What changed in this filing

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Item 1. Financial Statements

2024-08-06 compared with 2024-05-07 · 170 added, 99 removed, 328 unchanged (45% of the section changed)

9 unchanged sentences

Total current assets

Marketable securities - noncurrent

Property and equipment, net

11 unchanged sentences

Deferred revenue - noncurrent

Operating lease liability - noncurrent

Total liabilities

3 unchanged sentences

no shares issued and outstanding

Common stock, $ 0.00001 par value, 90,000,000 shares authorized;

58,600,787 and 57,708,613 shares issued and outstanding as of March 31, 2024 and December 31, 2023, respectively

Common stock, $ 0.00001 par value, 180,000,000 and 90,000,000 shares authorized as of June 30, 2024 and December 31, 2023 , respectively;

58,762,063 and 57,708,613 shares issued and outstanding as of June 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Six Months Ended

License and collaboration revenue

5 unchanged sentences

Interest income

Other expense, net

Income (loss) before income tax expense

Income tax expense

Other income (expense), net

Income (loss) before income tax (expense) benefit

Income tax expense (benefit)

Net income (loss)

8 unchanged sentences

Three Months Ended

Six Months Ended

Net income (loss)

Other comprehensive income (loss):

Unrealized loss on marketable securities

Gain on translation of foreign operations

Unrealized (loss) gain on marketable securities

Comprehensive income (loss)

5 unchanged sentences

Stockholders’

(Loss) Income

Three months ended March 31, 2024

Income (Loss)

Three months ended June 30, 2024

Balance at March 31, 2024

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

Stock-based compensation expense

Other comprehensive income (loss)

Net income (loss)

Balance at June 30, 2024

Comprehensive

Stockholders’

Income (Loss)

Three months ended June 30, 2023

Balance at March 31, 2023

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

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

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

Stock-based compensation expense

Other comprehensive income (loss)

Net income (loss)

Balance at June 30, 2023

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

PROTAGONIST THERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity (continued)

(In thousands, except share data)

Comprehensive

Stockholders’

Income (Loss)

Six months ended June 30, 2024

Balance at December 31, 2023

5 unchanged sentences

Net income (loss)

Balance at March 31, 2024

Balance at June 30, 2024

Comprehensive

Stockholders’

(Loss) Income

Three months ended March 31, 2023

Income (Loss)

Six months ended June 30, 2023

Balance at December 31, 2022

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

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

4 unchanged sentences

Net income (loss)

Balance at March 31, 2023

Balance at June 30, 2023

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

2 unchanged sentences

(In thousands)

Three Months Ended

Six Months Ended

Cash Flows from Operating Activities

Net income (loss)

Adjustments to reconcile net income (loss) to net cash used in operating activities:

Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities:

Stock-based compensation

7 unchanged sentences

Accrued expenses and other payables

Deferred revenue

Income taxes payable

Deferred revenue

Operating lease liability

Net cash used in operating activities

Net cash provided by (used in) operating activities

Cash Flows from Investing Activities

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Purchases of property and equipment

Net cash provided by investing activities

Net cash (used in) provided by investing activities

Cash Flows from Financing Activities

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

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

Tax withholding payments related to net settlement of restricted stock units

Proceeds from public offering of common stock, net of issuance costs

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

Net cash provided by financing activities

Net (decrease) increase in cash, cash equivalents and restricted cash

Net increase in cash, cash equivalents and restricted cash

Cash, cash equivalents and restricted cash, beginning of period

1 unchanged sentence

Supplemental Disclosure of Non-Cash Financing and Investing Information:

Right-of-use asset obtained in exchange for lease obligation

Leasehold improvements obtained under tenant improvement allowance

Purchases of property and equipment in accounts payable and accrued liabilities

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

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

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

The Company is a biopharmaceutical company with peptide-based new chemical entities rusfertide and JNJ-2113 in advanced Phase 3 stages of clinical development, both derived from the Company’s proprietary technology platform.

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

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

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

As of March 31, 2024, the Company had cash, cash equivalents and marketable securities of $ 322.6 million.

The Company has incurred cumulative net losses from inception through March 31, 2024 of $ 408.4 million.

As of June 30, 2024, the Company had cash, cash equivalents and marketable securities of $ 595.4 million.

