What changed in this filing

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Item 2. Management’s Discussion and Analysis

2022-11-03 compared with 2022-08-02 · 240 added, 170 removed, 464 unchanged (47% of the section changed)

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This discussion and analysis should be read in conjunction with our financial statements and the accompanying notes included in this report and the audited financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2021 filed with the SEC on March 1, 2022.

Our financial results for the three and six months ended June 30, 2022 are not necessarily indicative of results that may occur in future interim periods or for the full fiscal year.

Our financial results for the three and nine months ended September 30, 2022 are not necessarily indicative of results that may occur in future interim periods or for the full fiscal year.

This Quarterly Report on Form 10-Q contains statements indicating expectations about future performance and other forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended (Securities Act) and Section 21E of the Securities Exchange Act of 1934, as amended (Exchange Act), that involve risks and uncertainties.

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These statements appear throughout this Quarterly Report on Form 10-Q and are statements regarding our current expectations, beliefs or intent, primarily with respect to our operations and related industry developments.

Examples of these statements include, but are not limited to, statements regarding the following:

Examples of these statements include, but are not limited to:

our expectations regarding the impact of the global COVID-19 pandemic;

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The product is also commercially available in Europe, the UK (TAVLESSE) and Canada (TAVALISSE) for the treatment of chronic ITP in adult patients.

Our portfolio also includes olutasidenib, an oral, small molecule inhibitor of mIDH1 being investigated for the treatment of R/R AML and other malignancies.

We in-licensed olutasidenib from Forma with exclusive, worldwide rights to develop, manufacture, and commercialize the investigational agent.

See further discussions in the “Business Update – License and Transition Services Agreement with Forma” section below.

We conducted a Phase 3 clinical trial evaluating fostamatinib for the treatment of wAIHA.

Fostamatinib is also currently being studied in a Phase 3 clinical trial for the treatment of hospitalized high-risk patients with COVID-19;

and a NIH/NHLBI sponsored Phase 3 trial (ACTIV-4 Host Tissue Trial) for the treatment of COVID-19 in hospitalized patients.

Our portfolio also includes olutasidenib, an oral, small molecule inhibitor of mIDH1 being investigated for the treatment of AML and other malignancies.

We in-licensed olutasidenib from Forma with exclusive, worldwide rights to develop, manufacture, and commercialize the investigational drug.

We conducted a Phase 3 clinical trial evaluating fostamatinib for the treatment of wAIHA, and recently announced that we do not expect to file a sNDA for this indication at this time considering the top-line data results and the guidance received from the FDA.

We recently announced the completion of the FOCUS Phase 3 clinical trial of fostamatinib for the treatment of hospitalized high-risk patients with COVID-19.

Fostamatinib is also currently being studied in an NIH/NHLBI sponsored Phase 3 trial (ACTIV-4 Host Tissue Trial) for the treatment of COVID-19 in hospitalized patients.

Our other clinical programs include our IRAK inhibitor program and a RIPK1 inhibitor program in clinical development with partner Lilly.

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TAVALISSE IN ITP

For the six months ended June 30, 2022, net product sales of TAVALISSE were $34.7 million, an 18% increase compared to the same period in 2021.

For the nine months ended September 30, 2022, net product sales of TAVALISSE were $53.9 million, a 19% increase compared to the same period in 2021.

The increase in our net product sales was primarily driven by the increase in quantities sold as well as the increase in price per bottle of TAVALISSE.

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These engagements have enabled our field team to support existing prescribers, as well as develop relationships with new prescribers to identify appropriate patients for TAVALISSE.

Since the COVID-19 pandemic was declared, we have observed reduced patient-doctor interactions and our representatives are having fewer visits with health care providers, which negatively affected our ability to grow our product sales.

Starting in 2021, we began to see an increase in in-person engagements with health care providers, while also maintaining our level of virtual engagements.

In the third quarter of 2021, we expanded our sales force by increasing our territories.

In the fourth quarter of 2021, we saw an increasing trend of in-person engagements until the Omicron variant surge in December 2021 which again limited our access.

The COVID-19 pandemic has, and may continue to, adversely impact our business and operations.

The degree to which the COVID-19 pandemic continues to affect our business and operations will depend on developments that are highly uncertain and beyond our knowledge or control.

Periodic resurgence of COVID-19 cases negatively impacted and may continue to impact our ability to grow our product sales.

As COVID-19 cases surge, we have observed reduced patient-doctor interactions and our representatives are having fewer visits with health care providers.

We continue to maintain our virtual engagements and as we see the declining trend in number of COVID-19 cases, we expect to continue to increase the in-person engagement with health care providers.

We began to see increased in-person engagements with health care providers in the beginning of 2021, however, in the fourth quarter of 2021, the Omicron variant surged which again limited our access.

In 2022, we have seen increasing demand for TAVALISSE as in-person interactions have increased and more patients have started therapy.

As we see the declining trend in number of COVID-19 cases, we expect to continue to increase the in-person engagements with health care providers.

A post-hoc analysis from our Phase 3 clinical program in adult patients with chronic ITP, highlighting the potential benefit of using TAVALISSE in earlier lines of therapy, was published in the British Journal of Haematology in July 2020.

Inclusion in one of the leading peer-reviewed journals in the field of hematology underscores the significance of the 78% (25/32) response rate defined as at least one platelet count of at least 50,000/µL when TAVALISSE was used as a second-line therapy in our Phase 3 clinical program.

Adverse events were manageable and consistent with those previously reported with fostamatinib.

Our sales force is sharing this data with physicians.

License and Transition Services Agreement with Forma

On July 27, 2022, we entered into a license and transition services agreement with Forma for an exclusive license to develop, manufacture and commercialize olutasidenib, Forma’s proprietary, investigational inhibitor of mIDH1, for any uses worldwide, including for the treatment of AML and other malignancies.

Pursuant to the terms of the license and transition services agreement, we paid Forma an upfront fee of $2.0 million, with the potential to pay up to $67.5 million additional payments upon achievement of specified development and regulatory milestones and up to $165.5 million additional payments upon achievement of certain commercial milestones.

The potential development and regulatory milestone payments of $67.5 million include a $2.5 million payment upon achievement of certain near-term regulatory milestone, a $5.0 million payment upon the first regulatory approval of the licensed product, and $10.0 million payment upon the licensed product’s first commercial sale subject to certain other conditions.

In addition, subject to the terms and conditions of the license and transition services agreement, Forma would be entitled to tiered royalty payments on net sales of licensed products at percentages ranging from low-teens to mid-thirties, as well as certain portions of our sublicensing revenue, subject to certain standard reductions and offsets.

As of September 30, 2022, no milestone payment was met.

In October 2022, the near-term regulatory milestone was met which entitles Forma to receive a $2.5 million milestone payment.

Forma has submitted an NDA for olutasidenib for the treatment of m1DH1 R/R AML to the FDA and the PDUFA action date for the application is February 15, 2023.

Olutasidenib is highly synergistic with our existing hematology-oncology focused commercial and medical affairs infrastructure and if approved, would be our second commercial product in this space.

For more detailed discussions of in-licensed olutasidenib compound from Forma, refer to “In-licensed Program” section below.

On October 14, 2022, Novo Nordisk A/S (Novo Nordisk) announced the completion of the acquisition of Forma.

Following this acquisition, Forma became a wholly owned subsidiary of Novo Nordisk.

Fostamatinib in wAIHA

In June 2022, we announced top-line efficacy and safety data results of our FORWARD study, a Phase 3 pivotal trial of fostamatinib, an oral SYK inhibitor, in patients with wAIHA, which we initiated in March 2019.

In June 2022, we announced top-line efficacy and safety data results from our FORWARD study, a Phase 3 pivotal trial of fostamatinib, an oral SYK inhibitor, in patients with wAIHA, which we initiated in March 2019.

We completed the enrollment of our FORWARD study in November 2021 with 90 patients enrolled and completed the treatment period for the last patient under the study in April 2022.

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For more detailed discussions of the results of the trial, refer to “Clinical Stage Programs” section below.

We are conducting an in-depth analysis of these data to better understand differences in patient characteristics and outcomes and expect to discuss these findings with the FDA to determine the path forward in wAIHA.

Of the 90 patients that completed the FORWARD Phase 3 study, 71 (79%) enrolled in the open-label extension study which is ongoing.

Data from this study will be reported later.

We conducted an in-depth analysis of these data to better understand differences in patient characteristics and outcomes and submitted these findings to the FDA.

In October 2022, we announced that we received guidance from the FDA’s review of these findings.

Based on this guidance, we do not expect to file a supplemental New Drug Application (sNDA) for this indication at this time.

We will continue to explore our options for the wAIHA program in relation to our complete portfolio of development opportunities.

Of the 90 patients that completed the FORWARD Phase 3 study, 71 (79%) enrolled in the open-label extension study.

