What changed in this filing

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Item 1. Financial Statements

2025-05-06 compared with 2024-11-07 · 167 added, 248 removed, 282 unchanged (60% of the section changed)

3 unchanged sentences

(In thousands, except share and per share data)

September 30,

Current assets:

2 unchanged sentences

Receivable from collaboration partner

Contract asset

Prepaid expenses and other current assets

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Accounts payable

Payable to collaboration partner

Accrued expenses and other payables

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no shares issued and outstanding

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

Common stock, $ 0.00001 par value, 180,000,000 shares authorized;

61,928,760 and 61,035,139 shares issued and outstanding as of March 31, 2025 and December 31, 2024, respectively

Additional paid-in capital

8 unchanged sentences

Three Months Ended

Nine Months Ended

September 30,

License and collaboration revenue

3 unchanged sentences

Total operating expenses

Income (loss) from operations

(Loss) income from operations

Interest income

Other income (expense), net

Income (loss) before income tax benefit (expense)

Income tax benefit (expense)

Net income (loss)

Net income (loss) per share, basic

Net income (loss) per share, diluted

Weighted-average shares used to compute net income (loss) per share, basic

Weighted-average shares used to compute net income (loss) per share, diluted

(Loss) income before income tax expense

Income tax expense

Net (loss) income

Net (loss) income per share, basic

Net (loss) income per share, diluted

Weighted-average shares used to compute net (loss) income per share, basic

Weighted-average shares used to compute net (loss) income per share, diluted

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

PROTAGONIST THERAPEUTICS, INC.

Condensed Consolidated Statements of Comprehensive Income (Loss )

Condensed Consolidated Statements of Comprehensive (Loss ) Income

(In thousands)

Three Months Ended

Nine Months Ended

September 30,

Net income (loss)

Other comprehensive income (loss):

Net (loss) income

Other comprehensive (loss) income:

Unrealized gain (loss) on marketable securities

Gain on translation of foreign operations

Comprehensive income (loss)

Comprehensive (loss) income

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

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Stockholders’

Income (Loss)

Three months ended September 30, 2024

Balance at June 30, 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 September 30, 2024

Comprehensive

Stockholders’

Income (Loss)

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

Stock-based compensation expense

Other comprehensive income (loss)

Net income (loss)

Balance at September 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)

Nine months ended September 30, 2024

(Loss) Income

Three months ended March 31, 2025

Balance at December 31, 2024

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

Issuance of common stock upon exercise of Pre-Funded Warrants

Stock-based compensation expense

Other comprehensive income (loss)

Net income (loss)

Balance at September 30, 2024

Other comprehensive income

Balance at March 31, 2025

Comprehensive

Stockholders’

Income (Loss)

Nine months ended September 30, 2023

(Loss) Income

Three months ended March 31, 2024

Balance at December 31, 2023

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

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

Issuance of common stock upon exercise of Pre-Funded Warrants

Stock-based compensation expense

Other comprehensive income (loss)

Net income (loss)

Balance at September 30, 2023

Other comprehensive loss

Balance at March 31, 2024

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

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(In thousands)

Nine Months Ended

September 30,

Three Months Ended

Cash Flows from Operating Activities

Net income (loss)

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

Net (loss) income

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

Stock-based compensation

Operating lease right-of-use asset amortization

Non-cash lease expense

Accretion of discount on marketable securities

Net realized loss on sale of marketable securities

Changes in operating assets and liabilities:

Receivable from collaboration partner

Contract asset

Prepaid expenses and other assets

Accounts payable

Payable to collaboration partner

Accrued expenses and other payables

Income taxes payable

Deferred revenue

Income taxes payable

Operating lease liability

3 unchanged sentences

Proceeds from maturities of marketable securities

Proceeds from sale of marketable securities

Purchases of property and equipment

1 unchanged sentence

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

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

3 unchanged sentences

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

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Protagonist Therapeutics, Inc.

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

rusfertide and JNJ-2113.

(the “Company”) is a discovery through late-stage development biopharmaceutical company focused on peptide therapeutics.

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

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

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.

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

Two novel peptides derived from the Company’s proprietary discovery technology platform, icotrokinra (formerly known as JNJ-2113) and rusfertide, are currently in advanced Phase 3 clinical development.

Icotrokinra is a first-in-class investigational targeted oral peptide that selectively blocks the Interleukin-23 receptor (“IL-23R”) and is licensed to J&J Innovative Medicines (“JNJ”), formerly Janssen Biotech, Inc.

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

Rusfertide, an injectable mimetic of the natural hormone hepcidin, is currently in development for treatment of the rare blood disorder polycythemia vera (“PV”).

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

(“Takeda”), with the Company remaining primarily responsible for clinical development through a potential New Drug Application (“NDA”) filing.