The Company has incurred cumulative net losses from inception through June 30, 2024 of $ 439.0 million.

The Company’s ultimate success depends upon the outcome of its research and development and collaboration activities.

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Since the Company’s initial public offering in August 2016, it has financed its operations primarily through proceeds from offerings of common stock and payments received under license and collaboration agreements.

Risks and Uncertainties

The Company is currently operating in a period of macroeconomic uncertainty and capital markets disruption, which has been impacted by domestic and global monetary and fiscal policy, geopolitical instability, including ongoing military conflicts between Russia and Ukraine and in Israel and surrounding areas, rising tensions between China and Taiwan, and high interest rates.

The Company’s future results of operations and liquidity could be adversely impacted by outbreaks of disease, epidemics and pandemics, including potential 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.

Federal Reserve and other central banks may be unable to contain inflation through more restrictive monetary policy and inflation may increase or continue for a prolonged period of time.

Inflationary factors, such as increases in the cost of clinical supplies, interest rates, overhead costs and transportation costs may adversely affect the Company’s operating results.

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

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

Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

10-01 of Regulation S-X and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting.

As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted, and accordingly the condensed consolidated balance sheet as of March 31, 2024 has been derived from the Company’s unaudited consolidated financial statements at that date but does not include all of the information required by GAAP for complete consolidated financial statements.

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”), the instructions to Form 10-Q and Rule 10-01 of Regulation S-X and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting.

As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted, and accordingly the condensed consolidated balance sheet as of June 30, 2024 has been derived from the Company’s unaudited consolidated financial statements at that date but does not include all of the information required by GAAP for complete consolidated financial statements.

These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of the Company’s condensed consolidated financial statements.

The results of operations for the three months ended March 31, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future period.

The results of operations for the three and six months ended June 30, 2024 are not necessarily indicative of the results to be expected for the year ending December 31, 2024 or for any future period.

The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2023 included in the Company’s Annual Report on Form 10-K, filed with the SEC on February 27, 2024.

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PSUs allow the recipients of such awards to earn fully vested shares of the Company’s common stock upon the achievement of pre-established performance objectives.

Stock-based compensation expense associated with PSUs is based on the fair value of the Company’s common stock on the grant date, which equals the closing market price of the Company’s common stock on the grant date and is recognized when the performance objective is expected to be achieved.

The Company evaluates on a quarterly basis the probability of achieving the performance criteria.

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

closing market price of the Company’s common stock on the grant date and is recognized when the performance objective is expected to be achieved.

The Company evaluates the probability of achieving the performance criteria on a quarterly basis.

The cumulative effect on current and prior periods of a change in the estimated number of PSUs expected to be earned is recognized as compensation expense or as reduction of previously recognized compensation expense in the period of the revised estimate.

2 unchanged sentences

Three Months Ended

Six Months Ended

Research and development

8 unchanged sentences

Payments or reimbursements that are the result of a collaborative relationship instead of a customer relationship, such as co-development and co-commercialization activities, are recorded as increases or decreases to research and development expense or general and administrative expense, as appropriate.

There have been no other material changes to the Company’s significant accounting policies during the three months ended March 31, 2024, as compared to those disclosed in Note 2.

Except as described above, there have been no other material changes to the Company’s significant accounting policies during the six months ended June 30, 2024, as compared to those disclosed in Note 2.

Summary of Significant Accounting Policies included in the Company’s Annual Report on Form 10-K for the year ended December 31, 2023.

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

Recently Issued Accounting Pronouncements Not Yet Adopted as of March 31, 2024

Recently Issued Accounting Pronouncements Not Yet Adopted as of June 30, 2024

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

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

The Company is currently evaluating the impact of the adoption of this guidance on its financial position, results of operations and cash flow.

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

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

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(“Takeda”) (“the Takeda Collaboration Agreement”), which became effective in March 2024.

The Company and Takeda will jointly develop and commercialize rusfertide and potentially other specified second-generation injectable hepcidin mimetic compounds (the “Licensed Products”) in the United States (the “Profit-Share Territory”).

Pursuant to the Takeda Collaboration Agreement, the Company and Takeda are jointly developing and commercializing rusfertide and potentially other specified second-generation injectable hepcidin mimetic compounds (the “Licensed Products”) in the United States (the “Profit-Share Territory”).

