What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2024-02-27 compared with 2023-03-15 · 260 added, 282 removed, 675 unchanged (45% of the section changed)

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generally accepted accounting principles.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2023, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission (2013 framework), and our report dated February 27, 2024 expressed an unqualified opinion thereon.

Basis for Opinion

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Our responsibility is to express an opinion on the Company’s financial statements based on our audits.

We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S.

We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S.

federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

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Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud.

The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting.

As part of our audits we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company’s internal control over financial reporting.

Accordingly we express no such opinion.

Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks.

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The critical audit matter communicated below is a matter arising from the current period audit of the financial statements that was communicated or required to be communicated to the audit committee and that:

(1) relate to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing separate opinions on the critical audit matter or on the accounts or disclosures to which it relates.

(1) relates to accounts or disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or complex judgments.

The communication of the critical audit matter does not alter in any way our opinion on the consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the account or disclosure to which it relates.

Accrued clinical and research related expenses

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

Auditing management’s accounting for accrued clinical development cost is especially challenging because the evaluation is dependent on a high volume of data exchanged between third-party service providers, internal clinical personnel, and the Company’s finance department.

Auditing management’s accounting for accrued clinical and research related expenses is especially challenging because the evaluation is dependent on a high volume of data exchanged between third-party service providers, internal clinical personnel, and the Company’s finance department.

The accrued amounts are determined based on an evaluation of the unique terms and conditions set forth in each respective agreement.

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How We Addressed the Matter in Our Audit

To test accrued clinical development costs, our audit procedures included, among others, testing the accuracy and completeness of the inputs used in management’s analysis to determine costs incurred.

To test accrued clinical and research related expenses, our audit procedures included, among others, testing the accuracy and completeness of the inputs used in management’s analysis to determine costs incurred.

We also inspected terms and conditions for selected research and development contracts and change orders and compared these to the cost models management used in tracking progress of service agreements.

We met with the Company’s internal clinical personnel to understand the status of significant clinical activities.

We evaluated services incurred by third parties by understanding the terms and timeline of significant projects, and evaluating management’s determination of work performed, subjects enrolled, sites activated and costs incurred.

We evaluated accruals recorded for services incurred by third parties by understanding the terms and timeline of significant projects and evaluating management’s determination of work performed at the balance sheet date.

Further, we inspected selected invoices received from third parties after the balance sheet date and evaluated whether services performed prior to the balance sheet date had been properly included in costs accrued.

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San Mateo, California

March 15, 2023

February 27, 2024

PR OTAGONIST THERAPEUTICS, INC.

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Marketable securities

Receivable from collaboration partner – related party

Research and development tax incentive receivable

Receivable from collaboration partner

Prepaid expenses and other current assets

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Accounts payable

Payable to collaboration partner – related party

Payable to collaboration partner

Accrued expenses and other payables

Deferred revenue – related party

Operating lease liability - current

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Year Ended December 31,

License and collaboration revenue – related party

License and collaboration revenue

Operating expenses:

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Interest income

Interest expense

Loss on early repayment of debt

Other expense, net

Loss before income tax expense

Income tax expense

Net loss per share, basic and diluted

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Other comprehensive loss:

Loss (gain) on translation of foreign operations

Gain (loss) on translation of foreign operations

Unrealized gain (loss) on marketable securities

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Issuance of common stock pursuant to public offerings, net of issuance costs

Issuance of common stock pursuant to at-the-market offering, net of issuance costs

Issuance of common stock under equity incentive and employee stock purchase plans

Shares withheld for net settlement of tax withholding upon vesting of restricted stock units

Stock-based compensation expense

Other comprehensive gain

Other comprehensive income (loss)

Balance at December 31, 2021

Issuance of common stock pursuant to public offerings, net of issuance costs

Issuance of common stock pursuant to at-the-market offering, net of issuance costs

Issuance of common stock under equity incentive and employee stock purchase plans

Issuance of common stock upon exercise of Exchange Warrants

Shares withheld for net settlement of tax withholding upon vesting of restricted stock units

Stock-based compensation expense

Other comprehensive loss

Issuance costs related to prior period common stock offering

Other comprehensive income (loss)

Balance at December 31, 2022

Issuance of common stock pursuant to public offerings, net of issuance costs

Issuance of common stock pursuant to at-the-market offering, net of issuance costs

Exercise of Warrants in exchange for issuance of Pre-Funded Warrants

Issuance of common stock upon exercise of Warrants

Issuance of common stock under equity incentive and employee stock purchase plans

Issuance of common stock upon exercise of Exchange Warrants

Shares withheld for net settlement of tax withholding upon vesting of restricted stock units

Stock-based compensation expense

Issuance costs related to prior period common stock offering

Other comprehensive loss

Other comprehensive income (loss)

Balance at December 31, 2023

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Operating lease right-of-use asset amortization

Net amortization of (discount) premium on marketable securities

Depreciation and amortization

Change in deferred tax asset

Loss on early repayment of debt

(Accretion) amortization of discount/premium on marketable securities

Changes in operating assets and liabilities:

Research and development tax incentive receivable

Receivable from collaboration partner – related party

Receivable from collaboration partner

Prepaid expenses and other assets

Accounts payable

Payable to collaboration partner – related party

Payable to collaboration partner

Accrued expenses and other payables

Deferred revenue – related party

Deferred revenue

Operating lease liability

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Purchases of property and equipment

Net cash provided by (used in) investing activities

Net cash (used in) provided by investing activities

Cash Flows from Financing Activities

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Proceeds from at-the-market offering, net of issuance costs

Proceeds from exercise of Warrants in exchange for issuance of Pre-Funded Warrants

Proceeds from issuance of common stock upon exercise of Warrants

Proceeds from issuance of common stock upon exercise of stock options and purchases under employee stock purchase plan

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Issuance costs related to prior period common stock offering

Early repayment of long-term debt

Issuance costs related to long-term debt

Net cash provided by financing activities

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Cash, cash equivalents and restricted cash, end of period

Supplemental Disclosure of Cash Flow Information:

Cash paid for interest

Supplemental Disclosure of Non-Cash Financing and Investing Information:

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Issuance costs related to common stock offering included in accrued liabilities and other payables

Issuance costs related to at-the-market offering of common stock included in prepaid expenses and other assets at the end of the previous year

Issuance costs related to common stock offering included in prepaid expenses and other assets at the end of the previous year

The accompanying notes are an integral part of these consolidated financial statements.

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(the “Company”) is headquartered in Newark, California.

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

The Company is a biopharmaceutical company with peptide-based new chemical entities rusfertide and JNJ-2113 (formerly PN-235) in advanced stages of clinical development, both derived from the Company’s proprietary technology platform.

The Company’s clinical programs fall into two broad categories of diseases:

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

Protagonist Pty Limited (“Protagonist Australia”) is a wholly-owned subsidiary of the Company and is located in Brisbane, Queensland, Australia.

The Company has one wholly owned subsidiary, Protagonist Pty Limited (“Protagonist Australia”), located in Brisbane, Queensland, Australia.

Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the Chief Executive Officer, the Company’s chief operating decision maker, in deciding how to allocate resources and assessing performance.

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The Company’s Chief Executive Officer reviews financial information on an aggregate basis for the purposes of allocating and evaluating financial performance.

Substantially all of the Company’s long-lived assets are maintained in the United States.

Substantially all of the Company’s long-lived assets are in the United States.

As of December 31, 2023, the Company had cash, cash equivalents and marketable securities of $ 341.6 million.

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Risks and Uncertainties

The Company is 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.

The future impact on the Company’s 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.

The Company has experienced delays in its existing and planned clinical trials due to worldwide impacts related to the pandemic.

The Company’s 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 its operating activities and employees.

In addition, a recession or market correction related to or amplified by COVID-19 could materially affect the Company’s business.

The Company is 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, including an ongoing military conflict between Russia and Ukraine and the rising tensions between China and Taiwan, a recessionary environment and historically high domestic and global inflation.

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

The Company is currently operating in a period of macroeconomic uncertainty and capital markets disruption, which has been impacted by domestic and global monetary and fiscal policy, geopolitical instability, including ongoing military conflicts 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.

The Company’s 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 the Company’s operating results.

In addition, 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.

The Company continues to monitor these events and the potential impact on its business.

