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Item 7. Management’s Discussion and Analysis

2024-02-27 compared with 2023-03-15 · 217 added, 273 removed, 192 unchanged (72% of the section changed)

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

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

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

Our clinical programs fall into two broad categories of diseases:

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

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

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

(i) hematology and blood disorders, and (ii) inflammatory and immunomodulatory (“I&I”) diseases.

Our most advanced clinical asset, rusfertide (generic name for PTG-300), is an injectable hepcidin mimetic in development for the potential treatment of polycythemia vera (“PV”) and other blood disorders.

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

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

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

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

Data from our rusfertide Phase 2 clinical trials presented at medical conferences from 2021 through 2023 provided evidence regarding the potential of rusfertide for managing hematocrit, reducing thrombotic risk and improving iron deficiency symptoms.

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

Our rusfertide Phase 2 clinical trials include the following:

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

We completed enrollment of patients in the first quarter of 2022 with a target of approximately 50 patients to be enrolled through the end of the randomization portion of the trial, which was completed during the first quarter of 2023, and will continue in open label extension.

● PACIFIC, another Phase 2 trial for rusfertide patients diagnosed with PV and with routinely elevated hematocrit levels (>48%), was initiated during the first quarter of 2021 and completion of the 52-week trial is expected during the second quarter of 2023.

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

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

Rusfertide restart restored therapeutic benefits.

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

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

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

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

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

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

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 is continuing in an ongoing open-label extension (“OLE”);

● THRIVE, a Phase 2 long-term extension trial for REVIVE patients on years three through five of treatment;

● 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.

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

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

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

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

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

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

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

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

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

Significant efforts have been taken toward the goal of full enrollment and a high degree of interest has been observed from physicians and patient communities.

We expect enrollment completion in the fourth quarter of 2023.

On September 16, 2021, the U.S.

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

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

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

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

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

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

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

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

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

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

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

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

JNJ-2113 (formerly known as PN-235)

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

During the 12 weeks of the blinded randomized withdrawal, 92.3% of subjects on rusfertide (24 out of 26) were not phlebotomized.

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 (“ISRs”) comprising the majority of adverse events.

Long-term follow up data from the REVIVE trial presented at the American Society of Hematology (“ASH”) Annual Meeting in December 2023 showed durable hematocrit control, decreased phlebotomy use, long-term tolerability, and no new safety signals in patients with PV.

An analysis of the PACIFIC Phase 2 trial was also presented that indicated rusfertide improves markers of iron deficiency in patients with PV.

In addition, data was presented

regarding the prevalence of thromboembolic events and secondary cancers in PV patients not treated with rusfertide.

In February 2024, the full Phase 2 REVIVE trial results, including efficacy and safety data, were published in the New England Journal of Medicine.

We have initiated VERIFY, a global double-blind, placebo-controlled Phase 3 clinical trial of rusfertide in PV for approximately 250 patients.

We expect enrollment completion by the end of the first quarter of 2024.

By the end of 2024, we expect to receive the results of our ongoing two-year study evaluating the carcinogenicity potential of rusfertide when administered once weekly to rats.

In January 2024, we entered into a worldwide license and collaboration agreement for the development and commercialization of rusfertide with Takeda, which is yet to become effective.

Under the terms of the agreement, we expect to receive an upfront payment of $300 million and to be eligible to receive additional worldwide development, regulatory and commercial milestone payments of up to $330 million, as well as tiered royalties from 10% to 17% on ex-U.S.

We expect to be responsible for research and development through the completion of the Phase 3 VERIFY trial and U.S.

regulatory approval.

Takeda is expected to have rights for ex-U.S.

development and to be responsible for leading global commercialization activities.

We and Takeda expect to also share equally in U.S.

profits and losses (50% to us and 50% to Takeda).

Further details related to the agreement, including our right to opt-out of the 50:50 U.S.

profit and loss sharing arrangement in exchange for enhanced economics, are available in our Current Report on Form 8-K filed on January 31, 2024 with the U.S.

Securities and Exchange Commission (the “SEC”).