Takeda is solely and exclusively responsible for the development and commercialization of the Licensed Products in all other countries (the “Takeda Territory”).

The Company and Takeda will share costs of the development, manufacture and commercialization activities for the Licensed Products in the Profit-Share Territory, provided that (i) the Company will lead, and will be responsible for its costs associated with, completion of the ongoing Phase 3 VERIFY program evaluating rusfertide for the treatment of polycythemia vera (“PV’) as well as associated U.S.

The Company and Takeda share costs of the development, manufacture and commercialization activities for the Licensed Products in the Profit-Share Territory, provided that (i) the Company leads, and is solely responsible for its costs associated with, completion of the ongoing Phase 3 VERIFY program evaluating rusfertide for the treatment of polycythemia vera (“PV”) as well as associated U.S.

regulatory activities;

(ii) Takeda will lead, and will be solely responsible for its costs associated with, pre-commercialization activities related to rusfertide in the Profit-Share Territory, and (iii) Takeda will lead commercialization of rusfertide in the Profit-Share Territory, with Protagonist holding an option to co-detail.

(ii) Takeda leads, and is solely responsible for its costs associated with, pre-commercialization activities related to rusfertide in the Profit-Share Territory;

and (iii) Takeda leads commercialization of rusfertide in the Profit-Share Territory, with the Company holding an option to co-detail.

Takeda is solely responsible for all costs for the development, manufacture and commercialization of the Licensed Products in the Takeda Territory.

The Company granted Takeda a non-transferable, sublicensable, and except for certain specified exceptions, exclusive license to certain intellectual property of the Company to exercise its rights and perform its obligations under the Takeda Collaboration Agreement.

Within 30 days after the effectiveness of the Takeda Collaboration Agreement, the Company will receive an upfront payment of $ 300.0 million.

The Company became eligible to receive an upfront payment of $ 300.0 million upon the effectiveness of the Takeda Collaboration Agreement, which was received in April 2024.

In addition, the Company is eligible to receive additional worldwide development, regulatory and commercial milestone payments for rusfertide of up to $ 330.0 million, and tiered royalties from 10 % to 17 % on net sales of the Licensed Products in the Takeda Territory.

The Company and Takeda will also share equally in profits and losses ( 50 % to the Company and 50 % to Takeda) for Licensed Products in the Profit-Share Territory.

The Company and Takeda also share equally in profits and losses ( 50 % to the Company and 50 % to Takeda) for Licensed Products in the Profit-Share Territory.

Takeda will book sales of the Licensed Products globally.

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and (ii) for convenience without receipt of the Opt-out Payment (as defined below) (generally following the Initial Opt-out Period).

In addition, if the Company does not exercise the Full Opt-out Right, the Company may opt-out of any Licensed Product other than rusfertide on a Licensed Product-by-Licensed Product basis (each, a “Partial Opt-out Right” and either the Full Opt-out Right or a Partial Opt-out right being an “Opt-out Right”).

In addition, if the Company does not exercise the Full Opt-out Right, the Company may opt-out of any Licensed Product other than rusfertide on a Licensed

Product-by-Licensed Product basis (each, a “Partial Opt-out Right” and either the Full Opt-out Right or a Partial Opt-out right being an “Opt-out Right”).

Following the Company’s exercise of an Opt-out Right, the Company has agreed to transition applicable development and commercial activities to Takeda, and Takeda has agreed to assume sole operational and financial responsibility for such activities in the United States.

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● $ 50.0 million upon FDA approval of an NDA for rusfertide in PV (or $ 75.0 million if the Company exercises the Full Opt-out Right).

The Company has evaluated the Takeda Collaboration Agreement and concluded that it has elements that are within the scope of Topic 606 and Topic 808.

The Company evaluated the Takeda Collaboration Agreement and concluded that it has elements that are within the scope of Topic 606 and Topic 808.

As of the effective date of the Takeda Collaboration Agreement, the Company identified two distinct performance obligations:

(i) the rusfertide license delivered upon the effectiveness of the Takeda Collaboration Agreement and (ii) certain development services to be provided prior to the Initial Opt-out Period, including the Company’s responsibilities to complete the VERIFY Phase 3 clinical trial in PV and to file an NDA with the FDA upon successful completion of the VERIFY trial and associated manufacturing services.