Although the Company does not believe that inflation has had a material impact on its financial position or

results of operations to date, it 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 other factors, and such factors may lead to increases in the cost of manufacturing for and initiation of studies in the Company’s product candidates.

Although the Company does not believe that inflation has had a material adverse impact on its financial position or results of operations to date, its financial position or results of operations may be adversely affected in the future due to numerous factors, including global monetary and fiscal policy, supply chain constraints, the ongoing conflicts 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 for and delays in the initiation of studies in the Company’s product candidates.

Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying consolidated financial statements include the accounts of the Company and its wholly owned subsidiary, Protagonist Australia, and have been prepared in conformity with accounting principles generally accepted in the United States (“GAAP”).

All intercompany balances and transactions have been eliminated upon consolidation.

The financial statements of Protagonist Australia use the Australian dollar as the functional currency since the majority of expense transactions occur in such currency.

Gains and losses from foreign currency transactions were not material for all periods presented.

The re-measurement from Australian dollar to U.S.

dollars is outlined below:

Equity accounts, except for the change in retained earnings during the year, have been translated using historical exchange rates.

All other Australian dollar denominated assets and liabilities as of December 31, 2022 and 2021 have been translated using the year-end exchange rate.

The consolidated statements of operations have been translated at the weighted average exchange rates in effect during each year.

Effective January 1, 2023, the financial statements of Protagonist Australia use the U.S.

dollar as the functional currency, which reflects the expected nature of the ongoing operations of this subsidiary.

The cumulative translation adjustment as of January 1, 2023 related to this subsidiary was not material.

Prior to January 1, 2023, the financial statements of Protagonist Australia used the Australian dollar as the functional currency since the majority of expense transactions occurred in such currency.

Foreign currency translation gains and losses are reported as a component of stockholders’ equity in accumulated other comprehensive loss on the consolidated balance sheets.

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Management bases these estimates on historical and anticipated results, trends and various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to forecasted amounts and future events.

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

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, a recessionary environment, domestic and global monetary and fiscal policy and other factors.

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

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Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash equivalents and marketable securities.

Substantially all of the Company’s cash is held by two financial institutions that management believes are of high credit quality.

Such deposits may, at times, exceed federally insured limits.

Substantially all of the Company’s cash is held by three financial institutions that management believes are of high credit quality.

Such deposits generally exceed federally insured limits.

The primary focus of the Company’s investment strategy is to preserve capital and to meet liquidity requirements.

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Permissible investments of fixed income securities include obligations of the U.S.

government and its agencies, money market instruments including commercial paper and negotiable certificates of deposit, and highly rated corporate debt obligations and money market funds, and highly rated supranational and sovereign government securities.

government and its agencies, money market instruments including commercial paper and negotiable certificates of deposit, and highly rated corporate debt obligations and money market funds.

Cash Equivalents

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Restricted cash consists primarily of cash balances held as security in connection with a letter of credit related to the Company’s facility lease entered into in March 2017, as subsequently amended.

The letter of credit balance decreased from $ 0.5 million at December 31, 2020 to $ 0.2 million at December 31, 2021 and 2022 pursuant to the terms of the facility lease.

The Company’s letter of credit balance was $ 0.2 million at December 31, 2021, 2022 and 2023 pursuant to the terms of the facility lease.

Cash as Reported in Consolidated Statements of Cash Flows

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Cash and cash equivalents

Restricted cash - current

Restricted cash - noncurrent

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Long-term marketable securities have maturities of 365 days or longer as of the balance sheet date.

Unrealized gains and losses are excluded from earnings and are reported as a component of comprehensive loss.

Realized gains and losses and declines in fair value judged to be other than temporary, if any, on available-for-sale securities are included in interest income.

Unrealized gains and losses are excluded from earnings and are reported as a component of comprehensive income (loss).

Realized gains and losses, if any, on available-for-sale securities are included in interest income.

The cost of securities sold is based on the specific-identification method.

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The carrying amount of the Company’s financial instruments, including cash equivalents, receivables from its collaboration partner, accounts payable, payables to its collaboration partner and accrued expenses and other payables approximate fair value due to their short-term maturities.

to the Consolidated Financial Statements for additional information regarding the fair value of the Company’s other financial assets and liabilities.

See Note 4 to the Consolidated Financial Statements for additional information regarding the fair value of the Company’s other financial assets and liabilities.

Investment Impairment

As of each reporting date, the Company assesses each of its investments in available-for-sale debt securities whose fair value is below its cost basis to determine if the investment’s impairment is due to credit-related factors or noncredit-related factors.

Factors considered in determining whether an impairment is credit-related include the extent to which the investment’s fair value is less than its cost basis, declines in published credit ratings, issuer default on interest or principal payments, and declines in the financial condition and near-term prospects of the issuer.

Credit-related impairments on available-for-sale debt securities are recognized as an allowance for credit losses with a corresponding adjustment to other

income (expense), net.

The portion of the impairment that is not credit-related is recorded as a reduction of other comprehensive income (loss), net of applicable taxes.

Pursuant to Accounting Standard Update 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”), the Company has elected to exclude accrued interest from both the fair value and the amortized cost basis of the available-for-sale debt securities for the purposes of identifying and measuring an impairment.

The Company writes off accrued interest as a reduction of interest income when an issuer has defaulted on interest payments due on a security.

Property and Equipment

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Operating lease ROU assets and operating lease liabilities are recognized based on the present value of the future minimum lease payments over the lease term at commencement date.

If the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on the information available at commencement date in determining the present value of future payments.

If the Company’s leases do not provide an implicit rate, the Company uses its incremental borrowing rate based on information available at the commencement date in determining the present value of future payments.

The operating lease ROU asset also includes any lease payments made and excludes lease incentives and initial direct costs incurred.

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The Company uses the asset and liability method to account for income taxes in accordance with the authoritative guidance for income taxes.

Under this method, deferred tax assets and liabilities are determined based on future tax consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and tax loss and credit carryforwards.

Under this method, deferred tax assets and liabilities are determined based on future tax

consequences attributable to differences between the financial statement carrying amounts of existing assets and liabilities and their respective tax bases, and tax loss and credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates applied to taxable income in the years in which those temporary differences are expected to be recovered or settled.

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If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price.

payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received.

Milestone payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered probable of being achieved until those approvals are received.

If there is more than one performance obligation, the transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis.

The Company recognizes revenue as or when the performance obligations under the contract are satisfied.

At the end of each subsequent reporting period, the Company re-evaluates the probability or achievement of each such milestone and any related constraint, and if necessary, adjusts its estimates of the overall transaction price.

At the end of each

subsequent reporting period, the Company re-evaluates the probability or achievement of each such milestone and any related constraint, and if necessary, adjusts its estimates of the overall transaction price.

Any such adjustments are recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.

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

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

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

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

The Company accrues for these costs based on various factors such as estimates of the work completed and in accordance with agreements

established with its third-party service providers.

As actual costs become known, the Company adjusts its accrued liabilities.

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Research and Development Tax Incentive

The Company is eligible under the AusIndustry research and development tax incentive program to obtain either a refundable cash tax incentive or a taxable credit in the form of a non-cash tax incentive from the Australian Taxation Office (“ATO”).

The refundable cash tax incentive is available to the Company on the basis of specific criteria with which the Company must comply.

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For stock option awards, the Company uses the Black-Scholes option-pricing model to estimate fair values.

For restricted stock unit awards, the estimated fair value is generally the fair market value of the underlying stock on the grant date.

Stock-based compensation expense is recognized over the requisite service period and is based on the value of the portion of stock-based payment awards that is ultimately expected to vest.

For restricted stock unit (“RSU”) awards, the estimated fair value is generally the fair market value of the underlying stock on the grant date.

Stock-based compensation expense is recognized over the requisite service period and is based on the value of the portion of stock-based awards that is ultimately expected to vest.

The Company recognizes forfeitures of stock-based awards as they occur.

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Stock-based compensation expense associated with PSUs is based on the fair value of the Company’s common stock on the grant date, which equals the closing price of the Company’s common stock on the grant date.

The Company recognizes compensation expense over the vesting periods of the awards that are ultimately expected to vest when the achievement of the related performance obligation becomes probable.