The effectiveness of the agreement is dependent on and subject to the termination or expiration of any applicable waiting periods under the Hart-Scott-Rodino Act (the “HSR Act”).

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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We believe that, compared to antibody drugs, JNJ-2113 has the potential to provide clinical improvement in an oral medication with increased convenience and compliance and the opportunity for the earlier introduction of targeted oral therapy.

In May 2017, we entered into a worldwide license and collaboration agreement with Janssen Biotech, Inc.

(“Janssen”), a Johnson & Johnson company, to co-develop and co-detail our IL-23R antagonist compounds, including PTG-200 (JNJ-67864238) and certain related compounds for all indications, including inflammatory bowel disease (“IBD”).

In May 2017, we entered into a worldwide license and collaboration agreement with JNJ, formerly Janssen, to co-develop and co-detail our IL-23R antagonist compounds, including PTG-200 (JNJ-67864238) and certain related compounds for all indications, including inflammatory bowel disease (“IBD”).

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

The agreement with Janssen was amended in May 2019 to expand the collaboration by supporting efforts towards second-generation IL-23R antagonists;

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.

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

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

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

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

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

The agreement with JNJ was amended in May 2019 to expand the collaboration by supporting efforts towards second-generation IL-23R antagonists;

and in July 2021 to, among other things, enable JNJ to independently research and develop collaboration compounds for multiple indications in the IL-23 pathway and further align our financial interests.

Following completion of a Phase 1 trial in the fourth quarter of 2021, a decision was made by JNJ to advance second-generation product candidate JNJ-2113 (JNJ-77242113) based on its superior potency and overall pharmacokinetic and pharmacodynamic profile.

In February 2022, JNJ initiated FRONTIER 1, a 255-patient Phase 2b clinical trial of JNJ-2113 in moderate-to-severe plaque psoriasis, which was completed in December 2022.

FRONTIER 1 was a randomized, multicenter, double-blind, placebo-controlled trial that evaluated three once-daily dosages and two twice-daily dosages of JNJ-2113 taken orally.

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 by JNJ at the World Congress of Dermatology in Singapore.

JNJ-2113 achieved the trial’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.

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

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

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

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

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

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

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

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

We will be eligible to receive a $10.0 million milestone payment in connection with the dosing of a third patient in the second Phase 2 trial of a second-generation candidate, a $50 million milestone upon dosing of a third patient in a Phase 3 trial for a second-generation compound for any indication , and a $115.0 million milestone payment upon a Phase 3 clinical trial for a second-generation compound for any indication meeting its primary clinical endpoint .

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

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

JNJ has initiated five additional JNJ-2113 trials, including:

● ICONIC-LEAD – A 600-patient randomized, controlled Phase 3 trial to evaluate the safety and efficacy of JNJ-2113 compared with placebo in participants with moderate-to-severe plaque psoriasis, with PASI-90 and Investigator’s Global Assessment (“IGA”) score of 0 (clear) or 1 (almost clear) as co-primary endpoints;

● ICONIC-TOTAL – A 300-patient randomized, controlled Phase 3 trial to evaluate the efficacy and safety of JNJ-2113 compared with placebo for the treatment of plaque psoriasis in participants with at least moderate severity affecting special areas (scalp, genital, and/or palms of the hands and soles of the feet) with overall IGA score of 0 or 1 as the primary endpoint;

● ICONIC ADVANCE 1 – A 750-patient randomized, controlled Phase 3 trial to evaluate the effectiveness of JNJ-2113 in participants with moderate-to-severe plaque psoriasis compared to placebo and Sotyktu (“deucravacitinib”).

The trial’s primary co-endpoints are PASI-90 and IGA score of 0 or 1;

● ICONIC ADVANCE 2 – A 675-patient Phase 3 trial similarly designed to ICONIC ADVANCE 1, which is expected to start enrolling patients later in 2024;

● ANTHEM-UC – A 240-patient Phase 2b randomized, controlled trial to evaluate the safety and effectiveness of JNJ-2113 compared with placebo in participants with moderate-to-severely active ulcerative colitis (“UC”).

