, among others, the following:

● Our stock price has been and will likely continue to be volatile and may decline, regardless of our operating performance.

● Any failure to maintain the adequacy of internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock.

● Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others or make it difficult for stockholders to replace members of our board of directors .

Risks Related to Clinical Development

We are a biopharmaceutical company with no approved products and no historical commercial revenue, which makes it difficult to assess our future prospects and financial results.

We are a biopharmaceutical company with a limited operating history as a publicly traded company.

We are a biopharmaceutical company with a somewhat limited operating history as a publicly traded company.

Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of uncertainty.

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Consequently, the ability to accurately assess our future operating results or business prospects is significantly more limited than if we had a longer operating history or approved products on the market.

We expect that our financial condition and operating results will fluctuate significantly from period to period due to a variety of factors, many of which are beyond our control, including the success of our programs, decisions by regulatory bodies, actions taken by competitors and other factors identified in these risk factors.

We expect that our financial condition and operating results will fluctuate significantly from period to period due to a variety of factors, many of which are beyond our control, including the success of our programs, decisions by regulatory bodies, actions taken by competitors or current or future licensees or collaborative partners, market conditions and other factors identified in these risk factors.

Accordingly, the likelihood of our success must be evaluated in light of many potential challenges and variables associated with a clinical-stage biopharmaceutical company, many of which are outside of our control, and past results, including operating or financial results, should not be relied on as an indication of future results.

We are heavily dependent on the success of our product candidates in clinical development, and if any of these products fail to receive regulatory approval or are not successfully commercialized, our business would be adversely affected.

We currently have no product candidates that are in registrational or pivotal clinical trials or are approved for commercial sale, and we may never develop a marketable product.

We currently have no product candidates that are approved for commercial sale, and we may never develop a marketable product.

We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to our current product candidates and the development of other product candidates.

We cannot be certain that our product candidates will receive regulatory approval or, if approved, be successfully commercialized.

The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of our product candidates will be subject to extensive regulation by the FDA and other regulatory authorities in the United States and other countries.

The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of our product candidates will be subject to extensive regulation by the U.S.

Food and Drug Administration (“FDA”) and other regulatory authorities in the United States and other countries.

In addition, even if approved, our pricing and reimbursement will be subject to further review and discussions with payors.

We are not permitted to market any product candidate in the United States until after approval of a new drug application (“NDA”) from the FDA, or in any foreign countries until approval by corresponding regulatory authorities.

We will need to conduct larger, more extensive clinical trials in the

target patient populations to support a potential application for regulatory approval by the FDA or corresponding regulatory authorities.

Those trials, for rusfertide for the treatment of PV or subsequent late-stage product candidates, may not demonstrate the safety and efficacy of our product candidates to support a marketing approval in the United States or other jurisdictions.

Our product candidates require additional clinical development, regulatory approval and secure sources of commercial manufacturing supply.

We will need to successfully conduct and complete large, extensive clinical trials in the target patient populations to support a potential application for regulatory approval by the FDA or corresponding regulatory authorities.

Those trials, such as our ongoing VERIFY Phase 3 trial evaluating rusfertide for the treatment of

PV or subsequent late-stage product candidates, may not demonstrate the safety and efficacy of our product candidates to support a marketing approval in the United States or other jurisdictions.

Our product candidates require additional clinical development, regulatory approval and secure sources of commercial manufacturing supply prior to commercialization.

We cannot assure you that our clinical trials for our product candidates will be initiated or completed in a timely manner or successfully, or at all.

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Moreover, any delay or setback in the development of any product candidate would be expected to adversely affect our business and cause our stock price to fall.

For example, our stock price dropped significantly following the announcement in September 2021 of a full clinical hold imposed by the FDA on our rusfertide clinical studies.

Our stock price also dropped significantly in April 2022 following the announcement of topline data from our Phase 2 clinical trial evaluating PN-943 in ulcerative colitis.

For example, our stock price dropped significantly in September 2021 following the announcement of a full clinical hold imposed by the FDA on our rusfertide clinical studies.

Our stock price also dropped significantly in April 2022 following the announcement of our voluntary withdrawal of Breakthrough Therapy Designation for rusfertide, and the announcement of topline data from our Phase 2 clinical trial evaluating PN-943 in UC.

Clinical development is a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results.

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Any hypothesis formed from pre-clinical or early clinical observations for any of our product candidates may prove to be incorrect, and the data generated in animal models or observed in limited patient populations may be of limited value and may not be applicable in clinical trials conducted under the controlled conditions required by applicable regulatory requirements.

