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Item 2. Management’s Discussion and Analysis

2023-08-01 compared with 2023-05-02 · 191 added, 178 removed, 459 unchanged (45% 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, 2022 filed with the SEC on March 7, 2023.

Our financial results for the three months ended March 31, 2023 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 six months ended June 30, 2023 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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Examples of these statements include, but are not limited to:

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

our expectations regarding the impact of the global pandemic;

our business and scientific strategies;

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our drug discovery technologies;

our research and development expenses;

our research and development expense;

protection of our intellectual property and our intention to vigorously enforce our intellectual property rights;

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We are a biotechnology company dedicated to discovering, developing and providing novel therapies that significantly improve the lives of patients with hematologic disorders and cancer.

Our pioneering research focuses on signaling pathways that are critical to disease mechanisms.

We focus on products that address signaling pathways that are critical to disease mechanisms.

Our first product approved by the FDA is TAVALISSE (fostamatinib disodium hexahydrate) tablets, the only approved oral SYK inhibitor for the treatment of adult patients with chronic ITP who have had an insufficient response to a previous treatment.

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

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

Our second FDA approved product is REZLIDHIA (olutasidenib) capsules for the treatment of adult patients with R/R AML with a susceptible IDH1 mutation as detected by an FDA-approved test.

We began our commercialization of REZLIDHIA in December 2022.

W e in-licensed olutasidenib from Forma with exclusive, worldwide rights for its development, manufacturing and commercialization.

We conducted a Phase 3 clinical trial evaluating fostamatinib for the treatment of wAIHA and announced that we did not file an sNDA for this indication considering the top-line data results and guidance received from the FDA.

We 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 currently being studied in an NIH/NHLBI sponsored Phase 2/3 trial (ACTIV-4 Host Tissue Trial) for the treatment of COVID-19 in hospitalized patients.

W e in-licensed olutasidenib from Forma (now Novo Nordisk), with exclusive, worldwide rights for its development, manufacturing and commercialization.

We continue to advance the development of our IRAK 1/4 inhibitor program, in an open-label, Phase 1b trial to determine the tolerability and preliminary efficacy of the drug in patients with lower-risk MDS who are refractory or resistant to prior therapies.

Our other ongoing clinical programs include a fostamatinib Phase 2/3 trial, the ACTIV-4 Host Tissue Trial, for the treatment of hospitalized high-risk patients with COVID-19 being conducted and sponsored by the NIH/ NHLBI, and

a RIPK1 inhibitor program in clinical development with our partner Lilly.

We also have product candidates in clinical development with partners BerGenBio and Daiichi.

Business Updates

TAVALISSE IN ITP

For the three months ended March 31, 2023, net product sales of TAVALISSE were $22.3 million, a 38% increase compared to the same period in 2022.

For the six months ended June 30, 2023, net product sales of TAVALISSE were $43.6 million, a 26% increase compared to the same period in 2022.

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.

These increases were partially offset by the increase in revenue reserves mainly due to higher government and private party 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.

REZLIDHIA in R/R AML with mIDHI

For the three months ended March 31, 2023, we recognized $1.5 million of net product sales of REZLIDHIA.

For the six months ended June 30, 2023, we recognized $4.0 million of net product sales of REZLIDHIA.

We began the commercialization of REZLIDHIA in December 2022 following the FDA approval.

On December 1, 2022, the FDA approved REZLIDHIA capsules for the treatment of adult patients with R/R AML with a susceptible IDH1 mutation as detected by an FDA-approved test.

W e in-licensed olutasidenib from Forma with exclusive, worldwide rights for its development, manufacturing and commercialization.

Pursuant to the license and transition services agreement with Forma entered in July 2022, Forma provided us an exclusive license to develop, manufacture and commercialize olutasidenib, Forma’s proprietary inhibitor of mIDH1, for any uses worldwide, including for the treatment of AML and other malignancies.

In accordance with 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.

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.

During the year ended December 31, 2022, certain milestones were met which entitled Forma to receive a $17.5 million milestone payments.

No new milestone was met during the three months ended March 31, 2023.

For further discussions of the license and transition services agreement with Forma, see “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.

Our commercial efforts focus on targeting healthcare professionals (HCPs) who manage patients with R/R AML.

For further discussions and other updates including recent publications on REZLIDHIA, refer to “Commercial Products – REZLIDHIA in R/R AML with mIDH1” section below.

W e in-licensed olutasidenib from Forma (now Novo Nordisk), with exclusive, worldwide rights for development, manufacturing and commercialization of olutasidenib for any uses, including for the treatment of AML and other malignancies.

In accordance with the terms of the license and transition services agreement, we paid 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.

In addition, subject to the terms and conditions of the license and transition services agreement, Forma (now Novo Nordisk) 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.

During the year ended December 31, 2022, certain milestones were met which entitled Forma (now Novo Nordisk) to receive a $17.5 million milestone payments.

No new milestone was met during the six months ended June 30, 2023.

For further discussions, see “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.

R289, an Oral IRAK1/4 Inhibitor for Hematology-Oncology, Autoimmune, and Inflammatory Diseases

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 syndrome (MDS) .

The open-label, Phase 1b trial will determine the tolerability and preliminary efficacy of R289 in patients with low-risk MDS who are refractory or resistant to prior therapies.

We continue to advance the development of our IRAK 1/4 inhibitor 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 lower-risk MDS .

The open-label, Phase 1b trial will determine the tolerability and preliminary efficacy of R289 in patients with lower-risk MDS who are refractory or resistant to prior therapies.

In December 2022, we announced that we dosed the first patient in our Phase 1b trial of R289.

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The safety and efficacy data from this Phase 1b trial, along with the safety and pharmacokinetic/pharmacodynamic data from the completed first-in-human study in heathy volunteers, are intended to be used to determine the recommended Phase 2 dose for future clinical development of R289 targeting lower-risk MDS.

To date, we completed enrollment of the first cohort of the trial and enrollment of the second cohort is underway.

To date, target enrollment in the second cohort of the trial has been completed and we expect to begin enrollment in the third cohort in the near future.

Global Strategic Partnership with Lilly

Lilly is continuing to advance R552, with an initial Phase 2a trial in active rheumatoid arthritis.

This initial Phase 2a trial in approximately 100 patients with moderately to severely active rheumatoid arthritis is anticipated to begin in the second quarter of 2023 and will involve global recruitment.

Lilly is continuing to advance R552, an investigational, potent and selective RIPK1 inhibitor.