All of the trials in the ICONIC program will use the once-daily, immediate release formulation of JNJ-2113 from the previously completed FRONTIER 1 study.

The estimated primary completion date for the ICONIC-LEAD and ICONIC-TOTAL trials is November 2024 (see NCT06095115 and NCT06095102, respectively, at clinicaltrials.gov).

The estimated primary completion dates for the ICONIC-ADVANCE 1 and ICONIC-ADVANCE 2 trials are March 2025 and April 2025, respectively (see NCT06143878 and NCT06220604, respectively, at clinicaltrials.gov).

The estimated primary completion date for the ANTHEM-UC trial is May 2025 (see NCT06049017 at clinicaltrials.gov).

Other Phase 2 trials of JNJ-2113 include the SUMMIT trial for the treatment of moderate-to-severe plaque psoriasis and FRONTIER 2, a long-term extension study, both of which were completed by JNJ in 2023.

We earned a $50.0 million milestone payment upon dosing of the third patient in the ICONIC-TOTAL Phase 3 trial in late October 2023, which we received in December 2023.

We earned a $10.0 million milestone payment upon the dosing of the third patient in the ANTHEM Phase 2b trial in UC in December 2023, which we received in January 2024.

To date, we have earned $172.5 million in nonrefundable payments from JNJ.

We remain eligible for up to approximately $795.0 million in future development and sales milestone payments, inclusive of the potential milestones listed below:

● $115.0 million milestone payment upon JNJ-2113 meeting the co-primary endpoints in any one of the four ICONIC program Phase 3 trials;

● $35.0 million milestone payment upon the filing of a New Drug Application (“NDA”) for JNJ-2113 with the U.S.

Food and Drug Administration (the “FDA”);

● $50.0 million milestone payment upon approval of the NDA by the FDA;

● $15.0 million milestone payment upon the advancement of JNJ-2113 into a Phase 3 trial in a second indication.

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 applicable for net sales over $4.0 billion.

At JNJ’s Enterprise Business Review in December 2023, JNJ highlighted JNJ-2113 as a potential first- and best-in class targeted oral IL-23 peptide antagonist with potential across multiple indications, including plaque psoriasis, psoriatic arthritis and IBD, with potential peak year sales projection of $5.0 billion plus.

JNJ IL-23 monoclonal antibody (“mAb”) drugs Stelara and Tremfya generated $14.0 billion in revenues in 2023.

In February 2024, the JNJ-2113 Phase 2b FRONTIER 1 trial results in adults living with moderate-to-severe plaque psoriasis were published in the New England Journal of Medicine.

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

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

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.

Discovery Platform

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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.

Business Outlook

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

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

The future impact of COVID-19 on our activities will depend on a number of factors, including, but not limited to, the scope and magnitude of any resurgences in the outbreak and the spread of COVID-19 variants;

the timing, extent, effectiveness and durability of COVID-19 vaccine programs or other treatments;

and new 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 impacted by domestic and global monetary and fiscal policy, geopolitical instability, the ongoing military conflict between Russia and Ukraine and the rising tensions between China and Taiwan, a recessionary environment and historically high domestic and global inflation.

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

Our discovery pipeline has strategically focused on i) hematology and blood disorders and ii) I&I diseases.

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

In January 2024, we announced a new oral Interleukin-17 (“IL-17”) peptide antagonist program targeting three IL-17 dimers (IL-17 AA, AF and FF) which may offer potential treatment options for hidradenitis suppurativa (“HS”), spondyloarthritis (“SpA”), plaque psoriasis and psoriatic arthritis.

Our preliminary results showed similar or better in vitro potency than the currently approved drugs Cosentyx® and Taltz®.

We expect to nominate a development candidate by the end of 2024.

Business Update

We are currently operating in a period of economic uncertainty and capital markets disruption, which has been impacted by domestic and global monetary and fiscal policy, geopolitical instability, ongoing military conflicts, including between Russia and Ukraine and in Israel and surrounding areas, rising tensions between China and Taiwan, a recessionary environment, historically high domestic and global inflation, high interest rates and instability in banks and other financial institutions.