We plan on closing this study in 2023.

Fostamatinib in Hospitalized COVID-19 patients

In April 2021, we reported positive top-line results from a multi-center, Phase 2 clinical trial sponsored by the NIH/NHLBI, evaluating the safety of fostamatinib, our oral SYK inhibitor, for the treatment of hospitalized patients with COVID-19.

The trial met its primary endpoint of comparable safety than standard of care (SOC) and showed broad and consistent improvement in numerous efficacy endpoints, including mortality, ordinal scale assessment, and number of days in the ICU.

In May 2021, the trial data were submitted as part of a request for an Emergency Use Authorization (EUA) from the FDA for the fostamatinib as a treatment for hospitalized patients with COVID-19.

In May 2021, the trial data were submitted as part of a request for an Emergency Use Authorization (EUA) from the FDA for fostamatinib as a treatment for hospitalized patients with COVID-19.

In August 2021, the FDA informed us that the clinical data submitted from the NIH/NHLBI-sponsored Phase 2 trial of fostamatinib to treat hospitalized patients suffering from COVID-19 were insufficient to support an EUA.

In September 2021, the data from the NIH/NHLBI-sponsored Phase 2 trial was published in Clinical Infectious Diseases, an official publication of the Infectious Disease Society of America.

In November 2020, we launched a Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib in hospitalized COVID-19 patients without respiratory failure that have certain high-risk prognostic factors.

In July 2022, we completed enrollment with 280 patients in our pivotal Phase 3 clinical trial evaluating fostamatinib in high-risk patients hospitalized with COVID-19.

In November 2020, we launched a pivotal Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib in hospitalized COVID-19 patients without respiratory failure that have certain high-risk prognostic factors.

In July 2022, we completed enrollment with 280 patients.

The trial had originally targeted a total of 308 patients;

however, we determined the trial would be sufficiently powered with 280 patients to potentially provide a clinically meaningful result and determine the efficacy and safety of fostamatinib in hospitalized COVID-19 patients.

We expect to report top-line results in fourth quarter of 2022 and if the data is positive, file an EUA with the FDA.

In June 2021, we announced that fostamatinib has been selected for NIH ACTIV-4 (Accelerating COVID-19 Therapeutic Inventions and Vaccines) trial in hospitalized patients with COVID-19.

The ACTIV-4 Host study, initiated and funded by NHLBI, is a randomized, placebo-controlled trial of therapies, including fostamatinib, targeting the host response to COVID-19 in hospitalized patients.

The ACTIV-4 Host Tissue study will evaluate fostamatinib in a population targeted to include approximately 300 hospitalized patients with COVID-19.

On November 1, 2022, we announced the top-line results from the FOCUS Phase 3 clinical trial of fostamatinib in high risk hospitalized COVID-19 patents.

The trial approached but did not meet statistical significance (p=0.0603) in the primary efficacy endpoint of the number of days on oxygen through Day 29.

All prespecified secondary endpoints in the study numerically favored fostamatinib over placebo, including mortality, time to sustained recovery, change in ordinal scale assessment, and number of days in the ICU.

We are evaluating the opportunity and next steps in collaboration with our partner, the US Department of Defense.

In June 2021, we announced that fostamatinib has been selected for the NIH ACTIV-4 Host Tissue Trial in hospitalized patients with COVID-19.

The ACTIV-4 Host Tissue Trial, initiated and funded by NHLBI, is a randomized, placebo-controlled trial of therapies, including fostamatinib, targeting the host response to COVID-19 in hospitalized patients.

The ACTIV-4 Host Tissue Trial will evaluate fostamatinib in a targeted population of approximately 300 hospitalized patients with COVID-19.

Global Strategic Partnership with Lilly

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The agreement became effective in March 2021 upon clearance under the Hart-Scott-Rodino Antitrust Improvements Act of 1976.

We are responsible for 20% of development costs for R552 in the US, Europe, and Japan, up to a specified cap.

We are responsible for 20% of the development costs for R552 in the US, Europe, and Japan, up to a specified cap.

Lilly is responsible for funding the remainder of all development activities for R552 and other non-CNS disease development candidates.

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If we exercise our first opt-out right (no later than September 30, 2023), we are required to fund our share of the R552 development activities in the US, Europe, and Japan up to a maximum funding commitment of $65.0 million through April 1, 2024.

We are responsible for performing and funding initial discovery and identification of CNS disease development candidates.

Following candidate selection, Lilly will be responsible for performing and funding all future development and commercialization of the CNS disease development candidates.

Under the Lilly Agreement, we were responsible for performing and funding initial discovery and identification of CNS disease development candidates, and following candidate selection, Lilly will be responsible for performing and funding all future development and commercialization of the CNS disease development candidates.

In June 2022, Lilly provided notice of continuance pursuant to the terms of the Lilly Agreement, whereby Lilly elected its option to lead the identification and selection of CNS penetrant lead candidate.

Under the terms of the license agreement, we were entitled to receive a non-refundable and non-creditable upfront cash payment amounting to $125.0 million, which we received in April 2021.

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We would be entitled to receive tiered royalty payments on net sales of CNS disease products up to low-double digits, subject to certain standard reductions and offsets.

Lilly continues to advance R552, a potent and selective RIPK1 inhibitor, with the initial Phase 2 study in an immunologic disease indication anticipated to begin in the first half of 2023.

Lilly continues to advance R552, a RIPK1 inhibitor, with the initial Phase 2 study in an immunologic disease indication anticipated to begin in the first half of 2023.

RIPK1 is implicated in a broad range of key inflammatory cellular processes and plays a key role in Tumor Necrosis Factor (TNF) signaling, especially in the induction of pro-inflammatory necroptosis.

The program also includes RIPK1 compounds that cross the blood-brain barrier (CNS-penetrants) to address neurodegenerative diseases such as Alzheimer’s disease and Amyotrophic Lateral Sclerosis ( ALS).

License and Transition Services Agreement with Forma

On July 27, 2022, we entered into a license and transition services agreement with Forma for an exclusive license to develop, manufacture and commercialize olutasidenib, Forma’s proprietary inhibitor of mIDH1, for any uses worldwide, including for the treatment of R/R AML and other malignancies.

Pursuant to the terms of the license and transition services agreement, we will pay an upfront fee of $2.0 million, with the potential to pay up to $67.5 million additional payments upon achievement of specified development and regulatory milestones and up to $165.5 million additional payments upon achievement of certain commercial milestones.

Forma has submitted an NDA for olutasidenib to the FDA and the Prescription Drug User Fee Act (PDUFA) action date for the application is February 15, 2023.

Olutasidenib is highly synergistic with our existing hematology-oncology focused commercial infrastructure and if approved, would be our second commercial product in this space.

Patent Infringement Lawsuit

In June 2022, we received a notice letter regarding an Abbreviated New Drug Application (ANDA) submitted to the FDA by Annora Pharma Private Limited (Annora), requesting approval to market a generic version of TAVALISSE.

On July 25, 2022, we filed a lawsuit in the United States District Court for the District of New Jersey against Annora for infringement of certain of our US patents.

On July 25, 2022, we filed a lawsuit in the United States District Court for the District of New Jersey against Annora and its subsidiaries for infringement of certain of our US patents.

For a more detailed discussion of this litigation matter, see “Legal Proceedings” in Part II, Item 1 of this Quarterly Report on Form 10-Q.

Update on Current and Potential Future Impact of COVID-19 on our Business

We are continuing to monitor the impact of the evolving effects of the COVID-19 pandemic and have undertaken, and plan to continue to undertake, safety measures to keep our staff, patients, investigators and stockholders safe and to help the communities where we live and work to reduce the number of people exposed to the virus .

safe and to help the communities where we live and work to reduce the number of people exposed to the virus .

Through our existing Crisis Management Team (CMT), we implemented and continue to monitor our business continuity plans to prevent or minimize business disruption and ensure the safety and well-being of our personnel.

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We continue to evaluate the workplace for compliance with the local, state and federal guidance and may modify or update at any time to ensure the safety of our employees, contractors and visitors.

Recently, we updated our Plan as we move towards a hybrid schedule, reinstituting more in-person interactions back into our business beginning April 2022.

During the first quarter of 2022, we updated our Plan as we move towards a hybrid schedule, reinstituting more in-person interactions back into our business beginning April 2022.

We endeavor to provide the safest and most effective work environment under the circumstances, but we cannot guarantee that employees who come to the office will not be exposed to COVID-19 while at the office.

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The ultimate impact of the COVID-19 pandemic on our business and financial condition is highly uncertain and subject to change, and as such, we cannot ascertain the full extent of the impacts on our sales of our products, our ability to continue to secure new collaborations and support existing collaboration efforts with our partners and our clinical and regulatory activities.

