Item 7. Management’s Discussion and Analysis
Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations
Overview
We are a biopharmaceutical company with peptide-based new chemical entities rusfertide and JNJ-2113 (formerly PN-235) in advanced stages of development, both derived from our proprietary peptide technology platform. Our clinical programs fall into two broad categories of diseases: (i) hematology and blood disorders, and (ii) inflammatory and immunomodulatory (“I&I”) diseases.
Rusfertide
Our most advanced clinical asset, rusfertide (generic name for PTG-300), is an injectable hepcidin mimetic in development for the potential treatment of polycythemia vera (“PV”) and other blood disorders. Hepcidin is a key hormone in regulating iron equilibrium and is critical to the proper development of red blood cells (“RBCs”). Rusfertide mimics the effect of the natural hormone hepcidin, but with greater potency, solubility and stability. Data from our rusfertide Phase 2 clinical trials presented at medical conferences from 2021 through 2023 provided evidence regarding the potential of rusfertide for managing hematocrit, reducing thrombotic risk and improving iron deficiency symptoms. Rusfertide has a unique mechanism of action in the potential treatment of PV, which may enable it to specifically decrease and maintain hematocrit levels within the range of recommended clinical guidelines without causing the iron deficiency that can occur with frequent phlebotomy. Our rusfertide Phase 2 clinical trials include the following:
● REVIVE, a Phase 2 proof of concept (“POC”) trial, was initiated in the fourth quarter of 2019. We completed enrollment of patients in the first quarter of 2022 and 70 patients were enrolled through the end of the randomized withdrawal portion of the trial, which was completed during the first quarter of 2023 and is continuing in an ongoing open-label extension (“OLE”);
● THRIVE, a Phase 2 long-term extension trial for REVIVE patients on years three through five of treatment; and
● PACIFIC, another Phase 2 trial for rusfertide for patients diagnosed with PV and with routinely elevated hematocrit levels (>48%), was initiated during the first quarter of 2021, and the 52-week trial was completed during the second quarter of 2023.
In March 2023, we announced positive topline results from the blinded, placebo-controlled, randomized withdrawal portion of the REVIVE trial. Subjects receiving rusfertide achieved statistically significant improvements versus placebo in the trial’s primary endpoint. The double-blind, placebo-controlled, 12-week randomized withdrawal portion was included as Part 2 of the REVIVE trial to evaluate rusfertide in PV patients with frequent phlebotomy requirements. In the REVIVE trial, subjects were initially enrolled in the 28-week open label dose-titration and efficacy evaluation Part 1 of the study, followed by 1:1 randomization of 53 subjects to placebo versus rusfertide therapy for a subsequent duration of 12 weeks. More subjects receiving rusfertide during the blinded randomized withdrawal portion of the REVIVE trial were responders compared with placebo (69.2% versus 18.5%, p=0.0003). A trial subject was defined as a responder if the subject completed 12 weeks of double-blind treatment while maintaining hematocrit control without phlebotomy eligibility and without phlebotomy. During the 12 weeks of the blinded randomized withdrawal, 92.3% of subjects on rusfertide (24 out of 26) were not phlebotomized.
Data from the REVIVE trial presented at the European Hematology Association Congress in June 2023 suggested that rusfertide treatment results in highly statistically significant reduction in the need for therapeutic phlebotomy in phlebotomy-dependent patients, leading to rapid, sustained and durable control of hematocrit levels below 45%. Rusfertide was well tolerated, with localized injection site reactions (“ISRs”) comprising the majority of adverse events.
Long-term follow up data from the REVIVE trial presented at the American Society of Hematology (“ASH”) Annual Meeting in December 2023 showed durable hematocrit control, decreased phlebotomy use, long-term tolerability, and no new safety signals in patients with PV. An analysis of the PACIFIC Phase 2 trial was also presented that indicated rusfertide improves markers of iron deficiency in patients with PV. In addition, data was presented
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regarding the prevalence of thromboembolic events and secondary cancers in PV patients not treated with rusfertide. In February 2024, the full Phase 2 REVIVE trial results, including efficacy and safety data, were published in the New England Journal of Medicine.
We have initiated VERIFY, a global double-blind, placebo-controlled Phase 3 clinical trial of rusfertide in PV for approximately 250 patients. We expect enrollment completion by the end of the first quarter of 2024. By the end of 2024, we expect to receive the results of our ongoing two-year study evaluating the carcinogenicity potential of rusfertide when administered once weekly to rats.
In January 2024, we entered into a worldwide license and collaboration agreement for the development and commercialization of rusfertide with Takeda, which is yet to become effective. Under the terms of the agreement, we expect to receive an upfront payment of $300 million and to be eligible to receive additional worldwide development, regulatory and commercial milestone payments of up to $330 million, as well as tiered royalties from 10% to 17% on ex-U.S. net sales. We expect to be responsible for research and development through the completion of the Phase 3 VERIFY trial and U.S. regulatory approval. Takeda is expected to have rights for ex-U.S. development and to be responsible for leading global commercialization activities. We and Takeda expect to also share equally in U.S. profits and losses (50% to us and 50% to Takeda).
Further details related to the agreement, including our right to opt-out of the 50:50 U.S. profit and loss sharing arrangement in exchange for enhanced economics, are available in our Current Report on Form 8-K filed on January 31, 2024 with the U.S. Securities and Exchange Commission (the “SEC”). The effectiveness of the agreement is dependent on and subject to the termination or expiration of any applicable waiting periods under the Hart-Scott-Rodino Act (the “HSR Act”).
JNJ-2113 (formerly PN-235)
Our partnered Interleukin-23 receptor (“IL-23R”) antagonist compound JNJ-2113 is an orally delivered investigational drug that is designed to block biological pathways currently targeted by marketed injectable antibody drugs. Our orally stable peptide approach may offer a targeted therapeutic approach for gastrointestinal (“GI”) and systemic compartments as needed. We believe that, compared to antibody drugs, JNJ-2113 has the potential to provide clinical improvement in an oral medication with increased convenience and compliance and the opportunity for the earlier introduction of targeted oral therapy.
