What changed in this filing

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Item 2. Management’s Discussion and Analysis

2024-11-07 compared with 2024-08-06 · 103 added, 88 removed, 294 unchanged (39% of the section changed)

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in the United States and other jurisdictions.

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

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

Our clinical programs fall into two broad categories of diseases:

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

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

Our Product Pipeline

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

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

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

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

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

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

Under the terms of the agreement, we received a one-time, non-refundable upfront payment of $300.0 million in April 2024.

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

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The trial’s primary co-endpoints are PASI-90 and IGA score of 0 or 1;

● ICONIC ADVANCE 2 (NCT06220604) – A 543-patient Phase 3 trial similarly designed to ICONIC ADVANCE 1;

● ICONIC-ADVANCE 2 (NCT06220604) – A 731-patient Phase 3 trial similarly designed to ICONIC ADVANCE 1 in participants with moderate-to-severe plaque psoriasis;

● Pustular/Erythrodermic Psoriasis (NCT06295692) – A 19-patient open label Phase 3 trial to evaluate the effectiveness of JN-2113 in participants with pustular or erythrodermic psoriasis;

● ANTHEM-UC (NCT06049017) – A 252-patient Phase 2b randomized, controlled trial to evaluate the safety and effectiveness of JNJ-2113 compared with placebo in participants with moderate-to-severely active ulcerative colitis (“UC”).

Topline results for the ICONIC-LEAD and ICONIC-TOTAL trials are expected in the fourth quarter of 2024.

Topline results for the ANTHEM trial are expected in the first quarter of 2025.

Topline results for the ICONIC-ADVANCE 1, ICONIC-ADVANCE 2, and pustular/erythrodermic psoriasis trials are expected the second quarter of 2025.

All of the trials in the ICONIC program will use the 200 mg q.d.

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

Other Phase 2 trials of JNJ-2113 include the SUMMIT trial for the treatment of moderate-to-severe plaque psoriasis and FRONTIER 2, a long-term extension study, both of which were completed by JNJ in 2023.

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

Phase 2 trials of JNJ-2113 include the SUMMIT trial for the treatment of moderate-to-severe plaque psoriasis and FRONTIER 2, a long-term extension study, both of which were completed by JNJ in 2023.

At JNJ’s Enterprise Business Review in December 2023, JNJ highlighted JNJ-2113 as a potential first- and best-in class targeted oral IL-23 peptide antagonist with potential across multiple indications, including plaque psoriasis, psoriatic arthritis and inflammatory bowel disease, with potential peak year sales projection of $5.0 billion plus.

JNJ IL-23 monoclonal antibody drugs Stelara and Tremfya generated approximately $14.0 billion in revenues in 2023.

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

In August 2024, positive pre-clinical and clinical pharmacokinetic, pharmacodynamic and safety data for JNJ-2113 was published in the journal Scientific Reports.

Three company-sponsored poster presentations and one company-sponsored oral presentation were delivered at the 2024 European Academy of Dermatology and Venereology Congress in September 2024.

Data from FRONTIER 1 and FRONTIER 2 continue to demonstrate that JNJ-2113 has promising efficacy and safety through one year of treatment in patients with moderate-to-severe plaque psoriasis.

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

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We earned a $10.0 million milestone payment upon the dosing of the third patient in the ANTHEM Phase 2b trial in UC in December 2023, which we received in January 2024.

To date, we have earned $172.5 million in nonrefundable payments from JNJ.

To date, we have earned $172.5 million in non-refundable payments from JNJ.

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

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Our discovery pipeline has strategically focused on i) hematology and blood disorders, ii) I&I diseases and iii) metabolic diseases, including obesity.

We have a pre-clinical stage program to identify an orally active hepcidin mimetic or small molecule ferropotin blocker, which we believe to be complementary to the injectable rusfertide for offering the best treatment options for PV and other potential erythropoietic and iron imbalance disorders.