Resources have been deployed to enable our field team to have virtual engagements to support existing prescribers as well as partner with new prescribers to identify appropriate patients for TAVALISSE.

Other commercial related activities, such as our marketing programs, speaker bureaus, and market access initiatives that were in live forums have been conducted virtually, delayed or cancelled as a result of the COVID-19 pandemic.

During 2021, w e began to see an increase in in-person engagements with health care providers, particularly as we completed our sales force expansion in the third quarter of 2021, which

increased the territories we cover.

That growth of in-person interactions continued until December 2021 when the Omicron variant surge, which again limited our access.

In 2022, we have seen increasing demand for TAVALISSE as in-person interactions have increased and more patients have started therapy.

As we see the declining trend in number of COVID-19 cases, we expect to continue to increase the in-person engagements with health care providers.

Periodic resurgence of COVID-19 cases negatively impacted and may continue to impact our ability to grow our product sales.

As COVID-19 cases surge, we have observed reduced patient-doctor interactions and our representatives are having fewer visits with health care providers.

We continue to maintain our virtual engagements and as we see the declining trend in number of COVID-19 cases, we expect to continue to increase the in-person engagements with health care providers.

We have plans in place to continue implementing both virtual and live initiatives to ensure we are able to meet the needs of health care providers as the pandemic continues to evolve.

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ITP patients can suffer extraordinary bruising, bleeding and fatigue as a result of low platelet counts.

Current therapies for ITP include steroids, blood platelet production boosters that imitate thrombopoietin (TPOs) and splenectomy.

Current therapies for ITP include steroids, blood platelet production boosters that imitate thrombopoietin (TPO) and splenectomy.

Orally-available fostamatinib program.

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(Kissei) was granted orphan drug designation from the Japanese Ministry of Health, Labor and Welfare for R788 (fostamatinib) in chronic idiopathic thrombocytopenic purpura.

Adverse events were manageable and consistent with those previously reported with fostamatinib.

Our sales force is sharing this data with physicians.

Commercial activities, including sales and marketing

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We are also responsible for the exclusive manufacture and supply of fostamatinib for all future development and commercialization activities under a Commercial and Supply Agreement.

In-licensed Program

Olutasidenib in AML and Other Malignancies

In July 2022, we entered into a license and transition agreement with Forma for an exclusive license to develop, manufacture and commercialize olutasidenib, Forma’s proprietary inhibitor of mIDH1, for any uses worldwide, including for the treatment of R/R AML and other malignancies.

Olutasidenib is an oral, small molecule investigational drug designed to selectively bind to and inhibit mIDH1.

This targeted agent has the potential to provide therapeutic benefit by reducing 2-hydroxyglutarate levels and restoring normal cellular differentiation.

I socitrate dehydrogenase-1 ( IDH1) is a natural enzyme that is part of the normal metabolism of all cells.

When mutated, IDH1 activity can promote blood malignancies and solid tumors.

mIDH1 alterations are seen in AML, glioma, chondrosarcoma, and intrahepatic cholangiocarcinoma.

It is estimated that the US prevalence for AML is approximately 20,000 cases and global incidence for AML is approximately 120,000 cases, with approximately 6% to 9% linked to mIDH1.

Despite having approved treatment options for R/R AML patients who are mIDH1 positive, an unmet need remains.

Olutasidenib may represent a treatment option with reduced QTc potential, a more favorable drug-drug interaction profile (allowing for co-medication) and a stable pharmacokinetics (PK) profile that enables a consistent drug exposure over time.

Interim results from Forma’s Phase 2 registrational trial for olutasidenib in mIDH1 R/R AML were reported at the American Society of Clinical Oncology (ASCO) annual meeting in June 2021.

The results of this study of 153 patients showed that olutasidenib demonstrated a favorable tolerability profile as a monotherapy in patients with R/R

AML who have a susceptible mIDH1, and achieved a composite complete remission (CR), or CR plus CR with partial hematologic recovery (CRh) rate of 33.3% (30% CR and 3% CRh), the primary efficacy endpoint.

While a median duration of CR/CRh has not yet been reached, a sensitivity analysis (with a hematopoietic stem cell transplant, or HCST, as the end of a response) indicates the median duration of CR/CRh to be 13.8 months.

The overall response rate , comprised CR, CRh, CRi, partial response, and morphologic leukemia-free state (MLFS), was 46% and the median duration of ORR was 11.7 months.

The median overall survival (OS) was 10.5 months.

For patients with CR/CRh, the median OS was not yet reached, but the estimated 18-month survival is 87%.

The most frequently reported treatment emergent adverse events (>20%) were nausea (38%), constipation (25%), increased white blood cell count (25%), decreased RBC count (24%), pyrexia (23%), febrile neutropenia (22%), and fatigue (21%).

Grade 3/4 adverse events occurring in greater than 10% of patients, regardless of causality, were febrile neutropenia (20%), decreased red blood cell count (19%), decreased platelet count (16%), and decreased neutrophil count (13%).

Grade 3/4 laboratory liver abnormalities reported in 19 (12%) patients led to treatment discontinuation in seven (4%) patients.

The preferred terms of these laboratory liver abnormalities were alanine aminotransferase increased, aspartate aminotransferase increased, biliary tract disorder, blood bilirubin increased, cholangitis, cholestasis, hepatitis acute, hepatic enzymes increased, liver function test abnormal, liver function test increased, and transaminases increased.

Investigator-assessed IDH1 differentiation syndrome (all Grades) was observed in 21 (14%) patients, which led to treatment discontinuation in three patients and was fatal in one patient.

Subsequently, Forma presented the first Phase 2 results of olutasidenib used in combination with azacitidine, including safety/tolerability data at the American Society of Hematology (ASH) Annual Meeting in December 2021.

Based on the results of its Phase 2 trial, Forma has submitted an NDA for olutasidenib for the treatment of m1DH1 R/R AML to the FDA and the PDUFA action date for the application is February 15, 2023.

On November 3, 2022, we announced the upcoming presentation of five posters highlighting data from our commercial and clinical hematology-oncology portfolio at the 64 th ASH Annual Meeting and Exposition that will be held in December 2022.

An updated interim analysis from a Phase 2 registrational study of olutasidenib in patients with R/R AML demonstrated robust efficacy and safety results.

The registrational cohort of the Phase 2 study enrolled 153 patients with mIDH1 R/R AML who received olutasidenib monotherapy 150 mg twice daily.

The efficacy evaluable population was 147 patients who received their first dose at least six months prior to the interim analysis cutoff date of June 18, 2021.

The primary endpoint was a CR/CRh defined as less than 5% blasts in the bone marrow, no evidence of disease, and partial recovery of peripheral blood counts (platelets >50,000/microliter and absolute neutrophil count >500/microliter).

Overall response rate comprises CR, CRh, CR with incomplete blood count recovery, partial response and MLFS.

The results from the updated interim analysis of patients with mIDH1 R/R AML demonstrated a 35% CR+CRh rate with a median duration of 25.9 months.

Olutasidenib was effective in a broad range of patients including those with prior high-intensity chemotherapy and/or post-venetoclax.

The abstract concluded that the observed activity is clinically meaningful and represents a therapeutic advance in the treatment of this patient population.

In this pivotal cohort, olutasidenib was well tolerated with an adverse event profile largely characteristic of symptoms or conditions experienced by patients undergoing treatment for AML or of the underlying disease itself.

We plan to pursue strategic actions to further develop olutasidenib for the treatment of other malignancies and its potential commercialization.

Clinical Stage Programs

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We completed our Phase 2 clinical trial, also known as the SOAR study, in patients with wAIHA.

This trial was an open-label, multi-center, two-stage study that evaluated the efficacy and safety of fostamatinib in patients with wAIHA who had previously received treatment for the disorder but have relapsed.

The primary efficacy endpoint of this study was to achieve increased hemoglobin levels by week 12 of greater than 10 g/dL, and greater than or equal to 2 g/dL higher than baseline.

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The safety results were consistent with the overall safety profile data collected to date, which includes more than 5,000 patients across multiple diseases.

We are conducting an in-depth analysis of these data to understand the patient disease characteristics and outcomes and expect to discuss these findings with the FDA to determine the path forward in wAIHA.

Of the 90 patients that completed the FORWARD Phase 3 study, 71 (79%) enrolled in the open-label extension study which is ongoing.

Data from this study will be reported later.

We conducted an in-depth analysis of these data to better understand differences in patient characteristics and outcomes and submitted these findings to the FDA.

In October 2022, we announced that we received guidance from the FDA’s review of these findings.

Based on this guidance, we do not expect to file an sNDA for this indication at this time.

We will continue to explore our options for the wAIHA program in relation to our complete portfolio of development opportunities.

Of the 90 patients that completed the FORWARD Phase 3 study, 71 (79%) enrolled in the open-label extension study.