The Company also has a number of pre-clinical stage oral drug discovery programs addressing biologically and commercially validated targets, including the IL-17 oral peptide antagonist PN-881, an oral hepcidin program and an oral anti-obesity program.

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.

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 (“CODM”), in deciding how to allocate resources and assessing performance.

The Company operates and manages its business as one operating segment.

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

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 Chief Executive Officer reviews financial information on an aggregate basis for the purpose of allocating and evaluating financial performance.

See Note 10 to these condensed consolidated financial statements for the Company’s interim disclosures related to the adoption of ASU 2023-07 Segment Reporting (Topic 280) Improvements to Reporting Segment Disclosures for interim periods beginning on January 1, 2025.

As of March 31, 2025, the Company had cash, cash equivalents and marketable securities of $ 697.9 million.

The Company has incurred an accumulated deficit from inception through March 31, 2025 of $ 352.2 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 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.

The Company may incur additional losses in the future as it continues rusfertide Phase 3 development activities through 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 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.

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, 2025 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, 2025 are not necessarily indicative of the results to be expected for the year ending December 31, 2025 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, 2024 included in the Company’s Annual Report on Form 10-K, filed with the SEC on February 21, 2025.

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Actual results may differ materially from these estimates.

The Company has taken into consideration any known impacts in its accounting estimates to date and is not aware of any additional specific events or circumstances that would require any additional updates to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the filing date of this Quarterly Report on Form 10-Q.

There has been uncertainty and disruption in the global economy and financial markets due to a number of factors, including geopolitical instability, inflationary pressures, high interest rates, a recessionary environment, domestic and global monetary and fiscal policy, changes in trade policy, including tariffs or other trade restrictions or the threat of such actions, banking and other financial institution instability and other factors.

Our business may also be impacted by changes or disruptions at the U.S.

Food and Drug Administration (“FDA”) and other government agencies.

The Company has taken into consideration any known impacts to its accounting estimates to date and is not aware of any additional specific events or circumstances that would require any additional updates to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the filing date of this Quarterly Report on Form 10-Q.

These estimates may change as new events occur and additional information is obtained.

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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

2 unchanged sentences

Stock-Based Compensation Expense

The Company has granted stock options, restricted stock units (“RSUs”) and performance share units (“PSUs”).

The Company has granted stock options, restricted stock units (“RSUs”) and performance stock units (“PSUs”).

Stock-based compensation expense associated with stock options is based on the estimated grant date fair value using the Black-Scholes valuation model, which requires the use of subjective assumptions related to expected stock price volatility, option term, risk-free interest rate and dividend yield.

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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.

The Company recognized $ 1.8 million of stock-based compensation expense related to PSUs for the three months ended March 31, 2025.

The Company recognizes forfeitures of stock-based awards as they occur.

1 unchanged sentence

Three Months Ended

Nine Months Ended

September 30,

Research and development

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Significant Accounting Policies

Collaborative Arrangements

The Company analyzes its collaborative arrangements to assess whether such arrangements involve joint operating activities performed by parties that are both active participants in the activities and exposed to significant risks and rewards, and therefore are within the scope of Accounting Standards Codification Topic 808 - Collaborative Arrangements (“Topic 808”).

For collaborative arrangements that contain multiple elements, the Company determines which units of account are deemed to be within the scope of Topic 808 and which units of account are more reflective of a vendor-customer relationship, and therefore are within the scope of Accounting Standards Codification Topic 606 – Revenue from Contracts with Customers (“Topic 606”).

For units of account that are accounted for pursuant to Topic 808, an appropriate recognition method is determined and applied consistently, either by analogy to appropriate accounting literature or by applying a reasonable accounting policy election.

For collaborative arrangements that are within the scope of Topic 808, the Company evaluates the income statement classification for presentation of amounts due to or owed from other participants associated with multiple units of account in a collaborative arrangement based on the nature of each activity.

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 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 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 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 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 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.

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.

There have been no material changes to the Company’s significant accounting policies during the three months ended March 31, 2025, 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, 2024.

Recently Issued Accounting Pronouncements Not Yet Adopted as of March 31, 2025

In December 2023, the Financial Accounting Standard Board (“FASB”) issued Accounting Standards Update No.

2023-09 Income Taxes (Topic 740) – Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires public business entities to disclose specific categories in the income tax rate reconciliation annually and provide additional information for reconciling items that meet a qualitative threshold.

ASU 2023-09 also requires that entities disclose annually additional information about income taxes paid and disaggregated information for certain items.

ASU 2023-09 is effective for the Company beginning on January 1, 2025.

ASU 2023-09 is effective for the Company for fiscal years beginning on January 1, 2025.

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.

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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.

In January 2025, the FASB issued an update to ASU 2024-03 clarifying that all public business entities should initially adopt the disclosure requirements in the first annual reporting period beginning after December 15, 2026, and interim reporting periods beginning after December 15, 2027.