Our future results of operations and liquidity could be adversely impacted by outbreaks of disease, epidemics and pandemics, including potential further delays in existing and planned clinical trials, 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 banks in the United States in March 2023 has given rise to uncertainty in the security of amounts in deposit accounts uninsured by the Federal Deposit Insurance Corporation.

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 adverse impact on our financial position or results of operations to date, our financial position or results of

operations may be adversely affected in the future due to numerous factors, including domestic and global monetary and fiscal policy, supply chain constraints, consequences associated with ongoing military conflicts, including between Russia and Ukraine and in Israel and surrounding areas, and other factors, and such factors may lead to increases in the cost of manufacturing our product candidates and delays in initiating trials.

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

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

Janssen License and Collaboration Agreement

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

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

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

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

JNJ License and Collaboration Agreement

On July 27, 2021, we entered into an Amended and Restated License and Collaboration Agreement (the “Restated Agreement”) with JNJ, which amended and restated the License and Collaboration Agreement, effective July 13, 2017, by and between us and JNJ (the “Original Agreement”), as amended by the first amendment, effective May 7, 2019 (the “First Amendment”).

Prior to January 1, 2023, JNJ was a related party to us as Johnson & Johnson Innovation - JJDC, Inc.

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

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

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

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

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

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

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

In the fourth quarter of 2023, we received a $50.0 million milestone payment from JNJ in connection with the dosing of the third patient in the ICONIC-LEAD Phase 3 clinical trial of JNJ-2113 in patients with moderate-to-severe psoriasis.

In the first quarter of 2024, we received a $10.0 million milestone payment from JNJ in connection with the dosing of the third patient in connection with the ANTHEM Phase 2b clinical trial of JNJ-2113 in patients with UC in the fourth quarter of 2023.

We have earned a total of $172.5 million in non-refundable payments from JNJ since the inception of the Restated Agreement in 2017 through the date of this report.

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

Takeda Collaboration Agreement

In January 2024, we entered into a worldwide license and collaboration agreement for the development and commercialization of rusfertide with Takeda (the “Takeda Collaboration Agreement”), which is yet to become effective.

See Note 15 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information.

Critical Accounting Polices and Estimates

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

Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles (“GAAP”).

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

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

value of assets and liabilities that are not readily apparent from other sources.

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

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On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, accruals for research and development activities, stock-based compensation, income taxes, marketable securities and leases.

Estimates related to revenue recognition include actual costs incurred versus total estimated costs of our deliverables to determine percentage of completion in addition to the application and estimates of potential revenue constraints in the determination of the transaction price under its license and collaboration agreements.

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

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

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

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

There has been uncertainty and disruption in the global economy and financial markets due to a number of factors, including geopolitical instability, inflationary pressures, high interest rates, instability in banks and other financial institutions and domestic and global monetary and fiscal policy.

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

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

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

Revenue Recognition

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

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

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

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For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring proportional performance for purposes of recognizing revenue from non-refundable, upfront fees.

We evaluate the measure of proportional performance each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

We evaluate the measure of proportional performance for each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.

Milestone payments:

At the inception of each arrangement or amendment that includes development, regulatory or commercial milestone payments, we evaluate whether the milestones are considered probable of being reached and estimate the amount to be included in the transaction price.

estimate the amount to be included in the transaction price.

ASC 606 suggests two alternatives to use when estimating the amount of variable consideration:

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

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

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

Recent Accounting Pronouncements

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License and Collaboration Revenue

Our license and collaboration revenue is derived from payments we receive under the Janssen License and Collaboration Agreement.

Our license and collaboration revenue is derived from payments we receive under the JNJ License and Collaboration Agreement.

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

For the year ended December 31, 2024, we expect to recognize license and collaboration revenue from payments we are eligible to receive under the Takeda Collaboration Agreement, which is yet to become effective.

The effectiveness of the agreement and our receipt of payments thereunder is dependent on and subject to the termination or expiration of any applicable waiting periods under the HSR Act.