In May 2017, we entered into a worldwide license and collaboration agreement with JNJ, formerly Janssen, to co-develop and co-detail our IL-23R antagonist compounds, including PTG-200 (JNJ-67864238) and certain related compounds for all indications, including inflammatory bowel disease (“IBD”). PTG-200 was a first-generation investigational, orally delivered, IL-23R antagonist for the treatment of IBD. The agreement with JNJ was amended in May 2019 to expand the collaboration by supporting efforts towards second-generation IL-23R antagonists; and in July 2021 to, among other things, enable JNJ to independently research and develop collaboration compounds for multiple indications in the IL-23 pathway and further align our financial interests.
Following completion of a Phase 1 trial in the fourth quarter of 2021, a decision was made by JNJ to advance second-generation product candidate JNJ-2113 (JNJ-77242113) based on its superior potency and overall pharmacokinetic and pharmacodynamic profile.
In February 2022, JNJ initiated FRONTIER 1, a 255-patient Phase 2b clinical trial of JNJ-2113 in moderate-to-severe plaque psoriasis, which was completed in December 2022. FRONTIER 1 was a randomized, multicenter, double-blind, placebo-controlled trial that evaluated three once-daily dosages and two twice-daily dosages of JNJ-2113 taken orally. The primary endpoint of the trial was the proportion of patients achieving PASI-75 (a 75% improvement in skin lesions as measured by the Psoriasis Area and Severity Index (“PASI”)) at 16 weeks. In July 2023, we announced updated positive topline results from the trial, which were presented by JNJ at the World Congress of Dermatology in Singapore. JNJ-2113 achieved the trial’s primary and secondary efficacy endpoints. A statistically significant greater proportion of patients who received JNJ-2113 achieved PASI-75 as well as PASI-90 and PASI-100 (90% and 100% improvement, respectively, in skin lesions as measured by the PASI) responses compared to placebo at week 16 in all
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five of the trial’s treatment groups. A clear dose response was observed across an eight-fold dose range. Treatment was well tolerated, with no meaningful difference in frequency of adverse events across treatment groups versus placebo.
JNJ has initiated five additional JNJ-2113 trials, including:
● ICONIC-LEAD – A 600-patient randomized, controlled Phase 3 trial to evaluate the safety and efficacy of JNJ-2113 compared with placebo in participants with moderate-to-severe plaque psoriasis, with PASI-90 and Investigator’s Global Assessment (“IGA”) score of 0 (clear) or 1 (almost clear) as co-primary endpoints;
● ICONIC-TOTAL – A 300-patient randomized, controlled Phase 3 trial to evaluate the efficacy and safety of JNJ-2113 compared with placebo for the treatment of plaque psoriasis in participants with at least moderate severity affecting special areas (scalp, genital, and/or palms of the hands and soles of the feet) with overall IGA score of 0 or 1 as the primary endpoint;
● ICONIC ADVANCE 1 – A 750-patient randomized, controlled Phase 3 trial to evaluate the effectiveness of JNJ-2113 in participants with moderate-to-severe plaque psoriasis compared to placebo and Sotyktu (“deucravacitinib”). The trial’s primary co-endpoints are PASI-90 and IGA score of 0 or 1;
● ICONIC ADVANCE 2 – A 675-patient Phase 3 trial similarly designed to ICONIC ADVANCE 1, which is expected to start enrolling patients later in 2024; and
● ANTHEM-UC – A 240-patient Phase 2b randomized, controlled trial to evaluate the safety and effectiveness of JNJ-2113 compared with placebo in participants with moderate-to-severely active ulcerative colitis (“UC”).
All of the trials in the ICONIC program will use the once-daily, immediate release formulation of JNJ-2113 from the previously completed FRONTIER 1 study. The estimated primary completion date for the ICONIC-LEAD and ICONIC-TOTAL trials is November 2024 (see NCT06095115 and NCT06095102, respectively, at clinicaltrials.gov). The estimated primary completion dates for the ICONIC-ADVANCE 1 and ICONIC-ADVANCE 2 trials are March 2025 and April 2025, respectively (see NCT06143878 and NCT06220604, respectively, at clinicaltrials.gov). The estimated primary completion date for the ANTHEM-UC trial is May 2025 (see NCT06049017 at clinicaltrials.gov). Other Phase 2 trials of JNJ-2113 include the SUMMIT trial for the treatment of moderate-to-severe plaque psoriasis and FRONTIER 2, a long-term extension study, both of which were completed by JNJ in 2023.
We earned a $50.0 million milestone payment upon dosing of the third patient in the ICONIC-TOTAL Phase 3 trial in late October 2023, which we received in December 2023. We earned a $10.0 million milestone payment upon the dosing of the third patient in the ANTHEM Phase 2b trial in UC in December 2023, which we received in January 2024. To date, we have earned $172.5 million in nonrefundable payments from JNJ. We remain eligible for up to approximately $795.0 million in future development and sales milestone payments, inclusive of the potential milestones listed below:
● $115.0 million milestone payment upon JNJ-2113 meeting the co-primary endpoints in any one of the four ICONIC program Phase 3 trials;
● $35.0 million milestone payment upon the filing of a New Drug Application (“NDA”) for JNJ-2113 with the U.S. Food and Drug Administration (the “FDA”);
● $50.0 million milestone payment upon approval of the NDA by the FDA; and
● $15.0 million milestone payment upon the advancement of JNJ-2113 into a Phase 3 trial in a second indication.
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We also remain eligible to receive upward tiering royalties on net product sales at percentages ranging from six percent to ten percent, with ten percent applicable for net sales over $4.0 billion.
At JNJ’s Enterprise Business Review in December 2023, JNJ highlighted JNJ-2113 as a potential first- and best-in class targeted oral IL-23 peptide antagonist with potential across multiple indications, including plaque psoriasis, psoriatic arthritis and IBD, with potential peak year sales projection of $5.0 billion plus. JNJ IL-23 monoclonal antibody (“mAb”) drugs Stelara and Tremfya generated $14.0 billion in revenues in 2023.
