What changed in this filing

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Item 2. Management’s Discussion and Analysis

2023-08-03 compared with 2023-05-04 · 128 added, 103 removed, 193 unchanged (54% of the section changed)

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in the United States and other jurisdictions.

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

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

Our clinical programs fall into two broad categories of diseases;

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● REVIVE, a Phase 2 proof of concept (“POC”) trial, was initiated in the 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 for 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

Rusfertide restart restored therapeutic benefits.

Following a brief clinical hold, 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.

We completed enrollment of patients in the first quarter of 2022 and 70 patients were enrolled through the end of the randomized withdrawal 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 for patients diagnosed with PV and with routinely elevated hematocrit levels (>48%), was initiated during the first quarter of 2021, and the 52-week trial was completed during the second quarter of 2023.

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

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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.

Data from the REVIVE trial presented at the European Hematology Association Congress in June 2023 suggested that rusfertide treatment results in highly statistically significant reduction in the need for therapeutic phlebotomy in phlebotomy-dependent patients, leading to rapid, sustained and durable control of hematocrit levels below 45%.

Rusfertide was well tolerated, with localized injection site reactions comprising the majority of adverse events.

VERIFY, a global double-blind, placebo-controlled 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.

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)

We expect enrollment completion in the first quarter of 2024.

JNJ-2113 (formerly 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.

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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.

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.

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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.

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

In July 2023, we announced updated positive topline results from the trial, which were presented at the World Congress of Dermatology in Singapore.

JNJ-2113 achieved the study’s primary and secondary efficacy endpoints.

A statistically significant greater proportion of patients who received JNJ-2113 achieved PASI-75 as well as PASI-90 and PASI-100

(90% and 100% improvement, respectively, in skin lesions as measured by the PASI) responses compared to placebo at Week 16 in all five of the trial’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.

Janssen has announced their plans to initiate a Phase 3 registrational study in JNJ-2113 moderate-severe plaque psoriasis for adult patients 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 $50.0 million and $115.0 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 FRONTIER 2, a long-term extension study.

A Phase 1 trial of an immediate release formulation of JNJ-2113 in healthy 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, ulcerative colitis (“UC”) and Crohn’s disease (“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 first 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 primarily 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 already received as of today.

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

The filing of a New Drug Application (“NDA”) for JNJ-2113 with the U.S.

Food and Drug Administration would qualify us for a milestone payment of $35.0 million, and approval of the NDA by the FDA would qualify us for a milestone payment of $50.0 million, respectively.

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, which was completed in the second quarter of 2023, and FRONTIER 2, a long-term extension study.

Janssen has announced their plans to initiate a separate Phase 2b trial of JNJ-2113 in ulcerative colitis (“UC”), a second indication.

Advancement of JNJ-2113 into a Phase 2 and a Phase 3 study in a second indication would qualify us for milestone payments of $10.0 million and $15.0 million, respectively.

We remain eligible for up to approximately $855.0 million in future development and sales milestone payments, inclusive of those discussed above, in addition to the $112.5 million in nonrefundable payments from Janssen already received to date.

We also remain eligible to receive upward tiering royalties on net product sales at percentages ranging from six percent to ten percent, with ten percent being the royalty rate for over $4.0 billion in net sales.

PN-943 is a wholly owned, investigational, orally delivered, gut-restricted alpha 4 beta 7 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 included a 12-week induction period and a 40-week extended treatment period, which have been completed.

We completed a Phase 2 trial of PN-943 in patients with moderate to severe UC in early 2023.

We do not intend to dedicate further internal resources to clinical development or contract manufacturing activities for our PN-943 clinical program.

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

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

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.

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

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 Update

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 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, 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 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, 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.

We are currently operating in a period of economic uncertainty and capital markets disruption, which has been impacted by the COVID-19 pandemic, domestic and global monetary and fiscal policy, geopolitical instability, including the ongoing military conflict between Russia and Ukraine and rising tensions between China and Taiwan, a recessionary environment, historically high domestic and global inflation and failures of banking and other financial institutions.