The Company recognizes compensation expense on an accelerated basis over the vesting periods of the awards that are ultimately expected to vest when achievement of the related performance obligation becomes probable.

The Company assesses the probability of achievement of the related performance obligation on a quarterly basis.

If stock-based awards are granted in contemplation of or shortly before a planned release of material nonpublic information, and such information is expected to result in a material increase in the Company’s share price, the Company considers whether an adjustment to the observable market price is required when estimating fair values.

Net Loss per Share

Basic net loss per share is calculated by dividing the Company’s net loss by the weighted average number of shares of common stock and Exchange Warrants (as defined in Note 12.

Stockholders’ Equity below) outstanding during the period, without consideration of potentially dilutive securities.

In accordance with Accounting Standards Codification Topic 260, Earnings Per Share , outstanding Exchange 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.

Basic net loss per share is calculated by dividing the Company’s net loss by the weighted average number of shares of common stock, Exchange Warrants and Pre-Funded Warrants (as defined in Note 10.

Stockholders’ Equity for details) outstanding during the period, without consideration of potentially dilutive securities.

In accordance with Accounting Standards Codification Topic 260, Earnings Per Share (“ASC 260”), outstanding Exchange Warrants and 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.

Diluted net loss per share is the same as basic net loss per share for all periods presented since the effect of potentially dilutive securities is anti-dilutive given the net loss of the Company in each period.

Stockholders’ Equity for additional information regarding the Exchange Warrants.

Recently Issued Accounting Pronouncements Not Yet Adopted as of December 31, 2022

In June 2016, the FASB issued ASU No.

2016-13, Financial Instruments - Credit Losses (Topic 326) , which is intended to provide more useful information about expected credit losses on financial assets held by a reporting entity at each reporting date.

The new standard replaces the existing incurred loss impairment methodology with a methodology that requires consideration of a broader range of reasonable and supportable forward-looking information to estimate all expected credit losses.

This guidance was originally effective for fiscal years and interim periods beginning after December 15, 2019, with early adoption permitted for fiscal years and interim periods beginning after December 15, 2018.

In November 2019, the FASB issued ASU No.

2019-10, Financial Instruments – Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842):

Effective Dates , which amended the mandatory effective date of ASU No.

2016-13 for smaller reporting companies.

Based on the Company’s status as a smaller reporting company as of November 15, 2019, ASU 2016-13 is effective for the Company for fiscal years and interim periods beginning after December 15, 2022.

The Company does not expect the adoption of this new guidance to have a material impact on its consolidated financial statements and related disclosures.

Stockholders’ Equity for additional information regarding the Exchange Warrants and Pre-Funded Warrants.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standard Board (“FASB”) issued ASU 2016-13.

The guidance requires measurement and recognition of expected credit losses for financial assets at the time financial assets are initially recognized in the financial statements.

The measurement of expected credit losses is based on historical credit loss information as well as current and future economic factors.

ASU 2016-13 also eliminates the concept of “other-than-temporary” impairment when evaluating available-for-sale debt securities and instead focuses on determining whether any impairment is a result of credit loss or other factors.

In November 2019, the FASB issued Accounting Standards Update 2019-10, Financial Instruments – Credit Losses (Topic 326):

Effective Dates , which delayed the mandatory effective date of ASU 2016-13 for smaller reporting companies.

The Company adopted ASU 2016-13 effective January 1, 2023.

The adoption of this guidance did not have a material impact on the Company’s consolidated financial statements or related disclosures.

Recently Issued Accounting Pronouncements as of December 31, 2023

In December 2023, the FASB issued Accounting Standards Update No.

2023-09 Income Taxes (Topic 740) – Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires public business entities to disclose specific categories in the income tax rate reconciliation annually and provide additional information for reconciling items that meet a qualitative threshold.

ASU 2023-09 also requires that entities disclose annually additional information about income taxes paid and disaggregated information for certain items.

ASU 2023-09 is effective for the Company beginning on January 1, 2025.

The Company is currently evaluating the impact of the adoption of ASU 2023-09 on its financial position, results of operations and cash flows.

In November 2023, the FASB issued Accounting Standards Update No.

2023-07 Segment Reporting (Topic 280) – Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires public entities to disclose incremental segment information on an annual and interim basis.

ASU 2023-07 requires public entities with a single reportable segment to provide all the disclosures required by the amendments in ASU 2023-07 and all existing segment disclosures in Segment Reporting (Topic 280) .

ASU 2023-07 is effective for the Company for fiscal years beginning on January 1, 2024, and interim periods within fiscal years beginning on January 1, 2025.

The Company does not expect the adoption of ASU 2023-07 to have a material impact on its financial position, results of operations or cash flows.

In August 2020, the FASB issued Accounting Standards Update No.

2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts in Entity’s Own Equity (Subtopic 815-40):

Accounting for Convertible Instruments and Contracts in an Entity’s Own Equity (“ASU 2020-06”), which simplifies accounting for convertible instruments by removing major separation models required under current GAAP.

ASU 2020-06 also removes certain settlement conditions that are required for equity-linked contracts to qualify for the derivative scope exception, and it simplifies the diluted earnings per share calculation in certain areas.

ASU 2020 - 06 is effective for the Company beginning on January 1, 2024.

The Company does not expect the adoption of ASU 2020-06 to have a material impact on its financial position, results of operations or cash flows.

License and Collaboration Agreement

Agreement Terms

On July 27, 2021, the Company entered into an Amended and Restated License and Collaboration Agreement (the “Restated Agreement”) with Janssen Biotech, Inc., a Pennsylvania corporation (“Janssen”) which amended and restated the License and Collaboration Agreement, effective July 13, 2017, by and between the Company (the “Original Agreement”), as amended by the first amendment, effective May 7, 2019 (the “First Amendment”).

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

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

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

The Company received a $ 5.0 million payment triggered by the successful nomination of a second-generation oral Interleukin (“IL”)-23 receptor antagonist development compound (“second-generation compound”) during the first quarter of 2020 and a $ 7.5 million payment triggered by the completion of data collection activities for the first Phase 1 clinical trial of a second-generation compound during the fourth quarter of 2021.

On July 27, 2021, the Company entered into an Amended and Restated License and Collaboration Agreement (the “Restated Agreement”) with J&J Innovative Medicines (“JNJ”), formerly Janssen Biotech, Inc., which amended and restated the License and Collaboration Agreement, effective July 13, 2017, by and between the Company 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 the Company 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, the Company received a non-refundable, upfront cash payment of $ 50.0 million from JNJ.

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

quarter of 2020 and a $ 7.5 million payment triggered by the completion of data collection activities for the first Phase 1 clinical trial of a second-generation compound during the fourth quarter of 2021.

The Company received a $ 25.0 million milestone payment in connection with the dosing of the third patient in the first Phase 2 clinical trial for a second-generation compound during the second quarter of 2022.

The Company received a $ 50.0 million milestone payment in connection with the dosing of a third patient in the ICONIC-TOTAL Phase 3 clinical trial of JNJ-2113 in patients with moderate-to-severe psoriasis during the fourth quarter of 2023.

The Company became eligible to receive a $ 10.0 million milestone payment upon t he dosing of the third patient in the ANTHEM Phase 2b trial in UC in December 2023.

The Company has 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.

The Restated Agreement relates to the development, manufacture and commercialization of oral IL-23 receptor antagonist drug candidates.

The candidates nominated for initial development pursuant to the Restated Agreement included PTG-200 (JNJ-67864238), PN-232 (JNJ-75105186) and JNJ-2113 (JNJ-77242113) (formerly known as PN- 235).

The candidates nominated for initial development pursuant to the Restated Agreement included PTG-200 (JNJ-67864238), PN-232 (JNJ-75105186) and JNJ-2113 (JNJ-77242113) (formerly PN- 235).

PTG-200 is an oral IL-23 receptor antagonist that was in Phase 2a development for the treatment of Crohn’s disease (“CD”).

During the fourth quarter of 2021, following a pre-specified interim analysis criteria, a portfolio decision was made by Janssen to stop further development of both PTG-200 and PN-232 in favor of advancing JNJ-2113, based on its superior potency and overall pharmacokinetic and pharmacodynamic profile.

Janssen is primarily responsible for the conduct of all future trials, including current and anticipated Phase 2 trials, and the Company is primarily responsible for the conduct of the second-generation Phase 1 trials.