Lilly has initiated the Phase 2a trial studying R552 in adult patients with moderately to severely active rheumatoid arthritis.

The trial plans to enroll 100 patients globally.

RIPK1 is implicated in a broad range of key inflammatory cellular processes and plays a key role in tumor necrosis factor 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.

The Phase 2a trial analysis is expected by the end of 2024.

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.

Under the Lilly Agreement, 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.

We have the right to opt-out of co-funding the R552 development activities in the US, Europe and Japan at two different specified times.

Under the Lilly Agreement, we have the right to opt-out of co-funding the R552 development activities in the US, Europe and Japan at two different specified times.

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.

Through March 31, 2023, Lilly billed us $15.9 million of the funding development costs and the amounts were fully paid as of March 31, 2023.

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.

Through June 30, 2023, Lilly billed us $16.9 million of the funding development costs and the amounts were fully paid as of June 30, 2023.

Fostamatinib in Hospitalized COVID-19 patients

In November 2022, we announced the top-line results from the FOCUS 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 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.

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 discussing next steps with the FDA and in collaboration with our partner, the US Department of Defense.

We previously announced in November 2022 the top-line results from the FOCUS 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 did not meet statistical significance in the primary efficacy endpoint of the number of days on oxygen through Day 29.

Upon further analysis, we discovered an error by the contract research organization (CRO) in the application of a statistical stratification factor.

The contracted programming CRO misinterpreted receipt of prior COVID-19 treatment of interest 14 days before randomization (regardless of continuation post randomization), as those medications taken 14 days before the date of randomization and ended prior to the day of randomization.

After correcting for this statistical error, the primary endpoint of the study was met;

those who received fostamatinib had lower mean days on oxygen than those who received placebo (4.8 vs.

7.6 days, p=0.0136).

Further, fostamatinib showed significance or trend towards significance in all secondary endpoints of reducing mortality and morbidity compared to placebo after correcting for the error.

These results, which we intend to publish, have been accepted for oral presentation at IDWeek 2023.

During our continued analysis regarding fostamatinib in hospitalized COVID-19 patients, we provided the updated analysis to the FDA and our partner, the US Department of Defense.

Given the end of the federal COVID-19 Public Health Emergency (PHE) in May 2023 , and based on feedback from the FDA, US Department of Defense and other advisors regarding the program’s regulatory requirements, costs, timeline and potential for success, we decided not to submit an Emergency Use Authorization (EUA) or sNDA.

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.

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

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

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

The COVID-19 pandemic has adversely impacted our business and operations.

Although the World Health Organization declared end of COVID-19 global public health emergency in May 2023, the degree to which another global pandemic may affect our business and operations and financial condition in the future will depend on developments that are highly uncertain and beyond our knowledge or control.

As such, we cannot ascertain the full extent of the future impacts it may have on our business.

We continue to monitor the effects of the COVID-19 pandemic and continues to undertake safety measures to keep our staff, patients, investigators and stockholders safe .

See also “Part I, Item 1A, Risk Factors” of this Quarterly Report on Form 10-Q for additional information on risks and uncertainties related to the ongoing COVID-19 pandemic.

See also “Part I, Item 1A, Risk Factors” of this Quarterly Report on Form 10-Q for additional information on risks and uncertainties related to the COVID-19 pandemic.

Our Product Portfolio

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TAVALISSE/Fostamatinib in ITP

Disease background.

Chronic ITP affects an estimated 81,300 adult patients in the US.

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

Orally available fostamatinib program.

Taken in tablet form, fostamatinib blocks the activation of SYK inside immune cells.

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In October 2016, we announced the results of the second FIT study, reporting that the response rate (16% in the treatment group, versus 4% in the placebo group) was consistent with the first study, although the difference was not statistically significant.

double-blind studies, the most commonly-reported adverse reactions occurring in at least 5% of patients treated with TAVALISSE were diarrhea, hypertension, nausea, dizziness, increased alanine aminotransferase, increased aspartate aminotransferase, respiratory infection, rash, abdominal pain, fatigue, chest pain, and neutropenia.

Serious adverse drug reactions occurring in at least 1% of patients treated with TAVALISSE in the ITP double-blind studies were febrile neutropenia, diarrhea, pneumonia, and hypertensive crisis.

In the ITP double-blind studies, the most commonly reported adverse reactions occurring in at least 5% of patients treated with TAVALISSE were diarrhea, hypertension, nausea, dizziness, increased alanine aminotransferase, increased aspartate aminotransferase, respiratory infection, rash, abdominal pain, fatigue, chest pain, and neutropenia.

Serious adverse drug

reactions occurring in at least 1% of patients treated with TAVALISSE in the ITP double-blind studies were febrile neutropenia, diarrhea, pneumonia, and hypertensive crisis.

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.

In addition, a report describing the long-term safety and durable efficacy of TAVALISSE with up to 5 years of treatment was published in Therapeutic Advances in Hematology in 2021.

TAVALISSE was approved by the FDA in April 2018 for the treatment of ITP in adult patients who have had an insufficient response to a previous treatment, and successfully launched in the US in May 2018.

The FDA granted orphan drug designation for fostamatinib for the treatment of ITP in August 2015.

In January 2020, the EC granted our MAA in Europe for fostamatinib (TAVLESSE) for the treatment of chronic ITP in adult patients who are refractory to other treatments.

In January 2020, the EC granted a centralized MA for fostamatinib (TAVLESSE) valid throughout the European Union (EU) and in the UK after the departure of the UK from the EU for the treatment of chronic ITP in adult patients who are refractory to other treatments.

In December 2022, Japan’s PMDA approved the NDA for fostamatinib in chronic ITP.

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Also, to help ensure that all eligible patients in the US have appropriate access to our products, we have established a reimbursement and patient support program called Rigel OneCare (ROC).

Through ROC, we provide co-pay assistance to qualified, commercially insured patients to help minimize out-of-pocket costs and also provide free product to uninsured or under-insured patients who meet certain established clinical and financial eligibility criteria.

Through ROC, we provide co-pay assistance to qualified, commercially insured patients to help minimize out-of-pocket costs and provide free product to uninsured or under-insured patients who meet certain established clinical and financial eligibility criteria.

In addition, ROC is designed to provide reimbursement support, such as information related to prior authorizations, benefits investigations and appeals.

In addition, our collaborative partner Grifols has launched TAVLESSE in the UK and certain countries in Europe including Germany, France, Italy and Spain, and continues a phased rollout across the rest of Europe.