In January 2024, we announced a new oral Interleukin-17 (“IL-17”) peptide antagonist program targeting three IL-17 dimers (IL-17 AA, AF and FF) which may offer potential treatment options for hidradenitis suppurativa, spondyloarthritis, plaque psoriasis and psoriatic arthritis.

We expect to nominate a development candidate ready for Investigational New Drug (“IND”) enabling studies by the end of 2024.

We recently announced an oral peptide-based program for obesity and expect progression towards a development candidate by mid-2025.

We expect to nominate a development candidate ready for Investigational New Drug (“IND”) enabling studies, or foreign equivalents, by the end of 2024.

We also have an oral peptide-based program for obesity and expect progression towards a development candidate during the first half of 2025.

Risks and Uncertainties

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“Risk Factors” herein.

We have incurred cumulative net losses from inception through June 30, 2024 of $439.0 million.

We have incurred cumulative net losses from inception through September 30, 2024 of $472.2 million.

Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations.

We expect to continue to incur significant research and development expenses and other expenses related to our ongoing operations, product development, and pre-commercialization activities.

We expect to continue to incur significant research and development expenses and other expenses related to our ongoing operations, product development, pre-clinical discovery programs and pre-commercialization activities.

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

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

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

Management’s judgment is required in determining the level of effort required under an

arrangement and the period over which we expect to complete our performance obligations.

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

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

There have been no other material changes to our critical accounting policies during the six months ended June 30, 2024, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report for the year ended December 31, 2023 filed with the SEC on February 27, 2024.

There have been no other material changes to our critical accounting policies during the nine months ended September 30, 2024, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report for the year ended December 31, 2023 filed with the SEC on February 27, 2024.

Components of Our Results of Operations

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As such, we do not provide financial information regarding the costs incurred for early-stage pre-clinical and drug discovery programs on a program-specific basis prior to the clinical development stage.

We expect our research and development expenses to increase in the near term as compared to the prior year period as we continue to focus our resources on (i) progressing our rusfertide program into later stage clinical trials and preparing for commercialization and (ii) advancing our pre-clinical and drug discovery research programs, including our expected nomination of a development candidate from our discovery platform for IND-enabling studies by the end of 2024.

We expect our research and development expenses to increase in the near term as compared to the prior year period as we continue to focus our resources on (i) progressing our rusfertide program in later stage clinical trials and preparing for regulatory filings and commercialization and (ii) advancing our pre-clinical and drug discovery research programs, including our expected nomination of a development candidate from our discovery platform for IND-enabling studies, or foreign equivalents, by the end of 2024.

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

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Results of Operations

Comparison of the Three Months Ended June 30, 2024 and 2023

Comparison of the Three Months Ended September 30, 2024 and 2023

Three Months Ended

September 30,

(Dollars in thousands)

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*Percentage not meaningful.

(1) Includes $5.1 million and $4.8 million of non-cash stock-based compensation expense for the three months ended June 30, 2024 and 2023, respectively.

(2) Includes $3.8 million and $3.5 million of non-cash stock-based compensation expense for the three months ended June 30, 2024 and 2023, respectively.

(1) Includes $5.2 million and $3.8 million of non-cash stock-based compensation expense for the three months ended September 30, 2024 and 2023, respectively.

(2) Includes $5.0 million and $3.0 million of non-cash stock-based compensation expense for the three months ended September 30, 2024 and 2023, respectively.

License and Collaboration Revenue

License and collaboration revenue increased from $0 for the three months ended June 30, 2023 to $4.2 million for the three months ended June 30, 2024.

Revenue for the three months ended June 30, 2024 included $4.2 million of the $300.0 million transaction price for the Takeda Collaboration Agreement allocated to development services provided by us during the period based on the cost-based input method.

For the three months ended June 30, 2023, we did not recognize any license and collaboration revenue.

License and collaboration revenue increased from $0 for the three months ended September 30, 2023 to $4.7 million for the three months ended September 30, 2024, and consisted of $4.7 million of the $300.0 million transaction price for the Takeda Collaboration Agreement allocated to development services provided by us during the period based on the cost-based input method.