In February 2024, the JNJ-2113 Phase 2b FRONTIER 1 trial results in adults living with moderate-to-severe plaque psoriasis were published in the New England Journal of Medicine.
PN-943
PN-943 is a wholly owned investigational orally delivered gut-restricted alpha 4 beta 7 specific integrin antagonist for IBD. We completed a Phase 2 trial of PN-943 in patients with moderate to severe UC in early 2023. We do not intend to dedicate further internal resources to clinical development or contract manufacturing activities for our PN-943 clinical program.
Discovery Platform
Our clinical assets are all derived from our proprietary discovery platform. Our platform enables us to engineer novel, structurally constrained peptides that are designed to retain key advantages of both orally delivered small molecules and injectable antibody drugs in an effort to overcome many of their limitations as therapeutic agents. Importantly, constrained peptides can be designed to potentially alleviate the fundamental instability inherent in traditional peptides to allow different delivery forms, such as oral, subcutaneous, intravenous, and rectal. Our discovery pipeline has strategically focused on i) hematology and blood disorders and ii) I&I diseases. For example, we have a pre-clinical stage program to identify an orally active hepcidin mimetic, which we believe to be complementary to the injectable rusfertide for offering the best treatment options for PV, hereditary hemochromatosis and other potential erythropoietic and iron imbalance disorders.
In January 2024, we announced a new oral Interleukin-17 (“IL-17”) peptide antagonist program targeting three IL-17 dimers (IL-17 AA, AF and FF) which may offer potential treatment options for hidradenitis suppurativa (“HS”), spondyloarthritis (“SpA”), plaque psoriasis and psoriatic arthritis. Our preliminary results showed similar or better in vitro potency than the currently approved drugs Cosentyx® and Taltz®. We expect to nominate a development candidate by the end of 2024.
Business Update
We are currently operating in a period of economic uncertainty and capital markets disruption, which has been impacted by domestic and global monetary and fiscal policy, geopolitical instability, ongoing military conflicts, including between Russia and Ukraine and in Israel and surrounding areas, rising tensions between China and Taiwan, a recessionary environment, historically high domestic and global inflation, high interest rates and instability in banks and other financial institutions. Our future results of operations and liquidity could be adversely impacted by outbreaks of disease, epidemics and pandemics, including potential further delays in existing and planned clinical trials, difficulty in recruiting patients for these clinical trials, delays in manufacturing and collaboration activities and supply chain disruptions. The conflict in Ukraine has exacerbated market disruptions, including significant volatility in commodity prices, as well as supply chain interruptions, and has contributed to record inflation globally. The U.S. Federal Reserve and other central banks may be unable to contain inflation through more restrictive monetary policy and inflation may increase or continue for a prolonged period of time. Inflationary factors, such as increases in the cost of clinical supplies, interest rates, overhead costs and transportation costs may adversely affect our operating results. Also, the failure of Silicon Valley Bank and other regional banks in the United States during the first half of 2023 has given rise to uncertainty in the security of amounts in deposit accounts uninsured by the Federal Deposit Insurance Corporation. We continue to monitor these events and the potential impact on our business. Although we do not believe that inflation has had a material adverse impact on our financial position or results of operations to date, our financial position or results of
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operations may be adversely affected in the future due to numerous factors, including domestic and global monetary and fiscal policy, supply chain constraints, consequences associated with ongoing military conflicts, including between Russia and Ukraine and in Israel and surrounding areas, and other factors, and such factors may lead to increases in the cost of manufacturing our product candidates and delays in initiating trials.
Operations
We have incurred net losses in each year since inception and we do not anticipate achieving sustained profitability in the foreseeable future. Our net losses were $79.0 million, $127.4 million and $125.6 million for the years ended December 31, 2023, 2022 and 2021, respectively. As of December 31, 2023, we had an accumulated deficit of $615.7 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect to continue to incur significant research and development expenses and other expenses related to our ongoing operations, product development, and pre-commercialization activities. As a result, we expect to continue to incur losses in the future as we continue our development of, and seek regulatory approval for, our product candidates.
JNJ License and Collaboration Agreement
On July 27, 2021, we entered into an Amended and Restated License and Collaboration Agreement (the “Restated Agreement”) with JNJ, which amended and restated the License and Collaboration Agreement, effective July 13, 2017, by and between us and JNJ (the “Original Agreement”), as amended by the first amendment, effective May 7, 2019 (the “First Amendment”). Prior to January 1, 2023, JNJ was a related party to us as Johnson & Johnson Innovation - JJDC, Inc. was a significant (greater than 5%) stockholder of the Company, and both companies are subsidiaries of Johnson & Johnson. Upon the effectiveness of the Original Agreement, we received a non-refundable, upfront cash payment of $50.0 million from JNJ. Upon the effectiveness of the First Amendment, we received a $25.0 million payment from JNJ in 2019. In the first quarter of 2020, we received a $5.0 million payment triggered by the successful nomination of a second-generation IL-23R antagonist development compound. In the fourth quarter of 2021, we received a $7.5 million milestone payment from JNJ triggered by completion of the data collection for JNJ-2113 Phase 1 activities. In the second quarter of 2022, we received a $25.0 million milestone payment in connection with the dosing of a third patient in FRONTIER 1 during the first quarter of 2022 . In the fourth quarter of 2023, we received a $50.0 million milestone payment from JNJ in connection with the dosing of the third patient in the ICONIC-LEAD Phase 3 clinical trial of JNJ-2113 in patients with moderate-to-severe psoriasis. In the first quarter of 2024, we received a $10.0 million milestone payment from JNJ in connection with the dosing of the third patient in connection with the ANTHEM Phase 2b clinical trial of JNJ-2113 in patients with UC in the fourth quarter of 2023. We have earned a total of $172.5 million in non-refundable payments from JNJ since the inception of the Restated Agreement in 2017 through the date of this report. See Note 3 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information.
Takeda Collaboration Agreement
In January 2024, we entered into a worldwide license and collaboration agreement for the development and commercialization of rusfertide with Takeda (the “Takeda Collaboration Agreement”), which is yet to become effective. See Note 15 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information.