We have entered into various license and commercial agreements to commercialize fostamatinib globally, but we retain the global rights to fostamatinib outside of the respective territories under such license and commercial agreements.

Our collaborative partner Grifols has launched TAVLESSE in the UK and certain countries in Europe including Germany, France, Italy and Spain, and continues a phased rollout across the rest of Europe.

Our collaborative partner Medison has also launched TAVALISSE in Canada and Israel.

Further, our collaborative partner Kissei has also recently launched TAVALISSE in Japan.

Fostamatinib in Global Markets

We have entered into various license agreements to commercialize fostamatinib globally.

The following describes the arrangements we have in place with Grifols, Kissei, Medison, and Knight.

We retain the global rights to fostamatinib outside of the Grifols, Kissei, Medison and Knight territories.

Fostamatinib in Europe/Turkey

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The efficacy and safety of orally administered fostamatinib was assessed by comparing it with placebo in a randomized, double-blind study.

Japan has the third highest prevalence of chronic ITP in the world behind the US and

Japan has the third highest prevalence of chronic ITP in the world behind the US and Europe.

In February 2020, Kissei was granted orphan drug designation from the Japanese Ministry of Health, Labor and Welfare for R788 (fostamatinib) in chronic ITP.

In December 2021, Kissei reported positive top-line results for a Phase 3 clinical trial, meeting its primary endpoint.

The Phase 3 clinical trial showed that patients receiving fostamatinib achieved a stable platelet response significantly higher than patients receiving a placebo control.

The Phase 3 clinical trial showed that patients receiving fostamatinib

achieved a stable platelet response significantly higher than patients receiving a placebo control.

Based on the positive Phase 3 results, in April 2022, Kissei submitted an NDA to Japan’s PMDA for fostamatinib in chronic ITP.

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Fostamatinib in Canada/Israel

We have an exclusive commercial and license agreements with Medison entered in October 2019, to commercialize fostamatinib in all potential indications in Canada and Israel.

We have two exclusive commercial and license agreements with Medison entered in October 2019, to commercialize fostamatinib in all potential indications in Canada and Israel.

Under the terms of the agreements, we received an upfront payment of $5.0 million with the potential for approximately $35.0 million in regulatory and commercial milestones.

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REZLIDHIA in R/R AML with mIDH1

Disease background.

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

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Olutasidenib may represent a treatment option with durable remissions, reduced QTc potential, and a stable pharmacokinetics profile that enables a consistent drug exposure over time.

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 drug designed to selectively bind to and inhibit mIDH1.

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

Orally available olutasidenib program.

REZLIDHIA (olutasidenib) is an oral, small molecule, inhibitor of mIDH1 designed to bind to and inhibit mIDH1 to reduce 2-hydroxyglutarate levels and restore normal cellular differentiation of myeloid cells.

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The safety of REZLIDHIA 150 mg administered twice daily was evaluated in 153 adults with relapsed or refractory AML with an IDH1 mutation.

Olutasidenib was designated by the FDA as an orphan drug for the treatment of AML, which provides orphan drug market exclusivity from the time of marketing approval on December 1, 2022.

On December 1, 2022, the FDA has approved REZLIDHIA capsules for the treatment of adult patients with R/R AML with IDH1 mutation as detected by an FDA approved test.

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The recommended dosage of REZLIDHIA is 150 mg taken orally twice daily until disease progression or unacceptable toxicity.

The FDA approval was based on the NDA for olutasidenib for the treatment of m1DH1 R/R AML submitted by Forma, that had a PDUFA action date for the application of February 15, 2023.

The NDA application was supported with Forma’s Phase 2 registrational trial for olutasidenib in mIDH1 R/R AML.

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

The interim results of this trial 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.

The FDA approval was based on the NDA for olutasidenib for the treatment of m1DH1 R/R AML submitted by Forma (now Novo Nordisk) , that had a PDUFA action date for the application of February 15, 2023.

The NDA application was supported with a Phase 2 registrational trial for olutasidenib in mIDH1 R/R AML.

Interim results from the Phase 2 registrational trial were reported at the American Society of Clinical Oncology (ASCO) annual meeting in June 2021.

The interim results of this trial 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 complete remission (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 was not yet reached, a sensitivity analysis (with a hematopoietic stem cell transplant, or HCST, as the end of a response) indicated the median duration of CR/CRh was 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 overall response rate, comprised CR, CRh, CRi, partial response, and morphologic leukemia-free state (MLFS), was 46% and the median duration of overall response rate (ORR) was 11.7 months.

The median overall survival was 10.5 months.

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The most frequently reported treatment emergent adverse events were nausea, constipation, increased white blood cell count, decreased RBC count, pyrexia, febrile neutropenia, and fatigue.

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.

Olutasidenib was designated by the FDA as an orphan drug for the treatment of acute myeloid leukemia in April 2017.

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

In November 2022, we announced the presentation of five posters highlighting data from our commercial and clinical hematology-oncology portfolio at the 64 th American Society of Hematology (ASH) Annual Meeting and Exposition which was held in December 2022.

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

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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.

The ORR a secondary end point, was 48%, and was defined as the rate of CR, CRh, CR with incomplete blood count recovery (CRi), partial remission (which required recovery of neutrophil and platelet counts consistent with a CR), or MLFS.

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

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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.

On November 10, 2022, we announced the publication of data in The Lancet Haematology, which summarizes the Phase 1 results of the Phase 1/2 trial of olutasidenib .

The objectives of the first phase of the multi-center, open-label Phase 1/2 trial were to assess the safety, pharmacokinetic and pharmacodynamic profile, and clinical activity of olutasidenib, both as monotherapy and in combination with azacitidine, in patients with treatment-naïve or R/R AML or myelodysplastic syndrome (MDS) harboring IDH1 mutations.

In November 2022, we announced the publication of data in The Lancet Haematology, which summarizes the Phase 1 results of the Phase 1/2 trial of olutasidenib .

The published data suggest that olutasidenib, with or without azacitidine, was well-tolerated and was associated with improvements in clinical efficacy endpoints in patients with mIDH1 AML.

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REZLIDHIA demonstrated both a high rate of response and an extended median duration of complete response of 28.1 months, which is more than a year longer than what is reported with the Standard of Care (SoC).

In June 2023, we announced the second REZLIDHIA publication in Blood Advances , a review article examining the preclinical and clinical development, and the positioning of olutasidenib in the mIDH1 AML treatment landscape.

The review concluded that the approval of REZLIDHIA is a critical addition to the mIDH1 AML treatment landscape.