For the three months ended September 30, 2023, we did not recognize any license and collaboration revenue.

Research and Development Expenses

Three Months Ended

September 30,

(Dollars in thousands)

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Total research and development expenses

Research and development expenses increased $0.3 million, or 1%, from $33.2 million for the three months ended June 30, 2023 to $33.5 million for the three months ended June 30, 2024.

The increase was primarily due to (i) an increase of $4.5 million in pre-clinical and drug discovery research program expense partially offset by (ii) a decrease of $4.0 million in rusfertide clinical and development expense due primarily to decreases in contract manufacturing expenses and (iii) a decrease of $0.2 million in expenses for the PN-943 program as further development work was de-prioritized in 2023.

We expect to nominate a development candidate from our discovery platform ready for IND-enabling studies by the end of 2024.

We had 97 and 81 full-time equivalent research and development employees as of June 30, 2024 and 2023, respectively.

Research and development personnel-related expenses for the three months ended June 30, 2024 increased by $1.3 million as compared to the three months ended June 30, 2023, including increases of $1.0 million in personnel-related expenses and $0.3 million in stock-based compensation expense.

Research and development expenses increased $5.3 million, or 17%, from $30.7 million for the three months ended September 30, 2023 to $36.0 million for the three months ended September 30, 2024.

The increase was primarily

due to (i) an increase of $4.1 million in pre-clinical and drug discovery research program expense and ii) an increase of $1.4 million rusfertide clinical and development expense, partially offset by (iii) a decrease of $0.3 million in expenses for the PN-943 program as further development work was de-prioritized in 2023.

We expect to nominate a development candidate from our discovery platform ready for IND-enabling studies, or foreign equivalents, by the end of 2024.

We had 98 and 84 full-time equivalent research and development employees as of September 30, 2024 and 2023, respectively.

Research and development personnel-related expenses for the three months ended September 30, 2024 increased by $3.0 million as compared to the three months ended September 30, 2023, including increases of $1.5 million in personnel-related expenses and $1.5 million in stock-based compensation expense.

General and Administrative Expenses

General and administrative expenses increased $0.3 million, or 3%, from $9.1 million for the three months ended June 30, 2023 to $9.4 million for the three months ended June 30, 2024.

This increase was primarily due to a $0.7 million increase in personnel-related expenses and a $0.3 million increase in stock-based compensation expense, partially offset by a $0.7 million decrease in market research, legal and other general expenses.

We had 28 and 25 full-time equivalent general and administrative employees as of June 30, 2024 and 2023, respectively.

General and administrative expenses increased $2.5 million, or 33%, from $7.7 million for the three months ended September 30, 2023 to $10.2 million for the three months ended September 30, 2024.

This increase was primarily due to a $2.0 million increase in stock-based compensation expense and a $0.7 million increase in personnel-related expenses.

We had 28 and 27 full-time equivalent general and administrative employees as of September 30, 2024 and 2023, respectively.

Interest Income

Interest income increased $3.5 million, or 89%, from $3.9 million for the three months ended June 30, 2023 to $7.4 million for the three months ended June 30, 2024.

This increase was due primarily to higher invested balances, including the $300.0 million upfront payment received under the Takeda Collaboration Agreement in April 2024.

Interest income increased $3.4 million, or 81%, from $4.3 million for the three months ended September 30, 2023 to $7.7 million for the three months ended September 30, 2024.

This increase was primarily due to higher invested balances, including the $300.0 million one-time, non-refundable upfront payment received under the Takeda Collaboration Agreement in April 2024.

Income Tax Benefit

Income tax benefit was $0.7 million and $0 for the three months ended June 30, 2024 and 2023, respectively.

Income tax benefit for the three months ended June 30, 2024 was a result of our net loss position for the period.

The effective tax rate was 2.16% and 0% for the three months ended June 30, 2024 and 2023, respectively.