Critical Accounting Polices and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the consolidated financial statements, as well as the reported revenue generated, and the expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, and the results of which form the basis for making judgments about the carrying
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value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.
Use of Estimates
The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, we evaluate our estimates, including those related to revenue recognition, accruals for research and development activities, stock-based compensation, income taxes, marketable securities and leases. Estimates related to revenue recognition include actual costs incurred versus total estimated costs of our deliverables to determine percentage of completion in addition to the application and estimates of potential revenue constraints in the determination of the transaction price under our license and collaboration agreements. We base these estimates on historical and anticipated results, trends and various other assumptions that we believe are reasonable under the circumstances, including assumptions as to forecasted amounts and future events.
There has been uncertainty and disruption in the global economy and financial markets due to a number of factors, including geopolitical instability, inflationary pressures, high interest rates, instability in banks and other financial institutions and domestic and global monetary and fiscal policy. We have taken into consideration any known impacts of these factors in our accounting estimates to date and are not aware of any additional specific events or circumstances that would require any additional updates to our estimates or judgments or a revision of the carrying value of our assets or liabilities as of the date of the filing of this Annual Report on Form 10-K. These estimates may change as new events occur, circumstances change, and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.
Revenue Recognition
Under Accounting Standards Codification Topic 606, Revenue from Contracts with Customers (“ASC 606”), we recognize revenue when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine revenue recognition for arrangements that we determine are within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) we satisfy a performance obligation. We apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, we assess the goods or services promised within each contract, determine those that are performance obligations, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligations when (or as) the performance obligations are satisfied. We constrain our estimate of the transaction price up to the amount (the “variable consideration constraint”) that a significant reversal of recognized revenue is not probable.
Licenses of intellectual property: If a license to our intellectual property is determined to be distinct from the other performance obligations identified in an arrangement, we recognize revenue from non-refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able to use and benefit from the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring proportional performance for purposes of recognizing revenue from non-refundable, upfront fees. We evaluate the measure of proportional performance for each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.
Milestone payments: At the inception of each arrangement or amendment that includes development, regulatory or commercial milestone payments, we evaluate whether the milestones are considered probable of being reached and
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estimate the amount to be included in the transaction price. ASC 606 suggests two alternatives to use when estimating the amount of variable consideration: the expected value method and the most likely amount method. Under the expected value method, an entity considers the sum of probability-weighted amounts in a range of possible consideration amounts. Under the most likely amount method, an entity considers the single most likely amount in a range of possible consideration amounts. Whichever method is used should be consistently applied throughout the life of the contract; however, it is not necessary for us to use the same approach for all contracts. We expect to use the most likely amount method for development and regulatory milestone payments. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our control or the control of 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. We recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the probability or achievement of each such milestone and any related constraint, and if necessary, adjust our 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.
Any potential milestone payments that we determine are not associated with performance obligations as defined under the contract are excluded from the transaction price and are recognized as the triggering event occurs.
Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of sales, where the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).
Upfront payments and fees are recorded as deferred revenue upon receipt or when due and may require deferral of revenue recognition to a future period until we perform our obligations under these arrangements. Amounts payable to us are recorded as accounts receivable when our right to consideration is unconditional. Amounts payable to us and not yet billed to the collaboration partner are recorded as contract assets. We do not assess whether a contract has a significant financing component if the expectation at contract inception is such that the period between payment by the customer and the transfer of the promised goods or services to the customer will be one year or less.
Contractual cost sharing payments made to a customer or collaboration partner are accounted for as a reduction to the transaction price if such payments are not related to distinct goods or services received from the customer or collaboration partner.
Contracts may be amended to account for changes in contract specifications and requirements. Contract modifications exist when the amendment either creates new, or changes existing, enforceable rights and obligations. When contract modifications create new performance obligations and the increase in consideration approximates the standalone selling price for goods and services related to such new performance obligations, as adjusted for specific facts and circumstances of the contract, the modification is considered to be a separate contract and revenue is recognized prospectively. If a contract modification is not accounted for as a separate contract, we account for the promised goods or services not yet transferred at the date of the contract modification (the remaining promised goods or services) prospectively, as if it were a termination of the existing contract and the creation of a new contract, if the remaining goods or services are distinct from the goods or services transferred on or before the date of the contract modification. We account for a contract modification as if it were a part of the existing contract if the remaining goods or services are not distinct and, therefore, form part of a single performance obligation that is partially satisfied at the date of the contract modification. In such case the effect that the contract modification has on the transaction price, and on the entity’s measure of progress toward complete satisfaction of the performance obligation, is recognized as an adjustment to revenue (either as an increase in or a reduction of revenue) at the date of the contract modification (the adjustment to revenue is made on a cumulative catch-up basis).
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Research and Development Costs
Research and development costs are expensed as incurred, unless there is an alternate future use in other research and development projects or otherwise. Research and development costs include salaries and benefits, stock-based compensation expense, laboratory supplies and facility-related overhead, outside contracted services, including clinical trial costs, manufacturing and process development costs for both clinical and pre-clinical materials, research costs, development milestone payments under license and collaboration agreements, and other consulting services.
We accrue for estimated costs of research and development activities conducted by third-party service providers, which include the conduct of pre-clinical studies and clinical trials, and contract manufacturing activities. We record the estimated costs of research and development activities based upon the estimated services provided but not yet invoiced and we include these costs in accrued expenses and other payables in our consolidated balance sheets and within research and development expense in our consolidated statements of operations. We accrue for these costs based on various factors such as estimates of the work completed and in accordance with agreements established with our third-party service providers. As actual costs become known, we adjust our accrued liabilities. We have not experienced any material differences between accrued liabilities and actual costs incurred. However, the status and timing of actual services performed, number of patients enrolled, the rate of patient enrollment and the number and location of sites activated may vary from our estimates and may result in adjustments to our research and development expenses in future periods. Changes in these estimates that result in material changes to our accruals could materially affect the results of our operations.
Recent Accounting Pronouncements
Information regarding recent accounting pronouncements applicable to us is included in Note 2 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K.