In addition to our planned pre-clinical studies and clinical trials, we expect to have to complete one or more large scale, well-controlled clinical trials to demonstrate substantial evidence of efficacy and safety for each product candidate we intend to commercialize.

In addition to our planned pre-clinical studies and clinical trials, we will be required to complete one or more large scale, well-controlled clinical trials to demonstrate substantial evidence of efficacy and safety for each product candidate we intend to commercialize.

Further, given the patient populations for which we are developing therapeutics, we expect to have to evaluate long-term exposure to establish the safety of our therapeutics in a chronic-dose setting.

We have never conducted a Phase 3 clinical trial or submitted an NDA.

As a result, we have no history or track record to rely on when entering these phases of the development cycle.

We have not yet completed a Phase 3 clinical trial or submitted an NDA.

As a result, we have no corporate history or track record of successfully completing these phases of the development cycle.

Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through pre-clinical studies and initial clinical trials.

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We may experience delays in ongoing clinical trials, and we do not know whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all.

For example, to date we have experienced slower than expected patient enrollment in VERIFY, a global Phase 3 clinical trial of rusfertide in PV, resulting from operational challenges, including site staff shortages, which have continued to delay initial recruitment activities.

For example, we initially experienced slower than expected patient enrollment in VERIFY, a global Phase 3 clinical trial of rusfertide in PV.

Clinical trials can be delayed for a variety of reasons, including if a clinical trial is modified, suspended or terminated by us.

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

For example, in keeping with our organizational prioritization of rusfertide in PV, plans to initiate trials of rusfertide in other indications have been paused.

Clinical trials can also be delayed by the institutional review boards or ethics committees of the institutions in which such clinical trials are being conducted, by a Data Safety Monitoring Board, for such trial or by the FDA or other regulatory authorities.

Such authorities may impose a modification, suspension or termination due to a number of factors.

For example, on September 16, 2021, a full clinical hold by the FDA for the rusfertide clinical studies was triggered by a non-clinical finding in a 26-week rasH2 transgenic mouse model indicating benign and malignant subcutaneous skin tumors.

On October 8, 2021, the FDA removed the full clinical hold on our rusfertide clinical studies and dosing in all clinical studies of rusfertide could be resumed.

Also, in April 2022, the FDA indicated that it intends to rescind Breakthrough Therapy Designation for rusfertide in PV.

For additional information, see the Risk Factor –

“Our product candidates may cause undesirable side effects or have other properties adversely impacting safety that delay or prevent their regulatory approval, restrict their approved labeling, or otherwise limit their commercial opportunity” below.

In addition, there are a significant number of global clinical trials in inflammatory bowel disease and in hematologic disorders that are currently ongoing, especially in Phases 2 and 3, making it highly competitive and challenging to recruit subjects.

For example, our rusfertide clinical studies were subject to a three-week clinical hold by the FDA beginning in September 2021.

The clinical hold was triggered by a non-clinical finding in a 26-week rasH2 transgenic mouse model indicating benign and malignant subcutaneous skin tumors.

Also, in April 2022, the FDA indicated that it intended to rescind Breakthrough Therapy Designation for rusfertide in PV.

For additional information, see the risk factor entitled “O ur product candidates may cause undesirable side effects or have other properties adversely impacting safety that delay or prevent their regulatory approval, restrict their approved labeling, or otherwise limit their commercial opportunity” below.

In addition, there are a significant number of global clinical trials in hematologic disorders that are currently ongoing, especially in Phases 2 and 3, making it highly competitive and challenging to recruit subjects.

Additionally, other companies targeting the same patient populations as our clinical trials for such medicines may make it more difficult for us to complete enrollment in our clinical trials.

Furthermore, any negative results we may report in clinical trials of our product candidates, such as the premature termination of our Phase 2 clinical trial of PTG-100 for the treatment of moderate-to-severe UC, may make it difficult or impossible to recruit and retain patients in other clinical trials of that same product candidate.

Furthermore, any negative results we may report in clinical trials of our product candidate may make it difficult or impossible to recruit and retain patients in other ongoing or subsequent clinical trials of that same product candidate.

Delays or failures in planned patient enrollment or retention may result in increased costs, program delays or both.

In addition, we are subject to risks and uncertainties as a result of the ongoing military conflict in Ukraine and Russia.

A limited number of subjects were enrolled in our PN-943 Phase 2 IDEAL trial at clinical sites in Ukraine and Russia.

On March 3, 2022, due to the ongoing military conflict in this region, we decided to close down our clinical sites in Ukraine and Russia.

The impact of the ongoing military conflict in Ukraine and Russia on any future studies is uncertain at this time.