Pursuant to the Restated Agreement, the parties:

● amended development milestones to reflect Janssen’s expected development of collaboration compounds for multiple indications in the IL-23 pathway;

● limited the Company’s further development and related expense obligations under the Restated Agreement to the PTG-200 Phase 2a trial and the ongoing Phase 1 trials in PN-232 and JNJ-2113;

Janssen is responsible for all other future development and related expenses under the Restated Agreement;

● concluded the parties’ two-year research collaboration, while enabling Janssen to continue conducting additional research through July 2024 on compounds developed pursuant to the Original Agreement.

The Restated Agreement enables Janssen to develop collaboration compounds for multiple indications.

Under the Restated Agreement, Janssen is required to use commercially reasonable efforts to develop at least one collaboration compound for at least two indications.

The Company’s development cost obligations in the Original Agreement for the period following the effective date of the Original Agreement were as follows:

(a) up to $ 20.0 million of costs related to up to three Phase 1 trials of second-generation compounds;

(b) up to $ 20.0 million of costs related to Phase 2a and 2b costs for PTG-200 (i.e., 20 % of the first $ 100.0 million in costs);

and (c) up to $ 25.0 million in costs related to up to two Phase 2 trials evaluating second-generation compounds.

The Company’s development cost obligations under the Restated Agreement are as follows:

(a) the Company funded 20 % of the costs related to the Phase 2a trial evaluating PTG-200 for the treatment of CD (subject to a $ 20.0 million cap);

(b) the Company was responsible for 50 % of agreed-upon costs related to the Phase 1 trial evaluating JNJ- 2113 incurred through January 4, 2021;

and (c) the Company was responsible for 100 % of agreed-upon costs related to the Phase 1 trial evaluating PN-232.

Certain of the Company’s previous development cost obligations under the Original Agreement were limited or eliminated as follows:

(a) the Company’s previous $ 25.0 million obligation for 20 % of costs related to Phase 2 trials for second-generation products was eliminated;

(b) the Company’s previous $ 5.0 million obligation for 50 % of the costs of a potential third Phase 1 trial evaluating a second-generation compound was eliminated;

and (c) the Company had no obligation to fund any portion of any Phase 2b or other trial evaluating PTG-200 beyond the Phase 2a trial in CD.

One milestone for second-generation Phase 2 development was reduced from $ 50.0 million to $ 25.0 million in the Restated Agreement;

otherwise, the various milestone payment amounts in the Restated Agreement remain substantially the same as in the Original Agreement.

To reflect parallel development of multiple indications in the IL-23 pathway, milestone payments under the Restated Agreement generally correspond to the achievement of specified milestones in:

(a) any initial indication (rather than CD, as in the Original Agreement);

(b) any second indication (rather than ulcerative colitis (“UC”), as in the Original Agreement);

and (c) any third indication.

With respect to second-generation compounds, milestone payments for second and third indications may be triggered by any second-generation compound (i.e., not necessarily the second-generation compound that triggered the initial payment for any indication, or the payment for a second indication).

In addition, the opt-in payments contemplated by the Original Agreement related to the scope of Janssen’s license rights have been converted into development milestones in the Restated Agreement.

During the fourth quarter of 2021, a decision was made by JNJ to stop further development of both PTG-200 and PN-232 in favor of advancing JNJ-2113, based on its superior potency and overall pharmacokinetic and pharmacodynamic profile.

JNJ is primarily responsible for the conduct of all future trials, including anticipated Phase 2 and Phase 3 trials, and the Company is primarily responsible for the conduct of the second-generation Phase 1 trials.

The Restated Agreement enables JNJ to develop collaboration compounds for multiple indications.

Under the Restated Agreement, JNJ is required to use commercially reasonable efforts to develop at least one collaboration compound for at least two indications.

Upcoming potential development milestones for second-generation compounds include:

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

Development milestones for PTG-200 were unchanged under the Restated Amendment, except that milestone achievement is generally no longer indication-specific.

Pursuant to the Restated Agreement, the Company remains eligible to receive tiered royalties on net product sales at percentages ranging from mid-single digits to ten percent.

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

Food and Drug Administration (the “FDA”);

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

● $ 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.

Pursuant to the Restated Agreement, the Company remains eligible to receive tiered royalties on net product sales at percentages ranging from six percent to ten percent.

The sales milestone payments in the Original Agreement also remain the same in the Restated Agreement.

Pursuant to both the Original and Restated Agreements, payments to the Company for research and development services are generally billed and collected as services are performed or assets are delivered, including research activities and Phase 1 and Phase 2 development activities.

Janssen bills the Company for its share of the PTG-200 Phase 2a development costs as expenses are incurred by Janssen.

JNJ bills the Company for its share of the PTG-200 Phase 2a development costs as expenses are incurred by JNJ.

Milestone payments are received after the related milestones are achieved.

Janssen retains exclusive, worldwide rights to develop and commercialize IL-23 receptor antagonist compounds derived from the research collaboration conducted under the Original Agreement, or Janssen’s further research under the Restated Agreement.

Any further research and development will be conducted by Janssen.

The Company will have the right to co-detail (for CD and UC indications) up to two of the IL-23 receptor antagonist compounds under the collaboration in the U.S.

JNJ retains exclusive, worldwide rights to develop and commercialize IL-23 receptor antagonist compounds derived from the research collaboration conducted under the Original Agreement, or JNJ’s further research under the Restated Agreement.

Any further research and development will be conducted by JNJ.

The Company will have the right to co-detail (for CD and ulcerative colitis (“UC”) indications) up to two of the IL-23 receptor antagonist compounds under the collaboration in the U.S.

The Restated Agreement remains in effect until the royalty obligations cease following patent and regulatory expiry, unless terminated earlier.

Upon a termination of the Restated Agreement, all rights revert back to the Company, and in certain circumstances, if such termination occurs during ongoing clinical trials, Janssen would, if requested, provide certain financial and operational support to the Company for the completion of such trials.

Upon a termination of the Restated Agreement, all rights revert back to the Company, and in

certain circumstances, if such termination occurs during ongoing clinical trials, JNJ would, if requested, provide certain financial and operational support to the Company for the completion of such trials.

Revenue Recognition

The Restated Agreement contains a single performance obligation for the development license;

Phase 1 development services for PTG-200, PN-232 and JNJ-2113 (formerly known as PN-235);

Phase 1 development services for PTG-200, PN-232 and JNJ-2113;

the Company’s services associated with Phase 2a development for PTG-200 in CD;

the initial year of second-generation compound research services;

and all other such services that the Company may perform at the request of Janssen to support the development of PTG-200 through Phase 2a and PN-232 and JNJ-2113 through Phase 1.

and all other such services that the Company may perform at the request of JNJ to support the development of PTG-200 through Phase 2a and PN-232 and JNJ-2113 through Phase 1.

Under the Restated Agreement, development services performed by the Company for PTG-200 beyond Phase 2a and PN-232 and JNJ-2113 beyond Phase 1 are no longer required.

The Company determined that the license was not distinct from the revised development services within the context of the agreement because the revised development services did not change the utility of the intellectual property.

The Company also concluded that the remaining development services are not distinct from the partially delivered combined promise comprised under the agreement prior to the Restated Agreement of the development license and PTG-200, PN- 232 and JNJ-2113 services, including compound supply and other services.

The Company concluded that the remaining development services are not distinct from the partially delivered combined promise comprised under the agreement prior to the Restated Agreement of the development license and PTG-200, PN- 232 and JNJ-2113 services, including compound supply and other services.

Therefore, the Restated Agreement is treated as if it were part of the Original Agreement.

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The Company uses the most likely amount method to estimate variable consideration included in the transaction price.

Variable consideration after the effective date of the Restated Agreement consisted of future milestone payments and cost sharing payments for agreed-upon services offset by development cost reimbursable to Janssen.

Cost sharing payments from Janssen relate to the agreed-upon services for development activities that the Company performs within the duration of the contract and are included in the transaction price at the Company’s share of estimated budgeted costs

for these activities, including primarily internal full-time equivalent effort and third-party contract costs.

Cost sharing payments to Janssen relate to agreed-upon services for activities that Janssen performs within the duration of the contract are not a distinct service that Janssen transfers to the Company.