Components of Our Results of Operations
License and Collaboration Revenue
Our license and collaboration revenue is derived from payments we receive under the JNJ License and Collaboration Agreement. See Note 3 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information. For the year ended December 31, 2024, we expect to recognize license and collaboration revenue from payments we are eligible to receive under the Takeda Collaboration Agreement, which is yet to become effective. The effectiveness of the agreement and our receipt of payments thereunder is dependent on and subject to the termination or expiration of any applicable waiting periods under the HSR Act. See Note 15 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information.
Research and Development Expenses
Research and development expenses represent costs incurred to conduct research, such as the discovery and development of our product candidates. We recognize all research and development costs as they are incurred unless there is an alternative future use in other research and development projects or otherwise. Non-refundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received, rather than when payment has been made. In instances where we enter into agreements with third parties to provide research and development services to us, costs are expensed as services are performed. Amounts due under such arrangements may be either fixed fee or fee for service and may include upfront payments, monthly payments, and payments upon the completion of milestones or the receipt of deliverables.
Research and development expenses consist primarily of the following:
● expenses incurred under agreements with clinical trial sites that conduct research and development activities on our behalf;
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● employee-related expenses, which include salaries, benefits and stock-based compensation;
● laboratory vendor expenses related to the preparation and conduct of pre-clinical and non-clinical studies and clinical trials;
● costs related to production of clinical supplies and non-clinical materials, including fees paid to contract manufacturers;
● license fees and milestone payments under license and collaboration agreements; and
● facilities and other allocated expenses, which include expenses for rent and maintenance of facilities, information technology, depreciation and amortization expense and other administrative supplies.
We recognize the amounts related to our Australian research and development refundable cash tax incentive that are not subject to refund provisions as a reduction in research and development expenses. The research and development tax incentives are recognized when there is reasonable assurance that the incentives will be received, the relevant expenditure has been incurred and the amount of the consideration can be reliably measured. We evaluate our eligibility under the tax incentive program as of each balance sheet date and make accruals and related adjustments based on the most current and relevant data available. We may alternatively be eligible for a taxable credit in the form of a non-cash tax incentive. We recognize the amounts from grants under government programs as a reduction of research and development expenses when the related research costs are incurred.
We allocate direct and indirect costs incurred to product candidates when they enter clinical development. For product candidates in clinical development, direct costs consist primarily of clinical, pre-clinical, and drug discovery costs, costs of supplying drug substance and drug product for use in clinical and pre-clinical studies, including clinical manufacturing costs, contract research organization fees, and other contracted services pertaining to specific clinical and pre-clinical studies. Indirect costs allocated to our product candidates on a program-specific basis include research and development employee salaries, benefits, and stock-based compensation, and indirect overhead and other administrative support costs. Program-specific costs are unallocated when the clinical expenses are incurred for our early-stage research and drug discovery projects as our internal resources, employees and infrastructure are not tied to any one research or drug discovery project and are typically deployed across multiple projects. As such, we do not provide financial information regarding the costs incurred for early stage pre-clinical and drug discovery programs on a program-specific basis prior to the clinical development stage.
We expect our research and development expenses to increase in the near term as compared to prior year periods as we continue to focus our resources toward progressing our rusfertide program into later stage clinical trials and preparing for commercialization. We do not intend to dedicate further internal resources to clinical development or contract manufacturing activities for our PN-943 clinical program. The process of conducting research, identifying potential product candidates and conducting pre-clinical studies and clinical trials necessary to obtain regulatory approval and commencing pre-commercialization activities is costly and time intensive. We may never succeed in achieving marketing approval for our product candidates regardless of our costs and efforts. The probability of success of our product candidates may be affected by numerous factors, including pre-clinical data, clinical data, competition, manufacturing capability, our cost of goods to be sold, our ability to receive, and the timing of, regulatory approvals, market conditions, and our ability to successfully commercialize our products if they are approved for marketing. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will be able to generate revenue from the commercialization and sale of any of our product candidates. Our research and development programs are subject to change from time to time as we evaluate our priorities and available resources.
General and Administrative Expenses
General and administrative expenses consist of personnel costs, allocated facilities costs and other expenses for outside professional services, including legal, human resources, audit and accounting services, and pre-commercialization expenses, including selling and marketing costs. Personnel costs consist of salaries, benefits and
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stock-based compensation. Allocated expenses consist of expenses for rent and maintenance of facilities, information technology, depreciation and amortization expense and other administrative supplies. We expect to continue to incur expenses to support our continued operations as a public company, including expenses related to compliance with the rules and regulations of the SEC and those of the national securities exchange on which our securities are traded, insurance expenses, investor relations expenses, audit fees, professional services and general overhead and administrative costs.
Interest Income
Interest income consists of interest earned on our cash, cash equivalents, and marketable securities, which is comprised of contractual interest, premium amortization and discount accretion.
Other Expense, Net
Other expense, net consists primarily of amounts related to foreign exchange gains and losses and related items.
Results of Operations
Comparison of the Years Ended December 31, 2023 and 2022
Year Ended December 31,
Dollar
%
2023
2022
Change
Change
(Dollars in thousands)
License and collaboration revenue
$
60,000
$
26,581
$
33,419
126
Operating expenses:
Research and development (1)
120,161
126,215
(6,054)
(5)
General and administrative (2)
33,491
31,739
1,752
6
Total operating expenses
153,652
157,954
(4,302)
(3)
Loss from operations
(93,652)
(131,373)
37,721
(29)
Interest income
14,898
4,060
10,838
267
Other expense, net
(201)
(80)
(121)
151
Net loss
$
(78,955)
$
(127,393)
$
48,438
(38)
(1) Includes $17.1 million and $14.7 million of non-cash stock-based compensation expense for the years ended December 31, 2023 and 2022, respectively.
(2) Includes $12.2 million and $9.5 million of non-cash stock-based compensation expense for the years ended December 31, 2023 and 2022, respectively.