For example, in 2022 we closed down clinical trial sites in Russia and Ukraine at which a limited number of subjects were enrolled in our PN-943 Phase 2 IDEAL trial.

If we experience material delays in the completion of any clinical trial, the reduction in remaining patent term would harm the commercial prospects for that product candidate and our ability to generate product revenue from any of these product candidates will be delayed.

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Moreover, for our product candidates that are in development for indications for which injectable antibody drugs have been approved, clinical trials for those product candidates may need to show a risk/benefit profile that is competitive with those existing products in order to obtain regulatory approval or, if approved, a product label that is favorable for commercialization.

For example, on September 16, 2021 the Company’s clinical studies for rusfertide were placed on a full clinical hold by the FDA.

On October 8, 2021, per the FDA, the full clinical hold was lifted and dosing in all clinical studies of rusfertide could be resumed.

We provided the FDA with all requested information as the basis for a Complete Response and subsequent removal of the clinical hold.

For example, on September 16, 2021 our clinical studies for rusfertide were placed on a full clinical hold by the FDA.

On October 8, 2021, the FDA lifted the full clinical hold and dosing in all clinical studies of rusfertide could be resumed after we provided the FDA with all requested information as the basis for a Complete Response and subsequent removal of the clinical hold.

In particular, we provided the requested individual patient clinical safety reports, updated the investigator brochure and patient informed consent forms, performed a comprehensive review of the most recent safety database, and included new safety and stopping rules in the study protocols.

We are working closely with trial investigators and clinical trial sites to resume dosing of patients in ongoing clinical trials with rusfertide after patients have been reconsented.

The clinical hold was initially triggered by a recent non-clinical finding in a 26-week rasH2 transgenic mouse model indicating benign and malignant subcutaneous skin tumors.

The clinical hold was initially triggered by a non-clinical finding in a 26-week rasH2 transgenic mouse model indicating benign and

malignant subcutaneous skin tumors.

The rasH2 signal also prompted a re-examination of the four cases of cancer observed across all rusfertide clinical trials involving over 160 patients, and a comprehensive review of the safety database, including cases of suspected unexpected serious adverse reactions.

We have focused our limited resources to pursue particular product candidates and indications, and consequently, we may fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we have historically focused on research programs and product candidates mainly on the development of rusfertide, the product candidates subject to our Janssen collaboration and PN-943.

Going forward, we have no plans to devote further resources to PN-943 as part of our ongoing commitment to optimize and focus resources toward our rusfertide program in PV.

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

As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential.

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We have incurred significant operating losses every year since inception and expect to continue to incur operating losses for the foreseeable future.

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

As of March 31, 2023, we had an accumulated deficit of $570.5 million.

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

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

We do not anticipate generating revenue from sales of products for at least several years, if ever, and we do not yet have any product candidates in registration or pivotal clinical trials.

We do not anticipate generating revenue from sales of products for a number of years, if ever, and we have not yet successfully completed registrational or pivotal clinical trials for our product candidates.

If any of our product candidates fail in clinical trials or do not gain regulatory approval or fail to achieve market acceptance, we may never become profitable.

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We expect to require substantial additional future capital in order to complete clinical development and, if we are successful, to commercialize any of our current product candidates.

Further, in the event our Restated Agreement with Janssen is terminated, we may not receive any additional fees or milestone payments under that agreement.

Absent the funding support from this agreement, our further development of the collaboration product candidates would require significant

additional capital from us, or the establishment of alternative collaborations with third parties, which may not be possible.

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

Further, in the event that the Restated Agreement with Janssen is terminated, we may not receive any additional fees or milestone payments under that agreement.

Absent the funding support obtained under the Restated Agreement, our further development of the collaboration product candidates would require significant additional capital from us, or the establishment of alternative collaborations with third parties, which may not be possible.

As of March 31, 2023, we had cash, cash equivalents and marketable securities of $230.8 million.

Based upon our current operating plan and expected expenditures, we believe that our existing cash, cash equivalents, and marketable securities will be sufficient to fund our operations for at least the next 12 months.

However, we expect that we will need to have access to substantial additional funds in the future in order to complete clinical development or commercialize our product candidates to a point where our operations generate net cash inflows.

However, we expect that

we will need to have access to substantial additional funds in the future in order to complete clinical development or commercialize our product candidates to a point where our operations generate net cash inflows.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our product candidates or technologies.

We may seek additional funding through a combination of equity offerings, debt financings, collaborations and/or licensing arrangements.