The Company has determined that the initial transaction price totaled $ 300.0 million, comprised of the upfront payment.

The Company determined that the initial transaction price totaled $ 300.0 million, comprised of the upfront payment.

The Company has excluded any future estimated milestones or royalties from this transaction price to date, all of which are either currently constrained or subject to the sales-and usage-based royalty exception.

1 unchanged sentence

The Company allocated $ 254.1 million of the initial transaction price to the license and $ 45.9 million to the development services based upon the relative standalone selling price of each performance obligation.

The estimate of standalone selling price for the license was determined based using discounted cash flows for the expected development and commercialization of rusfertide and includes assumptions for forecasted revenues, development timelines and expenses, discount rates, and probabilities of technical and regulatory success.

The estimate of standalone selling price for the development services was determined based on forecasted costs and expenses over the expected development period.

For the license of rusfertide, the Company determined that Takeda could benefit from the license at the time the license was granted and therefore, the related performance obligation was satisfied at a point in time.

The amount allocated to the license, which represents functional intellectual property that was transferred at a point in time, was satisfied upon transfer of the license to Takeda.

The amount allocated to development services will be recognized over time based on a measure of the Company’s efforts toward satisfying the performance obligation relative to the total expected efforts or inputs to satisfy the performance obligation (e.g., costs incurred compared to total budget).

The Company recognized $ 0.9 million with respect to the period from effective date of the contract through March 31, 2024.

The Company recognized $ 5.0 million with respect to the period from effective date of the contract through June 30, 2024.

The Company determined that the Takeda Collaboration Agreement met the definition of a collaborative arrangement under Topic 808.

Both parties are active participants in directing and carrying out the development of the Licensed Products and both are exposed to the significant risk and rewards related to the commercial success of the Products.

If the Company does not exercise an Opt-out Right (“Company Opt-in”), the Company and Takeda would co-detail the Licensed Products in the U.S.

and share in the economic results through a profit-sharing structure.

The Company has determined that development costs subsequent to the Company Opt-in date are within the scope of Topic 808, which does not provide recognition and measurement guidance.

The Company determined that development costs subsequent to the Company Opt-in date are within the scope of Topic 808, which does not provide recognition and measurement guidance.

As such, the Company determined that Accounting Standards Codification Topic 730 – Research and Development was appropriate to analogize to based on the cost-sharing provisions of the agreement.

The Company has concluded that payments to or reimbursements from Takeda related to these services will be accounted for as an increase to or reduction of research and development expense, respectively.

The Company concluded that payments to or reimbursements from Takeda related to these services will be accounted for as an increase to or reduction of research and development expense, respectively.

JNJ License and Collaboration Agreement

On July 27, 2021, the Company entered into an Amended and Restated License and Collaboration Agreement with J&J Innovative Medicines (“JNJ”), formerly Janssen Biotech, Inc., which amended and restated the License and Collaboration Agreement, effective July 13, 2017, by and between the Company and JNJ, as amended by the first amendment, effective May 7, 2019 (together, the “JNJ License and Collaboration Agreement”).

From inception in 2017 through December 31, 2022, the Company earned a total of $ 112.5 million in non-refundable upfront cash payment from JNJ.

During the fourth quarter of 2023, the Company earned a $ 50.0 million milestone payment in connection with the dosing of a third patient in the ICONIC-TOTAL Phase 3 clinical trial of JNJ-2113 in patients with moderate-to-severe psoriasis and a $ 10.0 million milestone payment upon t he dosing of the third patient in the ANTHEM Phase 2b trial moderately-to-severely active ulcerative colitis (“UC”).

The Company has earned a total of $ 172.5 million in non-refundable payments from JNJ from inception in 2017 through the date of this Quarterly Report.

The JNJ License and Collaboration Agreement relates to the development, manufacture and commercialization of oral IL-23 receptor antagonist drug candidates and enables JNJ to develop collaboration compounds for multiple

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

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Revenue Recognition

For the three months ended March 31, 2024, the Company recognized license and collaboration revenue of $ 255.0 million related to the Takeda Collaboration Agreement transaction price, including $ 254.1 million allocated to the rusfertide license delivered to Takeda upon effectiveness of the agreement in March 2024 and $ 0.9 million for development services provided by the Company during the period based on the cost-based input method.