License and Collaboration Revenue
License and collaboration revenue increased $33.4 million, or 126%, from $26.6 million for the year ended December 31, 2022 to $60.0 million for the year ended December 31, 2023. The increase in revenue was primarily due to milestone payments earned under our license and collaboration agreement with JNJ during the fourth quarter of 2023, including a $50.0 million milestone payment upon dosing of the third patient in the ICONIC-LEAD Phase 3 trial of JNJ-2113 in patients with moderate-to-severe psoriasis, and a $10.0 million milestone payment upon the dosing of the third patient in the ANTHEM-UC Phase 2b trial in UC. License and collaboration revenue for the year ended December 31, 2022 was primarily related to the transaction price under the license and collaboration agreement with JNJ recognized based on proportional performance. We completed our performance obligation under the license and collaboration agreement with JNJ as of June 30, 2022.
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Research and Development Expenses
Year Ended December 31,
Dollar
%
2023
2022
Change
Change
(Dollars in thousands)
Clinical and development expense — rusfertide (PTG-300)
$
98,060
$
64,789
$
33,271
51
Clinical and development expense — PN-943
1,058
36,906
(35,848)
(97)
Clinical and development expense — JNJ-2113 (PN-235)
99
201
(102)
(51)
Clinical and development expense — Other
—
657
(657)
(100)
Preclinical and drug discovery research expense
20,944
23,704
(2,760)
(12)
Grants and tax incentives expense reimbursement, net
—
(42)
42
(100)
Total research and development expenses
$
120,161
$
126,215
$
(6,054)
(5)
Research and development expenses decreased $6.0 million, or 5%, from $126.2 million for the year ended December 31, 2022 to $120.2 million for the year ended December 31, 2023. The decrease was primarily due to (i) a decrease of $35.8 million in expenses for the PN-943 program, and (ii) a decrease of $2.8 million in expenses related to pre-clinical and drug discovery research expense, partially offset by (iii) an increase of $33.3 million in rusfertide clinical and contract manufacturing expenses primarily for the Phase 3 VERIFY clinical trial. We completed a Phase 2 trial of PN-943 in patients with moderate to severe UC in early 2023, following which we de-prioritized further development work.
We had 85 and 82 full-time equivalent research and development employees as of December 31, 2023 and 2022, respectively. Research and development personnel-related expenses for the year ended December 31, 2023 increased by $1.1 million as compared to the year ended December 31, 2022 primarily due to an increase of $2.3 million in stock-based compensation expense, partially offset by a decrease of $1.2 million of other personnel-related expenses.
General and Administrative Expenses
General and administrative expenses increased $1.8 million, or 6%, from $31.7 million for the year ended December 31, 2022 to $33.5 million for the year ended December 31, 2023 primarily due to an increase in stock-based compensation expense during the current year period, partially offset by one-time costs incurred during the first quarter of 2022.
We had 27 and 23 full-time equivalent general and administrative employees as of December 31, 2023 and 2022, respectively.
Interest Income
Interest income increased $10.8 million, or 267%, from $4.1 million for the year ended December 31, 2022 to $14.9 million for the year ended December 31, 2023. This increase was primarily due to higher invested balances and higher yields due to increased interest rates compared to the prior year period.
Comparison of the Years Ended December 31, 2022 and 2021
See Part II, Item 7—Results of Operations—Comparison of the Years Ended December 31, 2022 and 2021 in our Annual Report on Form 10-K for the year ended December 31, 2022, filed on March 15, 2023, for a discussion of our results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.
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Liquidity and Capital Resources
Sources of Liquidity
Historically we have funded our operations primarily from net proceeds from the sale of shares of our common stock and receipt of payments under collaboration agreements.
Proceeds from Sales of Our Common Stock
In April 2023, we completed an underwritten public offering of 5,000,000 shares of our common stock at a public offering price of $20.00 per share and issued an additional 750,000 shares of common stock at a price of $20.00 per share following the underwriters’ exercise of their option to purchase additional shares. Net proceeds, after deducting underwriting commissions and offering costs paid by us, were approximately $107.8 million.
In August 2022, we entered into an Open Market Sale Agreement SM , pursuant to which we may offer and sell up to $100.0 million shares of our common stock from time to time in “at-the-market” offerings (the “2022 ATM Facility”). During the three months ended March 31, 2023, we sold 1,749,199 shares of our common stock under the 2022 ATM Facility for net proceeds of $24.3 million, after deducting issuance costs. There were no sales of our common stock under the 2022 ATM Facility during the three months ended June 30, 2023, September 30, 2023 or December 31, 2023. There were no sales of our common stock under the 2022 ATM Facility during the year ended December 31, 2022.
In August 2018, we entered into a Securities Purchase Agreement with certain accredited investors (each, an “Investor” and, collectively, the “Investors”), pursuant to which we sold an aggregate of 2,750,000 shares of our common stock at a price of $8.00 per share for aggregate net proceeds of $21.7 million, after deducting offering expenses payable by us. In a concurrent private placement, we issued the Investors warrants to purchase an aggregate of 2,750,000 shares of our common stock (each, a “Warrant” and, collectively, the “Warrants”). Each Warrant was exercisable from August 8, 2018 through August 8, 2023. Warrants to purchase 1,375,000 shares of our common stock had an exercise price of $10.00 per share and Warrants to purchase 1,375,000 shares of our common stock had an exercise price of $15.00 per share. The exercise price and number of shares of our common stock issuable upon the exercise of the Warrants (the “Warrant Shares”) were subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrants. Under certain circumstances, the Warrants were exercisable on a “cashless” basis. In connection with the issuance and sale of the common stock and Warrants, we granted the Investors certain registration rights with respect to the Warrants and the Warrant Shares. The common stock and Warrants met the criteria for equity classification, and the net proceeds from the transaction were recorded as a credit to additional paid-in capital.