See Note 15 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information.

Research and Development Expenses

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Research and development expenses consist primarily of the following:

● expenses incurred under agreements with clinical study sites that conduct research and development activities on our behalf;

● expenses incurred under agreements with clinical trial sites that conduct research and development activities on our behalf;

● employee-related expenses, which include salaries, benefits and stock-based compensation;

● laboratory vendor expenses related to the preparation and conduct of pre-clinical, non-clinical, and clinical studies;

● laboratory vendor expenses related to the preparation and conduct of pre-clinical and non-clinical studies and clinical trials;

● costs related to production of clinical supplies and non-clinical materials, including fees paid to contract manufacturers;

● license fees and milestone payments under license and collaboration agreements;

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

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

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

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

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

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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 continue to de-prioritize our PN-943 clinical program and streamline certain discovery programs to focus our resources toward progressing our rusfertide program into later stage clinical trials and preparing for commercialization.

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

We expect our research and development expenses to increase in the near term as compared to prior year periods 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.

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

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

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

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

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

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

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

We will continue to explore out-licensing opportunities globally.

General and Administrative Expenses

General and administrative expenses consist of personnel costs, allocated facilities costs and other expenses for outside professional services, including legal, human resources, audit and accounting services, and pre-commercialization expenses, including selling and marketing costs.

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

Personnel costs consist of salaries, benefits and

stock-based compensation.

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

Interest Expense

Interest expense consists of interest recognized on our long-term debt, which is comprised of contractual interest, amortization of origination fees and other issuance costs, and accretion of final payment fees.

Loss on Early Repayment of Debt

Loss on early repayment of debt consists of prepayment and final payment fees paid upon the early repayment of our long-term debt.

Other Expense, Net

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Results of Operations

Comparison of the Years Ended December 31, 2023 and 2022

Year Ended December 31,

(Dollars in thousands)

License and collaboration revenue - related party

License and collaboration revenue

Operating expenses:

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(2) Includes $12.2 million and $9.5 million of non-cash stock-based compensation expense for the years ended December 31, 2023 and 2022, respectively.

*Percentage not meaningful

License and Collaboration Revenue

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

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

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

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

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

The transaction price as of December 31, 2022 includes $112.5 million of nonrefundable payments received as of June 30, 2022, $17.9 million of reimbursement from Janssen for services performed for IL-23 receptor antagonist compound research and other services, and variable consideration consisting of $8.2 million of development cost reimbursement from Janssen, partially offset by $6.9 million of net cost reimbursement due to Janssen for services performed.

Research and Development Expenses

License and collaboration revenue increased $33.4 million, or 126%, from $26.6 million for the year ended December 31, 2022 to $60.0 million for the year ended December 31, 2023.

The increase in revenue was primarily due to milestone payments earned under our license and collaboration agreement with JNJ during the fourth quarter of 2023, including a $50.0 million milestone payment upon dosing of the third patient in the ICONIC-LEAD Phase 3 trial of JNJ-2113 in patients with moderate-to-severe psoriasis, and a $10.0 million milestone payment upon the dosing of the third patient in the ANTHEM-UC Phase 2b trial in UC.

License and collaboration revenue for the year ended December 31, 2022 was primarily related to the transaction price under the license and collaboration agreement with JNJ recognized based on proportional performance.

We completed our performance obligation under the license and collaboration agreement with JNJ as of June 30, 2022.

Research and Development Expenses

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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

Clinical and development expense — Other

Preclinical and drug discovery research expense

Milestone payment obligation to former collaboration partner

Grants and tax incentives expense reimbursement, net

Total research and development expenses

Research and development expenses decreased $6.0 million, or 5%, from $126.2 million for the year ended December 31, 2022 to $120.2 million for the year ended December 31, 2023.

The decrease was primarily due to (i) a decrease of $35.8 million in expenses for the PN-943 program, and (ii) a decrease of $2.8 million in expenses related to pre-clinical and drug discovery research expense, partially offset by (iii) an increase of $33.3 million in rusfertide clinical and contract manufacturing expenses primarily for the Phase 3 VERIFY clinical trial.