Therefore, the consideration payable to Janssen is accounted for as a reduction in the transaction price.

The transaction price of the initial performance obligation under the Restated Agreement was $ 131.7 million as of December 31, 2022, an increase of $ 25.2 million from the transaction price of $ 106.5 million at December 31, 2021 under the Restated Agreement and an increase of $ 33.1 million from the transaction price of $ 98.6 million at December 31, 2020 under the Original Agreement.

In order to determine the transaction price, the Company evaluates 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 to date, $ 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.

The Company concluded that the variable consideration constraint is appropriately reflected in the transaction price as of December 31, 2022, and that the achievement of future milestones is subject to additional development and/or regulatory uncertainty and therefore it is not probable at December 31, 2022 that a material reversal of such revenues will not occur.

Janssen also opted in for certain additional services to be performed by the Company that were outside the initial performance obligation.

Cost sharing payments from JNJ related to the agreed-upon services for development activities that the Company performed within the duration of the contract were included in the transaction price at the Company’s share of the estimated budgeted costs for these activities, including primarily internal full-time equivalent effort and third-party contract costs.

Cost sharing payments to JNJ related to agreed-upon services for activities that JNJ performed within the duration of the contract are not a distinct service that JNJ transfers to the Company.

Therefore, the consideration payable to JNJ was accounted for as a reduction in the transaction price.

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

The transaction price as of December 31, 2022 included $ 112.5 million of nonrefundable payments received to date, $ 17.9 million of reimbursement from JNJ 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 JNJ, partially offset by $ 6.9 million of net cost reimbursement due to JNJ for services performed.

The Company concluded that the variable consideration constraint was appropriately reflected in the transaction price as of December 31, 2022, and that the achievement of future milestones is subject to additional development and/or regulatory uncertainty and therefore it was not probable at December 31, 2022 that a material reversal of such revenues would not occur.

JNJ also opted in for certain additional services to be performed by the Company that were outside the initial performance obligation.

Revenue for these additional services was recognized as these services were performed.

The Company utilized a cost-based input method to measure proportional performance and to calculate the corresponding amount of revenue to recognize.

In applying the cost-based input method of revenue recognition, the Company used actual costs incurred relative to expected costs to fulfill the combined performance obligation.

These costs consist primarily of internal full-time equivalent effort and third-party contract costs.

In applying the cost-based input method of revenue recognition, the

Company used actual costs incurred relative to expected costs to fulfill the combined performance obligation.

These costs consisted primarily of internal full-time equivalent effort and third-party contract costs.

Revenue was recognized based on actual costs incurred as a percentage of total estimated costs as the Company completed its performance obligations.

A cost-based input method of revenue recognition requires management to make estimates of costs to complete the Company’s performance obligations.

The Company believes this is the best measure of progress because other measures do not reflect how the Company transfers its performance obligation to Janssen.

The Company believes this is the best measure of progress because other measures do not reflect how the Company transfers its performance obligation to JNJ.

For the year ended December 31, 2023, the Company recognized $ 60.0 million of license and collaboration revenue, which included a $ 50.0 million milestone payment earned in October 2023 in connection with the dosing of the third patient in the ICONIC-TOTAL Phase 3 trial of JNJ-2113 in patients with moderate-to-severe psoriasis, and a $ 10.0 million milestone payment earned in December 2023 upon the dosing of the third patient in the ANTHEM Phase 2b trial in UC.

For the year ended December 31, 2022, the Company recognized $ 26.6 million of license and collaboration revenue, which was primarily related to the transaction price under the Restated Agreement recognized based on proportional performance.

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For the year ended December 31, 2021 , the Company recognized $ 27.4 million of license and collaboration revenue.

This amount included a cumulative catch-up adjustment increasing license and collaboration revenue by $ 8.0 million, and $ 18.6 million of license and collaboration revenue based on proportional performance following the Restated Agreement.

In addition, the Company recorded $ 0.8 million of revenue related to additional services provided by the Company under the Restated Agreement.

For the year ended December 31, 2020, the Company recognized $ 28.6 million of license and collaboration revenue.

This amount included $ 27.1 million of the transaction price based on proportional performance and an update in forecasted amounts for future services remaining to be performed and recognized under the Original Agreement.

In addition, the Company recorded $ 1.5 million of revenue for the year ended December 31, 2020 related to additional services provided by the Company under the Original Agreement.

The following tables present changes in the Company’s contract assets and liabilities during the periods presented (in thousands):

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Contract assets:

Receivable from collaboration partner - related party

Receivable from collaboration partner

Contract liabilities:

Deferred revenue - related party

Payable to collaboration partner - related party

Payable to collaboration partner

Year Ended December 31, 2022

Contract assets:

Receivable from collaboration partner - related party

Receivable from collaboration partner

Contract liabilities:

Deferred revenue - related party

Payable to collaboration partner - related party

Deferred revenue

Payable to collaboration partner

During the year ended December 31, 2022, the Company recognized revenue of $ 0.9 million from amounts included in the deferred revenue balance at the beginning of the year.

During the year ended December 31, 2021, the Company recognized revenue of $ 2.8 million from amounts included in the deferred revenue balance at the beginning of the year.

During the year ended December 31, 2020, the Company recognized $ 14.1 million from amounts included in the deferred revenue balance at the beginning of the year.

None of the costs to obtain or fulfill the contract were capitalized.

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Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date.

The accounting guidance establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

The accounting guidance establishes

a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level 1 —Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.

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Money market funds

Certificates of deposit

Commercial paper

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Treasury and agency securities

Supranational and sovereign government securities

Total financial assets

The Company’s commercial paper, corporate debt securities, U.S.

The Company’s certificates of deposit, commercial paper, corporate debt securities, and U.S.

Treasury and agency securities, including U.S.

Treasury bills, and supranational and sovereign government securities are classified as Level 2 as they were valued based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques, for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets.

Treasury bills, are classified as Level 2 as they were valued based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques, for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets.

The carrying amount of the Company’s remaining financial assets and liabilities, including cash, receivables and payables, approximates their fair value due to their short-term nature.

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Money market funds

Certificates of deposit

Commercial paper

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Treasury and agency securities

Supranational and sovereign government securities

Total cash equivalents and marketable securities

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The Company does not intend to sell its securities that are in an unrealized loss position, and it is not more likely than not that the Company will be required to sell its securities before recovery of their amortized cost basis, which may be at maturity.

Factors considered in determining whether a loss is temporary include the length of time and extent to which the fair value has been less than the amortized cost basis and whether the Company intends to sell the security or whether it is more likely than not that the Company would be required to sell the security before recovery of the amortized cost basis.

There were no realized gains or realized losses on marketable securities for the periods presented.

There were no material realized gains or realized losses on marketable securities for the periods presented.

The Company evaluated securities with unrealized losses to determine whether such losses, if any, were due to credit-related factors and determined that there were no credit-related losses to be recognized as of December 31, 2023.

Balance Sheet Components

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Prepaid expenses and other current assets consisted of the following (in thousands):

Prepaid clinical and research related expenses

Prepaid insurance

Prepaid clinical and research related expenses

Prepaid licenses

Other prepaid expenses

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Depreciation expense for the years ended December 31, 2023, 2022 and 2021, was $ 977,000 , $ 1,032,000 and $ 813,000 , respectively.

As of December 31, 2022, 2021 and 2020, $ 156,000 , $ 262,000 and $ 46,000 , respectively, of property and equipment, net, was located in Australia.

The remainder of the Company’s property and equipment, net is located in the United States.

As of December 31, 2023, 2022 and 2021, $ 56,000 , $ 156,000 and $ 262,000 , respectively, of the Company’s property and equipment, net, was located in Australia.

The remainder of the Company’s property and equipment, net was located in the United States.

Accrued Expenses and Other Payables

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Accrued professional service fees

Accrued payment to former collaboration partner

Total accrued expenses and other payables

Research Collaboration and License Agreement

The Company and Zealand Pharma A/S entered into a collaboration agreement in June 2012.

In October 2013, Zealand Pharma abandoned the collaboration, and the collaboration agreement was terminated in 2014.

The Company and Zealand Pharma A/S (“Zealand”) entered into a collaboration agreement in June 2012.

In October 2013, Zealand abandoned the collaboration, and the collaboration agreement was terminated in 2014.

The agreement provides for certain post-termination payment obligations to Zealand with respect to compounds related to the collaboration that meet specified conditions set forth in the collaboration agreement and which the Company elects to further develop following Zealand’s abandonment of the collaboration.

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However, upon reevaluation, the Company concluded in 2019 that rusfertide is not a compound requiring post-termination payments under the agreement and initiated an arbitration proceeding in January 2020.

On August 4, 2021, the Company and Zealand agreed to resolve the dispute and entered into an Arbitration Resolution Agreement.

In August 2021, the Company and Zealand agreed to resolve the dispute and entered into an Arbitration Resolution Agreement.

Commitments and Contingencies – Legal Proceedings for additional information on the results of arbitration proceedings related to this research and collaboration agreement.

Milestone payments to collaboration partners are recorded as research and development expense in the period that the expense is incurred.

For the year ended December 31, 2021, the Company recorded research and development expense of $ 4.0 million under this agreement.

No research and development expense was recorded under this agreement for the years ended December 31, 2022 or 2020.

Research and Development Tax Incentive

The Company did no t recognize any research and development cash tax incentive from the Australian Tax Office (“ATO”) during the year ended December 31, 2022.

During the years ended December 31, 2021 and 2020, the Company recognized AUD 4.2 million ($ 3.1 million) and AUD 1.4 million ($ 1.0 million), respectively, as a reduction of research and development expenses in connection with the research and development cash tax incentive from the ATO.

As of December 31, 2021 and 2020, the research and development tax incentive receivable was AUD 3.8 million ($ 2.8 million) and AUD 1.4 million ($ 1.1 million), respectively.

There was no cash tax incentive receivable balance as of December 31, 2022.

Term Loan Facility

On October 30, 2019 (the “Closing Date”), the Company entered into a Credit and Security Agreement, by and among the Company, MidCap Financial Trust, as a lender, Silicon Valley Bank, as a lender, the other lenders party thereto from time to time and MidCap Financial Trust, as administrative agent and collateral agent (“Agent”), (the “Term Loan Credit Agreement”), which provided for a $ 50.0 million term loan facility.

The Term Loan Credit Agreement provided for (i) on the Closing Date, $ 10.0 million aggregate principal amount of term loans, (ii) at the Company’s option until December 31, 2020, an additional $ 20.0 million term loan facility subject to the satisfaction of certain conditions, including clinical milestone achievement, and (iii) at the Company’s option, until September 30, 2021, an additional $ 20.0 million term loan facility subject to the satisfaction of certain conditions, including clinical milestone achievement, (collectively, the “Term Loans”).

The Company intended to use any proceeds of the Term Loans for general corporate purposes.

In June 2020, the Company prepaid its outstanding $ 10.0 million balance on the term loan as well as $ 0.6 million for related prepayment and exit fees.

Accordingly, the company accelerated amortization of $ 0.1 million related to capitalized and unamortized debt issuance costs, which is included as part of the $ 0.6 million loss on early repayment of debt.

The Company did not exercise its option to borrow the $ 20.0 million second tranche of Term Loans, which expired on December 31, 2020.

In September 2021, the Company executed a payoff letter to release all obligations under the Term Loan Credit Agreement, ending the Term Loan Credit Agreement.

The Company had no outstanding balance as of December 31, 2022, 2021 or 2020 related to the Term Loan Credit Agreement.

The Company recognized $ 0.6 million in interest expense related to the Term Loans during the year ended December 31, 2020.

No interest expense related to the Term Loans was recognized during the years ended December 31, 2022 and 2021.

The Company accounts for interest on its long-term debt under the effective interest method, with interest expense comprised of contractual interest, amortization of origination fees and other issuance costs, and accretion of final payment fees.

For the year ended December 31, 2021, the Company recorded research and development

expense of $ 4.0 million under this agreement.

No research and development expense were recorded under this agreement for the years ended December 31, 2023 or 2022.

The Company applies ASC 842 to recognize assets and liabilities for leases with lease terms of more than 12 months on the balance sheet.

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The Company has one operating lease agreement originally entered into in March 2017 for approximately 42,900 square feet for laboratory and office space located in Newark, California.

On July 2, 2021, the Company entered into a second amendment to its original facility lease agreement, as amended, for 15,000 square feet of additional office space in Newark, California (the “Second Amendment”).

In July 2021, the Company entered into a second amendment to its original facility lease agreement, as amended, for 15,000 square feet of additional office space in Newark, California (the “Second Amendment”).

The Company commenced operations in the additional space in September 2021.

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

Subject to required notice periods and the Company’s obligations under binding purchase orders, the Company can elect to discontinue the work under these agreements at any time.

Subject to the required notice periods and the Company’s obligations under binding purchase orders, the Company can elect to discontinue the work under these agreements at any time.

The Company expects 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.

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If the Company determines that a loss is reasonably possible and the loss or range of loss can be estimated, it discloses the possible loss.

On January 23, 2020, the Company initiated arbitration proceedings with the International Court of Arbitration of the International Chamber of Commerce against Zealand Pharma A/S (“Zealand”) related to a collaboration agreement the Company and Zealand entered into in 2012 and terminated in 2014.

In January 2020, the Company initiated arbitration proceedings with the International Court of Arbitration of the International Chamber of Commerce against Zealand related to a collaboration agreement the Company and Zealand entered into in 2012 and terminated in 2014.

The agreement provides for certain post-termination payment obligations to Zealand with respect to compounds related to the collaboration that the Company elects to further develop and meet specified conditions.

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

In August, the Company and Zealand agreed to resolve the dispute and reached an Arbitration Resolution Agreement.

Under the Arbitration Resolution Agreement, (1) the Company was required to make an additional payment of $ 1.5 million to Zealand in August 2022 with respect to rusfertide;

(2) all development milestones with respect of rusfertide were reduced by 50 %, except that the Company agreed to pay in full within two business days after the effective date of the Arbitration Resolution Agreement (and timely paid):

(2) all development milestones with respect of rusfertide were reduced by 50 %, except that the Company agreed to pay in full within two business days after the

effective date of the Arbitration Resolution Agreement (and timely paid):

(i) a $ 1.0 million milestone for initiation of a Phase 2b clinical trial;

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Stockholders’ Equity

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

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

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

Warrants to purchase 1,375,000 shares of the Company’s common stock have an exercise price of $ 10.00 per share and Warrants to purchase 1,375,000 shares of the

Company’s common stock have an exercise price of $ 15.00 per share.

The exercise price and number of shares of common stock issuable upon the exercise of the Warrants (the “Warrant Shares”) are 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 may be exercisable on a “cashless” basis.

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

The common stock and warrants are classified as equity in accordance with Accounting Standards Codification Topic 480 , Distinguishing Liabilities from Equity (“ASC 480”) , and the net proceeds from the transaction were recorded as a credit to additional paid-in capital.

As of December 31, 2022, none of the Warrants have been exercised.

Public Offerings

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

Net proceeds, after deducting underwriting commissions and offering costs paid by the Company, were $ 123.8 million.

In April 2023, the Company completed an underwritten public offering of 5,000,000 shares of its 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 the Company, were $ 107.8 million.

ATM Offerings

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

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

During the year ended December 31, 2022, the Company sold 422,367 shares of its common stock under the 2019 ATM Facility for net proceeds of $ 14.6 million, after deducting issuance costs.

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

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

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

There were no sales of the Company’s common stock under the 2022 ATM Facility during the three months ended June 30, 2023, September 30, 2023 and December 30, 2023.

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

Exchange Warrants

In December 2018, the Company entered into an exchange agreement (the “Exchange Agreement”) with an investor and its affiliates (the “Exchanging Stockholders”), pursuant to which the Company exchanged an aggregate of 1,000,000 shares of the Company’s common stock, par value $ 0.00001 per share, owned by the Exchanging Stockholders for pre-funded warrants (the “Exchange Warrants”) to purchase an aggregate of 1,000,000 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 Exchange Warrants), with an exercise price of $ 0.00001 per share.

The Exchange Warrants expire ten years from the date of issuance.

The Exchange Warrants were exercisable at any time prior to expiration except that the Exchange Warrants could not be exercised by the Exchanging Stockholders if, after giving effect thereto, the Exchanging Stockholders would beneficially own more than 9.99 % of the Company’s common stock, subject to certain exceptions.

The Exchange Warrants expired ten years from the date of issuance.

The Exchange Warrants were exercisable at any time prior to

expiration except that the Exchange Warrants could not be exercised by the Exchanging Stockholders if, after giving effect thereto, the Exchanging Stockholders would beneficially own more than 9.99 % of the Company’s common stock, subject to certain exceptions.

In accordance with Accounting Standards Codification Topic 505, Equity , the Company recorded the retirement of the common stock exchanged as a reduction of common stock shares outstanding and a corresponding debit to additional paid-in-capital at the fair value of the Exchange Warrants on the issuance date.

The Exchange Warrants were classified as equity in accordance with ASC 480 , and the fair value of the Exchange Warrants was recorded as a credit to additional paid-in capital and is not subject to remeasurement.

The Exchange Warrants met the criteria for equity classification and the fair value of the Exchange Warrants was recorded as a credit to additional paid-in capital and was not subject to remeasurement.

The Company determined that the fair value of the Exchange Warrants was substantially similar to the fair value of the retired shares on the issuance date due to the negligible exercise price for the Exchange Warrants.

During the year ended December 31, 2022, Exchange Warrants to purchase 400,000 shares of the Company’s common stock were net exercised, resulting in the issuance of 399,997 shares of common stock.

During the year ended December 31 2022, Exchange Warrants to purchase 400,000 shares of the Company’s common stock were net exercised, resulting in the issuance of 399,997 shares of common stock.

As of December 31, 2023, there were no outstanding Exchange Warrants.

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

During the year ended December 31, 2020, the Company sold 2,483,719 shares of its common stock under the 2019 ATM Facility for net proceeds of $ 41.9 million, after deducting issuance costs.

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

During the year ended December 31, 2022, the Company sold 422,367 shares of its common stock under the 2019 ATM Facility for net proceeds of $ 14.6 million, after deducting issuance costs.

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

In May 2020, the Company completed an underwritten public offering of 7,000,000 shares of common stock at a public offering price of $ 14.00 per share and issued an additional 1,050,000 shares of its 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 the Company, were $ 105.3 million.

In December 2020, the Company 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 its 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 the Company, were $ 107.6 million.

Net proceeds, after deducting underwriting commissions and offering costs paid by the Company, were $ 123.8 million.

In August 2022, the Company entered into an Open Market Sale Agreement SM (the “Sales Agreement”), pursuant to which the Company may offer and sell up to $ 100.0 million of shares of its 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.

Pre-Funded Warrants

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

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

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

The exercise price and number of shares of 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, the Company 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, the Company entered into certain agreements with the Investors and their affiliates under which the Company 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 the Company’s 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 the Company’s 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 ASC 260, 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.

Equity Incentive Plan

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ISOs were granted only to Company employees.

NSOs were granted to Company employees, non-employee board directors and consultants.

NSOs were granted to Company employees, non-employee members of the Company’s Board of Directors

(“Board”) and consultants.

Options under the 2007 Plan have a term of ten years and generally vest over a four-year period.

In July 2016, the Company’s board of directors and stockholders approved the 2016 Equity Incentive Plan (“2016 Plan”) to replace the 2007 Plan.

In July 2016, the Company’s Board and stockholders approved the 2016 Equity Incentive Plan (“2016 Plan”) to replace the 2007 Plan.

Under the 2016 Plan, 1,200,000 shares of the Company’s common stock were initially reserved for the issuance of stock options, restricted stock units and other awards to employees, directors and consultants.

Pursuant to the “evergreen” provision contained in the 2016 Plan, the number of shares reserved for issuance under the 2016 Plan automatically increases on January 1 of each year, starting on January 1, 2017 and continuing through (and including) January 1, 2026, by 4 % of the total number of shares of the Company’s capital stock outstanding on December 31 of the preceding fiscal year, or a lesser number of shares determined by the Company’s board of directors.

Upon adoption of the 2016 Plan, no additional stock awards were issued under the 2007 Plan.

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As of December 31, 2023, approximately 1,035,798 shares of common stock were available for issuance under the 2016 Plan.

The 2016 Plan is administered by the board of directors, or a committee appointed by the board of directors, which determines the types of awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule.

The 2016 Plan is administered by the Board, or a committee appointed by the Board, which determines the types of awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule.

Options granted under the 2016 Plan expire no later than ten years from the date of grant.

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Employee stock options generally vest over a period of approximately four years .

Non-employee director initial stock options generally vest monthly over a period of approximately three years , and non-employee director annual refresher stock options generally vest over a period of approximately one year .

Non-employee Board director initial stock options generally vest monthly over a period of approximately three years , and non-employee Board director annual refresher stock options generally vest over a period of approximately one year .

Consultant awards generally vest over a period of approximately one year.

Inducement Plan

In May 2018, the Company’s board of directors approved the 2018 Inducement Plan, as subsequently amended.

In May 2018, the Company’s Board approved the 2018 Inducement Plan, as subsequently amended.

The 2018 Inducement Plan is a non-stockholder approved stock plan, under which awards options and restricted stock unit awards to persons that were not previously employees or directors of the Company, or following a bona fide period of non-employment, as an inducement material to such persons entering into employment with the Company, within the meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules.

The 2018 Inducement Plan is administered by the board of directors or the Compensation Committee of the board, which determines the types of awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule.

The 2018 Inducement Plan is administered by the Board or the Compensation Committee of the Board, which determines the types of awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule.

Awards granted under the 2018 Inducement Plan expire no later than ten years from the date of grant.

Employee stock options granted under the 2018 Inducement Plan generally vest over a period of approximately four years .

As of December 31, 2023, approximately 548,722 shares of common stock were available for issuance under the 2018 Inducement Plan, as amended.

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The Company has limited historical exercise information to develop reasonable expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants.

Expected Volatility —For the year ended December 31, 2020, the Company’s expected volatility was based upon a blend of 75 % of the average volatility for comparable publicly traded biopharmaceutical companies over a period equal to the expected term of the stock option grants and 25 % of the volatility of the Company’s stock price since its initial public

offering in August 2016.

For the year ended December 31, 2021, the Company’s expected volatility was estimated based upon a mix of 50 % of the average volatility for comparable publicly traded biopharmaceutical companies over a period equal to the expected term of the stock option grants and 50 % of the volatility of the Company’s stock price since its initial public offering in August 2016.

Expected Volatility — Beginning January 1, 2023, the Company’s expected volatility is estimated based upon the volatility of the Company’s stock price over a period equal to the expected term of the stock option grants.

For the year ended December 31, 2022, the Company’s expected volatility was estimated based upon a mix of 25 % of the average

volatility for comparable publicly traded biopharmaceutical companies over a period equal to the expected term of the stock option grants and 75 % of the volatility of the Company’s stock price since its initial public offering in August 2016.

Risk-Free Interest Rate —The risk-free interest rate is based on the U.S.

Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of option.

Treasury zero coupon issues in effect at the time of grant for periods corresponding with the expected term of the option.

Expected Dividend —The Company has never paid dividends on its common stock and has no plans to pay dividends on its common stock.

Therefore, the Company used an expected dividend yield of zero.

Restricted Stock Units

A restricted stock unit award (“RSU”) is an agreement to issue shares of the Company’s common stock at the time of vesting.

An RSU is an agreement to issue shares of the Company’s common stock at the time of vesting.

RSUs generally vest annually in equal installments over three or four years on approximately the anniversary of the grant date.

RSUs granted to certain non-executive employees in 2022 vest 100 % annually on approximately the first anniversary of the grant date.

RSUs granted to certain non-executive employees in 2022 vested 100 % on approximately the first anniversary of the grant date.

RSUs granted to certain executives in 2021 vest 100 % on the third anniversary of the grant date.

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For the years ended December 31, 2023, 2022 and 2021, the aggregate fair value of RSUs that vested during the year was $ 5.9 million, $ 1.7 million and $ 0.8 million, respectively.

Performance Stock Units

Performance stock unit award (“PSU”) activity under the Company’s equity incentive plans is set forth below:

PSU activity under the Company’s equity incentive plans is set forth below:

Unvested PSUs at December 31, 2022

Unvested PSUs at December 31, 2023

The terms of the unvested PSUs provide for 100 % of shares to be earned based on the achievement of certain pre-determined performance objectives, subject to the participant’s continued employment.