In August 2023, prior to the expiration of the Warrants, we entered into certain agreements with the Investors and their affiliates under which we agreed to allow the Warrants to be exercised in exchange for pre-funded warrants representing the same number of Warrant Shares underlying the Warrants with an exercise price of $0.001 per share (the “Pre-Funded Warrants”). Subsequent to the execution of the agreements and prior to the expiration of the Warrants, all outstanding Warrants were exercised for gross proceeds of $34.4 million in exchange for 44,748 shares of our common stock and Pre-Funded Warrants to purchase 2,705,252 shares of common stock (subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Pre-Funded Warrants) with an exercise price of $0.001 per share. The Pre-Funded Warrants will expire upon the day they are exercised in full. The Pre-Funded Warrants are exercisable at any time prior to expiration except that the Pre-Funded Warrants cannot be exercised by the Investors if, after giving effect thereto, the Investors would beneficially own more than 9.99% of our common stock, subject to certain exceptions. The common stock and Pre-Funded Warrants met the criteria for equity classification and the net proceeds from the transaction were recorded as a credit to additional paid-in capital. In accordance with Accounting Standards Codification Topic 260, Earnings Per Share , outstanding Pre-Funded Warrants are included in the computation of basic net loss per share because the exercise price is negligible, and they are fully vested and exercisable after the original issuance date. As of December 31, 2023, none of the Pre-Funded Warrants have been exercised.
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Receipt of Payments Under Collaboration Agreements
We have earned $172.5 million in non-refundable payments from JNJ since the inception of the Restated Agreement in 2017 through the date of this Annual Report on Form 10-K as follows:
● Upon effectiveness of the Original Agreement, we received a non-refundable, upfront cash payment of $50.0 million from JNJ in 2017;
● Upon effectiveness of the First Amendment, we became eligible to receive a $25.0 million payment from JNJ, which was received during the second quarter of 2019;
● In December 2019, we became eligible to receive a $5.0 million payment triggered by the successful nomination of a second-generation development compound, which was received during the first quarter of 2020;
● In October 2021, we became eligible to receive a $7.5 million milestone payment triggered by completion of the data collection for JNJ-2113 (formerly PN-235) Phase 1 activities, which was received during the fourth quarter of 2021;
● In March 2022, we became eligible to receive a $25.0 million milestone payment in connection with the dosing of the third patient in the Phase 2b clinical trial of JNJ-2113 in moderate-to-severe plaque psoriasis, which was received during the second quarter of 2022;
● In October 2023, we became eligible to receive a $50.0 million milestone payment in connection with the dosing of the third patient in the ICONIC-TOTAL Phase 3 clinical trial of JNJ-2113 in moderate-to-severe plaque psoriasis, which was received in December 2023; and
● In December 2023, we became eligible to receive a $10.0 million milestone payment in connection with the dosing of the third patient in the ANTHEM Phase 2b clinical trial of JNJ-2113 in ulcerative colitis, which was received in January 2024.
We have also received payments for services provided under the collaboration agreement and we may make in-kind payment reimbursements to JNJ for certain costs they have incurred pursuant to the cost sharing terms of the agreement.
Pursuant to the Restated Agreement, we may be eligible to receive clinical development, regulatory and sales milestones, if and when achieved. Upcoming potential development milestones for second-generation products include:
● $115.0 million upon a Phase 3 clinical trial for a second-generation compound for any indication meeting its primary clinical endpoint;
● $35.0 million upon the filing of an NDA for a second-generation compound with the FDA;
● $50.0 million upon FDA approval of an NDA for a second-generation compound; and
● $15.0 million upon the dosing of the third patient in a Phase 3 clinical trial for a second-generation compound for a second indication.
Capital Requirements
As of December 31, 2023, we had $341.6 million of cash, cash equivalents and marketable securities and an accumulated deficit of $615.7 million. Our capital expenditures were $0.6 million, $0.8 million and $1.1 million for the years ended December 31, 2023, 2022 and 2021, respectively. Our primary uses of cash are to fund our operating
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expenses, primarily related to our research and development expenditures and general and administrative costs. We expect that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least the next twelve months from the date of this Annual Report on Form 10-K based on current operating plans and financial forecasts.
In January 2024, we entered into a worldwide license and collaboration agreement for the development and commercialization of rusfertide with Takeda, which is yet to become effective. See Note 15 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information.
We may require additional funding to advance our early discovery pipeline and to develop, acquire, or in-license other potential product candidates. Our future funding requirements will depend on many factors, including:
● the progress, timing, scope, results and costs of advancing our clinical trials for our product candidates, including the ability to enroll patients in a timely manner for our clinical trials;
● the costs of and our ability to obtain clinical and commercial supplies for our current product candidates and any other product candidates we may identify and develop;
● our ability to successfully commercialize our current product candidates and any other product candidates we may identify and develop;
● the success of our existing or future collaborations with third parties;
● the selling and marketing costs associated with our current product candidates and any other product candidates we may identify and develop, including the costs and timing of expanding our sales and marketing capabilities;
● the achievement of development, regulatory and sales milestones resulting in payments to us from JNJ under the Restated Agreement, Takeda under the Takeda Collaboration Agreement or other such arrangements that we may enter into, and the timing of receipt of such payments, if any;
● the timing, receipt and amount of royalties from JNJ under the Restated Agreement or Takeda under the Takeda Collaboration Agreement upon regulatory approval or clearance, if any;
● the amount and timing of sales and other revenues from our current product candidates and any other product candidates we may identify and develop, including the sales price and the availability of adequate third-party reimbursement;
● the cash requirements of any future acquisitions or discoveries of product candidates;
● the time and costs necessary to respond to technological and market developments;
● the extent to which we may acquire or in-license other product candidates and technologies;
Such additional funding may come from various sources, including raising additional capital, seeking access to debt, and seeking additional collaborative or other arrangements with partners, but such funding may not be available on terms acceptable to us, if at all. As discussed in Part I, Item 1A,”Risk Factors,” we are currently operating in a period of macroeconomic uncertainty and capital markets disruption, which has been significantly impacted by domestic and global monetary and fiscal policy, geopolitical instability, inflationary pressures, high interest rates and banking and other financial institution instability, among other factors. A future recession or market correction, including those due to significant geopolitical or macroeconomic events, could materially affect our business and our access to credit and financial markets.
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Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. Further, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials, other research and development activities and pre-commercialization costs. If we do raise additional capital through public or private equity offerings or convertible debt securities, the ownership interest of our existing stockholders could be diluted, and the terms of these securities could include liquidation or other preferences that could adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we could be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to fully estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated product development programs. For additional information, see Part I, Item 1A, “Risk Factors — Risks Related to our Financial Position and Capital Requirements.”
The following table summarizes our cash flows for the periods indicated:
Year Ended December 31,
2023
2022
2021
Consolidated Statements of Cash Flows Data:
(Dollars in thousands)
Cash used in operating activities
$
(70,236)
$
(108,137)
$
(107,865)
Cash (used in) provided by investing activities
$
(39,258)
$
91,468
$
(15,860)
Cash provided by financing activities
$
170,477
$
18,838
$
129,923
Stock-based compensation
$
29,293
$
24,202
$
16,395
Cash Used in Operating Activities
Cash used in operating activities for the year ended December 31, 2023 was $70.2 million, consisting primarily of our net loss of $79.0 million and a net change of $19.5 million in net operating assets and liabilities, partially offset by certain non-cash items, including $29.2 million of stock-based compensation expense. The $37.9 million decrease in cash used in operating activities for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to a $48.4 million decrease in our net loss and a $5.1 million increase in stock-based compensation expense, partially offset by a $4.0 million decrease in accretion of discount on marketable securities and an $11.7 million net change in net operating assets and liabilities.
Cash used in operating activities for the year ended December 31, 2022 was $108.1 million, consisting primarily of our net loss of $127.4 million and a net change of $7.8 million in net operating assets and liabilities, partially offset by certain non-cash items, including $24.2 million of stock-based compensation expense. The $0.3 million increase in cash used in operating activities for the year ended December 31, 2022, as compared to the year ended December 31, 2021, was primarily due to a $1.8 million increase in our net loss, a $4.5 million net change in net operating assets and liabilities and a $1.8 million net change in other non-cash items, partially offset by a $7.8 million increase in stock-based compensation expense.
Cash (Used in) Provided by Investing Activities
Cash used in investing activities for the year ended December 31, 2023 was $39.3 million, consisting of purchases of marketable securities of $191.1 million and purchases of property and equipment of $0.6 million, partially offset by proceeds from maturities of marketable securities of $152.4 million. The $130.7 million decrease in cash provided by investing activities for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily related to a decrease in the net activity of purchases and maturities of marketable securities. Purchases of property and equipment were primarily related to purchases of laboratory and computer equipment.
Cash provided by investing activities for the year ended December 31, 2022 was $91.5 million, consisting of proceeds from maturities of marketable securities of $307.1 million, partially offset by purchases of marketable securities of $214.9 million and purchases of property and equipment of $0.8 million. The $107.3 million increase in cash provided by investing activities for the year ended December 31, 2022, as compared to the year ended December
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31, 2021, was primarily related to a decrease of $71.7 million in purchases of marketable securities and an increase of $35.3 million in proceeds from maturities of marketable securities. Purchases of property and equipment were primarily related to purchases of laboratory and computer equipment.
Cash Provided by Financing Activities
Cash provided by financing activities for the year ended December 31, 2023 was $170.5 million, consisting primarily of net cash proceeds of $107.8 million from the April 2023 public offering of our common stock, $24.3 million from sales of our common stock under the 2022 ATM Facility, $34.4 million from the exercise of the Warrants in exchange for issuance of Pre-Funded Warrants and common stock, and $4.8 million in proceeds from the issuance of common stock upon exercise of stock options and purchases of common stock under our employee stock purchase plan. The $151.6 million increase in cash provided by financing activities for the year ended December 31, 2023, as compared to the year ended December 31, 2022, was primarily due to a $107.8 million increase in net cash proceeds from the April 2023 public offering, a $9.7 million increase in cash proceeds from ATM sales and a $34.4 million increase in net cash proceeds from the exercise of the Warrants.
Cash provided by financing activities for the year ended December 31, 2022 was $18.8 million, consisting primarily of net cash proceeds of $14.6 million from sales under the 2019 ATM Facility and proceeds from the issuance of common stock upon the exercise of stock options and purchases of common stock under our employee stock purchase plan of $4.4 million. The $111.1 million decrease in cash provided by financing activities for the year ended December 31, 2022, as compared to the year ended December 31, 2021, was primarily due to a $123.8 million decrease in cash proceeds from our public offerings of common stock and a $1.8 million decrease in proceeds from the issuance of common stock upon exercise of stock options and purchases of common stock under our employee stock purchase plan. These decreases were partially offset by a $14.6 million increase in cash proceeds from ATM sales.
Contractual Obligations and Other Commitments
In the normal course of business, we enter into agreements with contract service providers to assist in the performance of our research and development activities and clinical and commercial manufacturing activities. Subject to the required notice periods and our obligations under certain binding commitments, we can elect to discontinue the work under these agreements at any time. We expect to enter into additional clinical development, contract research, clinical and commercial manufacturing, supplier and collaborative research agreements in the future, which may require upfront payments and long-term commitments of capital resources.
Our contractual obligations include minimum lease payments under our operating lease obligations. In July 2021, we entered into a second amendment to our facility lease agreement dated as of March 2017 to lease approximately 15,000 square feet of additional office space in Newark, California. See Note 8 to the Consolidated Financial Statements elsewhere in this Annual Report on Form 10-K for additional information.
Under the Restated Agreement, we share with JNJ certain development, regulatory and compound supply costs. The actual amounts that we pay JNJ or that JNJ pays us will depend on a number of factors, some of which are outside of our control and some of which are contingent upon the success, if achieved, of certain development and regulatory activities. See Note 3 to the Consolidated Financial Statements elsewhere in this Annual Report on Form 10- K for additional information.
In January 2024, we entered into the Takeda Collaboration Agreement, which is yet to become effective. See Note 15 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information.
In June 2012, we entered into the Zealand Agreement to identify, optimize and develop novel disulfide-rich peptides to discover a hepcidin mimetic. We amended the Zealand Agreement in February 2014, at which point we assumed responsibility for the development program. In January 2020, we initiated arbitration proceedings with the International Court of Arbitration of the International Chamber of Commerce against Zealand. In August 2021, we and
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Zealand agreed to resolve the dispute and reached an Arbitration Resolution Agreement. See Note 7 and Note 9 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for additional information.