We have experienced delays in our existing and planned clinical trials due to worldwide impacts related to the COVID-19 pandemic, and our future results of operations and liquidity could be adversely impacted by outbreaks of disease, epidemics and pandemics, including further delays in existing and planned clinical trials, continued difficulty in recruiting patients for these clinical trials, delays in manufacturing and collaboration activities and supply chain disruptions.

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 regional banks in the United States between March and May of 2023 has given rise to uncertainty in the security of amounts in deposit accounts uninsured by the Federal Deposit Insurance Corporation.

Also, the failure of Silicon Valley Bank and other regional banks in the United States during the first half of 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.

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 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.

Our net loss was $33.7 million and $20.9 million for the three months ended March 31, 2023 and 2022, respectively.

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

Our net loss was $38.5 million and $72.2 million for the three and six months ended June 30, 2023, respectively.

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

As of June 30, 2023, we had an accumulated deficit of $608.9 million.

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

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was a significant (greater than 5%) stockholder of the Company, and both companies are subsidiaries of Johnson & Johnson.

2021, we entered into the Restated Agreement (“Restated Agreement”) with Janssen, which amends and restates the Original Agreement, as amended by the First Amendment.

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

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

There have been no material changes to our critical accounting policies during the three months ended March 31, 2023, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report for the year ended December 31, 2022 filed with the SEC on March 15, 2023.

There have been no material changes to our critical accounting policies during the three and six months ended June 30, 2023, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report for the year ended December 31, 2022 filed with the SEC on March 15, 2023.

Components of Our Results of Operations

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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.

We expect our research and development expenses to decrease in the near term as we focus our resources toward progressing our rusfertide program into later stage clinical trials and preparing for commercialization.

We expect our second half 2023 research and development expenses to remain relatively flat as compared to the first half of 2023 as we continue to focus our resources toward progressing our rusfertide program into later stage clinical trials and preparing for commercialization.

We do not intend to dedicate further internal resources to clinical development or contract manufacturing activities for our PN-943 clinical program.

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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.

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

Interest income consists of interest earned on our cash, cash equivalents and marketable securities, which is comprised of contractual interest, premium amortization and discount accretion.

Other (Expense) Income, Net

Other (expense) income, net consists primarily of amounts related to foreign exchange gains and losses and related items.

Other Expense, Net

Other expense, net consists primarily of amounts related to foreign exchange gains and losses and related items.

Results of Operations

Comparison of the Three Months Ended March 31, 2023 and 2022

Three Months Ended March 31,

Comparison of the Three Months Ended June 30, 2023 and 2022

Three Months Ended

(Dollars in thousands)

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Interest income

Other (expense) income, net

Other expense, net

*Percentage not meaningful

(1) Includes $4.6 million and $3.3 million of non-cash stock-based compensation expense for the three months ended March 31, 2023 and 2022, respectively.

(2) Includes $3.0 million and $2.6 million of non-cash stock-based compensation expense for the three months ended March 31, 2023 and 2022, respectively.

(1) Includes $4.8 million and $4.1 million of non-cash stock-based compensation expense for the three months ended June 30, 2023 and 2022, respectively.

(2) Includes $3.5 million and $2.7 million of non-cash stock-based compensation expense for the three months ended June 30, 2023 and 2022, respectively.

License and Collaboration Revenue

License and collaboration revenue decreased $25.7 million, or 100%, from $25.7 million for the three months ended March 31, 2022 to zero for the three months ended March 31, 2023.

License and collaboration revenue for the first quarter of 2022 included a $25.0 million milestone payment we earned following the dosing of the third patient in the FRONTIER 1 clinical trial for JNJ-2113.

License and collaboration revenue decreased $0.9 million, or 100%, from $0.9 million for the three months ended June 30, 2022 to zero for the three months ended June 30, 2023.

License and collaboration revenue for three months ended June 30, 2022 was primarily related to the transaction price recognized under the Restated Agreement based on proportional performance.

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

We determined that the transaction price of the initial performance obligation under the Restated Agreement was $131.7 million as of June 30, 2022, an increase of $0.2 million from the transaction price of $131.5 million as of March 31, 2022.