Comparison of the Six Months Ended June 30, 2024 and 2023

Six Months Ended

Income tax benefit was $0.4 million and $0 for the three months ended September 30, 2024 and 2023, respectively.

Income tax benefit for the three months ended September 30, 2024 was a result of our net loss position for the period.

The effective tax rate was 1.25% and 0% for the three months ended September 30, 2024 and 2023, respectively.

Comparison of the Nine Months Ended September 30, 2024 and 2023

Nine Months Ended

September 30,

(Dollars in thousands)

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*Percentage not meaningful.

(3) Includes $10.4 million and $9.4 million of non-cash stock-based compensation expense for the six months ended June 30, 2024 and 2023, respectively.

(4) Includes $7.9 million and $6.5 million of non-cash stock-based compensation expense for the six months ended June 30, 2024 and 2023, respectively.

(1) Includes $15.6 million and $13.2 million of non-cash stock-based compensation expense for the nine months ended September 30, 2024 and 2023, respectively.

(2) Includes $12.9 million and $9.5 million of non-cash stock-based compensation expense for the nine months ended September 30, 2024 and 2023, respectively.

License and Collaboration Revenue

License and collaboration revenue increased from $0 for the six months ended June 30, 2023 to $259.1 million for the six months ended June 30, 2024.

The Takeda Collaboration Agreement included a nonrefundable upfront payment of $300.0 million, of which we recognized $255.0 million during the three months ended March 31, 2024.

The remaining $45.0 million was recorded as deferred revenue to be recognized over time as the Company satisfies its performance obligation to complete the ongoing Phase 3 VERIFY trial for rusfertide.

License and collaboration revenue for the six months ended June 30, 2024 of $259.1 million included $254.1 million of the $300.0 million upfront cash payment allocated to the delivery of the rusfertide license to Takeda upon effectiveness of the agreement in March 2024, and $5.0 million allocated to development services provided by us during the period based on the cost input method.

For the six months ended June 30, 2023, we did not recognize any license and collaboration revenue.

License and collaboration revenue increased from $0 for the nine months ended September 30, 2023 to $263.8 million for the nine months ended September 30, 2024.

The Takeda Collaboration Agreement included a one-time, non-refundable upfront payment of $300.0 million, of which we recognized $255.0 million during the three months ended March 31, 2024.

The remaining $45.0 million was recorded as deferred revenue to be recognized over time as we satisfy our performance obligation to complete the ongoing Phase 3 VERIFY trial for rusfertide.

License and collaboration revenue for the nine months ended September 30, 2024 of $263.8 million included $254.1 million of the $300.0 million upfront cash payment allocated to the delivery of the rusfertide license to Takeda upon effectiveness of the Takeda Collaboration Agreement in March 2024, and $9.7 million allocated to development services provided by us during the period based on the cost input method.

For the nine months ended September 30, 2023, we did not recognize any license and collaboration revenue.

Research and Development Expenses

Six Months Ended

Nine Months Ended

September 30,

(Dollars in thousands)

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Clinical and development expense — other

Preclinical and drug discovery research expense

Pre-clinical and drug discovery research expense

Total research and development expenses

Research and development expenses increased $6.7 million, or 11%, from $60.6 million for the six months ended June 30, 2023 to $67.3 million for the six months ended June 30, 2024.

The increase was primarily due to (i) an increase of $8.8 million in pre-clinical and drug discovery research program expense partially offset by (ii) a decrease of $1.1 million in rusfertide clinical and development expense due primarily to decreases in contract manufacturing expenses and (iii) a decrease of $1.1 million in expenses for the PN-943 program as further development work was de-prioritized in 2023.

We expect to nominate a development candidate from our discovery platform for IND-enabling studies by the end of 2024.

We had 97 and 81 full-time equivalent research and development employees as of June 30, 2024 and 2023, respectively.