Further, the available data support the use of REZLIDHIA as monotheraphy in R/R AML patients who have failed intensive chemotheraphy or venetoclax plus hypomethylating agents (HMA) combination therapy.

In June 2023, we announced presentation of data from an analysis from the Phase 2 study of REZLIDHIA in 17 patients with mIDH1 AML who were previously treated with venetoclax.

Data was featured in a poster presentation at the European Hematology Association 2023 Hybrid Congress.

The data support olutasidenib induced durable remissions in patients with mIDH1 AML in this poor-prognosis patient population who were relapsed or refractory to venetoclax-based treatment.

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

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REZLIDHIA is highly synergistic with our existing hematology-oncology focused commercial and medical affairs infrastructure.

Our commercial efforts will focus on targeting h ematologists and hematologist-oncologists who manage patients with R/R AML with mIDH1.

Our commercial efforts will focus on targeting HCPs who manage patients with R/R AML with mIDH1.

We plan to enter collaborations with third parties to commercialize REZLIDHIA outside of US.

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R289, an Oral IRAK 1/4 Inhibitor for Hematology-Oncology, Autoimmune, and Inflammatory Diseases

Orally Available IRAK 1/4 Inhibitor Program.

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.

During the second quarter of 2018, we selected R835, the active metabolite of R289, a proprietary molecule from our IRAK 1/4 inhibitor 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 receptor (IL-1R) family 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.

R835 prevents cytokine release in response to TLR and IL-1R activation in vitro.

prevents cytokine release in response to TLR and IL-1R activation in vitro.

R835 is active in multiple rodent models of inflammatory disease including psoriasis, arthritis, lupus, multiple sclerosis and gout.

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The Phase 1 trial showed positive tolerability and PK data as well as established proof-of-mechanism by demonstrating the inhibition of inflammatory cytokine production in response to a lipopolysaccharide (LPS) challenge.

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

The open-label, Phase 1b trial will determine the tolerability and preliminary efficacy of R289 in patients with low-risk MDS who are refractory or resistant to prior therapies.

In January 2022, we received clearance from the FDA on our clinical trial design to explore R289 in lower-risk MDS.

The open-label, Phase 1b trial will determine the tolerability and preliminary efficacy of R289 in patients with lower-risk MDS who are refractory or resistant to prior therapies.

In December 2022, we announced that we dosed the first patient in our Phase 1b trial of R289.

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To date, we completed enrollment of the first cohort of the trial and enrollment of the second cohort is underway.

To date, target enrollment in the second cohort of the trial has been completed and we expect to begin enrollment in the third cohort in the near future.

Fostamatinib in Hospitalized COVID-19 Patients

Disease background.

COVID-19 is the infectious disease caused by Severe Acute Respiratory Syndrome Coronavirus-2 (SARS-CoV-2).

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On November 1, 2022, we announced the top-line results of the FOCUS trial.

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 trial 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 discussing next steps with the FDA and in collaboration with our partner, the US Department of Defense.

We previously announced in November 2022 the top-line results from the FOCUS 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 did not meet statistical significance in the primary efficacy endpoint of the number of days on oxygen through Day 29.

Upon further analysis, we discovered an error by the CRO in the application of a statistical stratification factor.

After correcting for this statistical error, the primary endpoint of the study was met;

those who received fostamatinib had lower mean days on oxygen than those who received placebo (4.8 vs.

7.6 days, p=0.0136).

Further, fostamatinib showed significance or trend towards significance in all secondary endpoints of reducing mortality and morbidity compared to placebo after correcting for the error.

These results, which we intend to publish, have been accepted for oral presentation at IDWeek 2023.

During our continued analysis regarding fostamatinib in hospitalized COVID-19 patients, we provided the updated analysis to the FDA and our partner, the US Department of Defense.

Given the end of the federal COVID-19 PHE in May 2023 , and based on feedback from the FDA, US Department of Defense and other advisors regarding the program’s regulatory requirements, costs, timeline and potential for success, we decided not to submit an EUA or sNDA.

NIH/NHLBI-sponsored Phase 2 Trial.

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The trial completed the enrollment in March 2021.

In April 2021, we announced that the Phase 2 clinical trial met its primary endpoint of safety.

In April 2021, w e announced that the Phase 2 clinical trial met its primary endpoint of safety.

Fostamatinib reduced the incidence of SAEs by half.

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In April 2022, Imperial College of London completed a pre-planned interim analysis of the primary endpoint, patients progressing from mild or moderate (modified WHO COVID-19 scale 3-4) to severe disease (modified WHO COVID-19 scale ≥5) within 14 days, in the Phase 2 MATIS trial.

The independent data monitoring committee determined that the fostamatinib plus SoC arm did not meet the prespecified criteria for continuation to the next stage of the trial.

The independent data monitoring committee determined that the fostamatinib plus SoC arm

did not meet the prespecified criteria for continuation to the next stage of the trial.

No safety concerns were identified.

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The research was focused on drug repurposing for the much lower risk of toxicity and the ability of FDA-approved treatments to be delivered on a shortened timescale, which is critical for patients afflicted with lung disease resulting from COVID-19.

to a combination of immune complexes formed by anti-Spike IgG in serum from severe COVID-19 patients.

In addition, the in vitro studies led by the Amsterdam University Medical Center at the University of Amsterdam, showed that R406, the active metabolite of fostamatinib, blocked macrophage hyperinflammatory responses to a combination of immune complexes formed by anti-Spike IgG in serum from severe COVID-19 patients.

Anti-Spike IgG levels are known to correlate with the severity of COVID-19.

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Fostamatinib in wAIHA

Disease background .

A utoimmune hemolytic anemia is a rare, serious blood disorder where the immune system produces antibodies that result in the destruction of the body’s own red blood cells.

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AIHA affects an estimated 45,000 Americans, and approximately 36,000 of those patients have wAIHA, where no approved treatment options currently exist.

Orally available fostamatinib program .

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

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The FDA granted orphan drug designation for fostamatinib for the treatment of wAIHA in January 2018.

In March 2019, we initiated our wAIHA pivotal Phase 3 clinical trial of fostamatinib, known as the FORWARD study.

In March 2019, we initiated our wAIHA pivotal Phase 3 clinical trial of fostamatinib, known as the

FORWARD study.

The clinical trial protocol calls for a placebo-controlled study of 90 patients with primary or secondary wAIHA who have failed at least one prior treatment.

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The trial did not demonstrate statistical significance in the primary efficacy endpoint of durable hemoglobin response in the overall study population.