For the three months ended March 31, 2023, no license and collaboration revenue was recognized.

The remaining unrecognized transaction price amount of $ 45.0 million was recorded as deferred revenue on the Company’s condensed consolidated balance sheet as of March 31, 2024 and will be recognized over time based on a measure of the Company’s efforts toward satisfying the performance obligation relative to the total expected efforts or inputs to satisfy the performance obligation (e.g.

For the three months ended June 30, 2024, the Company recognized license and collaboration revenue of $ 4.2 million related to the Takeda Collaboration Agreement transaction price for development services provided by the Company during the period based on the cost-based input method.

For the six months ended June 30, 2024, the Company recognized license and collaboration revenue of $ 259.1 million related to the Takeda Collaboration Agreement transaction price, including $ 254.1 million allocated to the rusfertide license delivered to Takeda upon effectiveness of the agreement in March 2024 and $ 5.0 million for development services provided by the Company during the period based on the cost-based input method.

For the three and six months ended June 30, 2023, no license and collaboration revenue was recognized.

The remaining unrecognized transaction price amount of $ 40.9 million related to the Takeda Collaboration Agreement was recorded as deferred revenue on the Company’s condensed consolidated balance sheet as of June 30, 2024 and will be recognized over time based on a measure of the Company’s efforts toward satisfying the performance obligation relative to the total expected efforts or inputs to satisfy the performance obligation (e.g.

costs incurred compared to total budget).

During the three months ended March 31, 2024 and 2023, the Company did no t recognize revenue from any amounts included in the deferred revenue contract liability balance at the beginning of each period.

For the three months ended June 30, 2024, the Company recognized $ 4.2 million of revenue that was included in the deferred revenue liability balance at the beginning of the period.

For the six months ended June 30, 2024 and the three and six months ended June 30, 2023, the Company did no t recognize revenue from any amounts included in the deferred revenue liability balance at the beginning of each period.

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

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The following tables present the fair value of the Company’s financial assets determined using the inputs defined above (in thousands):

March 31, 2024

June 30, 2024

Money market funds

Certificates of deposit

Treasury and agency securities

Commercial paper

Corporate debt securities

Treasury and agency securities

Total financial assets

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Certificates of deposit

Treasury and agency securities

Commercial paper

Corporate debt securities

Treasury and agency securities

Total financial assets

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

The Company’s certificates of deposit, U.S.

Treasury and agency securities, including U.S.

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

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

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

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Cash equivalents and marketable securities consisted of the following (in thousands):

March 31, 2024

June 30, 2024

Gross Unrealized

1 unchanged sentence

Certificates of deposit

Treasury and agency securities

Commercial paper

Corporate debt securities

Treasury and agency securities

Total cash equivalents and marketable securities

1 unchanged sentence

Cash equivalents

Marketable securities

Marketable securities - current

Marketable securities - noncurrent

Total cash equivalents and marketable securities

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Certificates of deposit

Treasury and agency securities

Commercial paper

Corporate debt securities

Treasury and agency securities

Total cash equivalents and marketable securities

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Total cash equivalents and marketable securities

Marketable securities of $ 150.1 million and $ 154.9 million held as of March 31, 2024 and December 31, 2023, respectively, had contractual maturities of less than one year .

All of the Company’s marketable securities are classified as available-for-sale.

Marketable securities of $ 208.4 million and $ 154.9 million held as of June 30, 2024 and December 31, 2023, respectively, had contractual maturities of

less than one year .

Marketable securities of $ 31.4 million held as of June 30, 2024 had contractual maturities of at least one year but no more than two years .

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

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

The Company evaluated securities with unrealized losses to determine whether such losses, if any, were due to credit-related factors and determined that there were no credit-related losses to be recognized as of March 31, 2024.

Balance Sheet Components

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Total accrued expenses and other payables

The Company applies Accounting Standards Codification Topic 842 -- Leases to recognize leases with terms of more than 12 months on the balance sheet.

The Company has elected to account for each separate lease component and non-lease components as one single component for all lease assets.

Leases with terms of 12 months or less are not recorded on the balance sheet, and the related lease expenses are recognized on a straight-line basis over the lease term.