The PSUs will vest, if at all, upon certification by the Compensation Committee of the Company’s Board of Directors of the actual achievement of the performance objectives, subject to specified change of control exceptions.

The terms of the PSUs provide for 100 % of shares to be earned based on the achievement of certain pre-determined performance objectives, subject to the participant’s continued employment.

The PSUs will vest, if at all, upon certification by the Compensation Committee of the Board of the actual achievement of the performance objectives, subject to specified change of control exceptions.

Stock-based compensation expense associated with PSUs is based on the fair value of the Company’s common stock on the grant date, which equals the closing market price of the Company’s common stock on the grant date.

The Company recognizes compensation expense over the vesting period of the awards that are ultimately expected to vest when the achievement of the related performance objective becomes probable.

During the year ended December 31, 2023, the Compensation Committee of the Board certified the actual achievement of performance objectives related to certain PSUs.

As a result, recipients earned a total of 114,000 shares of common stock.

The total fair market value of PSUs at vest date during the year ended December 31, 2023 was $ 3.0 million.

No PSUs vested during the years ended December 31, 2022 and 2021.

The total fair value of grant date fair value of unvested PSUs outstanding as of December 31, 2023 was $ 1.8 million.

As of December 31, 2022, the achievement of the related performance objectives was deemed not probable and, accordingly, no stock-based compensation expense for the unvested PSUs has been recognized as of December 31, 2022.

As of December 31, 2023, the achievement of the related performance objectives was deemed not probable and, accordingly, no stock-based compensation expense for unvested PSUs has been recognized as of December 31, 2023.

Employee Stock Purchase Plan

In July 2016, the Company’s board of directors and stockholders approved the 2016 Employee Stock Purchase Plan (“2016 ESPP”).

The 2016 ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended, and is administered by the Company’s board of directors and the Compensation Committee of the board of directors.

In July 2016, the Company’s Board and stockholders approved the 2016 Employee Stock Purchase Plan (“2016 ESPP”).

The 2016 ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal Revenue Code of 1986, as amended, and is administered by the Company’s Board and the Compensation Committee of the Board.

Under the 2016 ESPP, 150,000 shares of the Company’s common stock were initially reserved for employee purchases of the Company’s common stock.

Pursuant to the “evergreen” provision contained in the 2016 ESPP, the number of shares reserved for issuance automatically increases on January 1 of each year, starting on January 1, 2017 and continuing through (and including) January 1, 2026 by the lesser of (i) 1 % of the total number of shares of common stock outstanding on December 31 of the preceding fiscal year (ii) 300,000 shares, or (iii) such other number of shares determined by the board of directors.

The 2016 ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount through payroll deductions of up to 15 % of their eligible compensation.

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The Company may make contributions to this plan at its discretion.

The Company matched 50 % of each employee’s contribution up to a maximum of $ 4,000 for the year ended December 31, 2022 and $ 3,500 for the year ended December 31, 2021, resulting in recognized expense of approximately $ 0.3 million for the years ended December 31, 2022 and 2021.

No matching contributions were made to the plan by the Company for the year ended December 31, 2020.

The Company matched 50 % of each employee’s contribution up to a maximum of $ 4,000 for the years ended December 31, 2023 and 2022 and $ 3,500 for the year ended December 31, 2021, resulting in recognized expense of approximately $ 0.4 million for the year ended December 31, 2023 and $ 0.3 million for each of the years ended December 31, 2022 and 2021.

No income tax expense was recorded by the Company for the years ended December 31, 2023, 2022, and 2021.

The Company recorded income tax expense of $ 1.3 million for the year ended December 31, 2020.

During the second quarter of 2020, the Company’s Australia subsidiary sold beneficial rights to discovery intellectual property to its U.S.

entity, and the U.S.

entity reimbursed the Australia subsidiary for certain direct development costs.

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

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

The Company’s effective income tax rate differed from the Company’s federal statutory rate of 21 %, primarily because its U.S.

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Total net loss before taxes

The federal, state and foreign components of the income tax expense (benefit) are summarized as follows (in thousands):

The federal, state and foreign components of the income tax expense are summarized as follows (in thousands):

Year Ended December 31,

Total current tax (benefit) expense

Total current tax expense

Total deferred tax expense

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Net operating loss carryforwards

Depreciation and amortization

Accruals/other

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Net deferred tax assets

Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period.

ASC 740 requires that the tax benefit of net operating losses, temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to generate sufficient taxable income within the carryforward period.

Because of the Company’s recent history of operating losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance.

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The state net operating loss carryforwards will begin to expire in 2035, if not utilized.

As of December 31, 2022, the Company had approximately AUD 0.3 million ($ 0.2 million) of Australian tax loss carryforward.

As of December 31, 2023, the Company did no t have any Australian tax loss carryforward.

As of December 31, 2023, the Company had $ 36.9 million of federal and $ 12.8 million of state research and development tax credit carryforwards available to reduce future income taxes.

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At December 31, 2023, the Company had unrecognized tax benefits of $ 28.0 million, which are subject to a valuation allowance and would not affect the effective tax rate if recognized.

The Company does not anticipate that the total amounts of unrecognized tax benefits will significantly increase or decrease in the next 12 months.

The Company does not anticipate that the total amount of unrecognized tax benefits will significantly increase or decrease in the next 12 months.

The Company’s policy is to include interest and penalties related to unrecognized tax benefits within the provision for income taxes, as necessary.

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The Company’s tax returns remain open for examination for all years.

The Company’s Australia subsidiary had an accumulated deficit at December 31, 2022 and, accordingly, no provision has been provided thereon for any unremitted earnings.

Protagonist Australia had an accumulated deficit at December 31, 2023 and, accordingly, no provision has been provided thereon for any unremitted earnings.

The Company has elected to recognize any potential global intangible low-taxed income (“GILTI”) obligation as an expense in the period it is incurred.

The Company has received orphan drug designation from the U.S.

Food and Drug Administration (“FDA”) for its clinical asset rusfertide (PTG-300) for the treatment of polycythemia vera and beta-thalassemia and may qualify for a related 25 % U.S.

The Company has received orphan drug designation from the FDA for its clinical asset rusfertide (PTG-300) for the treatment of polycythemia vera and beta-thalassemia and may qualify for a related 25 % U.S.

Federal income tax credit on qualifying clinical study expenditures.

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The Tax Act made broad and complex changes to the U.S.

tax code, including the imposition of a one-time mandatory deemed repatriation tax (“Transition Tax”) on certain earnings accumulated offshore since 1986 and the reduction of the corporate tax rate from 35 % to 21 % for U.S.

tax code, including the imposition of a one-time mandatory deemed repatriation tax on certain earnings accumulated offshore since 1986 and the reduction of the corporate tax rate from 35 % to 21 % for U.S.

taxable income, resulting in a one-time remeasurement of U.S.

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Net Loss per Share

As the Company had a net loss for the years ended December 31, 2022, 2021 and 2020, all potential weighted average dilutive common shares were determined to be anti-dilutive.

As the Company had a net loss for the each of the years ended December 31, 2023, 2022 and 2021, all potential weighted average dilutive common shares were determined to be anti-dilutive.

The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share data):

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Subsequent Event

The Company sold 1,749,199 shares of its common stock under the 2022 ATM Facility pursuant to the Sales Agreement during the period from January 1, 2023 through filing date of this Annual Report on Form 10-K.

Net proceeds were $ 24.3 million, after deducting issuance costs.

As of the filing date of this Annual Report on Form 10-K, a total of $ 275.1 million of common stock remained available for sale under the registration statement on Form S-3 (File No.

333-266595) that was declared effective as of August 16, 2022, $ 75.1 million of which remained available for sale under the 2022 ATM facility.

In January 2024, the Company entered into a worldwide license and collaboration agreement for the development and commercialization of rusfertide with Takeda Pharmaceuticals USA, Inc.

(“Takeda”), which is yet to become effective.

Under the terms of the agreement, the Company expects 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.

The Company expects 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.

The Company and Takeda expect to also share equally in U.S.

profits and losses ( 50 % to the Company and 50 % to Takeda).

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

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

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure

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 8. Financial Statements and Supplementary Data