The trial also included key secondary endpoints, including hemoglobin response on at least one visit, change in hemoglobin from baseline of ≥2 g/dL, use of permitted rescue therapy after week 4, change in hemoglobin from baseline to end of treatment and change from baseline to week 24 in Functional Assessment of Chronic Illness

Therapy – Fatigue scale.

Across the trial’s overall patient population, fostamatinib was generally well-tolerated.

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

In July 2021, Rain announced that it initiated a Phase 3 trial 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 and in August 2022, Rain announced the completion of enrollment of its Phase 3 trial for milademetan in liposarcoma.

In late 2021, Rain commenced its second clinical trial for RAIN-32 in patients with MDM2-amplified advance solid tumors, and in November 2022, Rain provided an interim analysis of the trial which showed that the drug safety profile of milademetan is preliminary consistent with its prior Phase 1 trial.

In July 2021, Rain announced that it initiated a Phase 3 trial to evaluate the efficacy and safety of milademetan

(RAIN-32) for the treatment of patients with unresectable or metastatic dedifferentiated liposarcoma, a rare cancer originating from fat cells located in the soft tissues of the body, and announced the completion of enrollment in August 2022.

In May 2023, Rain announced that the trial did not meet its primary endpoint of progression free survival by blinded independent central review compared to the standard of care.

Based on the topline results, Rain does not expect to pursue further development of milademetan in dedifferentiated liposarcoma.

In late 2021, Rain commenced its second clinical trial of milademetan in patients with MDM2-amplified solid tumors.

In November 2022, Rain provided an interim analysis of the trial which showed that the drug safety profile of milademetan is preliminarily consistent with its prior Phase 1 trial.

In May 2023, Rain announced its plan to suspend the enrollment of its Phase 2 trial of milademetan in patients with MDM2-amplified solid tumors, and terminate its plans to initiate the Phase 1/2 study evaluating the safety and efficacy of milademetan in patients with CDKN2A loss/ TP53 wild type advanced solid tumors.

Research, Preclinical and Clinical Development Programs

We have retained a selected team of experts in drug discovery and preclinical development to leverage our existing proprietary collection of inhibitors, small-molecule compound libraries and large database of associated phenotypic and biochemical assay results of therapeutic interest.

We maintain leading expertise on specific areas of operation such as inhibition of SYK, IRAK1/4, RIPK1 and mIDH1 kinases to assist clinical development and commercial affairs, as well as to expand and explore additional opportunities for such inhibitors in the clinical

We maintain leading expertise on specific areas of operation such as inhibition of SYK, IRAK 1/4, RIPK1 and mIDH1 kinases to assist clinical development and commercial affairs, as well as to expand and explore additional opportunities for such inhibitors in the clinical space.

Our preclinical operations involve collaborations with clinical research organizations, leading investigators from universities and research organizations around the world, and strategic collaborations with other pharmaceutical companies.

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Results of Operations

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Product sales, net

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The following table summarizes the percentages of revenues from each of our customers who individually accounted for 10% or more of the total net product sales and revenues from collaborations:

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

McKesson Specialty Care Distribution Corporation

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Net product sales pertained to sales of our products in the US, net of chargebacks, discounts and fees, government and other rebates and returns.

For the three months ended March 31, 2023, net product sales increased by 47% compared to the same period in 2022.

For the three and six months ended June 30, 2023, net product sales increased by 29% and 37%, respectively, compared to the same periods in 2022.

The increase was primarily driven by increased TAVALISSE net product sales and the current period net product sales from REZLIDHIA.

TAVALISSE net product sales increased by $6.1 million or 38% in the three months ended March 31, 2023 compared to the same period in 2022, primarily as a result of increased quantities sold and higher price per bottle, partially offset by increased revenue reserves mainly due to higher government and private payer rebates.

In the three months ended March 31, 2023, we recognized $1.5 million of net product sales from REZLIDHA.

TAVALISSE net product sales increased by $2.8 million or 15% in the three months ended June 30, 2023, and $8.9 million or 26% in the six months ended June 30, 2023, compared to the same periods in 2022, primarily as a result of increased quantities sold and higher price per bottle.

In the three and six months ended June 30, 2023, we recognized $2.6 million and $4.0 million, respectively, of net product sales from REZLIDHA.

We began our commercialization of REZLIDHIA in December 2022.

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 months ended March 31, 2023 consisted primarily of revenue from Grifols related to the delivery of drug supplies of $1.6 million and royalty revenue of $0.7 million.

Contract revenues from collaborations in the three months ended March 31, 2022 consisted primarily of $0.2 million in revenue related to our license agreement with Lilly, and $0.3 million in revenue related to the research and development services with Grifols.

No government contract revenue was recognized in the three months ended March 31, 2023 and 2022.

Government contract revenue is primarily derived from income we recognize 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 March 31, 2023, we received $15.0 million of the awards which we recognized as revenue in the respective periods, with remaining $1.5 million awards available, subject to us meeting certain clinical trial events or milestones and approval by the US Department of Defense as specified in the agreement.

Contract revenues from collaborations in the three and six months ended June 30, 2023 consisted primarily of revenue from Grifols related to the delivery of drug supplies of $1.2 million and $2.8 million, respectively, and royalty revenue of $0.8 million and $1.5 million, respectively.

Contract revenues from collaborations in the three and six months ended June 30, 2022 were consisted primarily 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 from Grifols related delivery of fostamatinib supply and research and development services, and $0.3 million and $0.5 million, respectively, in revenue from Lilly related to delivery of CNS penetrant IP.

Government contract revenue in the three and six months ended June 30, 2023 was related to the income we recognized upon achievement of certain milestones 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, 2023, we received $16.0 million of the awards which we recognized as revenue in the respective periods, with remaining $0.5 million available, subject to us meeting certain milestone and approval by the US Department of Defense as specified in the agreement.

Our potential future revenues may include product sales, payments from our collaboration partners and from new collaboration partners with whom we enter into agreements in the future, if any, and from existing government grants and any future grants we may be entitled to, if any, the timing and amount of which is unknown at this time.

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 March 31, 2023, 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.

As of June 30, 2023, we had deferred revenues of $1.4 million, which we will recognize as revenue upon satisfaction of our remaining performance obligations under our collaboration agreement with Kissei.

Cost of Product Sales

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Cost of product sales

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Inventories sold for the periods presented include inventory quantities acquired or produced prior to the FDA approval of the product, and do not reflect the full cost of the inventories sold, since such costs incurred prior to FDA approval were previously expensed and charged to research and development expense.