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

The transaction price as of June 30, 2022 included $112.5 million of nonrefundable payments received to date, $17.9 million of reimbursement from Janssen for services performed for IL-23 receptor antagonist compound research costs and other services, and variable consideration consisting of $8.2 million of development cost reimbursement from Janssen, partially offset by $6.9 million of net cost reimbursement due to Janssen for services performed.

Research and Development Expenses

Three Months Ended March 31,

Three Months Ended

(Dollars in thousands)

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Total research and development expenses

Research and development expenses decreased $8.9 million, or 25%, from $36.3 million for the three months ended March 31, 2022 to $27.4 million for the three months ended March 31, 2023.

*Percentage not meaningful

Research and development expenses decreased $1.4 million, or 4%, from $34.6 million for the three months ended June 30, 2022 to $33.2 million for the three months ended June 30, 2023.

The decrease was primarily due to (i) a decrease of $13.4 million in expenses for the PN-943 program where further development work was de-prioritized to optimize and focus resources toward the rusfertide program in PV, and (ii) a decrease of $1.1 million in expenses

related to pre-clinical and drug discovery research expense, partially offset by (iii) an increase of $13.7 million in rusfertide clinical and contract manufacturing expenses primarily for the Phase 3 VERIFY clinical trial.

We had 81 and 101 full-time equivalent research and development employees as of June 30, 2023 and 2022, respectively.

Research and development personnel-related expenses for the three months ended June 30, 2023 increased by $0.5 million as compared to the three months ended June 30, 2022 due primarily to an increase in stock-based compensation expense.

General and Administrative Expenses

General and administrative expenses increased $1.5 million, or 19%, from $7.7 million for the three months ended June 30, 2022 to $9.2 million for the three months ended June 30, 2023 primarily due to increases in payroll and stock-based compensation and general expenses.

The increase in personnel expenses was primarily due to an increase in stock-based compensation expense.

We had 25 and 26 full-time equivalent general and administrative employees as of June 30, 2023 and 2022, respectively.

Interest Income

Interest income increased $3.4 million from $0.5 million for the three months ended June 30, 2022 to $3.9 million for the three months ended June 30, 2023.

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

Comparison of the Six Months Ended June 30, 2023 and 2022

Six Months Ended

(Dollars in thousands)

License and collaboration revenue

Operating expenses:

Research and development (1)

General and administrative (2)

Total operating expenses

Loss from operations

Interest income

Other expense, net

*Percentage not meaningful

(1) Includes $9.4 million and $7.4 million of non-cash stock-based compensation expense for the six months ended June 30, 2023 and 2022, respectively.

(2) Includes $6.5 million and $5.3 million of non-cash stock-based compensation expense for the six months ended June 30, 2023 and 2022, respectively.

License and Collaboration Revenue

License and collaboration revenue decreased $26.6 million, or 100%, from $26.6 million for the six months ended June 30, 2022 to zero for the six months ended June 30, 2023.

License and collaboration revenue for the six months ended June 30, 2022 included a $25.0 million milestone payment we earned following the dosing of the third patient in the FRONTIER 1 clinical trial for JNJ-2113.

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

Research and Development Expenses

Six Months Ended

(Dollars in thousands)

Clinical and development expense — rusfertide (PTG-300)

Clinical and development expense — PN-943

Clinical and development expense — JNJ-2113 (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

Total research and development expenses

Research and development expenses decreased $10.3 million, or 15%, from $70.9 million for the six months ended June 30, 2022 to $60.6 million for the six months ended June 30, 2023.

The decrease was primarily due to (i) a decrease of $28.2 million in expenses for the PN-943 program where further development work was de-prioritized to optimize and focus resources toward the rusfertide program in PV, and (ii) a decrease of $3.1 million in expenses related to pre-clinical and drug discovery research expense, partially offset by (iii) an increase of $21.9 million in rusfertide clinical and contract manufacturing expenses primarily for the Phase 3 VERIFY clinical trial.

We do not intend to dedicate further internal resources to clinical development or contract manufacturing activities for our PN-943 clinical program.

We had 80 and 97 full-time equivalent research and development employees as of March 31, 2023 and 2022, respectively.

