What changed in this filing

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Item 1. Financial Statements

2024-11-07 compared with 2024-08-06 · 130 added, 98 removed, 400 unchanged (36% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

September 30,

Current assets:

13 unchanged sentences

Accrued expenses and other payables

Deferred revenue - current

Deferred revenue

Income taxes payable

Operating lease liability - current

Operating lease liability

Total current liabilities

6 unchanged sentences

no shares issued and outstanding

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

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

59,521,903 and 57,708,613 shares issued and outstanding as of September 30, 2024 and December 31, 2023, respectively

Additional paid-in capital

Accumulated other comprehensive loss

Accumulated other comprehensive income (loss)

Accumulated deficit

6 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

License and collaboration revenue

6 unchanged sentences

Other income (expense), net

Income (loss) before income tax (expense) benefit

Income tax expense (benefit)

Income (loss) before income tax benefit (expense)

Income tax benefit (expense)

Net income (loss)

8 unchanged sentences

Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net income (loss)

Other comprehensive income (loss):

Unrealized loss on marketable securities

Unrealized gain (loss) on marketable securities

Gain on translation of foreign operations

7 unchanged sentences

Income (Loss)

Three months ended June 30, 2024

Balance at March 31, 2024

Three months ended September 30, 2024

Balance at June 30, 2024

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

2 unchanged sentences

Net income (loss)

Balance at June 30, 2024

Balance at September 30, 2024

Comprehensive

1 unchanged sentence

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

Three months ended September 30, 2023

Balance at June 30, 2023

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

Issuance of common stock upon exercise of Warrants

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

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

Stock-based compensation expense

1 unchanged sentence

Net income (loss)

Balance at June 30, 2023

Balance at September 30, 2023

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

5 unchanged sentences

Income (Loss)

Six months ended June 30, 2024

Nine months ended September 30, 2024

Balance at December 31, 2023

5 unchanged sentences

Net income (loss)

Balance at June 30, 2024

Balance at September 30, 2024

Comprehensive

1 unchanged sentence

Income (Loss)

Six months ended June 30, 2023

Nine months ended September 30, 2023

Balance at December 31, 2022

1 unchanged sentence

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

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

Issuance of common stock upon exercise of Warrants

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

3 unchanged sentences

Net income (loss)

Balance at June 30, 2023

Balance at September 30, 2023

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

2 unchanged sentences

(In thousands)

Six Months Ended

Nine Months Ended

September 30,

Cash Flows from Operating Activities

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Cash Flows from Financing Activities

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

Proceeds from issuance of common stock upon exercise of Warrants

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

3 unchanged sentences

Net cash provided by financing activities

Net increase in cash, cash equivalents and restricted cash

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

Cash, cash equivalents and restricted cash, beginning of period

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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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Protagonist Therapeutics, Inc.

(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 stages of clinical development, both derived from the Company’s proprietary technology platform.

(the “Company”) is a late-stage development biopharmaceutical company with two peptide-based new chemical entities:

rusfertide and JNJ-2113.

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

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

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

Rusfertide, a mimetic of the natural hormone hepcidin, is in Phase 3 development for the rare blood disorder polycythemia vera (“PV”).

Rusfertide is being co-developed and co-commercialized with Takeda Pharmaceuticals USA, Inc.

(“Takeda”) pursuant to a worldwide collaboration and license agreement entered into in 2024 (the “Takeda Collaboration Agreement”), with the Company remaining primarily responsible for development through Phase 3 and the New Drug Application (“NDA”) filing.

JNJ-2113 is an oral Interleukin-23 receptor (“IL-23R”) antagonist licensed to J&J Innovative Medicines (“JNJ”), formerly Janssen Biotech, and is in Phase 3 development for psoriasis and nearing completion of Phase 2b development for ulcerative colitis (“UC”).