We expect to continue to have a lower cost of product sales as we sell inventory quantities that were acquired or produced prior to the FDA approval of the product, until we sell inventory quantities reflecting the full cost.

We expect that this will be the case in the near term, and as a result, our cost of product sales will be less than we anticipate it will be in future periods.

As we acquire or produce more FDA approved inventory quantities in the future, our inventory cost in the balance sheet and cost of product sales will increase, reflecting the full cost of acquiring or producing such products.

As such, we recognize lower cost of product sales in the periods where we sell inventory quantities acquired or produced prior to the FDA approval of the product.

As we acquire or produce more FDA approved inventory quantities in the future, our inventory cost in the balance sheet and cost of product sales will reflect the full cost of acquiring or producing such products.

Further, following the approval of REZLIDHIA, we recognize amortization expense from capitalized intangible asset and royalty expense on REZLIDHIA sales within cost of sales.

The increase in cost of product sales in the three months ended March 31, 2023 compared to the same period in 2022 was partly due to amortization of capitalized intangible asset of $0.3 million and royalty expense of $0.2 million recorded within cost of sales in the three months ended March 31, 2023.

No such expenses were incurred in the same period in 2022.

Incrementally, cost of sales increased due to the increase in inventory quantities sold to our specialty distributors and delivery of drug supplies pursuant to our supply agreements with our collaborative partners.

Cost of product sales in the three and six months ended June 30, 2023 increased compared to the same periods in 2022 primarily due to amortization of capitalized intangible asset recorded in the three and six months ended June 30, 2023 of $0.3 million and $0.5 million, respectively, and royalty expense of $0.4 million and $0.6 million, respectively.

No such expenses were incurred in the same periods in 2022.

These increases were partly offset by the decrease in cost of product sales due to the timing of delivery of drug supplies pursuant to our supply agreements with our collaborative partners.

Research and Development Expense

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Research and development expense

Stock-based compensation expense included in research and development expense

Stock-based compensation expense included within research and development in the three months ended March 31, 2023 include an incremental charge of approximately $0.5 million from stock option modifications related to the acceleration of vesting and extension of exercise period of vested stock option grants made to a former officer whose employment ended in March 2023.

The decrease in research and development expense in three months ended March 31, 2023 compared to the same period in 2022 was mainly due to the winding down of activities related to our two Phase 3 clinical trials of fostamatinib for the treatment of hospitalized high-risk patients with COVID-19 of $2.5 million and evaluating fostamatinib for the treatment of w AIHA of $1.3 million, as well as timing of activities related to our IRAK 1/4 inhibitor

program of $1.4 million.

In addition, personnel-related costs decreased by $0.4 million, and other research and development expenses including allocated facilities and laboratory costs decreased by $0.4 million.

These decreases were partially offset by higher stock-based compensation expense of $0.6 million primarily due to stock option modifications as discussed above.

Our research and development expenditures include costs related to preclinical and clinical trials, scientific personnel, supplies, equipment, consultants, sponsored research, stock-based compensation, allocated facility costs, and upfront payment related to our in-licensed agreement with Forma.

W e expect to continue to incur significant research and development expense as we continue our activities in our clinical studies including our 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 did not meet statistical significance in the primary efficacy endpoint.

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

Stock-based compensation expense in the six months ended June 30, 2023 above include an incremental charge of approximately $0.5 million from stock option modifications recorded in the first quarter of 2023 related to the acceleration of vesting and extension of exercise period of vested stock option grants made to a former officer whose employment ended in March 2023.

The decrease in research and development expense in three months ended June 30, 2023 compared to the same period in 2022 was mainly due to timing of activities related to our IRAK 1/4 inhibitor program of $2.6 million, and timing of trial completion activities of our Phase 3 clinical trials of fostamatinib for the treatment of hospitalized high-risk patients with COVID-19 of $1.3 million and for the treatment of w AIHA of $1.8 million.

In addition, personnel-related costs decreased by $0.7 million, consultants and third party services decreased by $0.7 million, and other research and development expense including allocated facilities and laboratory costs decreased by $2.9 million.

The decrease in research and development expense in six months ended June 30, 2023 compared to the same period in 2022 was mainly due to timing of activities related to our IRAK 1/4 inhibitor program of $4.0 million, and timing of trial completion activities of our Phase 3 clinical trials of fostamatinib for the treatment of hospitalized high-risk patients with COVID-19 of $3.7 million and for the treatment of w AIHA of $3.1 million.

In addition, personnel-related costs decreased by $1.1 million, consultants and third party services decreased by $0.7 million, and other research and development expense including allocated facilities and laboratory costs decreased by $3.3 million.

These decreases were partially offset by the increase in stock-based compensation expense of $0.5 million mainly due to stock option modification as discussed above.

W e expect to continue to incur significant research and development expense as we continue our activities in our clinical studies including our IRAK 1/4 inhibitor program and any other clinical programs we may pursue in the future.

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.

We previously announced in November 2022 the top-line results did not meet statistical significance in the primary efficacy endpoint of the number of days on oxygen through Day 29.

Upon further analysis, we discovered an error by the CRO in the application of a statistical stratification factor.

After correcting for this statistical error, the primary endpoint of the study was met.

Given the end of the federal COVID-19 PHE in May 2023, and based on feedback from the FDA, US Department of Defense and other advisors regarding the program’s regulatory requirements, costs, timeline and potential for success, we decided not to submit an EUA or sNDA.

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.

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

We review our research and development expenses by focusing on three categories:

We review our research and development expense by focusing on three categories:

research, development, and other.

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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 and pre-regulatory approval milestone recorded as research and development expense in 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.

“Other” expenses also include the upfront payment to Forma (now Novo Nordisk) and pre-regulatory approval milestone recorded as research and development expense in 2022.

In addition to reviewing the three categories of research and development expense 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.

We also make our research and development decisions in the context of our overall business strategy, which includes the evaluation of potential collaborations for the development of our drug candidates.

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Clinical trials can be delayed for a variety of reasons, including delays in obtaining regulatory approval to commence a trial, delays from scale up, delays in reaching agreement on acceptable clinical trial agreement terms with prospective clinical sites, delays in obtaining institutional review board approval to conduct a clinical trial at a prospective clinical site or delays in recruiting subjects to participate in a clinical trial.

Further, the evolving effects of COVID-19 pandemic may affect 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 trial results.

We currently do not have reliable estimates of total costs for a particular drug candidate to reach the market.

Our potential products are subject to a lengthy and uncertain regulatory process that may involve unanticipated additional clinical trials and may not result in receipt of the necessary regulatory approvals.