We may seek additional funding through a combination of equity offerings, including the use of the 2022 ATM facility, debt financings, collaborations and/or licensing arrangements.

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

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In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our common stock to decline.

In the event that we enter into collaborations and/or licensing arrangements in order to raise capital, we may be required to accept unfavorable terms, including relinquishing or licensing to a third party on unfavorable terms our rights to our proprietary technology platform or product candidates.

In the event that we enter into additional collaborations and/or licensing arrangements in order to raise capital, we may be required to accept unfavorable terms, including relinquishing or licensing to a third party on unfavorable terms our rights to our proprietary technology platform or product candidates.

To the extent that we raise additional capital through the sale of equity securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder.

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Risks Related to our Reliance on Third Parties

If Janssen does not elect to continue the development of PN-235, our business and business prospects would be adversely affected.

PN-235, the product candidate in development pursuant to our Janssen collaboration, may prove to have undesirable or unintended side effects or other characteristics adversely affecting its safety, efficacy or cost effectiveness that could prevent or limit its approval for marketing and successful commercial use, or that could delay or prevent the commencement and/or completion of clinical trials.

If Janssen does not elect to continue the development of JNJ-2113 (formerly known as PN-235), our business and business prospects would be adversely affected.

JNJ-2113, the product candidate in development pursuant to our Janssen collaboration, may prove to have undesirable or unintended side effects or other characteristics adversely affecting its safety, efficacy or cost effectiveness that could prevent or limit its approval for marketing and successful commercial use, or that could delay or prevent the commencement and/or completion of clinical trials.

Under the terms of the Restated Agreement with Janssen, Janssen may terminate the agreement for convenience and without cause on written notice of a certain period.

In addition, prior to any termination of the agreement, Janssen will generally have control over the further clinical development of PN-235 and any other second-generation compounds.

In addition, prior to any termination of the agreement, Janssen will generally have control over the further clinical development of JNJ-2113 and any other licensed compounds.

Janssen’s decisions with respect to such development will affect the timing and availability of potential future payments under the agreement, if any.

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 PTG-200, and further development of PN-232 was also discontinued during the quarter, both in favor of PN-235, a novel peptide with exceptional, low picomolar potency and with superior in vivo stability.

For example, during the fourth quarter of 2021, following a pre-specified interim analysis criteria, a portfolio decision was made by Janssen to stop further development of both PTG-200 and PN-232 in favor of JNJ-2113.

If the Restated Agreement with Janssen is terminated early, or if Janssen’s development activities are terminated early or suspended for an extended period of time, or are otherwise unsuccessful, our business and business prospects would be materially and adversely affected.

We may have disagreements with Janssen during the term of the Janssen License and Collaboration Agreement, and if they are not settled amicably or in the favor of Protagonist, the result may harm our business.

We are subject to the risk of possible disagreements with Janssen regarding the development of PN-235 or other matters under the Restated Agreement with Janssen, such as the interpretation of the agreement or ownership of proprietary rights.

Also, after the period of collaborative development ends under the agreement, Janssen will have sole decision-making authority for product candidates resulting from the collaboration, which could lead to disputes with

We are subject to the risk of possible disagreements with Janssen regarding the development of JNJ-2113 or other matters under the Restated Agreement with Janssen, such as the interpretation of the agreement or ownership of proprietary rights.

Also, because the period of collaborative development under the agreement has ended, Janssen has sole decision-making authority for product candidates resulting from the collaboration, which could lead to disputes with Janssen.

Disagreements with Janssen could lead to litigation or arbitration, which would be expensive and would be time-consuming for our management and employees.

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We do not currently have, nor do we plan to develop, the infrastructure or capability internally to manufacture our drug supplies and we expect to continue to depend on contract manufacturers for the foreseeable future.

As we proceed with the development and potential commercialization of our product candidates, we will need to

increase the scale at which the drug is manufactured which will require the development of new manufacturing processes to potentially reduce the cost of goods.

We will rely on our internal process research and development efforts and those of contract manufacturers to develop the good manufacturing processes (“GMPs”) required for cost-effective, large-scale production.

As we proceed with the development and potential commercialization of our product candidates, we will need to increase the scale at which the drug is manufactured which will require the development of new manufacturing processes to potentially reduce the cost of goods.

We will rely on our internal process research and development efforts and those of contract manufacturers to develop the good manufacturing processes (“GMPs”) required for cost-effective,

large-scale production.

If we and our contract manufacturers are not successful in converting to commercial-scale manufacturing, then our product costs may not be competitive and the development and/or commercialization of our product candidates would be materially and adversely affected.