Following JNJ-2113’s joint discovery by the Company and JNJ scientists pursuant to the companies’ IL-23R collaboration, the Company was primarily responsible for the development of JNJ-2113 through Phase 1, with JNJ assuming responsibility for development in Phase 2 and beyond.

The Company also has a number of pre-clinical stage oral discovery programs addressing validated targets, including IL-17, hepcidin mimetic and anti-obesity programs.

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

Operating Segments

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

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

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.

As of September 30, 2024, the Company had cash, cash equivalents and marketable securities of $ 583.3 million.

The Company has incurred cumulative net losses from inception through September 30, 2024 of $ 472.2 million.

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

The Company may incur additional losses in the future and may need to raise additional capital to continue to execute its long-range business plan.

The Company may incur additional losses in the future as it continues the development of rusfertide through Phase 3 development and a potential NDA filing and invests in its pre-clinical discovery programs and may need to raise additional capital to continue to execute its long-range business plan.

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.

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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 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.

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 September 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.

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 and nine months ended September 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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Cash as reported in the condensed consolidated statements of cash flows consisted of (in thousands):

September 30,

Cash and cash equivalents

8 unchanged sentences

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.

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.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

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.

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.

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

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

Recently Adopted Accounting Pronouncements

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

In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No.

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

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

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

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

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

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

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

The Company adopted ASU 2020-06 effective January 1, 2024.

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 June 30, 2024

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

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

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

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

ASU 2023-07 requires all public entities, including public entities with a single reportable segment, to provide one or more measures of segment profit or loss used by the chief operating decision maker to allocate resources and assess performance.

Additionally, the guidance requires disclosures of significant segment expenses and other segment items as well as incremental qualitative disclosures.

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.

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ASU 2023-09 is effective for the Company 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 flows .

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

In November 2024, the FASB issued Accounting Standards Update No.

2024-03 Income Statement – Reporting Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40):

Disaggregation of Income Statement Expenses (“ASU 2024-03”), which requires detailed disclosures about specified categories of expenses (including employee compensation, depreciation, and amortization) included in certain expense captions presented on the face of the income statement.

ASU 2024-03 is effective for the Company or fiscal years beginning on January 1, 2027, and for interim periods within fiscal years beginning om January 1, 2028.

Early adoption is permitted.

The guidance may be applied either (1) prospectively to financial statements issued for reporting periods after the effective date of ASU 2024-03 or (2) retrospectively to all prior periods presented in the financial statements.

The Company does not expect the adoption of this guidance to have a material effect on its consolidated financial statements and continues to evaluate disclosure presentation alternatives.

License and Collaboration Agreements

Takeda Collaboration Agreement

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

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

In January 2024, the Company entered into the Takeda Collaboration Agreement, which became effective in March 2024.

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 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.

The Company and Takeda share the 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 PV as well as associated U.S.

regulatory activities;

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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.

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.

The Company received a one-time, non-refundable upfront payment of $ 300.0 million 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.

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Takeda will book sales of the Licensed Products globally.

The Company has the right to opt-out entirely of profit- and loss-sharing in the Profit-Share Territory for rusfertide and all other Licensed Products (the “Full Opt-out Right”) (i) during the 90-day period beginning 120 days after filing of a New Drug Application (“NDA”) with the U.S.

Food and Drug Administration (“FDA”) for rusfertide for polycythemia vera (“PV”) (the “Initial Opt-out Period”);

Food and Drug Administration (“FDA”) for rusfertide for PV (the “Initial Opt-out Period”);

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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and (ii) an additional $ 200 million payment following FDA approval of the NDA for rusfertide for PV (together, the “Opt-out Payment”).

If the Company exercises an Opt-out Right, Takeda has agreed to pay the Company royalties of 14 % to 29 % on worldwide net sales of Licensed Products with respect to which the Company has exercised an Opt-out Right.

If the Company exercises an Opt-out Right, Takeda has agreed to pay the Company royalties of 14 % to 29 % on worldwide net sales of the Licensed Products with respect to which the Company has exercised an Opt-out Right.