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

Early adoption is permitted.

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License and Collaboration Agreements

JNJ License and Collaboration Agreement

In July 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 2017, by and between the Company and JNJ, as amended in May 2019 (together, the “JNJ License and Collaboration Agreement”).

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.

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.

The JNJ License and Collaboration Agreement was further amended in November 2024 to:

● Increase the milestone payment for a Phase 3 clinical trial of any licensed product for any indication meeting its primary endpoint by $ 50.0 million, from $ 115.0 million to $ 165.0 million;

● Eliminate the $ 35.0 million milestone payment previously due for the acceptance of an NDA filing by the FDA for use of a licensed product for any indication;

● Eliminate the $ 15.0 million milestone payment previously due for the dosing of the third patient in the first Phase 3 clinical trial of a licensed product for a second indication.

The Company earned the $ 165.0 million milestone payment described above during the fourth quarter of 2024.

The Company has earned a total of $ 337.5 million in non-refundable payments from JNJ from inception in 2017 through March 31, 2025.

Upcoming potential milestones under the JNJ License and Collaboration Agreement include:

● $ 50.0 million upon FDA approval of an NDA in any indication;

● $ 25.0 million upon the acceptance of an NDA filing by the FDA for a second indication;

● $ 45.0 million upon FDA approval of an NDA for a second indication;

● $ 35.0 million upon the acceptance of an NDA filing by the FDA for a third indication;

● $ 50.0 million upon FDA approval of an NDA for a third indication.

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 %.

Takeda Collaboration Agreement

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

In January 2024, the Company entered into a worldwide license and collaboration agreement for rusfertide with Takeda, as amended March 2025 (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 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;

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

(ii) Takeda leads, and is solely responsible for its costs associated with, U.S.

regulatory and 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.

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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.

In March 2025, the Company and Takeda agreed, pursuant to the provisions of the Takeda Collaboration Agreement, as amended, that Takeda will assume responsibility for leading and implementing the regulatory strategy and associated activities for preparation of the NDA related to rusfertide in PV which is expected to be submitted with the FDA.

The transition to Takeda of leadership for NDA preparation is underway.

The Company remains primarily responsible for clinical development activities through the NDA filing.

The Company received a one-time, non-refundable upfront payment of $ 300.0 million in April 2024.

In March 2025, a $ 25.0 million milestone was deemed probable of achievement following positive topline results from the Phase 3 VERIFY trial of rusfertide in PV.

In addition, the Company is eligible to receive additional worldwide development, regulatory and commercial milestone payments for rusfertide of up to $ 305.0 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 the filing of an NDA with the U.S.

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).

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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:

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

Upcoming potential milestones under the Takeda Collaboration Agreement include:

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

● $ 15.0 million upon first regulatory approval for rusfertide in PV in three European countries, after pricing and reimbursement approval;

● $ 10.0 million upon first regulatory approval for rusfertide in PV in Japan.

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

(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 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 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 $ 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.

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

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

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 determined that development costs subsequent to the Company Opt-in date are within the scope of ASC 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 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 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 UC.

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

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.

Upcoming potential development and regulatory milestones include:

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

● $ 35.0 million upon the filing of an NDA for a second-generation compound with the FDA;

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

● $ 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.

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 %.

In March 2025, the $ 25.0 million milestone deemed probable of achievement due to the Phase 3 VERIFY trial of rusfertide in PV meeting its primary endpoint was no longer considered constrained and was added to the initial transaction price for a total transaction price of $ 325.0 million.

The additional $ 25.0 million was then allocated proportionally to each performance obligation under the agreement, resulting in an additional $ 21.3 million allocated to the license and an additional $ 3.7 million allocated to the development services under the agreement.

Revenue Recognition

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.

For the three months ended March 31, 2025, the Company recognized license and collaboration revenue of $ 28.3 million related to the Takeda Collaboration Agreement, including i) $ 22.8 million related to the proportional recognition of the $ 25.0 milestone deemed probable of being achieved due to the Phase 3 VERIFY trial meeting its primary endpoint and (ii) $ 5.5 million related to the initial transaction price for development services provided by the Company during the period.

Revenue recognition for the $ 25.0 million milestone, which is payable upon completion of the VERIFY clinical study report, was allocated based on the initial standalone selling price of each performance obligation under the agreement.

The remaining $ 2.2 million in revenue related to the milestone will be recognized through the conclusion of the development services performance obligation.

The Company recorded a corresponding contract asset of $ 22.8 million on its condensed consolidated balance sheet for the three months ended March 31, 2025.

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.

The remaining unrecognized transaction price amount of $ 45.0 million related to the Takeda Collaboration Agreement 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.

costs incurred compared to total budget).