On May 6, 2024, the Company amended its facility lease agreement dated as of March 6, 2017 (the “Amended Lease”) to extend the lease term for its existing office and laboratory space from one to 66 months and lease 17,698 rentable square feet of additional office space, all located in Newark, California.

The Company will begin operations in the additional space under the Amended Lease on July 1, 2024.

The Amended Lease, which expires in November 2029, provides for an agreed-upon period of rent abatement and a tenant improvement allowance of $ 1.8 million.

No additional security deposit was required pursuant to the Amended Lease, and the Company is responsible for its proportional share of operating expenses and tax obligations.

As a result of this amendment, the Company recorded an initial right-of-use asset and related liability of $ 10.5 million.

Balance sheet information related to the Company’s operating lease consisted of the following (dollars in thousands):

Operating Leases:

Operating lease right-of-use asset

Operating lease liability - current

Operating lease liability - noncurrent

Total operating lease liabilities

Weighted-average remaining lease term (years)

Weighted-average discount rate

The tenant improvement allowance under the Amended Lease represents a fixed amount that the Company is reasonably certain to use.

As such, it is reflected in the determination of the operating lease liability as of the lease commencement date.

Other information related to the Company’s operating lease consisted of the following (in thousands):

Three Months Ended

Six Months Ended

Operating lease cost

Short-term rent expense

Sublease income

Total lease expense

Supplemental cash flow information consisted of the following (in thousands):

Six Months Ended

Operating cash flow used by operating leases

New operating lease asset obtained in exchange for operating lease liability

Future minimum lease payments required under lease obligations as of June 30, 2024 consisted of the following (in thousands):

Year Ending December 31:

Remainder of 2024

Total future minimum lease payments

Imputed interest

Present value of lease liabilities

Stockholders’ Equity

Shares of Common Stock Authorized for Issuance

At the Company’s 2024 Annual Meeting of Stockholders held on June 20, 2024, the Company’s stockholders approved an amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Certificate of Incorporation”) to increase the number of authorized shares of the Company’s common stock from 90,000,000 to 180,000,000 , which also has the effect of increasing the total number of authorized shares from 100,000,000 to 190,000,000 (the “Amendment”).

On June 21, 2024, the Company filed a Certificate of Amendment to the Certificate of Incorporation with the Secretary of State of the State of Delaware to effect the Amendment, which became effective immediately upon such filing.

Public Offering

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

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

“2022 ATM Facility”).

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

There were no sales of the Company’s common stock under the 2022 ATM Facility during the three and six months ended June 30, 2024.

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

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

Pre-Funded Warrants

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

The 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.

The common stock and

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

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

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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.

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 shares were outstanding.

The Company has recorded an income tax provision of $ 3.3 million for the three months ended March 31, 2024.

No income tax provision was recorded for the three months ended March 31, 2023.

The primary difference in tax expense as compared to the prior year is a result of taxable income resulting from the recognition of revenue in connection with the Takeda Collaboration Agreement.

The tax provision for the three months ended March 31, 2024 was determined using an estimated annual effective tax rate, adjusted for discrete items, if any.

Based on the available objective evidence during the three months ended March 31, 2024, the Company believes it is more likely than not that its net deferred tax assets may not be realized.

During the three and six months ended June 30, 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 June 30, 2024, Pre-Funded Warrants to purchase 2,620,260 shares were outstanding.

The Company recorded an income tax benefit of $ 0.7 million and income tax expense of $ 2.7 million for the three and six months ended June 30, 2024, respectively.

No income tax provision was recorded for the three and six months ended June 30, 2023.

The primary difference in tax expense as compared to the prior year is a result of taxable income for the six months ended June 30, 2024 resulting from the recognition of revenue in connection with the Takeda Collaboration Agreement.

The tax provision for the three and six months ended June 30, 2024 was determined using an estimated annual effective tax rate, adjusted for discrete items, if any.

Based on the available objective evidence during the three and six months ended June 30, 2024, the Company believes it is more likely than not that its net deferred tax assets may not be realized.

The primary difference between the effective tax rate and the statutory tax rate relates to the Company’s change in valuation allowance.

Net Income (Loss) per Share

The computation of basic net income (loss) per common share is based on the weighted-average number of common shares outstanding during each period.