Research and development personnel-related expenses for the six months ended June 30, 2024 increased by $3.9 million as compared to the six months ended June 30, 2023, including increases of $2.9 million in personnel-related expenses and $1.0 million in stock-based compensation expense.

Research and development expenses increased $12.0 million, or 13%, from $91.3 million for the nine months ended September 30, 2023 to $103.2 million for the nine months ended September 30, 2024.

The increase was primarily due to (i) an increase of $12.9 million in pre-clinical and drug discovery research program expense partially offset by (ii) a decrease of $1.4 million in expenses for the PN-943 program as further development work was de-prioritized in 2023.

We expect to nominate a development candidate from our discovery platform for IND-enabling studies, or foreign equivalents, by the end of 2024.

We had 98 and 84 full-time equivalent research and development employees as of September 30, 2024 and 2023, respectively.

Research and development personnel-related expenses for the nine months ended September 30, 2024 increased by $6.9 million as compared to the nine months ended September 30, 2023, including increases of $4.5 million in personnel-related expenses and $2.4 million in stock-based compensation expense.

General and Administrative Expenses

General and administrative expenses increased $6.6 million, or 37%, from $17.8 million for the six months ended June 30, 2023 to $24.4 million for the six months ended June 30, 2024.

This increase was primarily due to a $4.6 million increase in advisory and legal fees related to the Takeda Collaboration Agreement, a $1.6 million increase in personnel-related expenses and a $1.4 million increase in stock-based compensation expense, partially offset by a $1.0 million decrease in market research, consulting and outside services and other general expenses.

We had 28 and 25 full-time equivalent general and administrative employees as of June 30, 2024 and 2023, respectively.

General and administrative expenses increased $9.1 million, or 36%, from $25.4 million for the nine months ended September 30, 2023 to $34.5 million for the nine months ended September 30, 2024.

This increase was primarily due to a $4.6 million increase in advisory and legal fees related to the Takeda Collaboration Agreement, a $3.3 million increase in stock-based compensation expense and a $2.0 million increase in personnel-related expenses, partially offset by a $0.9 million decrease in market research, consulting and outside services and other general expenses.

We had 28 and 27 full-time equivalent general and administrative employees as of September 30, 2024 and 2023, respectively.

Interest Income

Interest income increased $5.4 million, or 84%, from $6.4 million for the six months ended June 30, 2023 to $11.8 million for the six months ended June 30, 2024.

This increase was due primarily to higher invested balances, including the $300.0 million upfront payment received under the Takeda Collaboration Agreement in April 2024.

Interest income increased $8.8 million, or 83%, from $10.6 million for the nine months ended September 30, 2023 to $19.5 million for the nine months ended September 30, 2024.

This increase was primarily due to higher invested balances, including the $300.0 million one-time, non-refundable upfront payment received under the Takeda Collaboration Agreement in April 2024.

Income Tax Expense

Income tax expense was $2.7 million and $0 for the six months ended June 30, 2024 and 2023, respectively.

Income tax expense for the six months ended June 30, 2024 was a result of taxable income from the recognition of revenue in connection with the Takeda Collaboration Agreement.

The effective tax rate was 1.48% and 0% for the six months ended June 30, 2024 and 2023, respectively.

Income tax expense was $2.2 million and $0 for the nine months ended September 30, 2024 and 2023, respectively.

Income tax expense for the nine months ended September 30, 2024 was a result of taxable income from the recognition of revenue in connection with the Takeda Collaboration Agreement.

The effective tax rate was 1.53% and 0% for the nine months ended September 30, 2024 and 2023, respectively.

Liquidity and Capital Resources

Sources of Liquidity

We had $595.4 million and $341.6 million in cash, cash equivalents and marketable securities at June 30, 2024 and December 31, 2023, respectively.

We had $583.3 million and $341.6 million in cash, cash equivalents and marketable securities as of September 30, 2024 and December 31, 2023, respectively.

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

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

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

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

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

There were no sales of our 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, we sold 1,749,199 shares of our common stock under the 2022 ATM Facility for net proceeds of $24.3 million, after deducting issuance costs.

There were no sales of our common stock under the 2022 ATM Facility during the three months ended September 30, 2023.

Pre-Funded Warrants

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

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

Subsequent to the execution of the agreements and prior to the expiration of the Warrants, all outstanding Warrants were exercised for gross proceeds of $34.4 million in exchange for 44,748 shares of our common stock and Pre-Funded Warrants to purchase 2,705,252 shares of common stock (subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Pre-Funded Warrants) with an exercise price of $0.001 per share.

described in the Pre-Funded Warrants) with an exercise price of $0.001 per share.

The Pre-Funded Warrants will expire upon the day they are exercised in full.

The Pre-Funded Warrants are exercisable at any time prior to expiration except that the Pre-Funded Warrants cannot be exercised by the Investors if, after giving effect thereto, the Investors would

beneficially own more than 9.99% of our common stock, subject to certain exceptions.

The Pre-Funded Warrants are exercisable at any time prior to expiration except that the Pre-Funded Warrants cannot be exercised by the Investors if, after giving effect thereto, the Investors would beneficially own more than 9.99% of our common stock, subject to certain exceptions.

The common stock and Pre-Funded Warrants were recorded as a credit to additional paid-in capital.

In accordance with Accounting Standards Codification Topic 260, Earnings Per Share , outstanding Pre-Funded Warrants are included in the computation of basic net loss per share because the exercise price is negligible, and they are fully vested and exercisable after the original issuance date.

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 were outstanding.

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 were outstanding.

Receipt of Payments Under Collaboration Agreements

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

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

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

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We earned a $10.0 million milestone payment upon the dosing of the third patient in the ANTHEM Phase 2b trial in UC in December 2023, which we received in January 2024.

We have earned a total of $172.5 million in non-refundable payments from JNJ from the inception of the JNJ License and Collaboration Agreement in 2017 through June 30, 2024.

We have earned a total of $172.5 million in non-refundable payments from JNJ from the inception of the JNJ License and Collaboration Agreement in 2017 through September 30, 2024.

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

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Capital Requirements

As of June 30, 2024, we had $595.4 million of cash, cash equivalents and marketable securities and an accumulated deficit of $439.0 million.

Our capital expenditures were $0.3 million and $0.6 million for the six months ended June 30, 2024 and the year ended December 31, 2023, respectively.

As of September 30, 2024, we had $583.3 million in cash, cash equivalents and marketable securities and an accumulated deficit of $472.2 million.

Our capital expenditures were $1.0 million and $0.6 million for the nine months ended September 30, 2024 and the year ended December 31, 2023, respectively.

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

We expect that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operations for at

least the next twelve months from the date of this Quarterly Report based on current operating plans and financial forecasts.

We expect that our existing cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least the next twelve months from the date of this Quarterly Report based on current operating plans and financial forecasts.

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

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

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

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

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

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

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

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

● the selling and marketing costs associated with rusfertide, which is being co-developed and co-commercialized with Takeda under the Takeda Collaboration Agreement, and any other product candidates we may identify and develop, including the costs and timing of expanding our sales and marketing capabilities;

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

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If we do raise additional capital through public or private equity offerings or convertible debt securities, the ownership interest of our existing stockholders could be diluted, and the terms of these securities could include liquidation or other preferences that could adversely affect our stockholders’ rights.

If we raise additional capital through debt financing, we could be subject to covenants limiting or restricting our ability to take

specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise additional capital through debt financing, we could be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to fully estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated product development programs.

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The following table summarizes our cash flows for the periods indicated:

Six Months Ended

Nine Months Ended

September 30,

Condensed Consolidated Statements of Cash Flows Data:

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Stock-based compensation

Deferred revenue

Cash Provided by (Used in) Operating Activities

Cash provided by operating activities for the six months ended June 30, 2024 was $241.2 million and consisted primarily of our net income of $176.7 million, $18.3 million of stock-based compensation and a change of $47.7 million in net operating assets and liabilities.

The change in net operating assets and liabilities was driven primarily by a change of $40.9 million in deferred revenue related to the Takeda Collaboration Agreement and a change of $10.0 million in receivable from collaboration partner related to a milestone payment under the Janssen License and Collaboration Agreement, which we received in January 2024.

The $301.8 million increase in cash provided by operating activities during the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily due to the receipt of a $300.0 million upfront payment which we earned upon the effectiveness of the Takeda Collaboration Agreement.

Cash provided by operating activities for the nine months ended September 30, 2024 was $213.3 million and consisted primarily of our net income of $143.5 million, $28.5 million of stock-based compensation and a change of $45.1 million in net operating assets and liabilities.

The change in net operating assets and liabilities was driven primarily by a change of $36.2 million in deferred revenue related to the Takeda Collaboration Agreement and a change of $10.0 million in receivable from collaboration partner related to a milestone payment under the Janssen License and Collaboration Agreement.

The $300.5 million increase in cash provided by operating activities during the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily due to the receipt of a $300.0 million one-time, non-refundable upfront payment related to the Takeda Collaboration Agreement.

Cash (Used in) Provided by Investing Activities

Cash used in investing activities for the six months ended June 30, 2024 was $82.0 million and consisted primarily of purchases of marketable securities of $240.6 million, partially offset by proceeds from maturities of marketable securities of $158.8 million.

The $117.6 million increase in cash used in investing activities for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily related to the investment of a portion of the $300.0 million upfront payment we earned upon the effectiveness of the Takeda Collaboration Agreement.

Cash used in investing activities for the nine months ended September 30, 2024 was $290.8 million and consisted primarily of purchases of marketable securities of $507.3 million, partially offset by proceeds from maturities of marketable securities of $217.6 million.

The $312.8 million increase in cash used in investing activities for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily related to the investment of a portion of the proceeds related to the Takeda Collaboration Agreement.

Cash Provided by Financing Activities

Cash provided by financing activities for the six months ended June 30, 2024 was $9.8 million and consisted primarily of net cash proceeds of $10.4 million from the issuance of common stock upon exercises of stock options and purchases of stock under our employee stock purchase plan (“ESPP”), partially offset by $0.6 million in tax withholding payments related to net settlement of restricted stock units.

The $124.9 million decrease in cash provided by financing activities for the six months ended June 30, 2024, as compared to the six months ended June 30, 2023, was primarily due to $107.9 million of proceeds received from a public offering of our common stock in April 2023 and a $24.3 million decrease in ATM sales of our common stock, partially offset by a $7.1 million increase in proceeds from the issuance of common stock upon exercise of options and purchases of common stock under the ESPP.

Cash provided by financing activities for the nine months ended September 30, 2024 was $21.8 million and consisted of net cash proceeds of $22.4 million from the issuance of common stock upon exercises of stock options and purchases of stock under our employee stock purchase plan (“ESPP”), partially offset by $0.6 million in tax withholding payments related to net settlement of restricted stock units.

The $148.1 million decrease in cash provided by financing activities for the nine months ended September 30, 2024, as compared to the nine months ended September 30, 2023, was primarily due to $107.9 million of proceeds received from a public offering of our common

stock in April 2023 and a $24.3 million decrease in ATM sales of our common stock, partially offset by a $18.2 million increase in proceeds from the issuance of common stock upon exercise of options and purchases of common stock under the ESPP.

Contractual Obligations and Other Commitments

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See Note 7 to the condensed consolidated financial statements elsewhere in this report for additional information.

Except as described above, during the six months ended June 30, 2024 there were no other material changes to our material cash requirements, including commitments for capital expenditures, described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 27, 2024.

Except as described above, during the nine months ended September 30, 2024 there were no other material changes to our material cash requirements, including commitments for capital expenditures, described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 27, 2024.

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

What changed 10-Q

Item 2. Management’s Discussion and Analysis