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.

For the three months ended March 31, 2025, the Company recognized $ 5.5 million of revenue that was included in the deferred revenue liability balance at the beginning of the period.

For the three months ended March 31, 2024, the Company did not recognize revenue from any amounts included in the deferred revenue contract liability balance at the beginning of the 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):

September 30, 2024

March 31, 2025

Money market funds

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

September 30, 2024

March 31, 2025

Gross Unrealized

21 unchanged sentences

Marketable securities - current

Marketable securities - noncurrent

Total cash equivalents and marketable securities

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

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 .

Current marketable securities of $ 434.7 million and $ 321.7 million held as of March 31, 2025 and December 31, 2024, respectively, had contractual maturities of less than one year .

Noncurrent marketable securities of $ 123.5 million and $ 140.3 million held as of March 31, 2025 and December 31, 2024, respectively, 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 September 30, 2024.

During the three months ended March 31, 2025, the Company sold $ 7.0 million of marketable securities and recognized a net realized loss of $ 5.0 thousand.

There were no realized gains or realized losses on marketable securities for the three months ended March 31, 2024.

Balance Sheet Components

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

September 30,

Accrued interest receivable

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

2 unchanged sentences

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 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.

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):

September 30,

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

Nine Months Ended

September 30,

Operating lease cost

Short-term rent expense

Sublease income

Total lease expense

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

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 September 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

1 unchanged sentence

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

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

Net proceeds, after deducting underwriting commissions and offering costs paid by 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 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.

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, which became effective immediately upon such filing.

Pre-Funded Warrants

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

In August 2018, the Company entered into a Securities Purchase Agreement with certain accredited investors (each, an “Investor” and, collectively, the “Investors”).

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”).

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.

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

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”).

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 the Company’s common stock and Pre-Funded Warrants to purchase 2,705,252 shares of common stock (subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Pre-Funded Warrants) with an exercise price of $ 0.001 per share.

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

The Pre-Funded Warrants will expire on 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 the Company’s common stock, subject to certain exceptions.

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

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

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.

Net Income (Loss) per Share

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 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.

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

No Pre-Funded Warrants were exercised during the three months ended March 31, 2025.

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, 2025, Pre-Funded Warrants to purchase 1,500,000 shares of common stock remained outstanding.

No income tax expense was recorded by the Company for the three months ended March 31, 2025.

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

The difference in income tax expense as compared to the prior year was primarily due to taxable income for the three months ended March 31, 2024 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.

Net (Loss) Income per Share

The computation of basic net (loss) income 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 (loss) income 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 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):

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

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

Three Months Ended

Nine Months Ended

September 30,

Net income (loss)

Net (loss) income

Weighted-average shares of common stock, basic

1 unchanged sentence

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 9.2 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.

Net (loss) income per share of common stock

Basic net (loss) income per share of common stock

Diluted net (loss) income per share of common stock

Approximately 9.7 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 March 31, 2025 due to the Company’s net loss for the period.

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

Segment Reporting

Operating segments are components of an enterprise for which separate financial information is available and which are evaluated by a company’s CODM in deciding how to allocate resources and to assess performance.

The Company operates and manages its business as one operating segment, which primarily focuses on the discovery and development of innovative medicines in areas of unmet medical need.

The Company’s Chief Executive Officer serves as the Company’s CODM and manages and allocates resources to the operations of the Company on an entity-wide basis.

Managing and allocating resources on an entity-wide basis enables the CODM to assess the overall level of resources available and how to best deploy these resources across functions and research and development projects based on unmet medical need, scientific data, probability of technical and regulatory successful development, market potential and other considerations, and, as necessary, reallocate resources among our internal research and development portfolio and external opportunities to best support the long-term growth of our business.

The Company’s CODM reviews financial information on an aggregate basis for the purpose of allocating resources and evaluating financial performance, including segment net (loss) income, which is also reported on the condensed consolidated statement of operations as consolidated net (loss) income.

Segment information is as follows (dollars in thousands):

Three Months Ended

Discovery department expense (1)

Development department expense (1)

General and administrative expenses (1)

Employee wages and benefits - discovery

Employee wages and benefits - development

Employee wages and benefits - general and administrative

Stock-based compensation expense

Other segment items (2)

Interest income

Income tax expense

Segment (loss) profit

Reconciliation of (loss) profit

Adjustments and reconciling items

Consolidated net (loss) income

(1) Amounts exclude employee wages and benefits, stock-based compensation and expense allocations.

(2) Other segment items include foreign currency related income (expense) and other miscellaneous income (expense).

The accounting policies of the Company’s operating segment are the same as those described in Note 2.

Summary of Significant Accounting Policies.

The measure of segment assets is reported as total assets on the Company’s condensed consolidated balance sheets for the periods presented.

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