Research and development personnel-related expenses for the three months ended March 31, 2023 increased by $0.7 million as compared to the three months ended March 31, 2022, including an increase of $1.3 million in stock-based compensation expense partially offset by a decrease of $0.6 million in other personnel-related expenses.

We had 81 and 101 full-time equivalent research and development employees as of June 30, 2023 and 2022, respectively.

Research and development personnel-related expenses for the six months ended June 30, 2023 increased by $1.2 million as compared to the six months ended June 30, 2022 due to an increase of $2.0 million in stock-based compensation expense, partially offset by a decrease of $0.8 million in other personnel-related expenses.

General and Administrative Expenses

General and administrative expenses decreased $1.9 million, or 18%, from $10.5 million for the three months ended March 31, 2022 to $8.6 million for the three months ended March 31, 2023 due primarily to one-time costs incurred during the first quarter of 2022.

We had 23 and 25 full-time equivalent general and administrative employees as of March 31, 2023 and 2022, respectively.

General and administrative expenses decreased $0.4 million, or 2%, from $18.2 million for the six months ended June 30, 2022 to $17.8 million for the six months ended June 30, 2023 due primarily to one-time costs incurred during the first quarter of 2022, partially offset by an increase in stock-based compensation expense during the current year period.

We had 25 and 26 full-time equivalent general and administrative employees as of June 30, 2023 and 2022, respectively.

Interest Income

Interest income increased $2.3 million from $0.2 million for the three months ended March 31, 2022 to $2.5 million for the three months ended March 31, 2023.

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

Interest income increased $5.7 million from $0.7 million for the six months ended June 30, 2022 to $6.4 million for the six months ended June 30, 2023.

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

Liquidity and Capital Resources

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Historically, we have funded our operations primarily from net proceeds from the sale of shares of our common stock and the 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 could offer and sell up to $100.0 million of shares of our common stock from time to time in the “at-the-market” offerings (the “2022 ATM Facility”).

As of and for the three months ended March 31, 2023, we sold 1,749,199

shares of our common stock under the 2022 ATM Facility for net proceeds of $24.3 million, after deducting issuance costs.

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 the “at-the-market” offerings (the “2019 ATM Facility”).

In April 2023, we completed an underwritten public offering of 5,000,000 shares of our common stock at a public offering price of $20.00 per share and issued an additional 750,000 shares of common stock at a price of $20.00

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 approximately $107.8 million.

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”).

There were no sales under the 2022 ATM Facility during the year ended December 31, 2022.

During the three months ended March 31, 2023, we sold 1,749,199 shares of our common stock under the 2022 ATM Facility for net proceeds of $24.3 million, after deducting issuance costs.

There were no sales of our common stock under the 2022 ATM Facility during the three months ended June 30, 2023.

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, 2022, we sold 422,367 shares of our common stock under the 2019 ATM Facility for net proceeds of $14.6 million, after deducting issuance costs.

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● 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;

● In October 2021, we became eligible to receive a $7.5 million milestone payment 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 October 2021, we became eligible to receive a $7.5 million milestone payment triggered by completion of the data collection for JNJ-2113 (formerly 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.

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Upcoming potential development milestones for second-generation products include:

● $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 second 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;

● $35.0 million upon the filing of a New Drug Application (“NDA”) for a second-generation compound with the U.S.

Food and Drug Administration (the “FDA”);

● $50.0 million upon FDA approval of an NDA for a second-generation compound;

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

● $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.

Capital Requirements

As of March 31, 2023, we had $230.8 million of cash, cash equivalents and marketable securities and an accumulated deficit of $570.5 million.

Our capital expenditures for the three months ended March 31, 2023 were $10,000.

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

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 to operating activities is impacted by the timing of when we pay these expenses.

As of June 30, 2023, we had $313.4 million of cash, cash equivalents and marketable securities and an accumulated deficit of $608.9 million.

Our capital expenditures were $0.2 million and $0.8 million for the six months ended June 30, 2023 and the year ended December 31, 2022, respectively.

Our primary uses of cash are to fund our operating expenses, including 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.