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

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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.

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

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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 license was determined based on 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.

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

The Company recognized $ 9.7 million of revenue allocated to development services with respect to the period from the effective date of the contract through September 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

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.

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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”).

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.

On July 27, 2021, the Company entered into an Amended and Restated License and Collaboration Agreement with 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”).

The Company has earned a total of $ 172.5 million in non-refundable payments from JNJ from inception in 2017 through September 30, 2024.

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 indications.

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● $ 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.

The Company completed its performance obligation under the JNJ License and Collaboration Agreement as of June 30, 2022.

Pursuant to the agreement, the Company is eligible to receive future sales milestone payments and tiered royalties on net product sales at percentages ranging from 6 % to 10 %.

Revenue Recognition

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.

For the three months ended September 30, 2024, the Company recognized license and collaboration revenue of $ 4.7 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 nine months ended September 30, 2024, the Company recognized license and collaboration revenue of $ 263.8 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 $ 9.7 million for development services provided by the Company during the period based on the cost-based input method.

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

The remaining unrecognized transaction price amount of $ 36.2 million related to the Takeda Collaboration Agreement was recorded as deferred revenue on the Company’s condensed consolidated balance sheet as of September 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).

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.

For the three months ended September 30, 2024, the Company recognized $ 4.7 million of revenue that was included in the deferred revenue liability balance at the beginning of the period.

For the nine months ended September 30, 2024 and the three and nine months ended September 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):

June 30, 2024

September 30, 2024

Money market funds

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

June 30, 2024

September 30, 2024

Gross Unrealized

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Cash equivalents

Marketable securities

Marketable securities - current

Total cash equivalents and marketable securities

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 .

Current marketable securities of $ 337.6 million and $ 154.9 million held as of September 30, 2024 and December 31, 2023, respectively, had contractual maturities of less than one year .

Noncurrent marketable securities of $ 114.6 million held as of September 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 June 30, 2024.

Balance Sheet Components

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

September 30,

Prepaid clinical and research related expenses

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Property and equipment, net consisted of the following (in thousands):

September 30,

Laboratory equipment

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Accrued expenses and other payables consisted of the following (in thousands):

September 30,

Accrued clinical and research related expenses

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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 Company began occupying 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.

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

September 30,

Operating Leases:

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Operating lease cost

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

Six Months Ended

Nine Months Ended

September 30,

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):

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

Year Ending December 31:

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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 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.

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

During the nine months ended September 30, 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 September 30, 2023.

Pre-Funded Warrants

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

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

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

The 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 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.

No Pre-Funded warrants were exercised during the three months ended September 30, 2024.

During the nine months ended September 30, 2024, Pre-Funded Warrants to purchase 84,992 shares were net exercised, resulting in the issuance of 84,989 shares of common stock.

No Pre-Funded Warrants were exercised during the three and nine months ended September 2023.

As of September 30, 2024, Pre-Funded Warrants to purchase 2,620,260 shares were outstanding.

The Company recorded an income tax benefit of $ 0.4 million and income tax expense of $ 2.2 million for the three and nine months ended September 30, 2024, respectively.

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

The difference in tax expense as compared to the prior year was primarily due to taxable income for the nine months ended September 30, 2024 resulting from the recognition of revenue in connection with the Takeda Collaboration Agreement.

The tax provision for the three and nine months ended September 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 nine months ended September 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.

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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 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 nine months ended September 30, 2024 because the exercise price was negligible, and they were 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.

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Three Months Ended

Six Months Ended

Nine Months Ended

September 30,

Net income (loss)

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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.

Approximately 9.2 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 September 30, 2024 due to the Company’s net loss for the period.

Approximately 3.2 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 nine months ended September 30, 2024 because their effect was anti-dilutive.

Approximately 8.9 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 nine months ended September 30, 2023 due to the Company’s net losses 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