Moreover, our contract manufacturers are the sole source of supply for our clinical product candidates.

If we were to experience an unexpected loss of supply for any reason, whether as a result of manufacturing, supply or storage issues, natural disasters, the ongoing COVID-19 pandemic or otherwise, we could experience delays, disruptions, suspensions or termination of our clinical trial and planned development program, or be required to restart or repeat, any ongoing clinical trials.

If we were to experience an unexpected loss of supply for any reason, whether as a result of manufacturing, supply or storage issues, natural disasters, the COVID-19 pandemic or otherwise, we could experience delays, disruptions, suspensions or termination of our clinical trial and planned development program, or be required to restart or repeat, any ongoing clinical trials.

We also rely on our contract manufacturers to purchase from third-party suppliers the materials necessary to produce our product candidates for our clinical trials.

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Any of the foregoing possibilities could materially harm the prospects for our product candidates and business and operations.

We may fail to obtain orphan drug designations from the FDA and/or EU for our product candidates, as applicable, and even if we obtain such designations, we may be unable to maintain the benefits associated with orphan drug designation, including the potential for market exclusivity.

We may fail to obtain orphan drug designations from the FDA and/or the EMA for our product candidates, as applicable, and even if we obtain such designations, we may be unable to maintain the benefits associated with orphan drug designation, including the potential for market exclusivity.

Our strategy includes filing for orphan drug designation where available for our product candidates.

Rusfertide has received orphan drug designation for the treatment of patients with PV from the FDA and the European Union (“EU”).

Rusfertide has received orphan drug designation for the treatment of patients with PV from the FDA and the EMA.

Despite this designation, we may be unable to maintain the benefits associated with orphan drug status, including market exclusivity.

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In the United States and some foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval.

For example, in the United States in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, (collectively, the “ACA”) was enacted to increase access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and the health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms.

The law has continued the downward pressure on pharmaceutical pricing, especially under the Medicare program, and increased the industry’s regulatory burdens and operating costs.

There have been executive, judicial and Congressional challenges to certain aspects of the ACA.

For example, former President Trump signed Executive Orders and other directives designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA.

Concurrently, Congress considered legislation to repeal or repeal and replace all or part of the ACA.

While Congress has not passed comprehensive repeal legislation, several bills affecting the implementation of certain taxes under the ACA have been enacted.

The Tax Cuts and Jobs Act of 2017 (the “Tax Act”) included a provision repealing, effective January 1, 2019, the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year.

Additionally, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and the medical device tax and, effective January 1, 2021, also eliminated the health insurance tax.

Further, the Bipartisan Budget Act of 2018 (the “BBA”) among other things, amends the ACA, effective January 1, 2019, to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole.” On December 14, 2018, a Texas U.S.

District Court Judge ruled that the ACA is unconstitutional in its entirety because the “individual mandate” was repealed by Congress as part of the Tax Act.

Additionally, on December 18, 2019, the U.S.

Court of Appeals for the 5th Circuit upheld the District Court ruling that the individual mandate was unconstitutional and remanded the case back to the District Court to determine whether the remaining provisions of the ACA are invalid as well.

Supreme Court is currently reviewing this case, but it is unclear when a decision will be made.

On February 10, 2021, the Biden administration withdrew the federal government’s support for overturning the ACA.

Although the U.S.

Supreme Court has not yet ruled on the constitutionality of the ACA, on January 28, 2021, President Biden issued an executive order to initiate a special enrollment period for purposes of obtaining health insurance coverage through the ACA marketplace, which began on February 15, 2021 and will remain open until August 15, 2021.

The executive order also instructs certain governmental agencies to review and reconsider their existing policies and rules that limit access to healthcare, including among others, reexamining Medicaid demonstration projects and waiver programs that include work requirements, and policies that create unnecessary barriers to obtaining access to health insurance coverage through Medicaid or the ACA.

It is unclear how the Supreme Court ruling, other such litigation and the healthcare reform measures of the Biden administration will impact the ACA and our business.

In addition, other legislative changes have been proposed and adopted in the United States since the ACA was enacted.

These changes included aggregate reductions to Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013 and, due to subsequent legislative amendments to the statute, including the BBA, will remain in effect through 2030 unless additional action is taken by Congress.

COVID-19 relief legislation suspended the 2% Medicare sequester from May 1, 2020 through December 31, 2021.

In January 2013, the American Taxpayer Relief Act of 2012 was signed into law, which, among other things, further reduced Medicare payments to several types of providers and increased the statute of limitations period in which the government may recover overpayments to providers from three to five years.

Heightened governmental scrutiny over the manner in which manufacturers set prices for their marketed products has resulted in several recent Congressional inquiries and proposed and enacted federal and state legislation designed to, among other things, bring more transparency to product pricing, review the relationship between pricing and manufacturer patient programs, and reform government program reimbursement methodologies for products.

For example, on July 24, 2020 and September 13, 2020, the Trump administration announced several executive orders related to prescription drug pricing that attempt to implement several of the administration’s proposals.

The FDA also released a final rule, effective November 30, 2020, implementing a portion of the importation executive order providing guidance for states to build and submit importation plans for drugs from Canada.

Further, on November 20, 2020, HHS finalized a regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law.

The implementation of the rule has been delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response to ongoing litigation.

The rule also creates a new safe harbor for price reductions reflected at the point-of-sale, as well as a new safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers, the implementation of which have also been delayed until January 1, 2023.

On November 20, 2020, the Centers for Medicare & Medicaid Services (“CMS”) issued an interim final rule implementing former President Trump’s Most Favored Nation executive order, which would tie Medicare Part B payments for certain physician-administered drugs to the lowest price paid in other economically advanced countries, effective January 1, 2021.

On December 28, 2020, the United States District Court in Northern California issued a nationwide preliminary injunction against implementation of the interim final rule.

At the state level, legislatures have become increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing.

The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability or commercialize our product candidates, if approved.

We expect that additional state and federal healthcare reform measures will be adopted in the future, particularly in light of the new presidential administration, any of which could limit the amounts that federal and state governments will pay for healthcare therapies, which could result in reduced demand for our product candidates or additional pricing pressures.

Most recently, on August 16, 2022, President Biden signed into law the Inflation Reduction Act of 2022 (“IRA”) which, among other provisions, included several measures intended to lower the cost of prescription drugs and related healthcare reforms.

We cannot be sure whether additional legislation or rulemaking related to the IRA will be issued or enacted, or what impact, if any, such changes will have on the profitability of any of our drug candidates, if approved for commercial use, in the future.

Further, it is possible that additional governmental action is taken in response to the COVID-19 pandemic.

We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare therapies, which could result in reduced demand for us.

Legislative and regulatory proposals have also been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products.

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Our efforts, or those of any strategic licensing or collaboration partner, to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources, may be under-resourced compared to large well-funded pharmaceutical entities and may never be successful.

If ay product candidates we may develop in the future are approved but fail to achieve an adequate level of acceptance by physicians, patients, third-party payors and others in the medical community, we will not be able to generate sufficient revenue to become or remain profitable.

If ay product candidates we may develop in the future are approved but fail to achieve an adequate level of acceptance by physicians,

patients, third-party payors and others in the medical community, we will not be able to generate sufficient revenue to become or remain profitable.

Risks Related to our Business and Industry

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If our competitors succeed in obtaining FDA, EMA or other regulatory approval or discovering, developing and commercializing drugs before we do, there would be a material adverse impact on the future prospects for our product candidates and business.

For example, in June 2020, the FDA accepted a Biologics License Application for ropeginterferon alfa-2b for use in treatment for patients with PV in the absence of symptomatic splenomegaly from PharmaEssentia Corporation, the manufacturer of the novel pegylated interferon.

The FDA approved this application in November 2021.

For example, in November 2021, the FDA approved a Biologics License Application for ropeginterferon alfa-2b for use in treatment for patients with PV in the absence of symptomatic splenomegaly from PharmaEssentia Corporation, the manufacturer of the novel pegylated interferon.

We also face competition in certain instances from the existing standards of care, which may be significantly less expensive than our expected drug prices.

For example, one widely used treatment for PV and hereditary hemochromatosis (“HH”) patients is phlebotomy and/or chelation therapy.

For example, one widely used treatment for patients is phlebotomy and/or chelation therapy.

While patients may not like therapies that involve frequent blood draws, these therapies are inexpensive and may present pricing challenges for us if our drug candidates are successfully developed and approved.

The COVID-19 pandemic has and could continue to adversely impact our business, including our ongoing and planned clinical trials and pre-clinical and discovery research.

The extent to which the ongoing COVID-19 pandemic will continue to impact our business is uncertain and cannot be predicted.

The extent to which the COVID-19 pandemic will continue to impact our business is uncertain and cannot be predicted.

The pandemic’s impact on our business will depend on a variety of factors, including the timing, extent, effectiveness and durability of vaccine programs or other treatments, new or continuing travel and other restrictions and public health measures, such as social distancing, business closures or disruptions, and the development and spread of COVID-19 variants.