We completed a Phase 2 trial of PN-943 in patients with moderate to severe UC in early 2023, following which we de-prioritized further development work.

We had 85 and 82 full-time equivalent research and development employees as of December 31, 2023 and 2022, respectively.

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

Research and development personnel-related expenses for the year ended December 31, 2023 increased by $1.1 million as compared to the year ended December 31, 2022 primarily due to an increase of $2.3 million in stock-based compensation expense, partially offset by a decrease of $1.2 million of other personnel-related expenses.

General and Administrative Expenses

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

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

General and administrative expenses increased $1.8 million, or 6%, from $31.7 million for the year ended December 31, 2022 to $33.5 million for the year ended December 31, 2023 primarily due to an increase in stock-based compensation expense during the current year period, partially offset by one-time costs incurred during the first quarter of 2022.

We had 27 and 23 full-time equivalent general and administrative employees as of December 31, 2023 and 2022, respectively.

Interest Income

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

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

Interest income increased $10.8 million, or 267%, from $4.1 million for the year ended December 31, 2022 to $14.9 million for the year ended December 31, 2023.

This increase was primarily due to higher invested balances and higher yields due to increased interest rates compared to the prior year period.

Comparison of the Years Ended December 31, 2022 and 2021

Year Ended December 31,

(Dollars in thousands)

License and collaboration revenue - related party

Operating expenses:

Research and development (1)

General and administrative (2)

Total operating expenses

Loss from operations

Interest income

Interest expense

Loss on early repayment of debt

Other expense, net

Loss before income tax expense

Income tax expense

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

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

License and Collaboration Revenue

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

The decrease in license and collaboration revenue was primarily related to a decrease in services provided under the Janssen License and Collaboration Agreement recognized based on proportional performance, partially offset by an $8.0 million cumulative catch-up amount recognized during the year ended December 31, 2021.

This cumulative catch-up was primarily the result of an

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

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

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

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

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

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

Research and Development Expenses

Year Ended December 31,

(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

Pre-clinical and drug discovery research expense

Milestone payment obligation to former collaboration partner

Grants and tax incentives expense reimbursement, net

Total research and development expenses

*Percentage not meaningful

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

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

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

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

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

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

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

These increases were partially offset by a $1.7 million increase in grant and accrued refundable cash tax incentives and a decrease of $0.9 million in PTG-200 clinical trial and development expenses under the Janssen License

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

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

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

General and Administrative Expenses

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

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

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

Interest Income

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

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

Interest Expense

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

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

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

Loss on Early Repayment of Debt

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

We had no debt outstanding at December 31, 2021.

Other Expense, Net

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

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

Income Tax Expense

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

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

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

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

entity, and the U.S.

entity reimbursed the Australia subsidiary for certain direct development costs.

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

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

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

See Part II, Item 7—Results of Operations—Comparison of the Years Ended December 31, 2022 and 2021 in our Annual Report on Form 10-K for the year ended December 31, 2022, filed on March 15, 2023, for a discussion of our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.

Liquidity and Capital Resources

Liquidity and Capital Expenditures

Sources of Liquidity

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

Proceeds from Sales of Our Common Stock

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 , pursuant to which we may offer and sell up to $100.0 million shares of our common stock from time to time in “at-the-market” offerings (the “2022 ATM Facility”).

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, September 30, 2023 or December 31, 2023.

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

In August 2018, we entered into a Securities Purchase Agreement with certain accredited investors (each, an “Investor” and, collectively, the “Investors”), pursuant to which we sold an aggregate of 2,750,000 shares of our common stock at a price of $8.00 per share for aggregate net proceeds of $21.7 million, after deducting offering expenses payable by us.

In a concurrent private placement, we issued the Investors warrants to purchase an aggregate of 2,750,000 shares of our common stock (each, a “Warrant” and, collectively, the “Warrants”).

Each Warrant was exercisable from August 8, 2018 through August 8, 2023.

Warrants to purchase 1,375,000 shares of our common stock had an exercise price of $10.00 per share and Warrants to purchase 1,375,000 shares of our common stock had an exercise price of $15.00 per share.