Failure to receive the

necessary regulatory approvals would prevent us from commercializing the product candidates affected.

Failure to receive the necessary regulatory approvals would prevent us from commercializing the product candidates affected.

In addition, clinical trials of our potential products may fail to demonstrate safety and efficacy, which could prevent or significantly delay regulatory approval.

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

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended

From January 1, 2007*

to March 31, 2023

to June 30, 2023

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

“Other” expenses for the three months ended March 31, 2023 and 2022 consisted of allocated facilities costs of $0.6 million and $1.3 million, respectively, and stock-based compensation expense of $1.0 million and $0.5 million, respectively.

For the three months ended March 31, 2023, a major portion of our total research and development expense was associated with our IRAK program.

For the three months ended March 31, 2022, a major portion of our total research and development expense was associated with our COVID-19, AIHA and IRAK programs.

“Other” expenses for the three months ended June 30, 2023 and 2022 consisted of allocated facilities costs of $0.1 million and $1.0 million, respectively, and stock-based compensation expense of $0.4 million and $0.5 million, respectively.

For the six months ended June 30, 2023 and 2022, allocated facilities costs was $0.8 million and $2.3 million, respectively, and allocated stock-based compensation expense was $1.4 million and $0.9 million, respectively.

For the three and six months ended June 30, 2023, a major portion of our total research and development expense was associated with our IRAK 1/4 program.

For the three and six months ended June 30, 2022, a major portion of our total research and development expense was associated with our COVID-19, AIHA and IRAK 1/4 inhibitor program.

Selling, General and Administrative Expense

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

(in thousands)

Selling, general and administrative expense

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

Stock-based compensation expense included within selling, general and administrative in the three months ended March 31, 2022 include an incremental charge of approximately $0.8 million from stock option modifications to extend the exercise period of the stock option grants made to our two former Board of Directors whose terms expired in May 2022.

The increase in selling, general and administrative expense in the three months ended March 31, 2023 compared to the same period in 2022 was mainly due to increased expenses on consulting and third party services of $1.7 million, partially offset by lower stock-based compensation expense of $1.0 million primarily due to the stock option modifications as discussed above, and decreased other various sales, general and administrative costs of $0.4 million.

We expect our selling, general and administrative expenses to increase as we continue to expand our commercial activities of our products.

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

The decrease in selling, general and administrative expense in the three months ended June 30, 2023 compared to the same period in 2022 was mainly due to decreased expenses on consulting and third party services of $1.5 million, partially offset by increased commercial related expenses of $0.7 million and increased other various sales, general and administrative costs of $0.1 million.

The decrease in selling, general and administrative expense in the six months ended June 30, 2023 compared to the same period in 2022 was mainly due to decreased stock-based compensation expense of $1.1 million, partly due to stock option modification as discussed above, and decreased other various sales, general and administrative costs of $0.3 million.

These decreases we partially offset by the increase in commercial related expenses of $1.0 million.

We expect to incur significant selling, general and administrative expenses, as we expect our commercial related expenses to increase as we continue to expand our commercial activities of our products.

We expect some cost savings on our general and administrative costs in the future because of reduction in workforce in our administrative group in October 2022.

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

However, due to the evolving effects of COVID-19 pandemic, we may not be able to fully forecast the scope of impacts it may have on our commercial activities and sales of our product.

Interest Income and Interest Expense

Three Months Ended March 31,

Three Months Ended June 30,

(in thousands)

Interest income

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Interest income is related to our interest-bearing cash and investment balances.

Interest expense for the periods presented comprised primarily of interest on the outstanding term loan with MidCap.

Interest expense on our term loan with Midcap increased by approximately $0.7 million in the three months ended March 31, 2023, compared to the same period in 2022, primarily due to the increase in the outstanding term loan balance, as well as higher interest rate.

This increase was offset by the interest expense recognized in the three months ended March 31, 2022 related to the accretion of financing liability with Lilly amounting to $0.7 million.

The increase interest income in the three and six months ended June 30, 2023, compared to the same periods in 2022, was primarily driven by higher interest rates.

Interest expense comprised primarily of interest on the outstanding term loan with MidCap.

The increase in interest expense in the three and six months ended June 30, 2023, compared to the same periods in 2022, was primarily due to higher interest expense on our term loan with Midcap of $1.3 million and $2.0 million, respectively, driven by higher outstanding term loan balance, as well as higher interest rates.

The increase interest expense in the six months ended June 30, 2023 compared to the same period of 2022 was partly offset by the interest expense recognized in first quarter of 2022 related to the accretion of financing liability with Lilly of $0.7 million.

Critical Accounting Policies and Use of Estimates

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Liquidity and Capital Resources

As of March 31, 2023 and December 31, 2022, we had approximately $58.7 million and $58.2 million, respectively, in cash, cash equivalents and short-term investments.

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

As of June 30, 2023 and December 31, 2022, we had approximately $64.4 million and $58.2 million, respectively, in cash, cash equivalents and short-term investments.

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

Cash in excess of immediate requirements is invested with regard to liquidity and capital preservation.

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We continue to monitor the impact of the changes in the conditions of the credit and financial markets to our investment portfolio and assess if future changes in our investment strategy are necessary.

We maintain a depository relationship with SVB.

On March 10, 2023, SVB was closed by the California Department of Financial Protection and Innovation, which appointed the FDIC as receiver.

On March 12, 2023, federal regulators announced that the FDIC would complete its resolution of SVB in a manner that fully protects all depositors.

On March 27, 2023, FCB announced that it entered into an agreement with FDIC to purchase all of the asset and

liabilities of SVB.

Customers of SVB automatically become customers of FCB following the acquisition.

To date and as of March 31, 2023, the amount of our cash held on deposit with SVB/FVB was not material with respect our total cash, cash equivalents and short-term investments.

All of our cash deposits with SVB/FCB are accessible to us, and we do not anticipate any losses with respect to such funds.

Following summarizes our cash flow activity for the periods presented:

Three Months Ended March 31,

Six Months Ended June 30,

(in thousands)

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Net increase in cash and cash equivalents

Net cash used in operating activities for the three months ended March 31, 2023 was primarily related to payments for our operating expenses, partially offset by the proceeds from sales of our products (TAVALISSE and REZLIDHIA), and the timing of cash receipt from our collaboration partners, including the $20.0 million regulatory milestone payment from Kissei received in January 2023.