The computation of diluted net income (loss) per common share is based on the weighted-average number of common shares outstanding during the period plus, when their effect is

dilutive, incremental shares consisting of shares subject to stock options, RSUs, PSUs, the Company’s employee stock purchase plan (“ESPP”), and warrants.

In accordance with Accounting Standards Codification Topic 260, Earnings Per Share , 2,620,260 outstanding Pre-Funded Warrants were included in the computation of weighted-average common shares, basic for the three months ended March 31, 2024 because the exercise price is negligible, and they are fully vested and exercisable after the original issuance date.

The computation of basic net income (loss) per share of common stock is based on the weighted-average number of shares of common stock outstanding during each period.

The computation of diluted net income (loss) per share of common stock is based on the weighted-average number of shares of common stock outstanding during the period plus, when their effect is dilutive, incremental shares consisting of shares subject to stock options, RSUs, PSUs, the Company’s employee stock purchase plan (“ESPP”), and warrants.

In accordance with Accounting Standards Codification Topic 260, Earnings Per Share , 2,620,260 outstanding Pre-Funded Warrants were included in the computation of weighted-average shares of common stock, basic for the three and six months ended June 30, 2024 because the exercise price is negligible, and they are fully vested and exercisable after the original issuance date.

In periods when the Company has net income, the dilutive effect of all potentially outstanding shares is computed using the treasury stock method.

In periods in which the Company reports a net loss, all common stock equivalents are deemed anti-dilutive such that basic net loss per common share and diluted net loss per common share are equal.

The following table reconciles the numerator and denominator used to calculate diluted net income (loss) per common share (in thousands, except share and per share data):

In periods in which the Company reports a net loss, all common stock equivalents are deemed anti-dilutive such that basic net loss per share of common stock and diluted net loss per share of common stock are equal.

The following table reconciles the numerator and denominator used to calculate diluted net income (loss) per share of common stock (in thousands, except share and per share data):

Three Months Ended

Six Months Ended

Net income (loss)

Weighted-average common share, basic

Weighted-average shares of common stock, basic

Dilutive effect of common stock equivalents

Weighted-average common share, dilutive

Net income (loss) per common share

Basic net income (loss) per common share

Diluted net income (loss) per common share

Approximately 4.2 million potentially dilutive common shares consisting of shares subject to outstanding stock options, RSUs, and ESPP were excluded from the diluted net income per common share computation for the three months ended March 31, 2024 because their effect was anti-dilutive.

Approximately 12.0 million potentially dilutive common shares consisting of shares subject to outstanding stock options, RSUs, PSUs, ESPP and warrants were excluded from the diluted net loss per common share computation for the three months ended March 31, 2023 due to the Company’s net loss for the period.

Subsequent Event

On May 6, 2024, the Company amended its facility lease agreement dated as of March 6, 2017 (the “Amended Lease”) to lease 60,575 rentable square feet of office and laboratory space located in Newark, California.

The term of the Amended Lease commences on July 1, 2024 (or such later date when tenant improvements in newly leased office space within the facility are substantially complete).

Under the Amended Lease, which expires in November 2029, the Company will pay an initial monthly base rent of $ 3.53 per square foot, which will increase by 3.5 % annually.

The Amended Lease provides for an agreed-upon period of rent abatement.

The Company will be responsible for its proportional share of operating expenses and tax obligations.

No additional security deposit was required pursuant to the Amended Lease.

Weighted-average shares of common stock, dilutive

Net income (loss) per share of common stock

Basic net income (loss) per share of common stock

Diluted net income (loss) per share of common stock

Approximately 9.9 million potentially dilutive shares of common stock (consisting of shares subject to outstanding stock options, RSUs, PSUs, and under the ESPP) were excluded from the diluted net loss per share of common stock computation for the three months ended June 30, 2024 due to the Company’s net loss for the period.

Approximately 3.4 million potentially dilutive shares of common stock (consisting of shares subject to outstanding stock options, RSUs, and under the ESPP) were excluded from the diluted net income per share of common stock computations for the six months ended June 30, 2024 because their effect was anti-dilutive.

Approximately 11.7 million potentially dilutive shares of common stock (consisting of shares subject to outstanding stock options, RSUs, PSUs, under the ESPP and warrants) were excluded from the diluted net loss per share of common stock computations for the three and six months ended June 30, 2023 due to the Company’s net loss for these periods.

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 1. Financial Statements