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● delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff, or maintaining ongoing operations at such sites;

● diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of clinical trials;

● interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others or interruption of clinical trial subject visits and trial procedures, which may impact the integrity of subject data and clinical trial endpoints;

● limitations in resources, including our employees, that would otherwise be focused on the conduct of our business or our current or planned clinical trials or pre-clinical research, including because of sickness, the desire to avoid contact with large groups of people or restrictions on movement or access to our facility as a result of government-imposed “shelter-in-place” or similar working restrictions;

● interruptions or delays in the operations of the U.S.

Food and Drug Administration (“FDA”) or other regulatory authorities, which may impact review and approval timelines;

● delays in manufacturing, receiving the supplies, materials and services needed to conduct clinical trials and pre-clinical research.

● changes in regulations as part of a response to the COVID-19 pandemic which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs or require us to discontinue the clinical trial altogether;

● delays in necessary interactions with regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or furloughs of government or contractor personnel.

While the extent of the impact of the COVID-19 pandemic on our business and financial results is uncertain, a continued and prolonged public health crisis such as the COVID-19 pandemic could have a material negative impact on our business, financial condition, and operating results.

Unstable market and economic conditions, including elevated and sustained inflation, may have serious adverse consequences on our business, financial condition and stock price.

As has been widely reported, we are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by domestic and global monetary and fiscal policy, geopolitical instability, an ongoing military conflict between Russia and Ukraine, and historically high domestic and global inflation.

As has been widely reported, we are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by domestic and global monetary and fiscal policy, geopolitical instability, including an ongoing military conflict between Russia and Ukraine and the rising tensions between China and Taiwan, and historically high domestic and global inflation.

In particular, the conflict in Ukraine has exacerbated market disruptions, including significant volatility in commodity prices, as well as supply chain interruptions, and has contributed to record inflation globally.

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

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

A future recession or market correction or other significant geopolitical events could materially affect our business and the value of our common stock.

Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions.

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In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive these difficult economic times, which could directly affect our ability to attain our operating goals.

We maintain our cash at financial institutions, often in balances that exceed federally-insured limits.

The failure of financial institutions could adversely affect our ability to pay our operational expenses or make other payments.

Our cash held in non-interest-bearing and interest-bearing accounts exceeds the Federal Deposit Insurance Corporation (FDIC) insurance limits.

If such banking institutions were to fail, we could lose all or a portion of those amounts held in excess of such insurance limitations.

For example, the FDIC took control of Silicon Valley Bank on March 10, 2023.

The Federal Reserve subsequently announced that account holders would be made whole.

However, the FDIC may not make all account holders whole in the event of future bank failures.

In addition, even if account holders are ultimately made whole with respect to a future bank failure, account holders’ access to their accounts and assets held in their accounts may be substantially delayed.

Any material loss that we may experience in the future or inability for a material time period to access our cash and cash equivalents could have an adverse effect on our ability to pay our operational expenses or make other payments, which could adversely affect our business.

If we fail to comply with state and federal healthcare regulatory laws, we could face substantial penalties, damages, fines, disgorgement, integrity oversight and reporting obligations, exclusion from participation in governmental healthcare programs, and the curtailment of our operations, any of which could adversely affect our business, operations, and financial condition.

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● the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”);

on HIPAA-covered entities, their business associates as well as their covered subcontractors with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

● HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and their implementing regulations, which also imposes obligations, including mandatory contractual terms, on HIPAA-covered entities, their business associates as well as their covered subcontractors with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

● the federal civil monetary penalties statute;

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Any or all of these factors may limit our ability to continue to attract and retain high quality personnel, which could negatively affect our ability to successfully develop and commercialize product candidates and to grow our business and operations as currently contemplated.

We expect to expand the size of our organization, and we may experience difficulties in managing this growth.

As of September 30, 2022, we had 122 full-time equivalent employees, including 99 full-time equivalent employees engaged in research and development.

We expect to expand the size of our organization in the future, and we may experience difficulties in managing this growth.

As of March 31, 2023, we had 103 full-time equivalent employees, including 80 full-time equivalent employees engaged in research and development.

As our development and commercialization plans and strategies develop, we expect to need additional managerial, operational, scientific, sales, marketing, research, development, regulatory, manufacturing, financial and other resources.

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Our business is increasingly dependent on critical, complex and interdependent information technology systems, including Internet-based systems, to support business processes as well as internal and external communications.