We plan on closing this study in 2023.

Fostamatinib in Hospitalized COVID-19 Patients

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In December 2021, we expanded the inclusion criteria to include patients with more severe disease (NIAID Ordinal Scale 6) to more accurately reflect the clinically predominant patient population hospitalized with COVID-19 and help speed enrollment .

In collaboration with the FDA

and Department of Defense, we also updated the primary endpoint for the study from progression to severe disease within 29 days, to the number of days on oxygen through day 29.

This endpoint allows for closer comparison of the results with earlier results from the NIH/NHLBI Phase 2 trial with fostamatinib and various other NIH-sponsored trials, such as ACTIV-4, which uses a similar outcome measure as a primary endpoint.

In July 2022, we completed enrollment with 280 patients in our pivotal Phase 3 clinical trial evaluating fostamatinib in high-risk patients hospitalized with COVID-19.

In collaboration with the FDA and Department of Defense, we also updated the primary endpoint for the study from progression to severe disease within 29 days, to the number of days on oxygen through day 29.

This endpoint allows for closer comparison of the results with earlier results from the NIH/NHLBI Phase 2 clinical trial with fostamatinib and various other NIH-sponsored trials, such as the ACTIV-4 Host Tissue Trial, which uses a similar outcome measure as a primary endpoint.

In July 2022, we completed enrollment with 280 patients.

The trial had originally targeted a total of 308 patients;

We expect to report top-line results in fourth quarter of 2022 and if the data is positive, file an EUA with the FDA.

On November 1, 2022, we announced the top-line results of the FOCUS Phase 3 clinical trial of fostamatinib in high risk hospitalized COVID-19 patents.

The trial approached but did not meet statistical significance (p=0.0603) in the primary efficacy endpoint of the number of days on oxygen through Day 29.

We are evaluating the opportunity and next steps in collaboration with our partner, the US Department of Defense.

NIH/NHLBI-sponsored Phase 2 Trial.

In September 2020, we announced a Phase 2 clinical trial sponsored by the NIH/NHLBI in order to evaluate the safety of fostamatinib for the treatment of hospitalized COVID-19 patients.

In September 2020, we announced a Phase 2 clinical trial sponsored by the NIH/NHLBI to evaluate the safety of fostamatinib for the treatment of hospitalized COVID-19 patients.

This multi-center, double-blind, placebo-controlled study randomly assigned fostamatinib or matched placebo (1:1) to 59 evaluable patients.

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The data from the NIH/NHLBI-Sponsored Phase 2 trial was published in Clinical Infectious Diseases, an official publication of the Infectious Disease Society of America in September 2021.

In May 2021, the NIH/NHLBI Phase 2 clinical data were submitted as part of a request for EUA from the FDA for fostamatinib as a treatment for hospitalized patients with COVID-19.

In May 2021, the NIH/NHLBI Phase 2 clinical data were submitted as part of a request for an EUA from the FDA for fostamatinib as a treatment for hospitalized patients with COVID-19.

ACTIV-4 Host Tissue Phase 3 Trial.

Following the completed NIH/NHLBI-sponsored Phase 2 study as discussed above, in June 2021, we announced that fostamatinib has been selected for an NIH ACTIV-4 (Accelerating COVID-19 Therapeutic Inventions and Vaccines) trial in hospitalized patients with COVID-19.

The master protocol for this study is designed to be flexible in the number of study arms, the use of a single placebo group, and the stopping and adding of new therapies.

In June 2021, we announced that fostamatinib had been selected for the NIH ACTIV-4 Host Tissue Trial in hospitalized patients with COVID-19.

The master protocol for this study was designed to be flexible in the number of study arms, the use of a single placebo group, and the stopping and adding of new therapies.

Eligible participants will include patients hospitalized for COVID-19 with laboratory-confirmed SARS-CoV-2 infection on oxygen therapy.

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During the second quarter of 2018, we selected R835, the active metabolite of R289 , a proprietary molecule from our IRAK 1/4 preclinical development program, for human clinical trials.

This investigational candidate is an orally administered, potent and selective inhibitor of IRAK1 and IRAK4 that blocks inflammatory cytokine production in response to toll-like receptor (TLR) and the interleukin-1 (IL-1R) family receptor signaling.

TLRs and IL-1Rs play a critical role in the innate immune response and dysregulation of these pathways can lead to a variety of inflammatory conditions including psoriasis, rheumatoid arthritis, inflammatory bowel disease and gout (among others).

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We continue to advance the development of our IRAK1/4 program, completing the evaluation of a new pro-drug formulation of R835, R289, in single-ascending and multiple ascending dose studies with positive safety results in 2021.

In January 2022, we received clearance from the FDA on our clinical trial design to explore R289 in low-risk myelodysplastic syndromes (LR MDS).

The open-label, Phase 1b study will determine the tolerability and preliminary efficacy of R289 in patients with LR MDS who are relapsed, refractory/resistant, intolerant or have inadequate response to prior therapies such as erythropoietin (EPO), thrombopoietin (TPO), luspatercept, or hypomethylating agents (HMAs) for MDS.

In January 2022, we received clearance from the FDA on our clinical trial design to explore R289 in low-risk myelodysplastic syndromes (MDS).

The open-label, Phase 1b study will determine the tolerability and preliminary efficacy of R289 in patients with low-risk MDS who are relapsed, refractory/resistant, intolerant or have inadequate response to prior therapies such as erythropoietin, TPO, luspatercept, or hypomethylating agents (HMAs) for MDS.

We are also exploring indications in rare immune diseases.

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BGB324 – BerGenBio

We have an exclusive, worldwide research, development and commercialization agreement with BerGenBio for our investigational AXL receptor tyrosine kinase (AXL) inhibitor, BGB324/R428 (now referred to as bemcentinib).

The product is being investigated in two Phase 2 clinical trials for the treatment of hospitalized patients with COVID-19.

Clinical trials are also ongoing across oncology indications with high unmet medical need including acute myeloid leukemia (AML), myelodysplastic syndrome (MDS), and non-small cell lung cancer (NSCLC).

We have an exclusive, worldwide research, development and commercialization agreement with BerGenBio for our investigational AXL receptor tyrosine kinase inhibitor, BGB324/R428 (now referred to as bemcentinib).

In October 2022, BerGenBio announced the initiation of a Phase 1b/2a trial evaluating bemcentinib in combination with the current SoC, checkpoint inhibitor pembrolizumab and doublet chemotheraphy, for the treatment of first line non-small cell lung cancer patients harboring serine/threonine kinase 11 mutations.

The product is also being investigated in Phase 2 clinical trials in patients with AML and COVID-19.

Bemcentinib is being studied in over 600 patients, demonstrating its safety as a monotherapy and in combination with chemotheraphy and immune checkpoint inhibition.

DS-3032 - Daiichi

DS-3032 is an investigational oral selective inhibitor of the murine double minute 2 (MDM2) protein investigated by Daiichi in three Phase 1 clinical trials for solid and hematological malignancies including AML, acute lymphocytic leukemia, chronic myeloid leukemia in blast phase, lymphoma and MDS.

Preliminary safety and efficacy data from a Phase 1 study of DS-3032 suggests that DS-3032 may be a promising treatment for hematological malignancies including relapsed/refractory AML and high-risk MDS.

In September 2020, worldwide rights to DS-3032 were out-licensed from Daiichi to Rain Therapeutics Inc.

In July 2021, Rain announced that it initiated the Phase 3 study which will evaluate the efficacy and safety of milademetan (RAIN-32), a MDM2 inhibitor, for the treatment of de-differentiated liposarcoma, a rare cancer originating from fat cells located in the soft tissues of the body.

In late 2021, Rain commenced its second clinical trial for RAIN-32 in patients with MDM2-applified advance solid tumors.

Preliminary safety and efficacy data from a Phase 1 study of DS-3032 suggests that DS-3032 may be a promising treatment for hematological malignancies including R/R AML and high-risk MDS.

In September 2020, worldwide rights to DS-3032 (milademetan) were out-licensed from Daiichi to Rain Therapeutics Inc.

In July 2021, Rain announced that it initiated a Phase 3 study to evaluate the efficacy and safety of milademetan (RAIN-32) for the treatment of well-differentiated/dedifferentiated liposarcoma, a rare cancer originating from fat cells located in the soft tissues of the body.

In late 2021, Rain commenced its second clinical trial for RAIN-32 in patients with MDM2-amplified advance solid tumors.

In August 2022, Rain announced completion of enrollment of its Phase 3 study for milademetan in liposarcoma.