The exercise price and number of shares of our common stock issuable upon the exercise of the Warrants (the “Warrant Shares”) were subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrants.

Under certain circumstances, the Warrants were exercisable on a “cashless” basis.

In connection with the issuance and sale of the common stock and Warrants, we granted the Investors certain registration rights with respect to the Warrants and the Warrant Shares.

The common stock and Warrants met the criteria for equity classification, and the net proceeds from the transaction were recorded as a credit to additional paid-in capital.

In August 2023, prior to the expiration of the Warrants, we entered into certain agreements with the Investors and their affiliates under which we agreed to allow the Warrants to be exercised in exchange for pre-funded warrants representing the same number of Warrant Shares underlying the Warrants with an exercise price of $0.001 per share (the “Pre-Funded Warrants”).

Subsequent to the execution of the agreements and prior to the expiration of the Warrants, all outstanding Warrants were exercised for gross proceeds of $34.4 million in exchange for 44,748 shares of our common stock and Pre-Funded Warrants to purchase 2,705,252 shares of common stock (subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Pre-Funded Warrants) with an exercise price of $0.001 per share.

The Pre-Funded Warrants will expire upon the day they are exercised in full.

The Pre-Funded Warrants are exercisable at any time prior to expiration except that the Pre-Funded Warrants cannot be exercised by the Investors if, after giving effect thereto, the Investors would beneficially own more than 9.99% of our common stock, subject to certain exceptions.

The common stock and Pre-Funded Warrants met the criteria for equity classification and the net proceeds from the transaction were recorded as a credit to additional paid-in capital.

In accordance with Accounting Standards Codification Topic 260, Earnings Per Share , outstanding Pre-Funded Warrants are included in the computation of basic net loss per share because the exercise price is negligible, and they are fully vested and exercisable after the original issuance date.

As of December 31, 2023, none of the Pre-Funded Warrants have been exercised.

Receipt of Payments Under Collaboration Agreements

We have earned $172.5 million in non-refundable payments from JNJ since the inception of the Restated Agreement in 2017 through the date of this Annual Report on Form 10-K as follows:

● Upon effectiveness of the Original Agreement, we received a non-refundable, upfront cash payment of $50.0 million from JNJ in 2017;

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

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

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

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

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

● 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, which was received during the second quarter of 2022;

● In October 2023, we became eligible to receive a $50.0 million milestone payment in connection with the dosing of the third patient in the ICONIC-TOTAL Phase 3 clinical trial of JNJ-2113 in moderate-to-severe plaque psoriasis, which was received in December 2023;

● In December 2023, we became eligible to receive a $10.0 million milestone payment in connection with the dosing of the third patient in the ANTHEM Phase 2b clinical trial of JNJ-2113 in ulcerative colitis, which was received in January 2024.

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

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

Upcoming potential development milestones for second-generation products include:

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

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

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

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

● $35.0 million upon the filing of an NDA for a second-generation compound with the FDA;

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

● $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

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Our capital expenditures were $0.6 million, $0.8 million and $1.1 million for the years ended December 31, 2023, 2022 and 2021, 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 in operating activities is impacted by the timing of when we pay these expenses.

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

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

We could utilize our available capital resources sooner than we currently expect if, for instance, our planned pre-clinical and clinical trials are successful or expanded, our product candidates enter new and more advanced stages of clinical development, we experience significant delays or difficulties in commencing, enrolling or completing clinical studies, our newer product clinical trials advance beyond the discovery stage, or various other factors.

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

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

Our primary uses of cash are to fund our operating

expenses, primarily related to our research and development expenditures and general and administrative costs.

We expect that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least the next twelve months from the date of this Annual Report on Form 10-K based on current operating plans and financial forecasts.

In January 2024, we entered into a worldwide license and collaboration agreement for the development and commercialization of rusfertide with Takeda, which is yet to become effective.

See Note 15 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information.

We may require additional funding to advance our early discovery pipeline and to develop, acquire, or in-license other potential product candidates.