The size and complexity of our internal computer systems and those of our CROs, contract manufacturers, collaboration partner, and other third parties on which we rely may make them potentially vulnerable to breakdown, telecommunications and electrical failures, malicious intrusion such as ransomware and computer viruses that may result in the impairment of key business processes.

breakdown, telecommunications and electrical failures, malicious intrusion such as ransomware and computer viruses that may result in the impairment of key business processes.

Our systems are potentially vulnerable to data security breaches, by employees or others, that may expose sensitive data to unauthorized persons.

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We currently carry clinical trial liability insurance for our clinical trials.

Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage.

Although we maintain such

insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage.

Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage.

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The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford medications and therapies.

organizations, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors.

Sales of any of our product candidates that receive marketing approval will depend substantially, both in the United States and internationally, on the extent to which the costs of our product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors.

If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize our product candidates.

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Our granted U.S.

patents covering PTG-200 and PN-943 expire in 2035, and our granted U.S.

patent covering rusfertide expires in 2034.

patent covering rusfertide expires in 2034, but is eligible for extension of up to five years for a portion of the time spent in development.

Although the life of a patent can be increased based on certain delays caused by the U.S.

Patent and Trademark Office (the “PTO”), this increase can be reduced or eliminated based on certain delays caused by the patent applicant during patent prosecution.

If we encounter delays in our clinical trials

or in gaining regulatory approval, the period of time during which we could market any of our product candidates under patent protection, if approved, would be reduced.

If we encounter delays in our clinical trials or in gaining regulatory approval, the period of time during which we could market any of our product candidates under patent protection, if approved, would be reduced.

We may not be able to protect our intellectual property rights throughout the world.

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For example, we primarily rely on trade secrets and confidentiality agreements to protect our peptide therapeutics technology platform.

Any disclosure to or misappropriation by third parties of our confidential proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our competitive position in our market.

position in our market.

If we are unable to protect the confidentiality of our trade secrets and proprietary know-how or if competitors independently develop viable competing products, our business and competitive position may be harmed.

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Issued patents and patent applications may be challenged in the courts and in the patent office in the United States and abroad.

An adverse determination in any such challenge could prevent the issuance of, reduce the scope of, invalidate or render unenforceable our patent rights, result in the loss of exclusivity, or limit our ability to stop others

from using or commercializing our platform technology and products.

Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

Any issued patents covering our product candidates, including any patent that may issue as a result of our pending or future patent applications, could be found invalid or unenforceable if challenged in court in the United States or abroad.

As more groups become engaged in scientific research and product development in fields related to our product candidates, such as IL-23R, α4β7 integrin or hepcidin mimetics, the risk of our patents, or patents that we have in-licensed, being challenged through patent interferences, derivation proceedings, oppositions, re-examinations, litigation or other means will likely increase.

As more groups become engaged in scientific research and product development in fields related to our product candidates, such as hepcidin mimetics or IL-23R, the risk of our patents, or patents that we have in-licensed, being challenged through patent interferences, derivation proceedings, oppositions, re-examinations, litigation or other means will likely increase.

An adverse outcome in a patent dispute could have a material adverse effect on our business by:

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There may be applications now pending of which we are unaware that may later result in issued patents that may be infringed by the practice of our peptide therapeutics technology platform or the manufacture, use or sale of our product candidates.

or formulation itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire.

If any third-party patents were to be held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final product or formulation itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire.

As our industry expands and more patents are issued, the risk increases that our product candidates or technologies may give rise to claims of infringement of the patent rights of others.

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Our stock price has fluctuated in the past and is likely to be volatile in the future.

From January 1, 2021 through September 30, 2022, the reported sale price of our common stock has fluctuated between $6.91 and $50.54 per share.

From January 1, 2023 through March 31, 2023, the reported sale price of our common stock has fluctuated between $10.62 and $25.69 per share.

The stock market in general and the market for biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies.

As a result of this volatility, investors may experience losses on their investment in our common stock, including due to the factors discussed in these “Risk Factors” and elsewhere in this Annual Report.

Volatility in our share price could subject us to securities class action litigation.

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If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

We are obligated to develop and maintain proper and effective internal controls over financial reporting and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock.

We are required to develop and maintain proper and effective internal controls over financial reporting and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock.

We are required, pursuant to Section 404 of the Sarbanes-Oxley Act (Section 404), to furnish a report by management on the effectiveness of our internal control over financial reporting.

This assessment needs to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting.

If we have a material weakness, we would receive an adverse opinion regarding our internal control over financial reporting from our independent registered accounting firm.

If we have a material weakness and our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting, we would receive an adverse opinion.

We currently do not have an internal audit group, and we may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and continue the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404.

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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-Q

Item 1A. Risk Factors