AZ-D0449 – AZ

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Results of Operations

Three months ended June 30, 2022 and 2021

Three Months Ended June 30,

Six Months Ended June 30,

Three months ended September 30, 2022 and 2021

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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The following table summarizes the percentages of revenues from each of our customers who individually accounted for 10% or more (wherein * denotes less than 10%) of the total net product sales and revenues from collaborations:

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

McKesson Specialty Care Distribution Corporation

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Net product sales during the periods presented pertained to sales of TAVALISSE in the US, net of chargebacks, discounts and fees, government and other rebates and returns.

For the three and six months ended June 30, 2022, net product sales of TAVALISSE increased by 9% and 18%, respectively, compared to the same periods in 2021.

The increases were primarily driven by the increase in quantities sold mainly due to the recent sales force expansion and increased in-person engagements, as well as the increase in price per bottle of TAVALISSE.

For the three and nine months ended September 30, 2022, net product sales of TAVALISSE increased by 20% and 19%, respectively, compared to the same periods in 2021.

The increases were primarily driven by the increase in quantities sold mainly due to the recent sales force expansion and

increased in-person engagements, as well as the increase in price per bottle of TAVALISSE.

These increases were partially offset by the increase in revenue reserves mainly due to higher rebates on contracts we recently entered with certain PBMs, and higher government program rebates.

Our first quarter net sales are typically impacted by the first quarter reimbursement issues such as the resetting of co-pays and the Medicare donut hole.

Contract revenues from collaborations in the three and six months ended June 30, 2022 were comprised of $7.5 million and $7.6 million, respectively, in revenue from Kissei related to a milestone payment and delivery of fostamatinib supply, $2.0 million for each of the periods in revenue related to our license agreement with Knight, $1.4 million and $1.7 million, respectively, in revenue related from Grifols related the research and development services and delivery of fostamatinib supply, and $0.3 million and $0.5 million, respectively, in revenue related to our license agreement with Lilly.

Contract revenues from collaborations in the three and six months ended June 30, 2021 were comprised primarily of $3.3 million and $63.9 million, respectively, in revenue related to our license agreement with Lilly and $0.4 million in revenue for each periods related to the research and development services with Grifols.

In addition, contract revenues in the six months ended June 30, 2021 include $4.0 million revenue related to grant of non-exclusive license of a certain patent to an unrelated third-party company and $1.0 million revenue for the delivery of drug supply under our collaboration agreement with Grifols recognized in the first quarter of 2021.

Contract revenues from collaborations of $0.7 million in the three months ended September 30, 2022 were comprised primarily of revenue from Grifols related to the research and development services, delivery of fostmatinib and royalty revenue.

Contract revenues from collaborations in the three months ended September 30, 2021 were comprised of $2.4 million in revenue related to our license agreement with Lilly, $1.8 million in revenue related to a milestone payment under our collaboration agreement with Daiichi, $0.2 million in revenue related to the research and development services with Grifols and $0.1 million in revenue from milestone payment under our commercial and license agreement with Medison.

Contract revenues from collaborations in the nine months ended September 30, 2022 comprised of $7.6 million in revenue from Kissei related to a milestone payment and delivery of fostamatinib supply, $2.4 million in revenue from Grifols related the research and development services, delivery of fostamatinib supply and royalty revenue, $2.0 million in revenue related to our license agreement with Knight, and $0.5 million in revenue related to our license agreement with Lilly.

Contract revenues from collaborations in the nine months ended September 30, 2021 were comprised of $66.4 million revenue related to our license agreement with Lilly, $4.0 million revenue related to grant of non-exclusive license of a certain patent to an unrelated third-party company, $1.8 million in revenue related to the achievement of milestone under our collaboration agreement with Daiichi, $1.0 million revenue for the delivery of drug supply under our collaboration agreement with Grifols, $0.6 million in revenue related to the research and development services with Grifols and $0.1 million in revenue from milestone payment under our commercial and license agreement with Medison.

Government contract revenue was related to the income we recognized from the $16.5 million government award granted to us, pursuant to the agreement we entered in January 2021 with the US Department of Defense to support our ongoing Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib in hospitalized COVID-19 patients.

Through June 30, 2022, we recognized $10.5 million of revenue from this award and we expect to receive the remaining award of $6.0 million and will recognize as income throughout the period we conduct our clinical trial, when there is reasonable assurance that the conditions of the grant will be met, and the grant will be received.

Through September 30, 2022, we recognized $13.0 million of revenue from this award and we expect to receive the remaining award of $3.5 million and will recognize as income throughout the period we conduct our clinical trial, when there is reasonable assurance that the conditions of the grant will be met, and the grant will be received.

Our potential future revenues may include product sales from TAVALISSE;

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Our net product sales may be impacted by changes to the government program rebates and new private payer rebate contracts we entered or may enter in the future.

As of June 30, 2022, we had deferred revenues of $1.5 million, which we will recognize as revenue upon satisfaction of our remaining performance obligations under our respective collaboration agreements.

As of September 30, 2022, we had deferred revenues of $1.4 million, which we will recognize as revenue upon satisfaction of our remaining performance obligations under our respective collaboration agreements.

Cost of Product Sales

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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As we produce TAVALISSE in the future, our inventory cost in the condensed balance sheet and cost of product sales will increase reflecting the full cost of manufacturing.

The cost of product sales increased in the three and six months ended June 30, 2022, compared to the same periods in 2021, primarily due to delivery of drug supply pursuant to our supply agreements with our collaborative partners, Grifols and Kissei.

No material increases in our cost of product sales related to our sales of TAVALISSE in the US during the three and six months ended June 30, 2022, compared to the same periods in 2021.

There were no material increases in our cost of product sales related to our sales of TAVALISSE in the US during the three and nine months ended September 30, 2022, compared to the same periods in 2021.

For the nine months ended September 30, 2022 compared to the same period in 2021, the increase in cost of product sales was primarily due to delivery of drug supply pursuant to our supply agreements during the second quarter of 2022 with our collaborative partners, Grifols and Kissei.

Research and Development Expense

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

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Stock-based compensation expense included in research and development expense

The decrease in research and development expense in the three months ended June 30, 2022 compared to the same period in 2021 was mainly due to decrease in personnel-related costs of $1.6 million primarily as a result of the restructuring of our early-stage research department in November 2021, decrease in research and development costs on our ongoing Phase 3 clinical trial on hospitalized COVID-19 patients of $2.5 million, decrease in research and development costs in our AIHA study of $0.9 million, and decrease in other various research and development expenses of $0.9 million.

These decreases were partially offset by the increase in our research and development of our IRAK 1/4 inhibitor program of $2.7 million and increase in consulting and third-party services of $1.2 million .

The decrease in research and development expense in the six months ended June 30, 2022 compared to the same period in 2021 was mainly due to decrease in personnel-related costs of $2.7 million primarily as a result of the restructuring as discussed above, decrease in research and development costs on our ongoing Phase 3 clinical trial on hospitalized COVID-19 patients of $3.2 million, decrease in research and development costs in our AIHA study of $1.6 million, and decrease in other various research and development expenses of $1.3 million.

These decreases were partially offset by the increase in our research and development of our IRAK 1/4 inhibitor program of $4.2 million, and increase in consulting and third-party services of $1.2 million.

Our research and development expenditures include costs related to preclinical and clinical trials, scientific personnel, supplies, equipment, consultants, sponsored research, stock-based compensation, and allocated facility costs.

W e expect to continue to incur significant research and development expense as we continue our activities in our Phase 3 wAIHA, COVID-19 and other clinical studies.

In November 2021, we completed enrollment of the wAIHA study and i n April 2022, we completed the treatment period for the last patient under the study.

In June 2022, we announced that top-line results from the trial did not demonstrate statistical significance in the primary efficacy endpoint of durable hemoglobin response in the overall study population.

In July 2022, we completed the enrollment in our Phase 3 clinical trial of fostamatinib for the treatment of hospitalized high-risk patients with COVID-19 and expect to provide top-line results in the fourth quarter of 2022.

In January 2021, the US Department of Defense awarded us a total of $16.5 million grant that will partially fund our Phase 3 clinical trial for hospitalized COVID-19 patients.

Currently, we cannot fully forecast the scope the evolving effects of COVID-19 pandemic may have on our ability to continue to treat patients enrolled in our trials, supply study drug, obtain complete data points in accordance with the study protocol, and overall impact on, and timing of, clinical study results.

We expect cost savings on our research and development costs because of reduction in workforce, primarily in the research organization.

The decrease in research and development expense in the three months ended September 30, 2022 compared to the same period in 2021 was mainly due to lower research and development costs in our COVID-19 study of $1.8 million, lower research and development costs in our AIHA study of $0.9 million, and lower research and development costs in our IRAK1/4 inhibitor program of $1.2 million.

These decreases were primarily due to timing of activities related to such studies.

Further, personnel-related costs decreased by $0.8 million and other various research and development expenses including allocated facilities and laboratory costs decreased by $0.9 million, primarily as a result of the restructuring of our early-stage research department in November 2021.