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

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

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

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

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

● our ability to successfully commercialize our current product candidates and any other product candidates we may identify and develop;

● the success of our existing or future collaborations with third parties;

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

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

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

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

● the timing, receipt and amount of royalties from JNJ under the Restated Agreement or Takeda under the Takeda Collaboration Agreement upon regulatory approval or clearance, if any;

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

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

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

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

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

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

As discussed in Part I, Item1A.“Risk Factors”, we are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by domestic and global monetary and fiscal policy, and geopolitical instability, among other factors.

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

As discussed in Part I, Item 1A,”Risk Factors,” we are currently operating in a period of macroeconomic uncertainty and capital markets disruption, which has been significantly impacted by domestic and global monetary and fiscal policy, geopolitical instability, inflationary pressures, high interest rates and banking and other financial institution instability, among other factors.

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.

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

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

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

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

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

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

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

Year Ended December 31,

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Cash used in operating activities

Cash provided by (used in) investing activities

Cash (used in) provided by investing activities

Cash provided by financing activities

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Cash Used in Operating Activities

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

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

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

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

Cash Provided by (Used in) Investing Activities

Cash used in operating activities for the year ended December 31, 2023 was $70.2 million, consisting primarily of our net loss of $79.0 million and a net change of $19.5 million in net operating assets and liabilities, partially offset by certain non-cash items, including $29.2 million of stock-based compensation expense.

The $37.9 million decrease in cash used in operating activities for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to a $48.4 million decrease in our net loss and a $5.1 million increase in stock-based compensation expense, partially offset by a $4.0 million decrease in accretion of discount on marketable securities and an $11.7 million net change in net operating assets and liabilities.

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

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

Cash (Used in) Provided by Investing Activities

Cash used in investing activities for the year ended December 31, 2023 was $39.3 million, consisting of purchases of marketable securities of $191.1 million and purchases of property and equipment of $0.6 million, partially offset by proceeds from maturities of marketable securities of $152.4 million.

The $130.7 million decrease in cash provided by investing activities for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily related to a decrease in the net activity of purchases and maturities of marketable securities.

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

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

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

The $107.3 million increase in cash provided by investing activities for the year ended December 31, 2022, as compared to the year ended December

31, 2021, was primarily related to a decrease of $71.7 million in purchases of marketable securities and an increase of $35.3 million in proceeds from maturities of marketable securities.

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

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

The $75.1 million decrease in cash used in investing activities for the year ended December 31, 2021, as compared to the year ended December 31, 2020, was primarily due to an increase of $82.3 million in proceeds from maturities of marketable securities.

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

Cash Provided by Financing Activities

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

Cash provided by financing activities for the year ended December 31, 2023 was $170.5 million, consisting primarily of net cash proceeds of $107.8 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, $34.4 million from the exercise of the Warrants in exchange for issuance of Pre-Funded Warrants and common stock, and $4.8 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 $151.6 million increase in cash provided by financing activities for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to a $107.8 million increase in net cash proceeds from the April 2023 public offering, a $9.7 million increase in cash proceeds from ATM sales and a $34.4 million increase in net cash proceeds from the exercise of the Warrants.

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

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

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

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

The $117.7 million decrease in cash provided by financing activities for the year ended December 31, 2021, as compared to the year ended December 31, 2020, was primarily due to an $89.5 million decrease in cash proceeds from our public offerings of common stock, a $42.1 million decrease in cash proceeds from ATM sales.

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

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

Contractual Obligations and Other Commitments

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

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

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

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

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

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

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

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

See Note 8 to the Consolidated Financial Statements elsewhere in this Annual Report on Form 10-K for additional information.

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

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

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

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

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

In January 2024, we entered into the Takeda Collaboration Agreement, which is yet to become effective.

See Note 15 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information.

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

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

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

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

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

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

In August 2021, we and

Zealand agreed to resolve the dispute and reached an Arbitration Resolution Agreement.

See Note 7 and Note 9 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information.

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

What changed 10-K

Item 7. Management’s Discussion and Analysis