Net cash used in operating activities for the three months ended March 31, 2022 was primarily related to payments for our operating expenses, partially offset by the proceeds from sales of our product (TAVALISSE), cash received from collaboration partners, and cash received from the award granted by the US Department of Defense.

Net cash provided by investing activities for the three months ended March 31, 2023 comprises maturities of short-term investments of $15.7 million and proceeds from sale of property and equipment of $0.1 million, partially offset by the payment of milestone obligations to Forma recorded as intangible assets of $15.0 million.

Net cash provided by investing activities for the three months ended March 31, 2022 comprises net maturities of short-term investments of $22.9 million, partially offset by purchases of property and equipment of $0.2 million.

Net cash provided by financing activities for the three months ended March 31, 2023 was primarily due to the net cash proceeds from term loan financing (Tranche 5) of $20.0 million, partially offset by our cost share payments to Lilly of $0.8 million.

Net cash provided by financing activities for the three months ended March 31, 2022 was primarily due to the net cash proceeds from term loan financing (Tranche 3) of $10.0 million and proceeds from exercise of stock options of $0.9 million, partially offset by our payment of cost share to Lilly of $2.1 million.

Net cash provided in operating activities for the six months ended June 30, 2023 was primarily due the proceeds from sales of our products (TAVALISSE and REZLIDHIA), cash receipt from our collaboration partners, including the $20.0 million regulatory milestone payment from Kissei received in January 2023, and cash received from the awards granted by the US Department of Defense, partially offset by the payments of our operating expenses.

Net cash used in operating activities for the six months ended June 30, 2022 was primarily due to payments for our operating expenses, partially offset by the proceeds from sales of our product (TAVALISSE), and cash received from collaboration partners.

Net cash provided by investing activities for the six months ended June 30, 2023 comprises net maturities of short-term investments of $18.6 million and proceeds from sale of property and equipment of $0.1 million, partially offset by the payment of milestone obligations to Forma (now Novo Nordisk) recorded as intangible assets of $15.0 million.

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 sale of property and equipment of $0.3 million, partially offset by purchases of property and equipment of $0.2 million.

Net cash provided by financing activities for the six months ended June 30, 2023 was primarily due to the net cash proceeds from term loan financing (Tranche 5) of $20.0 million and proceeds from exercise of stock options and participation in the Purchase Plan of $0.6 million, partially offset by our cost share payments to Lilly of $1.8 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 exercise 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.

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

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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 March 31, 2023, 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.

As of June 30, 2023, 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.

In August 2020, we entered into an Open Market Sale Agreement with Jefferies LLC (Jefferies), 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.

We have a shelf registration statement filed with the SEC that was declared effective on May 3, 2022, which registered, among other securities, a base prospectus which covers the offering, issuance, and sale by us of up to $250.0 million in the aggregate of the securities identified from time to time in one or more offerings, which include the $100.0 million of shares of our common stock that may be offered, issued and sold under the Open Market Sale Agreement.

As of March 31, 2023, we have not sold any shares of common stock under such Open Market Sale Agreement.

As of June 30, 2023, we have not sold any shares of common stock under such Open Market Sale Agreement.

We have a Credit Agreement with MidCap entered in September 2019, and subsequently amended in March 2021 (First Amendment), in February 2022 (Second Amendment) and in July 2022 (Third Amendment).

The Credit Agreement provides for $60.0 million term loan credit facility, which was fully funded as of March 31, 2023.

The Credit Agreement provides for $60.0 million term loan credit facility, which was fully funded as of June 30, 2023.

To date, no remaining funds are available for draw under the term loan credit facility with Midcap.

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Unless and until we can generate sufficient cash from our operating activities, we may choose to raise additional funds through public and/or private offerings of equity securities, debt financings, or from other sources.

However, certain external factors such as COVID-19, conflicts in Russia and Ukraine, political and economic legislations, and other factors may continue to rapidly evolve which could significantly disrupt the global financial markets.

However, certain external factors such as global pandemics, conflicts in Russia and Ukraine, political and economic legislations, and other factors may continue to rapidly evolve which could significantly disrupt the global financial markets.

Our ability to raise additional funds may be adversely impacted by potential worsening of global economic conditions and volatility in the credit and financial markets in the US and worldwide.

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● competing technological and market developments;

● the costs and timing of obtaining, enforcing and defending our patent and other intellectual property rights;

● the costs and timing of obtaining, enforcing and defending our patent and other intellectual property rights, including regulatory rights such as regulatory data exclusivities;

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

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In addition, these agreements may, from time to time, be subjected to amendments as a result of any change orders executed by the parties.

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 March 31, 2023, Lilly billed us $15.9 million of the funding development costs and the amounts were fully paid as of March 31, 2023.

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, 2023, Lilly billed us $16.9 million of the funding development costs and the amounts were fully paid as of June 30, 2023.

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.

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, pursuant to our license and transition services agreement with Forma entered in July 2022, Forma is entitled to potential 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 December 31, 2022, certain milestones were met which entitled Forma to receive $17.5 million milestone payments, of which, $2.5 million was paid in the fourth quarter of 2022 and $15.0 million was paid in the first quarter of 2023.

No new milestone was met during the three months ended March 31, 2023.

As of March 31, 2023, we have a contractual commitment related to our leased facilities of $1.6 million, with approximately $0.7 million payable within 12 months.

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, pursuant to our license and transition services agreement, Forma (now Novo Nordisk) is entitled to potential 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 December 31, 2022, certain milestones were met which entitled Forma (now Novo Nordisk) to receive $17.5 million milestone payments, of which, $2.5 million was paid in the fourth quarter of 2022 and $15.0 million was paid in the first quarter of 2023.

No new milestone was met during the six months ended June 30, 2023.

As of June 30, 2023, we have a contractual commitment related to our leased facilities of $1.4 million, with approximately $0.7 million payable within 12 months.

See “Note 10 – Leases” to our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for further discussions of our leases.

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

As of March 31, 2023, the outstanding principal amount of the loan was $60.0 million, and no principal payments are due within 12 months.

As of June 30, 2023, the outstanding principal amount of the loan was $60.0 million, and no principal payments are due within 12 months.

We are also obligated to pay annual administrative fees.

As of March 31, 2023, future interest calculated using the base interest rate as per the Credit Agreement, and the final fee payments associated with the credit facility amounted to $12.8 million, with approximately $4.4 million payable within 12 months.

As of June 30, 2023, future interest calculated using the base interest rate as per the Credit Agreement, and the final fee payments associated with the credit facility amounted to $11.7 million, with approximately $4.4 million 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