These decreases were partially offset by the $2.0 million upfront payment to Forma recorded as acquired IPR&D included within research and development expense in the third quarter of 2022.

The decrease in research and development expense in the nine months ended September 30, 2022 compared to the same period in 2021 was mainly due to decrease in personnel-related costs of $3.5 million, and decrease in various research and development expenses including allocated facilities and laboratory costs of $3.4 million, primarily as a result of the restructuring as discussed above.

Further, research and development costs decreased by $3.8 million on our COVID-19 study, and $2.5 million on or AIHA study, primarily due to timing of activities related to such studies.

These decreases were partially offset by the increase of research and development in our IRAK 1/4 inhibitor program of $3.0 million, upfront payment to Forma of $2.0 million as discussed above, and increase in consulting and third-party services of $1.2 million.

W e expect to continue to incur significant research and development expense as we continue our activities in our clinical studies including COVID-19 and IRAK 1/4 inhibitor program.

In July 2022, we completed the enrollment of the FOCUS Phase 3 clinical trial of fostamatinib for the treatment of hospitalized high-risk patients with COVID-19 and on November 1, 2022, we announced the top-line results of the clinical trial.

The trial approached but did not meet statistical significance in the primary efficacy endpoint.

We are evaluating the opportunity and next steps in collaboration with our partner, the US Department of Defense.

Our Phase 3 clinical trial for hospitalized COVID-19 patients is partially funded by the award granted to us by the US Department of Defense as discussed above.

Our P hase 3 wAIHA study has completed enrollment in November 2021 and completed the treatment period for the last patient in April 2022.

In June 2022, we announced that the top-line results from the trial did not demonstrate statistical significance in the primary efficacy endpoint of durable hemoglobin response in the overall study population.

We conducted an in-depth analysis of these data to better understand differences in patient characteristics and outcomes and submitted these findings to the FDA.

In October 2022, we announced that we received guidance from the FDA’s review of these findings.

Based on this guidance, we do not expect to file an sNDA for this indication at this time.

We will continue to explore our options for the wAIHA program in relation to our complete portfolio of development opportunities.

Following our agreement with Forma to acquire exclusive license to develop, manufacture and commercialize olutasidenib, we recorded the upfront payment of $2.0 million as IPR&D, and included such amount within research and development expense in the three and nine months ended September 30, 2022.

As specified in the agreement, Forma is entitled to receive future potential development and regulatory milestones.

As we incur such milestone payment obligations in the future, we will record such amounts within research and development expenses if such milestone payment obligations are incurred at development stage or prior to a regulatory approval.

Further, we may incur research and development costs as we continue to pursue strategic actions to further develop olutasidenib for the treatment of other malignancies.

In November 2021, we exited our early-stage research to focus our resources on our mid to late-stage development programs and our commercialization efforts.

We believe that this strategy will strengthen our ability to execute on near-term value drivers, such as growing ITP sales, expanding the addressable market for fostamatinib with wAIHA and COVID-19, and advancing our wholly-owned IRAK1/4 program in hematologic disease and immunology.

In October 2022, we announced further reduction in our workforce resulting to elimination of certain positions primarily in development as well as administration group.

We continue to expect cost savings on our research and development costs because of these reduction in workforce.

We believe that this strategy strengthens our ability to execute on near-term value drivers, such as growing ITP sales, expanding the addressable market for fostamatinib and olutasidenib, and advancing our other clinical trials.

Currently, we cannot fully forecast the scope of the evolving effects that the COVID-19 pandemic may have on our ability to continue to treat patients enrolled in our trials, enroll and assess new patients, supply study drug, obtain complete data points in accordance with the study protocol, and overall impact on, and timing of, clinical study results.

We do not track fully burdened research and development costs separately for each of our drug candidates.

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“Other” expenses primarily consist of allocated facilities costs and allocated stock-based compensation expense relating to personnel in research and development groups.

“Other” expenses also include the upfront payment to Forma recorded in the third quarter of 2022.

In addition to reviewing the three categories of research and development expenses described in the preceding paragraph, we principally consider qualitative factors in making decisions regarding our research and development programs, which include enrollment in clinical trials and the results thereof, the clinical and commercial potential for our drug candidates and competitive dynamics.

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The following table presents our total research and development expense by category (in thousands).

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

From January 1, 2007*

to June 30, 2022

to September 30, 2022

* We started tracking research and development expense by category on January 1, 2007.

“Other” expenses for the three months ended June 30, 2022 and 2021 consisted of allocated facilities costs of $1.0 million and $1.5 million, respectively, and allocated stock-based compensation expense of $0.5 million for each of the periods.

For the six months ended June 30, 2022 and 2021, allocated facilities costs was $2.3 million and $3.0 million, respectively, and allocated stock-based compensation expense was $0.9 million and $1.1 million, respectively.

For the three and six months ended June 30, 2022 and 2021, a major portion of our total research and development expense was associated with our COVID-19, AIHA and IRAK programs, personnel-related costs of our research and development personnel and allocated facilities costs.

“Other” expenses for the three and nine months ended September 30, 2022 consisted of allocated facilities costs of $1.2 million and $3.5 million, respectively, allocated stock-based compensation expense of $0.6 million and $1.5 million, respectively, and acquired IPR&D of $2.0 million related to our in-license agreement with Forma for each of the respective periods.

“Other” expenses for the three and nine months ended September 30, 2021 consisted of allocated facilities cost of $1.5 million and $4.5 million, respectively, and allocated stock-based compensation expense of $0.4 million and $1.5 million, respectively.

For the three and nine months ended September 30, 2022 and 2021, a major portion of our total research and development expense was associated with our COVID-19, AIHA and IRAK programs, personnel-related costs of our research and development personnel and allocated facilities costs.

Selling, General and Administrative Expense

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

2 unchanged sentences

Stock-based compensation expense included in selling, general and administrative expense

Stock-based compensation expense for the six months ended June 30, 2022 include an incremental charge of approximately $0.8 million recorded in the first quarter of 2022 as a result of stock option modification in March 2022 related to the extension of exercise period of the stock option grants made to two former Board of Directors whose terms expired in May 2022.

The increase in selling, general and administrative expense in the three months ended June 30, 2022 compared to the same period in 2021 was mainly due to the increase in personnel-related costs and recruitment fees of $1.9 million, increase in costs of commercial activities of $1.5 million, increase in trainings, conferences and travel related costs of $0.7 million, and increase in other various sales, general and administrative costs of $0.5 million.

The increase in selling, general and administrative expense in the six months ended June 30, 2022 compared to the same period in 2021 was mainly due to the increase in personnel-related costs and recruitment fees of $4.3 million, increase in costs of commercial activities of $3.7 million, increase in trainings, conferences and travel related costs of $1.8 million, increase in stock-based compensation expense of $0.8 million primarily due to an incremental charge as discussed above, and increase in other various sales, general and administrative costs of $0.2 million.

Stock-based compensation expense for the nine months ended September 30, 2022 include an incremental charge of approximately $0.8 million recorded in the first quarter of 2022 as a result of stock option modification in March 2022 related to the extension of exercise period of the stock option grants made to two former Board of Directors whose terms expired in May 2022.

The increase in selling, general and administrative expense in the three months ended September 30, 2022 compared to the same period in 2021 was mainly due to the increase in personnel-related costs and recruitment fees of $1.6 million, increase in trainings, conferences and travel related costs of $0.7 million, increase in costs of commercial activities of $0.2 million, and increase in other various sales, general and administrative costs of $0.5 million.

The increase in selling, general and administrative expense in the nine months ended September 30, 2022 compared to the same period in 2021 was mainly due to the increase in personnel-related costs and recruitment fees of $5.9 million, increase in costs of commercial activities of $3.8 million, increase in trainings, conferences and travel related costs of $2.4 million, increase in stock-based compensation expense of $1.2 million primarily due to an incremental charge as discussed above, and increase in other various sales, general and administrative costs of $0.3 million.

These increases were partially offset by the decrease in our consulting and third-party services of $0.7 million.

We expect our selling, general and administrative expense for the remainder of 2022 to increase as we continue to expand our commercial activities, including the effect of the recent sales force expansion.

As discussed above, in October 2022, we announced a reduction in our workforce

resulting to elimination of certain positions in our administrative group.

We expect some cost savings on our general and administrative costs in the future because of such reduction in workforce.

In response to the limitations on in-person office visits during the ongoing COVID-19 pandemic, we continue to deploy resources to enable our field-based employees to continue to engage virtually with healthcare providers.

These virtual engagements have enabled our field team to support existing prescribers as well as partner with new prescribers to identify appropriate

patients for our product.

These virtual engagements have enabled our field team to support existing prescribers as well as partner with new prescribers to identify appropriate patients for our product.

However, we are not currently able to fully forecast the scope of impacts that the COVID-19 pandemic may have on our commercial activities and sales of our product.

Interest Income and Interest Expense

Three Months Ended June 30,

Three Months Ended September 30,

September 30,

(in thousands)

4 unchanged sentences

Interest expense is comprised primarily of interest on the outstanding term loan with MidCap and interest accreted on the outstanding financing liability associated with the license agreements with Lilly and Medison.

The decrease in interest expense in the three and six months ended June 30, 2022, compared with the same periods in 2021, were mainly due to the timing of accretion of interest on the outstanding financing liability.

During the three and six months ended June 30, 2022, no interest and $0.7 million interest, respectively, was recognized on the outstanding financing liability, compared to $1.4 million for each of the three and six months ended June 30, 2021.

The decrease in interest expense in the three and nine months ended September 30, 2022, compared with the same periods in 2021, were mainly due to the timing of accretion of interest on the outstanding financing liability.

During the three and nine months ended September 30, 2022, no interest and $0.7 million interest, respectively, was recognized on the outstanding financing liability, compared to $0.9 million and $2.3 million, for the three and nine months ended September 30, 2021, respectively.

The decrease in interest expense as discussed above were partially offset by higher interest on our term loan with MidCap due to the increase in the outstanding term loan balance.

In February 2022, we accessed additional $10.0 million term loan (Tranche 3) from our credit facility with MidCap.

In February 2022, we accessed additional $10.0 million term loan (Tranche 3), and in July 2022, we accessed additional $10.0 million term loan (Tranche 4) from our credit facility with MidCap.

Provision for Income Taxes

Three Months Ended June 30,

Six Months Ended June 30,

Three Months Ended September 30,

Nine Months Ended September 30,

(in thousands)

1 unchanged sentence

Provision for (benefit from) income taxes

For the three and six months ended June 30, 2022, we did not recognize provision for income taxes due to our pre-tax book loss as we continue to record a full valuation allowance on our deferred tax assets considering our cumulative losses in prior years and forecasted losses in the future.

The benefit from and the provision for income tax for the three and six months ended June 30, 2021 were determined using our effective tax rate on our year-to-date income (loss).

For the three and nine months ended September 30, 2022, we did not recognize provision for income taxes due to our pre-tax book loss as we continue to record a full valuation allowance on our deferred tax assets considering our cumulative losses in prior years and forecasted losses in the future.

The benefit from and the provision for income tax for the three and nine months ended September 30, 2021 were determined using our effective tax rate on our year-to-date income (loss).

We estimated a state tax liability over our pre-tax income (loss) for 2021, which was primarily due to revenue recognized for the Lilly Agreement.

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There had been no material changes to these accounting policies.

Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2021.

There have been no material changes to these accounting policies.

Our significant accounting policies are described in “Note 1 – Description of Business and Summary of Significant Accounting Policies” to our “Notes to Financial Statements” contained in “Part II, Item 8, Financial Statements and Supplementary Data” of our Annual Report on Form 10-K for the year ended December 31, 2021.

There have been no material changes to these accounting policies except for our accounting associated with our in-license agreement with Forma as discussed in detail in “Note 4 - Sponsored Research and License Agreements and Government Contract” to our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Recent Accounting Pronouncements

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Liquidity and Capital Resources

As of June 30, 2022, we had approximately $89.2 million in cash, cash equivalents and short-term investments, as compared to approximately $125.0 million as of December 31, 2021.

As of September 30, 2022, we had approximately $81.6 million in cash, cash equivalents and short-term investments, as compared to approximately $125.0 million as of December 31, 2021.

We continue to maintain investment portfolios primarily in money market funds, US treasury bills, government-sponsored enterprise securities, and corporate bonds and commercial paper.

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Following summarizes our cash flow activity for the periods presented:

Six Months Ended June 30,

Nine Months Ended September 30,

(in thousands)

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Financing activities

Net increase (decrease) in cash and cash equivalents

Net cash used in operating activities for the six months ended June 30, 2022 was primarily related to payments for our research and development programs and other operating expenses, partially offset by the proceeds from sales of TAVALISSE, and the timing of cash receipt from our collaboration partners and cash grant from the US Department of Defense.

Net cash provided by operating activities for the six months ended June 30, 2021 was primarily due to the cash received from Lilly for the portion allocated as net transaction price of $67.1 million, proceeds from sales of TAVALISSE, and timing of cash receipt from our collaboration partners and cash grant from the US Department of Defense.

Net increase in cash and cash equivalents

Net cash used in operating activities for the nine months ended September 30, 2022 was primarily related to payments for our research and development programs and other operating expenses, partially offset by the proceeds from sales of TAVALISSE, and the timing of cash receipt from our collaboration partners and cash grant from the US Department of Defense.

Net cash provided by operating activities for the nine months ended September 30, 2021 was primarily due to the cash received from Lilly for the portion allocated as net transaction price of $67.1 million, proceeds from sales of TAVALISSE, and timing of cash receipt from our collaboration partners and cash grant from the US Department of Defense.

These increases were partially offset by payments of our research and development programs and other operating expenses.

Net cash provided by investing activities for the six months ended June 30, 2022 comprises net maturities of short-term investments of $43.6 million and proceeds from disposal of assets of $0.3 million, partially offset by capital expenditures of $0.2 million.

Net cash used in investing activities for the six months ended June 30, 2021 comprises net purchases of short-term investments of $41.6 million and capital expenditures of $0.5 million.

Net cash provided by financing activities for the six months ended June 30, 2022 was primarily due to the net cash proceeds from term loan financing (Tranche 3) of $9.9 million and proceeds from exercises of stock options and participation in the Purchase Plan of $1.5 million, partially offset by our payment of cost share to Lilly of $8.3 million.

N et cash provided by financing activities for the six months ended June 30, 2021 was primarily due to the cash received from Lilly for the portion allocated as financing component amounting to $57.9 million, and proceeds from exercise of stock options and participation in the Purchase Plan of $3.4 million.

We believe that our existing capital resources will be sufficient to support our current and projected funding requirements, including the continued commercialization of TAVALISSE, through at least the next 12 months from the Form 10-Q filing date.

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our

available capital resources sooner than we currently expect.

Net cash provided by investing activities for the nine months ended September 30, 2022 comprises net maturities of short-term investments of $54.0 million and proceeds from disposal of assets of $0.5 million, partially offset by capital expenditures of $0.4 million.

Net cash used in investing activities for the nine months ended September 30, 2021 comprises net purchases of short-term investments of $85.9 million and capital expenditures of $0.6 million.

Net cash provided by financing activities for the nine months ended September 30, 2022 was primarily due to the net cash proceeds from term loan financing (Tranche 3 and 4) of $19.5 million and proceeds from exercises of stock options and participation in the Purchase Plan of $1.5 million, partially offset by our payment of cost share to Lilly of $12.4 million.

N et cash provided by financing activities for the nine months ended September 30, 2021 was primarily due to the cash received from Lilly for the portion allocated as financing component amounting to $57.9 million, and proceeds from exercise of stock options and participation in the Purchase Plan of $3.7 million.

We believe that our existing capital resources will be sufficient to support our current and projected funding requirements, including the continued commercialization of TAVALISSE as well as the potential commercial launch of olutasidenib, through at least the next 12 months from the Form 10-Q filing date.

We have based this estimate on assumptions that may prove to be wrong, and we could utilize our available capital resources sooner than we currently expect.

Because of the numerous risks and uncertainties associated with commercializing a product, the development of our product candidates and other research and development activities, we are unable to estimate with certainty our future product revenues, our revenues from our current and future collaborative partners, the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical trials and other research and development activities.

Capital Resources

Since inception, we have financed our operations primarily through sales of equity securities, from sales of TAVALISSE beginning in May 2018, and contract payments under our collaboration agreements.

Since inception, we have financed our operations primarily through sales of equity securities, debt financing, from sales of TAVALISSE beginning in May 2018, and contract payments under our collaboration agreements.

Under our existing collaboration agreements that we entered in the ordinary course of business, we received or may be entitled to receive upfront cash payments, payments contingent upon specified events achieved by such partners and royalties on any net sales of products sold by such partners under the agreements.

As of June 30, 2022, total future contingent payments to us under our existing agreements, excluding terminated or terminating agreements, could exceed $1.3 billion if all potential product candidates achieved all of the payment triggering events under all of our current agreements (based on a single product candidate under each agreement).This estimated future contingent amount does not include any estimated royalties that could be due to us if the partners successfully commercialize any of the licensed products.

As of September 30, 2022, total future contingent payments to us under our existing agreements, excluding terminated agreements, could exceed $1.3 billion if all potential product candidates achieved all of the payment triggering events under all of our current agreements.

This estimated future contingent amount does not include any estimated royalties that could be due to us if the partners successfully commercialize any of the licensed products.

Future events that may trigger payments to us under the agreements are based solely on our partners’ future efforts and achievements of specified development, regulatory and/or commercial events.

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Under the agreement with the US Department of Defense, we are entitled to receive such award based on the agreed-upon payment schedule, subject to submission of proper documentation as evidence of completion of certain clinical trial events or milestones as specified in the agreement, and approval by the US Department of Defense that such events or milestones have been met.

Through June 30, 2022, we recognized $10.5 million in revenue from this award and expect to receive the remaining awards of $6.0 million throughout the period of which we conduct our clinical trial, subject to us meeting certain clinical trial events or milestones and approval by the US Department of Defense as specified in the agreement.

Through September 30, 2022, we recognized $13.0 million in revenue from this award and expect to receive the remaining awards of $3.5 million throughout the period of which we conduct our clinical trial, subject to us meeting certain clinical trial events or milestones and approval by the US Department of Defense as specified in the agreement.

In August 2020, we entered into an Open Market Sale Agreement SM with Jefferies LLC, as a sole agent, pursuant to which we may sell from time to time, through Jefferies, shares of our common stock in sales deemed to be “at-the-market offerings” as defined in Rule 415 under the Securities Act, subject to conditions specified in the Open Market Sale Agreement, including maintaining an effective registration statement covering the sale of shares under the Open Market Sale Agreement.

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and a base prospectus which covers the offering, issuance, and sale by us of the securities identified from time to time in one or more offerings .

On March 1, 2022, we filed a post-effective amendment to the automatic shelf registration statement immediately after filing our Annual Report on Form 10-K for the year ended December 31, 2021, because we no longer qualified as a WKSI upon filing of such Annual Report.

On March 1, 2022, we filed a post-

effective amendment to the automatic shelf registration statement immediately after filing our Annual Report on Form 10-K for the year ended December 31, 2021, because we no longer qualified as a WKSI upon filing of such Annual Report.

The post-effective amendment was declared effective on May 3, 2022.

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The Credit Agreement provides for $60.0 million term loan credit facility.

As of June 30, 2022, we have a principal term loan outstanding with MidCap amounting to $30.0 million.

On July 27 2022, we entered into the Third Amendment to our Credit Agreement with MidCap and on such date, an additional $10.0 million term loan was funded.

To date, the facility gives us the ability to access an additional $20.0 million at our option, subject

to the achievement of certain customary conditions.

See further discussions of our Credit Agreement with MidCap in “Note 9 – Debt” and “Note 12 – Subsequent Events” to our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

As of September 30, 2022, we have a principal term loan outstanding with MidCap amounting to $40.0 million and the facility gives us the ability to access an additional $20.0 million at our option through March 31, 2023, subject to the achievement of certain customary conditions.

We have a sublease agreement originally entered in December 2014, and subsequently amended in February 2017 and July 2017, with an unrelated third party to occupy a portion of our research and office space which expire in January 2023.

As of June 30, 2022, we expect to receive approximately $2.8 million in future sublease income (excluding our subtenant’s share of facility’s operating expenses) through January 2023.

As of September 30, 2022, we expect to receive approximately $1.6 million in future sublease income (excluding our subtenant’s share of facility’s operating expenses) through January 2023.

Our operations will require significant additional funding for the foreseeable future.

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● expenses associated with any unforeseen litigation, including any arbitration and securities class action lawsuits.

candidates at an earlier stage of development or on less favorable terms than we would otherwise choose or may adversely affect our ability to operate as a going concern.

Insufficient funds may require us to delay, scale back or eliminate some or all of our commercial efforts and/or research or development programs, to lose rights under existing licenses or to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose or may adversely affect our ability to operate as a going concern.

Material Cash Requirements

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As discussed in detail in “Note 4 – Sponsored Research and License Agreements and Government Contract” of our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, pursuant to our global exclusive license agreement and strategic collaboration agreement with Lilly, we are responsible for funding the development costs for R552 in the US, Europe, and Japan, up to $65.0 million through April 1, 2024.

Through June 30, 2022, Lilly billed us $8.3 million of the funding development costs and the amounts were fully paid as of June 30, 2022.

Through September 30, 2022, Lilly billed us $12.4 million of the funding development costs and the amounts were fully paid as of September 30, 2022.

We have the right to opt-out of co-funding of development costs at two different specified times.

If we decide not to exercise our opt-out rights, we will be required to share in global development costs up to certain amounts at a specified cap, as set forth in the agreement.

As of June 30, 2022, we have a contractual commitment related to our facilities lease which will expire in January 2023 amounting to $6.1 million.

Additionally, as discussed in detail in “Note 4 – Sponsored Research and License Agreements and Government Contract” of our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, in July 2022, we entered into a license and transition services agreement with Forma.

Pursuant to such agreement, we paid Forma an upfront fee of $2.0 million, with potential for an additional development and regulatory milestone payments of up to $67.5 million, commercial milestone payments of up to $165.5 million, and tiered royalty payments.

As of September 30, 2022, no milestone payment was met.

In October 2022, a regulatory milestone was met which entitles Forma to receive a $2.5 million milestone payment.

As of September 30, 2022, we have a contractual commitment related to our facilities lease which will expire in January 2023 amounting to $3.5 million.

This amount excludes the expected sublease income as discussed above.

As discussed in “Note 12 – Subsequent Events” of our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q, o n October 28, 2022, we entered into a sublease agreement with Atara to sublease approximately 13,670 rentable square feet of office space located in South San Francisco, California.

Subject to the terms of the sublease agreement, the lease term shall commence no sooner than November 1, 2022 and shall expire on May 24, 2025.

The future lease payments associated with this sublease agreement are approximately $1.7 million.

We expect this new leased facility will be held as our new headquarters following the expiration of our current leased facility

in South San Francisco, California in January 2023.

As discussed above, we have a contractual commitment with respect to our credit facility with MidCap.

Prior to the Third Amendment to Credit Agreement with MidCap, we are obligated to make interest payments at an annual rate of one-month LIBOR (or a comparable applicable index rate determined pursuant to the Credit Agreement if the LIBOR is no longer available) plus 5.65%, subject to a LIBOR floor of 1.50% and payable monthly in arrears, originally for the first 24 months and the interest plus principal amortization for the next 36 months.

Our Credit Agreement provides us an option to extend the interest-only period to 36 months (first interest-only extension) and again to 48 months (second interest-only extension) upon the satisfaction of certain conditions set forth in the Credit Agreement.

In June 2021, we satisfied the first interest-only extension conditions under the Initial Credit Agreement which effectively extended the interest-only period to 36 months or through October 1, 2022.

Further, in June 2022, we satisfied the second interest-only extension conditions which effectively extended the interest-only period to 48 months or through October 1, 2023.

As of June 30, 2022, the outstanding principal amount of the loan was $30.0 million, and no principal payments are due within 12 months under the current 48-month interest-only period.

Under the amended Credit Agreement, the term loans mature on September 1, 2026, and the interest-only period is through October 1, 2024.

The interest rate applicable to the term loans under the amended Credit Agreement is the sum of one-month SOFR, plus an adjustment of 0.11448%, subject to 1.50% applicable floor, plus applicable margin of 5.65%.

A final payment fee of 2.5% of principal is due at maturity date of the term loans.

As of September 30, 2022, the outstanding principal amount of the loan was $40.0 million, and no principal payments are due within 12 months.

We are also obligated to pay annual administrative fees and a final fee due at maturity.

Future interest and final fee payments associated with the credit facility amounted to $4.6 million, with $2.1 million payable within 12 months.

As discussed in detail in “Note 12 – Subsequent Events” of our “Notes to Condensed Financial Statements” contained Part I, Item 1 of this Quarterly Report on Form 10-Q, in July 2022, we entered into the Third Amendment to our Credit Agreement with MidCap, which among other things, extend the maturity date for the term loans to September 1, 2026, extend the interest-only period for the term loans to October 1, 2024, reset the prepayment fee applicable to the term loans, and change the interest rate benchmark from LIBOR to SOFR (as defined in the amended Credit Agreement).

To date, the outstanding principal balance of the loan was $40.0 million.

Additionally, as discussed in detail in “Note 12 – Subsequent Events” of our “Notes to Condensed Financial Statements” contained Part I, Item 1 of this Quarterly Report on Form 10-Q, in July 2022, we entered into a license and transition services agreement with Forma.

Pursuant to such agreement, we will pay Forma an upfront fee of $2.0 million, with potential for an additional development and regulatory milestone payments of up to $67.5 million, commercial milestone payments of up to $165.5 million, and tiered royalty payments.

Future interest and final fee payments associated with the credit facility amounted to $9.6 million, with approximately $3.0 million is payable within 12 months.

We are also subject to claims related to the patent protection of certain of our technologies, as well as purported securities class action lawsuit, other litigations, and other contractual agreements.

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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