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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 focus our resources toward progressing our rusfertide program into later stage clinical trials and preparing for commercialization.

We expect that our cash burn will be lower in 2023 due to our annual research and development expenses decreasing in the near term as we continue to focus our resources toward progressing our rusfertide program into later stage clinical trials and preparing for commercialization.

We do not intend to dedicate further internal resources to clinical development or contract manufacturing activities for our PN-943 clinical program.

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“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, geopolitical instability and banking and other financial institution failures, 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.

A future recession or market correction, including those due to 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.

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

Three Months Ended March 31,

Six Months Ended

Condensed Consolidated Statements of Cash Flows Data:

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Cash used in operating activities

Cash provided by (used in) investing activities

Cash provided by investing activities

Cash provided by financing activities

1 unchanged sentence

Cash Used in Operating Activities

Cash used in operating activities for the three months ended March 31, 2023 was $34.3 million, consisting primarily of our net loss of $33.7 million and a net change of $8.0 million in net operating assets and liabilities, partially offset by certain non-cash items, including $7.6 million of stock-based compensation expense.

The $3.3 million decrease in cash flow used in operating activities during the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, was primarily due to a $15.9 million net change in operating assets and liabilities and a $1.6 million increase in stock-based compensation expense, partially offset by a $12.8 million increase in our net loss.

Cash Provided by (Used in) Investing Activities

Cash provided by investing activities for the three months ended March 31, 2023 was $9.8 million, consisting of proceeds from maturities of marketable securities of $37.9 million, partially offset by purchases of marketable securities of $28.1 million.

The $14.3 million increase in cash provided by investing activities for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, was primarily related to a decrease of $27.8 million in purchases of marketable securities, partially offset by a $13.7 million decrease in proceeds from maturities of marketable securities.

Cash used in operating activities for the six months ended June 30, 2023 was $60.6 million, consisting primarily of our net loss of $72.2 million and a net change of $4.0 million in net operating assets and liabilities, partially offset by certain non-cash items, including $15.9 million of stock-based compensation expense.

The $9.3 million increase in cash flow used in operating activities during the six months ended June 30, 2023, as compared

to the six months ended June 30, 2022, was primarily due to a $10.2 million increase in our net loss and a $2.6 million increase in discount accretion on marketable securities, partially offset by a $3.2 million increase in stock-based compensation expense.

Cash Provided by Investing Activities

Cash provided by investing activities for the six months ended June 30, 2023 was $35.6 million, consisting of proceeds from maturities of marketable securities of $70.0 million, partially offset by purchases of marketable securities of $34.1 million.

The $5.3 million increase in cash provided by investing activities for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily related to a decrease of $68.0 million in purchases of marketable securities, partially offset by a $63.0 million decrease in proceeds from maturities of marketable securities.

Cash Provided by Financing Activities

Cash provided by financing activities for the three months ended March 31, 2023 was $26.5 million, consisting primarily of net cash proceeds from sales of $24.3 million under the 2022 ATM Facility 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 $2.3 million.

The $9.5 million increase in cash provided by financing activities for the three months ended March 31, 2023, as compared to the three months ended March 31, 2022, was primarily due to a $9.7 million increase in net cash proceeds from ATM sales.

Cash provided by financing activities for the six months ended June 30, 2023 was $134.6 million, consisting primarily of net cash proceeds of $107.9 million from the April 2023 public offering of our common stock, $24.3 million from sales of our common stock under the 2022 ATM Facility, and $3.2 million in proceeds from the issuance of common stock upon exercise of stock options and purchases of common stock under our employee stock purchase plan.

The $117.0 million increase in cash provided by financing activities for the six months ended June 30, 2023, as compared to the six months ended June 30, 2022, was primarily due to a $117.6 million increase in net cash proceeds from the public offerings and ATM sales of our common stock.

Contractual Obligations and Other Commitments

During the three months ended March 31, 2023, there were no material changes to our material cash requirements, including commitments for capital expenditures, described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 15, 2023.

During the three and six months ended June 30, 2023, there were no material changes to our material cash requirements, including commitments for capital expenditures, described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 15, 2023.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis