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Item 2. Management’s Discussion and Analysis

2024-05-07 compared with 2023-11-02 · 182 added, 199 removed, 138 unchanged (73% of the section changed)

MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

You should read the following discussion and analysis of our financial condition and results of operations together with our Unaudited Condensed Consolidated Financial Statements and related notes included in Part I, Item 1 of this quarterly report on Form 10-Q (the “Quarterly Report”) and with our Audited Consolidated Financial Statements and related notes thereto for the year ended December 31, 2022, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 15, 2023.

You should read the following discussion and analysis of our financial condition and results of operations together with our Unaudited Condensed Consolidated Financial Statements and related notes included in Part I, Item 1 of this quarterly report on Form 10-Q (the “Quarterly Report”) and with our Audited Consolidated Financial Statements and related notes thereto for the year ended December 31, 2023, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on February 27, 2024.

Forward-Looking Statements

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Forward-looking statements reflect our current views with respect to future events, are based on assumptions, and are subject to risks, uncertainties and other important factors.

In particular, statements, whether expressed or implied, concerning, among other things, the potential for our programs, the timing of our clinical trials, the timing of enrollment in our clinical trials, our cash runway, the potential for eventual regulatory approval and commercialization of our product candidates, our potential receipt of milestone payments and royalties under our collaboration agreements, future operating results, our ability to generate sales, income or cash flow, the impact of any future outbreaks of disease, epidemics and pandemics, such as the COVID-19 pandemic (“COVID-19”), ongoing military conflicts, including between Ukraine and Russia and in Israel and surrounding areas;

rising tensions between China and Taiwan, inflationary pressures, the impact of a potential U.S.

government shutdown, the availability of credit and our exposure to banking or other financial institution instability are forward-looking statements.

In particular, statements, whether expressed or implied, concerning, among other things, the potential for our programs, the timing of our clinical trials, including enrollment, data and regulatory submissions, our cash runway, the potential for eventual regulatory approval and commercialization of our product candidates, our potential receipt of milestone payments and royalties under our collaboration agreements, future operating results, our ability to generate sales, income or cash flow, the impact of any future outbreaks of disease, epidemics and pandemics, ongoing military conflicts, including between Ukraine and Russia and in Israel and surrounding areas;

rising tensions between China and Taiwan, inflationary pressure and the availability of credit are forward-looking statements.

Forward-looking statements involve risks, uncertainties and assumptions that are beyond our ability to control or predict, including those risks, uncertainties and assumptions discussed in Part II, Item 1A, of this Quarterly Report.

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in the United States and other jurisdictions.

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

We are a biopharmaceutical company with peptide-based new chemical entities rusfertide and JNJ-2113 in advanced Phase 3 stages of development, both derived from our proprietary discovery technology platform.

Our clinical programs fall into two broad categories of diseases:

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

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

Our Product Pipeline

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 and is wholly owned.

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

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

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

Rusfertide has a unique mechanism of action in the potential treatment of 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.

Rusfertide, our injectable hepcidin mimetic partnered with Takeda Pharmaceuticals USA, Inc.

(“Takeda”), is in development for the treatment of polycythemia vera (“PV”).

We have initiated VERIFY (ClinicalTrials.gov identifier NCT05210790), a global double-blind, placebo-controlled Phase 3 clinical trial of rusfertide in PV for approximately 250 patients.

The trial evaluates the efficacy, symptom burden and safety of once-weekly, subcutaneously self-administered rusfertide in patients with uncontrolled hematocrit who are phlebotomy dependent despite standard of care treatment.

The trial enrolled patients across North and South America, Europe, Asia and Australia.

Enrollment for the VERIFY trial has been completed and we expect to announce top-line data for the trial’s 32-week primary efficacy endpoint by the end of the first quarter of 2025, potentially leading to a New Drug Application (“NDA”) filing in the fourth quarter of 2025.

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.

Our rusfertide Phase 2 clinical trials include the following:

● REVIVE, a Phase 2 proof of concept 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 will continue in ongoing open label extension.

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

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

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

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

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

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

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

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.

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 trial, followed by 1:1 randomization of 53 subjects to placebo versus rusfertide therapy for a subsequent duration of 12 weeks.

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

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

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

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 comprising the majority of adverse events.

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

We expect enrollment completion in the first quarter of 2024.

JNJ-2113 (formerly PN-235)

Our partnered Interleukin-23 receptor (“IL-23R”) antagonist compound JNJ-2113 is an orally delivered investigational drug that is designed to block biological pathways currently targeted by marketed injectable antibody drugs.

Our orally stable peptide approach may offer a targeted therapeutic approach for gastrointestinal (“GI”) and systemic compartments as needed.

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

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

In addition, data was presented regarding the prevalence of thromboembolic events and secondary cancers in PV patients not treated with rusfertide.

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

In January 2024, we entered into a worldwide license and collaboration agreement with Takeda for the development and commercialization of rusfertide (the “Takeda Collaboration Agreement”.

Under the terms of the agreement, we earned a nonrefundable upfront payment of $300.0 million upon effectiveness of the agreement in March 2024, which we received in April 2024.

We are eligible to receive additional worldwide development, regulatory and commercial milestone payments for rusfertide of up to $330 million, inclusive of the following potential upcoming milestones:

● $25.0 million upon successful achievement of the primary endpoint in the Phase 3 VERIFY trial for rusfertide in PV;

● $50.0 million upon U.S.

Food and Drug Administration (the “FDA”) approval of NDA for rusfertide in PV (or $75.0 million if we exercise our full right to opt-out of the 50:50 U.S.

profit and loss sharing arrangement).

We are also eligible to receive tiered royalties from 10% to 17% on ex-U.S.

net sales of rusfertide and other specified second-generation injectable hepcidin memetic compounds (the “Licensed Products”).

We and Takeda will also share equally in profits and losses (50% to us and 50% to Takeda of the Licensed Products in the United States.

See Note 3 to the condensed consolidated financial statements included elsewhere in this Quarterly Report for further details related to the agreement, including our right to opt-out of the 50:50 U.S.

profit and loss sharing arrangement.

Our Interleukin-23 receptor (“IL-23R”) antagonist compound JNJ-2113, partnered with J&J Innovative Medicines (“JNJ”), formerly Janssen Biotech, Inc., 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 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 Janssen Biotech, Inc.

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

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

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

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

During the fourth quarter of 2021, following a pre-specified interim analysis criteria, a portfolio decision was made by Janssen to advance second-generation product candidate JNJ-2113 (JNJ-77242113) based on its superior potency and overall pharmacokinetic and pharmacodynamic profile.

A JNJ-2113 Phase 1 trial was completed in the fourth quarter of 2021.

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

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

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

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

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

A statistically significant greater proportion of patients who received JNJ-2113 achieved PASI-75 as well as PASI-90 and PASI-100 (90% and 100% improvement, respectively, in skin lesions as measured by the PASI) responses compared to placebo at Week 16 in all five of the trial’s treatment groups.

JNJ has initiated the following JNJ-2113 trials:

● ICONIC-LEAD (NCT06095115) – 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 (90% improvement in skin lesions as measured by the Psoriasis Area and Severity Index (“PASI”)) and Investigator’s Global Assessment (“IGA”) score of 0 (clear) or 1 (almost clear) as co-primary endpoints;

● ICONIC-TOTAL (NCT06095102) – 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 (NCT06143878) – 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 (NCT06220604)– A 675-patient Phase 3 trial similarly designed to ICONIC ADVANCE 1;

● ANTHEM-UC (NCT06049017) – 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 200 mg q.d.

immediate release formulation of JNJ-2113 from the previously completed FRONTIER 1 trial.

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 (75% improvement in skin lesions as measured by the 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 (100% improvement in skin lesions as measured by the PASI) responses compared to placebo at week 16 in all five of the trial’s treatment groups.

A clear dose response was observed across an eight-fold dose range.

Treatment was well tolerated, with no meaningful difference in frequency of adverse events across treatment groups versus placebo.

In October 2023, Janssen initiated three JNJ-2113 studies, including:

● ICONIC-LEAD – A 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 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;

● ANTHEM-UC – A 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”).

Additional Phase 3 studies are expected to be initiated in the first quarter of 2024 as part of the broader psoriasis ICONIC clinical program led by Janssen.

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

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

We earned a $50.0 million milestone payment upon dosing of the third patient in the ICONIC-LEAD Phase 3 trial in late October 2023.

Under our agreement with Janssen,

● we will qualify for a $10.0 million milestone payment upon the dosing of the third patient in the Phase 2b trial in UC;

● we will qualify for a $115.0 million milestone payment upon JNJ-2113 meeting the primary endpoint in a Phase 3 trial;

● we will qualify for a $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”);

● we will qualify for a $50.0 million milestone payment upon approval of the NDA by the FDA;

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

We remain eligible for up to approximately $805.0 million in future development and sales milestone payments, inclusive of those future development milestones discussed above, in addition to the $112.5 million in nonrefundable payments from Janssen already received to date and the $50.0 million that was achieved in the fourth quarter of 2023.

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

PN-943 is a wholly owned, investigational, orally delivered, gut-restricted alpha 4 beta 7 specific integrin antagonist for IBD.

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

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

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.

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 inflammatory bowel disease, with potential peak year sales projection of $5.0 billion plus.

JNJ IL-23 monoclonal antibody 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.

In March 2024, data presented at the American Academy of Dermatology 2024 Annual Meeting showed that, in Phase 2b FRONTIER 2, JNJ-2113 maintained high rates of skin clearance through 52 weeks in adults with moderate-to-severe plaque psoriasis.

On July 17, 2021, we entered into an Amended and Restated License and Collaboration Agreement with JNJ, which amended and restated the License and Collaboration Agreement, effective July 13, 2017, by and between the Company and JNJ, as amended by the first amendment, effective May 7, 2019 (together, the “JNJ License and Collaboration Agreement”).

Under the JNJ License and Collaboration Agreement, 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 are eligible for up to approximately $795.0 million in future development and sales milestone payments, inclusive of the following potential upcoming milestones:

● $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 an NDA for JNJ-2113 with the FDA;

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

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

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

See Note 3 to the condensed consolidated financial statements included elsewhere in this Quarterly Report for additional information.

Discovery Platform

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

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

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

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, spondyloarthritis, 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 ready for Investigational New Drug enabling studies 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 the direct and indirect effects of COVID-19, 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, the impact of a potential U.S.

government shutdown and instability in banks and other financial institutions.

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

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

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, and high interest rates.

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, 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.

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

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

Our net loss was $34.1 million and $106.3 million for the three and nine months ended September 30, 2023, respectively.

Our net loss was $31.2 million and $93.2 million for the three and nine months ended September 30, 2022, respectively.

As of September 30, 2023, we had an accumulated deficit of $643.0 million.

Although we do not believe that inflation has had a material adverse impact on our financial position or results of operations to date, our financial position or results of operations may be adversely affected in the future due to numerous factors, including domestic and global monetary and fiscal policy, supply chain constraints, consequences associated with ongoing military conflicts, including between Russia and Ukraine and in Israel and surrounding areas, and other factors, and such factors may lead to increases in the cost of manufacturing our product candidates and delays in initiating trials.

We have incurred cumulative net losses from inception through March 31, 2024 of $408.4 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.

Janssen License and Collaboration Agreement

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

Prior to January 1, 2023, Janssen 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 Janssen.

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

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

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

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

See Note 3 to the condensed consolidated financial statements included elsewhere in this report for additional information.

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

Critical Accounting Polices and Estimates

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

generally accepted accounting principles.

The preparation of these unaudited condensed 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 unaudited condensed consolidated financial statements, as well as the reported revenue generated, and 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, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

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

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

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

Revenue Recognition

Topic 606 requires us to allocate the arrangement consideration on a relative standalone selling price basis for each performance obligation after determining the transaction price of the contract and identifying the performance obligations to which that amount should be allocated.

The relative standalone selling price is defined as the price at which an entity would sell a promised good or service separately to a customer.

If other observable transactions in which we have sold the same performance obligation separately are not available, we estimate the standalone selling price of each performance obligation.

Key assumptions to determine the standalone selling price may include forecasted revenues, development timelines, reimbursement rates for personnel costs, discount rates and probabilities of technical and regulatory success.

Whenever we determine that goods or services promised in a contract should be accounted for as a combined performance obligation over time, we determine the period over which the performance obligations will be performed and revenue will be recognized.

Revenue is recognized using either the proportional performance method or on a straight-line basis if efforts will be expended evenly over time.

Costs incurred or labor hours are typically used as the measure of performance.

Management judgment is required in determining the level of effort required under an arrangement and the period over which we expect to complete our performance obligations.

If we determine that the performance obligation is satisfied over time, any upfront payment received is initially recorded as deferred revenue on our consolidated balance sheets.

Certain judgments affect the application of our revenue recognition policy.

For example, we record short-term and long-term deferred revenue based on our best estimate of when such revenue will be recognized.

Short-term deferred revenue consists of amounts that are expected to be recognized as revenue in the next 12 months, and long-term deferred revenue consists of amounts that we do not expect will be recognized in the next 12 months.

estimate is based on our current operating plan and, if our operating plan should change in the future, we may recognize a different amount of deferred revenue over the next 12-month period.

There have been no other material changes to our critical accounting policies during the three months ended March 31, 2024, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report for the year ended December 31, 2023 filed with the SEC on February 27, 2024.

Components of Our Results of Operations

License and Collaboration Revenue

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

See Note 3 to the condensed consolidated financial statements included elsewhere in this report for additional information.

Our license and collaboration revenue is derived from payments we receive under our license and collaboration agreements with Takeda and JNJ.

See Note 3 to the condensed consolidated financial statements included elsewhere in this Quarterly Report for additional information.

Research and Development Expenses

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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, non-clinical and clinical studies;

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

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

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

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

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

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

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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 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 costs 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.

Program-specific costs are unallocated when the related 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 fourth quarter 2023 research and development expenses to remain relatively flat as compared to the first nine months of 2023 as we continue to focus our resources toward progressing our rusfertide program into later stage clinical trials and preparing for commercialization.

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

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

We expect our research and development expenses to increase in the near term as compared to the prior year period as we continue to focus our resources on (i) progressing our rusfertide program into later stage clinical trials and preparing for commercialization and ii) advancing our pre-clinical and drug discovery research programs.

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.

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Results of Operations

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

Three Months Ended

September 30,

(Dollars in thousands)

Operating expenses:

Research and development (1)

General and administrative (2)

Total operating expenses

Loss from operations

Interest income

Other expense, net

(1) Includes $3.8 million and $3.9 million of non-cash stock-based compensation expense for the three months ended September 30, 2023 and 2022, respectively.

(2) Includes $3.0 million and $2.1 million of non-cash stock-based compensation expense for the three months ended September 30, 2023 and 2022, respectively.

Research and Development Expenses

Comparison of the Three Months Ended March 31, 2024 and 2023

Three Months Ended

September 30,

(Dollars in thousands)

Clinical and development expense — rusfertide (PTG-300)

Clinical and development expense — PN-943

Clinical and development expense — JNJ-2113 (PN-235)

Clinical and development expense — other

Pre-clinical and drug discovery research expense

Grants and tax incentives expense reimbursement, net

Total research and development expenses

*Percentage not meaningful.

Research and development expenses increased $5.3 million, or 21%, from $25.4 million for the three months ended September 30, 2022 to $30.7 million for the three months ended September 30, 2023.

The increase was primarily due to (i) an increase of $9.1 million in rusfertide clinical and contract manufacturing expenses primarily for the Phase 3 VERIFY clinical trial, partially offset by (ii) a decrease of $4.0 million in expenses for the PN-943 program where further development work was de-prioritized to optimize and focus resources toward the rusfertide program in PV.

We had 84 and 99 full-time equivalent research and development employees as of September 30, 2023 and 2022, respectively.

Research and development personnel-related expenses for the three months ended September 30, 2023 decreased by $0.7 million as compared to the three months ended September 30, 2022 due primarily to a decrease in stock-based compensation expense.

General and Administrative Expenses

General and administrative expenses increased $0.8 million, or 11%, from $6.9 million for the three months ended September 30, 2022 to $7.7 million for the three months ended September 30, 2023 due primarily to increases in stock-based compensation expense and other personnel-related expenses, partially offset by decreases in consulting, marketing expense and other general expenses.

We had 27 and 23 full-time equivalent general and administrative employees as of September 30, 2023 and 2022, respectively.

Interest Income

Interest income increased $3.1 million from $1.2 million for the three months ended September 30, 2022 to $4.3 million for the three months ended September 30, 2023.

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

Comparison of the Nine Months Ended September 30, 2023 and 2022

Nine Months Ended

September 30,

(Dollars in thousands)

License and collaboration revenue

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Total operating expenses

Loss from operations

Income (loss) from operations

Interest income

Other expense, net

(1) Includes $13.2 million and $11.3 million of non-cash stock-based compensation expense for the nine months ended September 30, 2023 and 2022, respectively.

(2) Includes $9.5 million and $7.4 million of non-cash stock-based compensation expense for the nine months ended September 30, 2023 and 2022, respectively.

Income (loss) before income tax expense

Income tax expense

Net income (loss)

*Percentage not meaningful.

(1) Includes $5.3 million and $4.6 million of non-cash stock-based compensation expense for the three months ended March 31, 2024 and 2023, respectively.

(2) Includes $4.1 million and $3.0 million of non-cash stock-based compensation expense for the three months ended March 31, 2024 and 2023, respectively.

License and Collaboration Revenue

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

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

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

License and collaboration revenue increased from $0 for the three months ended March 31, 2023 to $255.0 million for the three months ended March 31, 2024.

Revenue for the three months ended March 31, 2024 included $254.1 million of the $300.0 million transaction price for the Takeda Collaboration Agreement allocated to the delivery of the rusfertide license to Takeda upon effectiveness of the agreement in March 2024, and $0.9 million allocated to development services provided by us during the period based on the cost-based input method.

For the three months ended March 31, 2023, we did not recognize any license and collaboration revenue.

Research and Development Expenses

Nine Months Ended

September 30,

Three Months Ended

(Dollars in thousands)

Clinical and development expense — rusfertide (PTG-300)

Clinical and development expense — rusfertide

Clinical and development expense — PN-943

Clinical and development expense — JNJ-2113 (PN-235)

Clinical and development expense — other

Preclinical and drug discovery research expense

Grants and tax incentives expense reimbursement, net

Pre-clinical and drug discovery research expense

Total research and development expenses

Research and development expenses decreased $5.1 million, or 5%, from $96.3 million for the nine months ended September 30, 2022 to $91.3 million for the nine months ended September 30, 2023.

The decrease was primarily due to (i) a decrease of $32.2 million in expenses for the PN-943 program where further development work was de-prioritized to optimize and focus resources toward the rusfertide program in PV, and (ii) a decrease of $3.0 million in expenses related to pre-clinical and drug discovery research expense, partially offset by (iii) an increase of $31.0 million in rusfertide clinical and contract manufacturing expenses primarily for the Phase 3 VERIFY clinical trial.

We had 84 and 99 full-time equivalent research and development employees as of September 30, 2023 and 2022, respectively.

Research and development personnel-related expenses for the nine months ended September 30, 2023 increased by $0.4 million as compared to the nine months ended September 30, 2022 due to an increase of $1.9

million in stock-based compensation expense, partially offset by a decrease of $1.5 million in other personnel-related expenses.

Research and development expenses increased $6.3 million, or 23%, from $27.4 million for the three months ended March 31, 2023 to $33.7 million for the three months ended March 31, 2024.

The increase was primarily due to (i) an increase of $2.9 million in rusfertide clinical and contract manufacturing expenses primarily for the ongoing Phase 3 VERIFY clinical trial and (ii) an increase of $4.3 million in pre-clinical and drug discovery research program expense, partially offset by (iii) a decrease of $0.9 million in expenses for the PN-943 program where further development work was de-prioritized to optimize and focus resources toward the rusfertide program in PV.

completed a Phase 2 trial of PN-943, an orally delivered gut-restricted alpha 4 beta 7 specific integrin antagonist, in patients with moderate to severe UC in early 2023.

We had 97 and 80 full-time equivalent research and development employees as of March 31, 2024 and 2023, respectively.

Research and development personnel-related expenses for the three months ended March 31, 2024 increased by $2.6 million as compared to the three months ended March 31, 2023, including increases of $1.9 million in personnel-related expenses and $0.7 million in stock-based compensation expense.

General and Administrative Expenses

General and administrative expenses increased $0.3 million, or 1%, from $25.1 million for the nine months ended September 30, 2022 to $25.4 million for the nine months ended September 30, 2023 due primarily 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 September 30, 2023 and 2022, respectively.

General and administrative expenses increased $6.3 million, or 73%, from $8.6 million for the three months ended March 31, 2023 to $14.9 million for the three months ended March 31, 2024.

This increase was primarily due to a $4.6 million increase in advisory and legal fees related to the Takeda Collaboration Agreement, a $1.1 million increase in stock-based compensation expense and a $0.9 million increase in personnel-related expenses, partially offset by a $0.7 million decrease in consulting and outside services, marketing and other general expenses.

We had 27 and 23 full-time equivalent general and administrative employees as of March 31, 2024 and 2023, respectively.

Interest Income

Interest income increased $8.8 million from $1.8 million for the nine months ended September 30, 2022 to $10.6 million for the nine months ended September 30, 2023.

Interest income increased $1.9 million from $2.5 million for the three months ended March 31, 2023 to $4.4 million for the three months ended March 31, 2024.

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

Income Tax Expense

Income tax expense was $3.3 million and $0 for the three months ended March 31, 2024 and 2023, respectively.

Income tax expense for the three months ended March 31, 2024 is a result of taxable income resulting from the recognition of revenue in connection with the Takeda Collaboration Agreement.

The effective tax rate was 1.54% and 0% for the three months ended March 31, 2024 and 2023, respectively.

Liquidity and Capital Resources

Sources of Liquidity

We had $322.6 million and $341.6 million in cash, cash equivalents and marketable securities at March 31, 2024 and December 31, 2023, respectively.

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

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In April 2023, we completed an underwritten public offering of 5,000,000 shares of our common stock at a public offering price of $20.00 per share and issued an additional 750,000 shares of common stock at a price of $20.00 per share following the underwriters’ exercise of their option to purchase additional shares.

Net proceeds, after deducting underwriting commissions and offering costs paid by us, were approximately $107.8 million.

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

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

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

There were no sales of our common stock under the 2022 ATM Facility during the three months ended March 31, 2024.

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 and September 30, 2023.

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.

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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 were 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.

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”).

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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 were classified as equity in accordance with ASC 480 and the net proceeds from the transaction were recorded as a credit to additional paid-in capital.

The common stock and Pre-Funded Warrants 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 September 30, 2023, none of the Pre-Funded Warrants have been exercised.

During the three months ended March 31, 2024, Pre-Funded Warrants to purchase 84,992 shares were net exercised, resulting in the issuance of 84,989 shares of common stock.

As of March 31, 2024, Pre-Funded Warrants to purchase 2,620,260 were outstanding.

Receipt of Payments Under Collaboration Agreements

We have received $112.5 million in non-refundable payments from Janssen since the inception of the Restated Agreement in 2017 through the date of this report as follows:

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

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

● 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 late 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-LEAD Phase 3 clinical trial of JNJ-2113 in moderate-to-severe plaque psoriasis.

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

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:

In March 2024, we earned a $300.0 million upfront payment from Takeda upon the closing of the Takeda Collaboration Agreement, which was received in April 2024.

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

Upcoming potential development milestones under the Takeda Collaboration Agreement include:

● $25.0 million upon successful achievement of the primary endpoint in the Phase 3 VERIFY trial for rusfertide in PV;

● $50.0 million upon FDA approval of an NDA for rusfertide in PV (or $75.0 million if we exercise our full right to opt-out of the 50:50 U.S.

profit and loss sharing arrangement in exchange for enhanced economics).

We have earned a total of $112.5 million in non-refundable payments from JNJ from the inception of the JNJ License and Collaboration Agreement in 2017 through December 31, 2022.

In addition, we earned the following milestone payments under the JNJ License and Collaboration Agreement during the year ended December 31, 2023:

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

● in December 2023, we earned a $10.0 million payment for services 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 JNJ License and Collaboration Agreement, we may be eligible to receive clinical development, regulatory and sales milestones, if and when achieved.

Upcoming potential development and regulatory milestones under the Janssen License and Collaboration Agreement include:

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

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

● $10.0 million upon the dosing of the third patient in the first Phase 2 clinical trial for any second-generation compound for a second indication (i.e.

an indication different than the indication which triggered the $25.0 million milestone received during the second quarter of 2022 described above);

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

Capital Requirements

As of September 30, 2023, we had $322.7 million of cash, cash equivalents and marketable securities and an accumulated deficit of $643.0 million.

Our capital expenditures were $0.6 million and $0.8 million for the nine months ended September 30, 2023 and the year ended December 31, 2022, respectively.

Our primary uses of cash are to fund our operating expenses, including our research and development expenditures, general and administrative costs and pre- commercialization costs.

Cash used in operating activities is impacted by the timing of when we pay these expenses.

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

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

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

We expect that our cash burn will approximate current levels for the remainder of the year, but will increase in 2024.

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.

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

As of March 31, 2024, we had $322.6 million of cash, cash equivalents and marketable securities and an accumulated deficit of $408.4 million.

Our capital expenditures were $0.2 million and $0.6 million for the three months ended March 31, 2024 and the year ended December 31, 2023, respectively.

Our primary uses of cash are to fund our operating expenses, including 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 Quarterly Report based on current operating plans and financial forecasts.

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

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

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

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

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

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

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

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

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

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

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

● the achievement of development, regulatory and sales milestones resulting in payments to us from JNJ under the JNJ License and Collaboration 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 JNJ License and Collaboration Agreement or Takeda under the Takeda Collaboration Agreement upon regulatory approval or clearance, if any;

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

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

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

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

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

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

As discussed in Part II, Item 1A.

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

“Risk Factors,” we are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by domestic and global monetary and fiscal policy, geopolitical instability, inflationary pressures and high interest rates, 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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The following table summarizes our cash flows for the periods indicated:

Nine Months Ended

September 30,

Three Months Ended

Condensed Consolidated Statements of Cash Flows Data:

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Cash Used in Operating Activities

Cash used in operating activities for the nine months ended September 30, 2023 was $87.2 million, consisting primarily of our net loss of $106.3 million and a net change of $3.1 million in net operating assets and liabilities, partially offset by certain non-cash items, including $22.7 million of stock-based compensation expense.

The $10.7 million increase in cash flow used in operating activities during the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily due to a $13.1 million increase in our net loss and a $3.6 million increase in discount accretion on marketable securities, partially offset by a $4.0 million increase in stock-based compensation expense.

Cash used in operating activities for the three months ended March 31, 2024 was $27.4 million, consisting primarily of our net income of $207.3 million and $9.4 million of stock-based compensation, partially offset by a net change of $243.3 million in net operating assets and liabilities.

The change in net operating assets and liabilities was driven by a change of $290.0 million in receivable from collaboration partner partially offset by $45.1 million in deferred revenue, both of which related to the $300.0 million upfront payment we earned upon the effectiveness of the Takeda Collaboration Agreement in March 2024.

The $6.9 million decrease in cash used in operating activities during the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, was primarily due to a

$241.1 million change in our net income and a $1.8 million increase in stock-based compensation expense, partially offset by a $235.3 million net change in net operating assets and liabilities.

Cash Provided by Investing Activities

Cash provided by investing activities for the nine months ended September 30, 2023 was $22.0 million, consisting of primarily of proceeds from maturities of marketable securities of $115.7 million, partially offset by purchases of marketable securities of $93.1 million.

The $65.5 million decrease in cash provided by investing activities for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily related to a decrease in the net activity of purchases and maturities of marketable securities.

Cash provided by investing activities for the three months ended March 31, 2024 was $6.1 million, consisting primarily of proceeds from maturities of marketable securities of $72.0 million, partially offset by purchases of marketable securities of $65.7 million.

The $3.8 million decrease in cash provided by investing activities for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, was primarily related to a decrease in the net activity of purchases and maturities of marketable securities.

Cash Provided by Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2023 was $170.0 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 $4.3 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 $151.7 million increase in cash provided by financing activities for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily due to a $107.8 million increase in net cash proceeds from the public offerings, a $9.7 million increase in ATM sales of our common stock and a $34.4 million increase in net cash proceeds from the exercise of the Warrants.

Cash provided by financing activities for the three months ended March 31, 2024 was $7.2 million, consisting primarily of net cash proceeds of $7.8 million from the issuance of common stock upon exercises of stock options and purchases of stock under our employee stock purchase plan (“ESPP”), partially offset by $0.6 million in tax withholding payments related to net settlement of restricted stock units.

The $19.3 million decrease in cash provided by financing activities for the three months ended March 31, 2024, as compared to the three months ended March 31, 2023, was primarily due to a $24.3 million decrease in ATM sales of our common stock, partially offset by $5.5 million increase in proceeds from issuance of common stock upon exercise of options and purchases of common stock under the ESPP.

Contractual Obligations and Other Commitments

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

Takeda Collaboration Agreement

Under the Takeda Collaboration Agreement, we are obligated for expenditures related to completion of our Phase 3 clinical trial for rusfertide in PV and, if successful, an NDA filing with the FDA.

The timing and actual amounts may vary from estimates depending on numerous factors, some of which are outside of our control and some of which are contingent upon the success of certain development and regulatory activities.

The timing and amount of such payments are not determinable as of the date of the Quarterly Report on Form 10-Q.

During the three months ended March 31, 2024, there were no other material changes to our material cash requirements, including commitments for capital expenditures, described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 27, 2024.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis