What changed in this filing

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Item 7. Management’s Discussion and Analysis

2023-03-08 compared with 2022-03-09 · 348 added, 376 removed, 26 unchanged (97% of the section changed)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

should read the following discussion and analysis of our financial condition and results of operations together with our financial statements

and related notes appearing elsewhere in this Annual Report on Form 10-K.

Some of the information contained in this discussion and analysis

or set forth elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business

and related financing, includes forward-looking statements that involve risks and uncertainties.

As a result of many factors, including

those factors set forth in the “Risk Factors” section of this document, our actual results could differ materially from the

results described in, or implied by, the forward-looking statements contained in the following discussion and analysis.

are a New York City based clinical-stage biopharmaceutical company committed to identifying and advancing transformative therapies for

the treatment of cancer and rare diseases.

We were founded on the principle of applying modern scientific, regulatory or manufacturing

advancements to established mechanisms in order to create new development opportunities.

We prioritize creativity, diverse perspectives,

integrity and tenacity to expedite our goal of bringing life-changing therapies to people with limited treatment options.

portfolio includes two development programs utilizing TARA-002, an investigational cell therapy based on the broad immunopotentiator,

OK-432, which was originally granted marketing approval by the Japanese Ministry of Health and Welfare as an immunopotentiating cancer

therapeutic agent.

This cell therapy is currently approved in Japan and Taiwan for LMs, and multiple oncologic indications.

We have secured

worldwide rights to the asset excluding Japan and Taiwan and have begun to explore its use in oncology and rare disease indications.

TARA-002 was developed from the same master cell bank of genetically distinct group A Streptococcus pyogenes as OK-432 (marketed

as Picibanil® in Japan and Taiwan by Chugai Pharmaceutical Co., Ltd., or Chugai Pharmaceutical).

We are currently developing TARA-002

in non-muscle invasive bladder cancer, or NMIBC, and in LMs.

Our lead oncology program is TARA-002 in NMIBC, which is cancer found

in the tissue that lines the inner surface of the bladder that has not spread into the bladder muscle.

Bladder cancer is the sixth most

common cancer in the United States, with NMIBC representing approximately 80% of bladder cancer diagnoses.

Approximately 65,000 patients

are diagnosed with NMIBC in the United States each year.

Very few new therapeutics have been approved for NMIBC since the 1990s and the

current standard of care for NMIBC includes intravesical Bacillus Calmette–Guérin, or BCG.

The mechanism of TARA-002 is similar

TARA-002 and BCG are intravesically administered and elicit both a Th1 type immune response and locally activated generally similar

array of cytokines and immune cells.

October 2021, we announced that the Office of Tissues and Advanced Therapies Division, or the OTAT Division, of the FDA’s Center

for Biologics Evaluation and Research, or CBER, cleared our Investigational New Drug, or IND, application for TARA-002 in NMIBC.

commenced a Phase 1 dose-finding, open-label clinical trial to evaluate TARA-002 in treatment-naïve and treatment-experienced NMIBC

patients with high-grade carcinoma in situ and high-grade papillary tumors (Ta).

In the initial dose escalation phase of the trial, patients

will receive six weekly intravesical doses of TARA-002.

The primary objective of the trial is to evaluate the safety, tolerability and

preliminary signs of anti-tumor activity of TARA-002, with the goal of establishing a recommended dose for a future Phase 2 clinical

are also pursuing TARA-002 in LMs, which are rare, non-malignant cysts of the lymphatic vascular system that primarily form in the head

and neck region of children before the age of two.

In July 2020, the FDA granted Rare Pediatric Disease designation for TARA-002 for

the treatment of LMs.

OK-432, the originator therapy to TARA-002, has been the standard of care in LMs in Japan for over 20 years.

addition to the clinical experience in Japan, we have secured the rights to a dataset from one of the largest ever conducted Phase 2

trials in LMs, in which OK-432 was administered via a compassionate use program led by the University of Iowa to over 500 pediatric and

adult patients.

We have an IND for TARA-002 for LMs with the Vaccines and Related Products Division of the FDA, or Vaccines Division,

and in October 2021 we submitted the completed confirmatory, current Good Manufacturing Practices (cGMP) comparability data for TARA-002

in relation to OK-432 as part of the IND.

We are engaged with the FDA to align on a development plan for TARA-002 in LMs.

third development program in our portfolio is intravenous, or IV, Choline Chloride, an investigational phospholipid substrate replacement

therapy initially in development for patients receiving parenteral nutrition, or PN, who have intestinal failure associated liver disease,

IV Choline Chloride has been granted Orphan Drug Designation by the FDA for this indication and has also been granted Fast

Track Designation for the treatment of IFALD.

Following a positive end of Phase 2 meeting with the FDA, we received feedback on the design

of the studies necessary to complete a registration package for IV Choline Chloride for the treatment of IFALD, including a Phase 1 pharmacokinetic,

or PK, trial and a Phase 3 clinical trial.

Prior to initiating these clinical trials, we are conducting a prevalence study to enhance

understanding of the PN patient population and we plan to use this information to determine the next steps for the development program.

In September 2021, we reported results of the retrospective part of the prevalence study, which supported the significant unmet medical

need in patients dependent on PN who have IFALD.

We are currently conducting the prospective part of the study, which is a multi-center,

cross-sectional observational study that will assess the prevalence of choline deficiency, as well as cholestasis and steatosis, in patients

dependent on PN.

We had been pursuing an additional program, Vonapanitase, a recombinant

human elastase.

Following a review of the research, preclinical, and clinical data of Vonapanitase, we have determined to cease further

development of this product candidate at this time.

have devoted substantial efforts to the development of these programs and do not have any approved products and have not generated any

revenue from product sales.

Management’s Discussion and Analysis of Financial

Condition and Results of Operations

You should read the following

discussion and analysis of our financial condition and results of operations together with our financial statements and related notes

appearing elsewhere in this Annual Report on Form 10-K.

Some of the information contained in this discussion and analysis or set forth

elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related

financing, includes forward-looking statements that involve risks and uncertainties.

As a result of many factors, including those factors

set forth in the “Risk Factors” section of this document, our actual results could differ materially from the results described

in, or implied by, the forward-looking statements contained in the following discussion and analysis.

We are a New York City based

clinical-stage biopharmaceutical company committed to advancing transformative therapies for the treatment of cancer and rare diseases.

We were founded on the principle of applying modern scientific, regulatory or manufacturing advancements to established mechanisms in

order to create new development opportunities.

We prioritize creativity, diverse perspectives, integrity and tenacity to expedite our

goal of bringing life-changing therapies to people with limited treatment options.

Our portfolio includes two

development programs utilizing TARA-002, an investigational cell therapy based on the broad immunopotentiator, OK-432, which was originally

granted marketing approval by the Japanese Ministry of Health and Welfare as an immunopotentiating cancer therapeutic agent.

therapy is currently approved in Japan and Taiwan for LMs and multiple oncologic indications.

We have secured worldwide rights to the

asset excluding Japan and Taiwan and are exploring its use in oncology and rare disease indications.

TARA-002 was developed from the

same master cell bank of genetically distinct group A Streptococcus pyogenes as OK-432 (marketed as Picibanil® in Japan and

Taiwan by Chugai Pharmaceutical).

We are currently developing TARA-002 in non-muscle invasive bladder cancer, or NMIBC, and in LMs.

Our lead oncology program

is TARA-002 in NMIBC, which is cancer found in the tissue that lines the inner surface of the bladder that has not spread into the bladder

Bladder cancer is the sixth most common cancer in the United States, with NMIBC representing approximately 80% of bladder cancer

Approximately 65,000 patients are diagnosed with NMIBC in the United States each year.

Very few new therapeutics have been

approved for NMIBC since the 1990s and the current standard of care for NMIBC includes intravesical Bacillus Calmette–Guérin,

The mechanism of action of TARA-002 is similar to that of BCG.

TARA-002 and BCG are both intravesically administered, elicit

a Th1 type immune response and produce a locally-activated generally similar array of cytokines and immune cells.

We are conducting a Phase

1 dose-finding, open-label clinical trial to evaluate TARA-002 in treatment-naïve and treatment-experienced NMIBC patients with carcinoma

in situ, or CIS and high-grade papillary tumors (Ta), known as the ADVANCED-1 trial.

In the initial dose escalation phase, or Phase 1a

portion of the trial, patients receive six weekly intravesical doses of TARA-002.

The primary objective of the trial is to evaluate the

safety, tolerability and preliminary signs of anti-tumor activity of TARA-002, with the goal of establishing a recommended dose for a

future Phase 2 clinical trial.

The trial is ongoing and we expect data from the Phase 1a portion of the trial in the second quarter of

In addition, we continue to conduct pre-clinical studies on TARA-002 to better characterize the mechanism of action to help us understand

how TARA-002 may perform in potential combinations with other agents used to treat NMIBC.

We use pre-clinical data to help us define other

cancer targets for TARA-002 both within the urothelial cancer space and other types of cancer affecting different parts of the body.

We are also pursuing TARA-002

in LMs, which are rare, non-malignant cysts of the lymphatic vascular system that primarily form in the head and neck region of children

before the age of two.

In July 2020, the FDA granted Rare Pediatric Disease designation for TARA-002 for the treatment of LMs and in May

2022 the European Medicines Agency granted orphan drug designation to TARA-002 for the treatment of LMs.

In addition to the clinical experience

in Japan, we have secured the rights to a dataset from one of the largest ever conducted Phase 2 trials in LMs, in which OK-432 was administered

via a compassionate use program led by the University of Iowa to over 500 pediatric and adult patients.

We have an IND for LMs with the

Vaccines and Related Products Division of the FDA, or Vaccines Division.

The FDA continues to provide us with guidance regarding a development

path for TARA-002 in LMs.

We received feedback from the Vaccines Division on the protocol for our proposed Phase 2 clinical trial evaluating

TARA-002 in LMs.

In the second half of 2023 we expect to initiate this Phase 2 single arm, open-label clinical trial to evaluate the safety

and efficacy of TARA-002 in pediatric patients with macrocystic and mixed-cystic LMs.

The trial design includes a safety lead-in phase

followed by an expansion phase.

We are conducting trial preparation activities and have identified multiple trial sites.

The third development program

in our portfolio is intravenous, or IV, Choline Chloride, an investigational phospholipid substrate replacement therapy initially in development

for patients receiving parenteral nutrition, or PN, who have intestinal failure associated liver disease, or IFALD.

IV Choline Chloride

has been granted Orphan Drug Designation by the FDA for this indication and has also been granted Fast Track Designation for the treatment

Following a positive end of Phase 2 meeting with the FDA, we received feedback on the design of the studies necessary to complete

a registration package for IV Choline Chloride for the treatment of IFALD, including a Phase 1 pharmacokinetic, or PK, trial and a Phase

3 clinical trial.

Prior to initiating these clinical trials, we are conducting a prevalence study to enhance understanding of the PN patient

population and we plan to use this information to determine the next steps for the development program.

In September 2021, we reported

results of the retrospective part of the prevalence study, which supported the significant unmet medical need in patients dependent on

PN who have IFALD.

We are currently conducting the prospective part of the prevalence study, which is a multi-center, cross-sectional

observational study to assess the prevalence of choline deficiency, as well as cholestasis and steatosis, in patients dependent on PN.

We expect to have results of the study in the third quarter of 2023.

In April 2022, the USPTO issued to us Patent No.

US 11,311,503 claiming

a sterile aqueous choline salt composition with a term expiring in 2041.

We have devoted substantial

efforts to the development of these programs and do not have any approved products and have not generated any revenue from product sales.

TARA-002 has not yet been approved for use for treatment of NMIBC, LMs or any other indications.

expect to generate revenues in the near-term, if ever.

To finance our current strategic plans, including the conduct of ongoing and future

clinical trials and further research and development costs, we will need to raise additional capital.

inception, we have incurred significant operating losses.

As of December 31, 2021, we had an accumulated deficit of approximately $94.0

We expect to continue to incur significant expenses and increasing operating losses for at least the next few years as we continue

our development of, and seek marketing approvals for, our product candidates, prepare for and begin the commercialization of any approved

products, and add infrastructure and personnel to support our product development efforts and operations as a public company in the United

a clinical-stage company, our expenses and results of operations are likely to fluctuate significantly from quarter-to-quarter and year-to-year.

We believe that our period-to-period comparisons of our results of operations should not be relied upon as indicative of our future performance.

of December 31, 2021, we had approximately $130.7 million in cash, cash equivalents, and marketable debt securities.

January 9, 2020, Protara Therapeutics, Inc.

(formerly ArTara Therapeutics, Inc., formerly Proteon Therapeutics, Inc., the “Company”),

completed its previously announced merger transaction with ArTara Subsidiary, Inc.

(formerly ArTara Therapeutics, Inc., “Private

ArTara”) in accordance with the terms of the Agreement and Plan of Merger and Reorganization, dated as of September 23, 2019, by

and among the Company, REM 1 Acquisition, Inc.

(“Merger Sub”), and Private ArTara (as amended on November, 19, 2019, the

“Merger Agreement”), pursuant to which Merger Sub merged with and into Private ArTara, with Private ArTara surviving as a

wholly owned subsidiary of the Company (the “Merger”).The Merger was structured as a reverse merger and Private ArTara was

determined to be the accounting acquirer based on the terms of the Merger and other factors.

Following the completion of the Merger,

the Company is focused on advancing Private ArTara’s drug development programs.

January 9, 2020, in connection with, and prior to the completion of, the Merger, the Company effected a 1-for-40 reverse stock split

of its common stock (the “Reverse Stock Split”), Private ArTara changed its name from “ArTara Therapeutics, Inc.”

to “ArTara Subsidiary, Inc.”, and the Company changed its name from “Proteon Therapeutics, Inc.” to “ArTara

Therapeutics, Inc.”.

On May 11, 2020, the Company changed its name to Protara Therapeutics, Inc.

In addition, immediately following

the closing of the Private Placement (defined below), all of the outstanding shares of the Company’s Series A Preferred Stock were

converted into shares of the Company’s common stock.

the terms of the Merger Agreement, the Company issued shares of its common stock to Private ArTara’s stockholders, at an exchange

ratio of 0.190756 shares of its common stock, after taking into account the Reverse Stock Split, for each share of Private ArTara common

stock outstanding immediately prior to the Merger.

The Company assumed all of the outstanding and unexercised stock options of Private

ArTara, with such stock options now representing the right to purchase a number of shares of the Company’s common stock equal to

0.190756 multiplied by the number of shares of Private ArTara common stock previously represented by such Private ArTara stock options.

The Company also assumed all of the unvested Private ArTara restricted stock awards, which were exchanged for a number of shares of the

Company’s common stock equal to 0.190756 multiplied by the number of shares of Private ArTara common stock previously represented

by such Private ArTara restricted stock awards and unvested to the same extent as such Private ArTara restricted stock awards and subject

to the same restrictions as such Private ArTara restricted stock awards.

shares of the Company’s common stock issued to the former stockholders of Private ArTara were registered with the U.S.

and Exchange Commission (the “SEC”) on a Registration Statement on Form S-4 (Reg.

333-234549) (the “Registration

shares of the Company’s common stock listed on The Nasdaq Capital Market, previously trading through the close of business on Thursday,

January 9, 2020 under the ticker symbol “PRTO,” commenced trading on The Nasdaq Capital Market, on a post-Reverse Stock Split

adjusted basis, under the ticker symbol “TARA,” on Friday, January 10, 2020.

ultimate impact of the current COVID-19 pandemic is highly uncertain and subject to change.

We have experienced delays and may experience

additional future delays that impact our business, our research and development activities, the healthcare systems in which we operate

and the global economy as a whole.

We will continue to monitor the COVID-19 public health crisis closely including whether the effects

would have a material impact on our operations, liquidity and capital resources.

response to the initial outbreak of COVID-19 and the prevalence of new variants and additional waves of infections throughout the pandemic,

we have from time to time implemented work-from-home policies for our employees and at times have temporarily modified our operations

to comply with applicable safety recommendations.

Similar health and safety measures have affected or may affect third parties with whom

we do business, including the third parties that we have contracted with to conduct studies for TARA-002, our study sites or other clinical

partners, laboratories through which we conduct non-clinical studies.

our third-party manufacturers and other parties with whom we conduct

business and regulatory agencies.

The effects of these measures and our related adjustments to our business are likely to negatively

impact productivity, disrupt our business and delay our timelines, the magnitude of which will depend, in part, on the length and severity

of the pandemic and associated health and safety measures and other limitations on our ability to conduct our business in the ordinary

and/or long-term disruptions in our operations as a result of COVID-19, including in response to the prevalence of new variants of the

virus, additional waves of infections and the associated health and safety measures, will negatively impact our business, operating results

and financial condition.

Specifically, we anticipate that the stress of COVID-19 on healthcare systems around the globe will negatively

impact our ability to conduct clinical trials in the near-term primarily due to the lack of resources at clinical trial sites and the

resulting inability to timely enroll patients in the trials.

We also anticipate that the global impact of COVID-19 will negatively impact

our ability to conduct non-clinical studies due primarily to laboratory closures and limited availability of personnel.

the potential economic impact brought by, and the duration of, COVID-19 may be difficult to assess or predict, and it may limit our ability

to access capital, which could in the future negatively affect our liquidity.

A recession or market correction resulting from the COVID-19

pandemic and related effects on the economy such as supply chain disruptions and inflation risk could materially affect our business

and the value of our common stock.

and Development

and development expenses consist primarily of costs incurred for the development of TARA-002 and IV Choline Chloride, which include employee-related

We do not expect to generate revenues

in the near-term, if ever.

To finance our current strategic plans, including the conduct of ongoing and future clinical trials and further

research and development costs, we will need to raise additional capital.

Since inception, we have

incurred significant operating losses.

As of December 31, 2022, we had an accumulated deficit of approximately $130.5 million.

to continue to incur significant expenses and increasing operating losses for at least the next few years as we continue our development

of, and seek marketing approvals for, our product candidates, prepare for and begin the commercialization of any approved products, and

add infrastructure and personnel to support our product development efforts and operations as a public company in the United States.

As a clinical-stage company,

our expenses and results of operations are likely to fluctuate significantly from quarter-to-quarter and year-to-year.

We believe that

our period-to-period comparisons of our results of operations should not be relied upon as indicative of our future performance.

As of December 31, 2022,

we had approximately $102.3 million in cash, cash equivalents, and marketable debt securities.

COVID-19 and Related Macroeconomic Conditions

The COVID-19 pandemic and

related macroeconomic conditions, such as supply chain shortages, inflation and economic volatility have, and may continue to have, an

impact on our results of operations.

We will continue to monitor whether such conditions would have a material impact on our operations,

liquidity and capital resources.

Further, rising inflation has, in part, caused a disruption in the capital markets, which may lead to

a recession or market correction that could impact our access to capital, and could in the future negatively affect our liquidity.

recession or market correction, continued supply chain disruptions and/or inflation could materially affect our business and the value

of our common stock.

Financial Overview

Research and Development

Research and development

expenses consist primarily of costs incurred for the development of TARA-002 and IV Choline Chloride, which include employee-related

expenses, including salaries, benefits, travel and stock-based compensation expense, expenses incurred under agreements with clinical

2 unchanged sentences

depreciation and other expenses, which include expenses for rent and maintenance of facilities and other supplies.

and Administrative

and administrative expenses consist principally of employee-related expenses, including salaries, benefits, travel and stock-based compensation

expense, in executive and other administrative functions.

Other general and administrative expenses also include professional fees for

legal, patent review, consulting and accounting services, facility related costs, as well as expenses related to audit, legal, regulatory

and tax-related services associated with maintaining compliance with our Nasdaq listing and SEC requirements, director and officer liability

insurance premiums and investor relations costs associated with being a public company.

Income (Expense)

and investment income consists of interest income on our cash, cash equivalents and marketable debt securities and amortization of investment

Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial position

and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally

accepted in the United States of America, or GAAP.

The preparation of financial statements in conformity with GAAP requires us to make

estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

We base our estimates on

historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances.

General and Administrative

General and administrative

expenses consist principally of employee-related expenses, including salaries, benefits, travel and stock-based compensation expense,

in executive and other administrative functions.

Other general and administrative expenses also include professional fees for legal,

intellectual property matters, consulting and accounting services, facility related costs, as well as expenses related to audit, legal,

regulatory and tax-related services associated with maintaining compliance with our Nasdaq listing and SEC requirements, director and

officer liability insurance premiums and investor relations costs associated with being a public company.

Other Income (Expense), net

Interest and investment

income consists of interest income on our cash, cash equivalents and marketable debt securities and amortization of investment premiums.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion

and analysis of our financial position and results of operations is based on our financial statements, which have been prepared in accordance

with accounting principles generally accepted in the United States of America, or GAAP.

The preparation of financial statements in conformity

with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying

We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable

under the circumstances.

Actual results may differ materially from those estimates or assumptions.

While our significant accounting policies are described in more detail

in the notes to our consolidated financial statements and related notes appearing elsewhere in this Annual Report on 10-K, we believe

the following accounting policies to be most critical to the judgments and estimates used in the preparation of our financial statements.

January 9, 2020, in connection with the Merger, we separately valued the assets and liabilities acquired, and then determined goodwill

as the residual of the purchase price less identified net assets.

The carrying value of goodwill is $29.5 million at December 31,

2021 and 2020, respectively.

represents the excess of purchase price over the fair value of identifiable net assets acquired in a business combination.

an indefinite useful life.

Goodwill is assessed annually for impairment as of December 31, or more frequently if an event occurs

or circumstances change that would indicate that it is more likely than not that the fair value of a reporting unit or the fair value

of an indefinite-lived intangible asset has declined below its carrying value.

In performing its annual goodwill impairment assessment,

we have the option under GAAP to qualitatively assess whether it is more likely than not that the fair value of a reporting unit is less

than its carrying value;

if the conclusion of the qualitative assessment is that there are no indicators of impairment, then we would

not perform a quantitative assessment.

Otherwise, a quantitative assessment is performed and the fair value of the reporting unit is

is evaluated for impairment at the reporting unit level, which is defined as an operating segment, or one level below an operating segment.

We have determined that we operate as one reporting unit and have selected December 31 as the date to perform our annual impairment test.

As of December 31, 2021, we elected to forego the qualitative screen and performed a quantitative annual goodwill impairment test for

our single reporting unit.

Based upon the results of our annual goodwill impairment test, no adjustments to the carrying value of goodwill

were necessary during the year ended December 31, 2021.

For the year ended December 31, 2020, we elected to perform a qualitative impairment

assessment of goodwill and concluded that no impairment existed as of the test date.

In consideration of the results of our annual goodwill impairment test,

as well as the carrying amount of the goodwill held by our single reporting unit, further information and sensitivity analysis for our

reporting unit has been included below.

fair value of our reporting unit was determined using an income approach based on discounted cash flows, or DCF, as we elected to forgo

the qualitative screen.

Determining fair value using a DCF analysis requires the exercise of significant judgment with respect to

several assumptions and estimates, including the amount and timing of expected future cash flows and appropriate discount rate to be

The expected cash flows used in the DCF analyses are based on our most recent internal long-range forecast and budget and, for

years beyond the budget, our estimates, which are based, in part, on industry benchmarks and forecasted growth rates.

The discount rates

used in the DCF analyses are intended to reflect the risks inherent in the expected future cash flows of the respective programs within

our portfolio.

Assumptions used in the DCF analyses, including the discount rate, are assessed based on our current results and forecasted

future performance, as well as macroeconomic and industry specific factors.

The estimated fair value of the reporting unit was determined by utilizing

a discount rate of 17.5%, resulting in an estimate excess of fair value over carrying value greater than 20%.

Assuming all other factors

remain the consistent, a 150-basis point increase in the discount rate would decrease the excess estimated fair value over carrying value

to approximately 20%.

note that a deterioration in general market conditions, a sustained trend of weaker than anticipated financial performance, a decline

in share price for a sustained period of time, adverse clinical trial or regulatory related events, significant increase in market competition,

a deterioration in general market conditions due to the impact of COVID-19 pandemic or otherwise, or an increase in the market-based

weighted average cost of capital, among other factors, could significantly impact our impairment analysis and may result in future goodwill

impairment charges that, if incurred, could have a material adverse effect on our results of operations or financial position.

tax assets and liabilities are recognized for the estimated future tax consequences attributable to differences between the financial

statement carrying amounts of existing assets and liabilities and their respective tax basis, operating loss and tax credit carryforwards.

Deferred tax assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences

are expected to be recovered or settled.

The measurement of net deferred tax assets is reduced by the amount of any tax benefit that,

based on available evidence, is not expected to be realized, and a corresponding valuation allowance is established.

benefits are recognized only for tax positions that are more likely than not to be sustained upon examination by tax authorities.

amount recognized is measured as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement.

A liability for “unrecognized tax benefits” is recorded for any tax benefits claimed in our tax returns that do not meet

these recognition and measurement standards.

As of December 31, 2021 and 2020, no liability for unrecognized tax benefits was required

to be recorded.

Our policy is to record interest and penalties on uncertain tax positions as a component of income tax expense.

or penalties were recorded during the years ended December 31, 2021 and 2020.

a business combination, the assets acquired and the liabilities assumed are recognized at the acquisition date, measured at their fair

values as of that date.

In a business combination achieved in stages, the identifiable assets and liabilities are recognized at their

tax liabilities and assets are recognized for the deferred tax consequences of differences between the tax bases and the recognized values

of assets acquired and liabilities assumed in a business combination in accordance with ASC Topic 740-10 “Income Taxes”.

of Operations

of the Years Ended December 31, 2021 and 2020

following table summarizes our results of operations for the years ended December 31, 2021 and 2020 (in thousands):

While our significant accounting

policies are described in more detail in the notes to our consolidated financial statements and related notes appearing elsewhere in

this Annual Report on 10-K, we believe the following accounting policies to be most critical to the judgments and estimates used in the

preparation of our financial statements.

On January 9, 2020, in connection

with the Merger, we separately valued the assets and liabilities acquired, and then determined goodwill as the residual of the purchase

price less identified net assets.

The carrying value of goodwill was $0.0 million and $29.5 million at December 31, 2022 and 2021,

respectively.

Goodwill represents the

excess of purchase price over the fair value of identifiable net assets acquired in a business combination.

Goodwill has an indefinite

Goodwill is assessed annually for impairment as of December 31, or more frequently if an event occurs or circumstances

change that would indicate that it is more likely than not that the fair value of a reporting unit or the fair value of an indefinite-lived

intangible asset has declined below its carrying value.

In performing its annual goodwill impairment assessment, we have the option under

GAAP to qualitatively assess whether it is more likely than not that the fair value of a reporting unit is less than its carrying value;

if the conclusion of the qualitative assessment is that there are no indicators of impairment, then we would not perform a quantitative

Otherwise, a quantitative assessment is performed and the fair value of the reporting unit is determined.

Goodwill is evaluated for

impairment at the reporting unit level, which is defined as an operating segment, or one level below an operating segment.

We have determined

that we operate as one reporting unit and have selected December 31 as the date to perform our annual impairment test.

As of December

31, 2022, we elected to forego the qualitative screen and performed a quantitative annual goodwill impairment test for our single reporting

As of December 31,

2022, our stock price and market capitalization declined approximately 60% from December 31, 2021.

Although we believe this decline reflects

the overall performance of similar life science companies with less than $250 million in market capitalizations, or microcap companies,

we do not believe it reflects the progress made in advancing our product candidate pipeline.

The life sciences sector, which includes

pre-commercialization and therefore net operating loss generating companies, relies heavily on the capital markets to finance their operations

and fund pre-clinical and clinical trials for their existing development programs.

As a result of a shift in risk appetite in the overall

financial markets, the availability of capital for life science companies decreased significantly in 2022.

Industry reports highlight

a decline of more than 50 percent in both the number of healthcare follow-on financings as well as the amount of capital raised in 2022

compared to 2021.

These challenging financing conditions had a significantly negative impact on stock prices and respective market capitalizations,

particularly for microcap companies.

We consider the heightened financing risk that impacted the life sciences sector during 2022 to be

one of the key macroeconomic factors that led to a sustained decrease in our stock price and market capitalization leading up to our annual

goodwill impairment assessment date in late 2022.

The fair value of our reporting

unit was determined using an income approach based on discounted cash flows, or DCF, as we elected to forgo the qualitative screen.

fair value using a DCF analysis requires the exercise of significant judgment with respect to several assumptions and estimates, including

the amount and timing of expected future cash flows and appropriate discount rate to be applied.

The expected cash flows used in the DCF

analyses are based on our most recent internal long-range forecast and budget and, for years beyond the budget, our estimates, which are

based, in part, on industry benchmarks and forecasted growth rates.

The discount rate used in

the DCF analysis is intended to reflect the risks inherent in the expected future cash flows of the respective programs within our portfolio.

Assumptions used in the DCF analysis, including the discount rate, are assessed based on our current results and forecasted future performance,

as well as macroeconomic and industry specific factors, including the aforementioned market factors influenced by financing risk discussed

We determined the estimated

fair value of our single reporting unit by utilizing a discount rate of 36%, which reflects these market factors.

Based upon this discount

rate, the fair value of our single reporting unit was below its carrying value by an amount greater than the carrying value of goodwill,

and we recorded an impairment charge of $29.5 million in the fourth quarter of 2022 to fully write off the goodwill.

Deferred tax assets and

liabilities are recognized for the estimated future tax consequences attributable to differences between the financial statement carrying

amounts of existing assets and liabilities and their respective tax basis, operating loss and tax credit carryforwards.

assets and liabilities are measured using enacted tax rates in effect for the year in which those temporary differences are expected

to be recovered or settled.

The measurement of net deferred tax assets is reduced by the amount of any tax benefit that, based on available

evidence, is not expected to be realized, and a corresponding valuation allowance is established.

Tax benefits are recognized

only for tax positions that are more likely than not to be sustained upon examination by tax authorities.

The amount recognized is measured

as the largest amount of benefit that is greater than 50 percent likely to be realized upon settlement.

A liability for “unrecognized

tax benefits” is recorded for any tax benefits claimed in our tax returns that do not meet these recognition and measurement standards.

As of December 31, 2022 and 2021, no liability for unrecognized tax benefits was required to be recorded.

Our policy is to record interest

and penalties on uncertain tax positions as a component of income tax expense.

No interest or penalties were recorded during the years

ended December 31, 2022 and 2021.

Results of Operations

Comparison of the Years Ended December

31, 2022 and 2021

The following table summarizes

our results of operations for the years ended December 31, 2022 and 2021(in thousands):

Year Ended December 31,

Period-to-Period

Operating expenses:

1 unchanged sentence

General and administrative

Loss on impairment of goodwill

Total operating expenses

2 unchanged sentences

Interest and investment income

Interest expense

Other income (expense), net

and Development Expenses .

During the year ended December 31, 2021, our research and development expenses were approximately $21.1

million which represented an increase of approximately $9.1 million as compared to the year ended December 31, 2020.

This increase was

primarily due to an increase of $4.1 million for manufacturing activities associated with TARA-002, an increase of $1.0 million of non-clinical,

clinical and regulatory expenses associated with TARA-002, an increase of $1.7 million in manufacturing and clinical expenses associated

with the prospective IV Choline Chloride study, an increase of $1.9 million in compensation, benefits and other employee-related expenses,

and an increase of $0.7 million in stock-based compensation.

Research and Development

During the year ended December 31, 2022, our research and development expenses were approximately $16.8 million which represented

a decrease of approximately $4.3 million as compared to the year ended December 31, 2021.

This decrease was primarily due to a decrease

of $2.3 million for clinical manufacturing activities associated with TARA-002 due to higher production costs in 2021 as we were preparing

for clinical trials, a decrease of $1.5 million of non-clinical and regulatory expenses associated with TARA-002, and a decrease of $1.4

million in clinical manufacturing expenses associated with the prospective IV Choline Chloride study.

This was partially offset by an

increase of $1.2 million of clinical expenses associated with TARA-002.

General and Administrative

During the year ended December 31, 2022, our general and administrative expenses were approximately $20.7 million which

represented an increase of approximately $3.9 million as compared to the year ended December 31, 2020.

The increase was primarily due

to an increase of $1.9 million in compensation, benefits and other employee-related expenses, an increase of $2.1 million in expenses

for development of market development capabilities, and an increase of $0.7 million in expenses associated with the opening of our new

office in New York, New York.

This was partially offset by a decrease of $0.6 million in legal fees, as we incurred significant one-time

expenses in the first quarter of 2020 upon the closing of the reverse merger.

represented a decrease of approximately $5.6 million as compared to the year ended December 31, 2021.

The decrease was primarily due to

a decrease of $3.8 million in stock-based compensation and a decrease of $1.8 million in expenses related to a reduction in market development

Loss on impairment of

During the year ended December 31, 2022, we recorded a non-cash impairment charge of $29.5 million.

There was no impairment

charge during the year ended December 31, 2021.

Other Income (Expense),

During the year ended December 31, 2021, interest and investment income was approximately $0.2 million which represented a decrease

of approximately $0.3 million as compared to the year ended December 31, 2020.

and Capital Resources

of December 31, 2021 and 2020, our cash, cash equivalents, and marketable debt securities were $130.7 million and $168.6 million, respectively.

We have not generated revenues since our inception and have incurred net losses of approximately $47.3 million and $34.0 million for

the years ended December 31, 2021 and 2020, respectively.

As of December 31, 2021, we had working capital of approximately $88.8 million

and stockholder’s equity of approximately $161.9 million.

During the year ended December 31, 2021, cash flows used in operating

activities were approximately $34.5 million, consisting primarily of a net loss of approximately $47.3 million, which includes non-cash

stock-based compensation charges of approximately $10.4 million.

Since inception, we have met our liquidity requirements principally

through the sale of our common stock and preferred stock in private placements and underwritten offerings.

connection with the Merger, we consummated the Private Placements, raising gross proceeds of approximately $42.5 million.

with the execution of the Merger Agreement, certain institutional investors (together, the “Investors”) entered into a subscription

agreement (as amended on November 19, 2019, the “Subscription Agreement”) with Protara Therapeutics, Inc.

and Private ArTara,

pursuant to which (A) Protara Therapeutics, Inc.

issued, in a private placement immediately after the Merger (the “Proteon Private

Placement”), (i) 3,879.356 of shares of Protara Therapeutics, Inc.’s Series 1 Convertible Non-Voting Preferred Stock (“Series

1 Preferred Stock”) at a purchase price of approximately $7,011.47 per share for gross proceeds of $27.2 million and proceeds,

net of issuance costs, of $25.3 million, (ii) 1,896,888 shares of Protara Therapeutics, Inc.’s common stock at a purchase price

of approximately $7.01 per share for gross proceeds of $13.3 million and proceeds, net of issuance costs, of $12.4 million and (B) Private

ArTara issued, in a private placement immediately prior to the Merger (the “ArTara Private Placement”), 284,875 shares of

Private ArTara common stock (post-Exchange Ratio (as defined in the Merger Agreement) basis) at a purchase price of approximately $7.01

per share (post-Exchange Ratio basis) (together with the Proteon Private Placement, the “Private Placements”) for gross proceeds

of $2.0 million and proceeds, net of issuance costs, of $1.9 million.

The shares issued in the Proteon Private Placement were registered

for resale on a registration statement on Form S-3 filed and declared effective by the SEC on February 10, 2020.

September 24, 2020, pursuant to an underwriting agreement, dated September 22, 2020, we issued and sold in an underwritten public offering

(the “Common Offering”) an aggregate of 4,600,000 shares of our common stock at an offering price of $16.87 per share, for

gross and net proceeds of approximately $77.6 million and $73.6 million, respectively.

The underwriters were granted an option to purchase

up to 690,000 additional shares of common stock at the public offering price, less the underwriting discount.

On October 6, 2020, the

underwriters exercised their overallotment option in full, purchasing an additional 690,000 shares, resulting in the receipt of gross

and net proceeds of approximately $11.6 million and $11.1 million, respectively.

September 24, 2020, pursuant to an underwriting agreement, dated September 22, 2020, we issued and sold in an underwritten public offering

(the “Preferred Offering”) an aggregate of 4,148 shares of our Series 1 Preferred Stock at an offering price of $16,873.54

per share, for gross and net proceeds of approximately $70.0 million and $66.3 million, respectively.

December 2020, we filed a shelf registration statement on Form S-3, or the Shelf Registration Statement, which became effective in December

The Shelf Registration Statement permits:

(i) the offering, issuance and sale by us of up to a maximum aggregate offering price

of $300.0 million of common stock, preferred stock, debt securities and warrants in one or more offerings and in any combination.

securities have been sold to date under the Shelf Registration Statement.

are in the business of developing biopharmaceuticals and have no current or near term revenues.

We have incurred substantial clinical

and other costs in our drug development efforts.

We will need to raise additional capital in order to fully realize management’s

believe that our current financial resources, as of the date of the issuance of these consolidated financial statements, are sufficient

to satisfy our estimated liquidity needs for at least twelve months from the issuance of these consolidated financial statements.

As a result of economic conditions, general global economic uncertainty,

political change, pandemics, and other factors, we do not know whether additional capital will be available when needed, or that, if available,

we will be able to obtain additional capital on reasonable terms.

If we are unable to raise additional capital due to the volatile global

financial markets, general economic uncertainty or other factors, we may need to curtail planned development activities.

a recession or market correction resulting from the COVID-19 pandemic and related effects on the economy such as supply chain disruptions

and inflation risk could materially affect our business and the value of our common stock.

following table summarizes our sources and uses of cash for the years ended December 31, 2020 and 2021 (in thousands):

During the year ended December 31, 2022, interest and investment income was approximately $1.1 million which represented an

increase of approximately $0.9 million as compared to the year ended December 31, 2021.

The increase was due to an increase of $0.9 in

interest earned on investments in marketable debt securities.

Liquidity and Capital Resources

As of December 31, 2022 and

2021, our cash, cash equivalents, and marketable debt securities were $102.3 million and $130.7 million, respectively.

We have not generated

revenues since our inception and have incurred net losses of approximately $66.0 million and $47.3 million for the years ended December

31, 2022 and 2021, respectively.

As of December 31, 2022, we had working capital of approximately $80.4 million and stockholder’s

equity of approximately $102.1 million.

During the year ended December 31, 2022, cash flows used in operating activities were approximately

$26.5 million, consisting primarily of a net loss of approximately $66.0 million, which includes non-cash activities such as approximately

$29.5 million in impairment loss on goodwill and $6.7 million in stock-based compensation charges.

Since inception, we have met our liquidity

requirements principally through the sale of our common stock and preferred stock in private placements and underwritten offerings.

In December 2020, we filed

a shelf registration statement on Form S-3, or the Shelf Registration Statement, which became effective in December 2020.

The Shelf Registration

Statement permits:

(i) the offering, issuance and sale by us of up to a maximum aggregate offering price of $300.0 million of common

stock, preferred stock, debt securities and warrants in one or more offerings and in any combination.

No securities have been sold to

date under the Shelf Registration Statement.

We are in the business of

developing biopharmaceuticals and have no current or near-term revenues.

We have incurred substantial clinical and other costs in our

drug development efforts.

We will need to raise additional capital in order to fully realize management’s plans.

We believe that our current

financial resources, as of the date of the issuance of our consolidated financial statements included elsewhere in this Annual Report

on Form 10-K, are sufficient to satisfy our estimated liquidity needs for at least twelve months.

As a result of volatility

in the capital markets, economic conditions, general global economic uncertainty, political change, global pandemics, and other factors,

we do not know whether additional capital will be available when needed, or that, if available, we will be able to obtain additional

capital on reasonable terms.

If we are unable to raise additional capital due to the volatile global financial markets, general economic

uncertainty or other factors, we may need to curtail planned development activities.

Specifically, rising inflation, which is in part,

tied to the impacts of the COVID-19 pandemic and resulting supply chain disruptions, has, in part, caused a disruption in the capital

markets, which may lead to a recession or market correction that could impact our access to capital, and could in the future negatively

affect our liquidity.

A recession or market correction, continued supply chain disruptions and/or inflation could materially affect our

business and the value of our common stock.

Further, recent rises in interest rates have had and may continue to have a negative effect

on market prices for common stock of pharmaceutical companies that have no current or near-term revenue.

Further increases in interest

rates, which have been implemented and may be further implemented to counteract inflationary pressures, may continue to exacerbate this

The following table summarizes

our sources and uses of cash for the years ended December 31, 2022 and 2021 (in thousands):

Years Ended December 31,

Period-to-Period

Net cash used in operating activities

2 unchanged sentences

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

of the Years Ended December 31, 2021 and 2020

cash used in operating activities was approximately $34.5 million for the year ended December 31, 2021 compared to approximately $23.4

million for the year ended December 31, 2020.

The increase of approximately $11.1 million in cash used in operating activities was primarily

driven by an increase net loss of approximately $13.3 million, which was partially offset by a $3.3 million increase in non-cash items

including stock-based compensation, right-of-use asset, and amortization of premium on bonds.

There was a decrease in working capital

Comparison of the Years Ended December

31, 2022 and 2021

Net cash used in operating

activities was approximately $26.5 million for the year ended December 31, 2022 compared to approximately $34.5 million for the year ended

December 31, 2021.

The decrease in cash used in operating activities of approximately $8.0 million was primarily driven by a decrease

in net loss of approximately $18.7 million, which was partially offset by a $3.8 million decrease in non-cash items including stock-based

compensation, right-of-use asset, and amortization of premium on marketable debt securities.

There was an increase in working capital

of $1.1 million, primarily related to changes in prepaid expenses and other current assets, accounts payable, and accrued expenses resulting

from the timing of payments to our service providers.

Net cash used in investing activities was approximately $98.2 million

for the year ended December 31, 2021 compared to net cash provided by investing activities of approximately $2.8 million for the year

ended December 31, 2020.

The change of $101.0 million resulted primarily from the proceeds from maturity and redemption of marketable

debt securities of $27.2 million.

This was offset by the purchases of marketable debt securities of $124.7 million during the year ended

December 31, 2021.

cash used in financing activities was approximately $0.2 million for the year ended December 31, 2021 compared to net cash provided by

financing activities of $189.4 million for the year ended December 31, 2020.

The net cash used in financing of $0.2 million for the year

ended December 31, 2021 was for the repurchase of shares in connection with the settlement of restricted stock units.

The net cash provided

by financing activities for the year ended December 31, 2020 consisted primarily of the proceeds, net of offering costs, from the Common

Offering of approximately $73.6 million, the Preferred Offering of approximately $66.3 million, the issuance of Series 1 Preferred Stock

of approximately $25.3 million, the Proteon Private Placement of approximately $12.4 million, the underwriters overallotment option of

approximately $11.1 million, and the ArTara Private Placement of approximately $1.9 million, offset by repayments of short-term debt

of approximately $1.7 million

and Other Obligations

lease obligations

operating lease obligations primarily consist of lease payments on our corporate headquarters in New York, New York, as well as lease

payments for our development laboratory, a manufacturing facility and an additional manufacturing space, all located in North America

which are described in further detail in Note 10 of our consolidated financial statements included in this Annual Report on Form 10-K.

Future contractual payments on operating lease obligations due within one year of December 31, 2021 are $1.3 million, and future contractual

payments on operating lease obligations due greater than one year from December 31, 2021 are $5.9 million.

time to time, we enter into certain types of contracts that contingently require us to indemnify parties against third-party claims,

supply agreements, and agreements with directors and officers.

The terms of such obligations vary by contract and in most instances a

maximum dollar amount is not explicitly stated therein.

Generally, amounts under these contracts cannot be reasonably estimated until

a specific claim is asserted, thus no liabilities have been recorded for these obligations on our consolidated balance sheet for the

periods presented.

We enter into contracts in the normal course of business with CROs

and clinical sites for the conduct of clinical trials, non-clinical research studies, professional consultants for expert advice and other

vendors for clinical supply manufacturing or other services.

These contracts generally provide for termination on notice, and therefore

are cancelable contracts.

of these agreements require us to pay milestones to such third parties upon achievement of certain development, regulatory or commercial

milestones as further described in Note 11 of our consolidated financial statements included in this Annual Report on Form 10-K.

related to contingent milestone payments are not considered contractual obligations as they are contingent on the successful achievement

of certain development, regulatory approval and commercial milestones, which may not be achieved.

also have obligations to make future payments to third parties that become due and payable on the achievement of certain milestones,

including future payments to third parties with whom we have entered into research, development and commercialization agreements.

have not included these commitments on our balance sheet because the achievement and timing of these milestones is not fixed and determinable.

Quantitative and Qualitative Disclosures About Market Risk .

disclosure required.

Net cash provided by investing

activities was approximately $15.0 million for the year ended December 31, 2022 compared to net cash used in investing activities of

approximately $98.2 million for the year ended December 31, 2021.

The change of $113.1 million resulted primarily from purchase of marketable

debt securities of $43.6 million for the year ended December 31, 2022 as compared to $124.7 million for the year ended December 31, 2021

and from proceeds from maturity and redemption of marketable debt securities of $58.6 million for the year ended December 31, 2022 as

compared to $27.2 million for the year ended December 31, 2021.

Net cash used in financing

activities was approximately $0.1 million for the year ended December 31, 2022 compared to net cash provided by financing activities

of $0.2 million for the year ended December 31, 2021.

The decrease of approximately $0.1 million was driven by the reduction in stock

price of the shares repurchased in connection with the settlement of restricted stock units for the year ended December 31, 2022.

Contractual and Other Obligations

Operating lease obligations

Our operating lease obligations

primarily consist of lease payments on our corporate headquarters in New York, New York, as well as lease payments for our development

laboratory, a manufacturing facility and an additional manufacturing space, all located in North America which are described in further

detail in Note 8 of our consolidated financial statements included in this Annual Report on Form 10-K.

Future contractual payments on

operating lease obligations due within one year of December 31, 2022 are $1.3 million, and future contractual payments on operating lease

obligations due greater than one year from December 31, 2022 are $6.4 million.

Other obligations

From time to time, we enter

into certain types of contracts that contingently require us to indemnify parties against third-party claims, supply agreements, and

agreements with directors and officers.

The terms of such obligations vary by contract and in most instances a maximum dollar amount

is not explicitly stated therein.

Generally, amounts under these contracts cannot be reasonably estimated until a specific claim is asserted,

thus no liabilities have been recorded for these obligations on our consolidated balance sheet for the periods presented.

We enter into contracts

in the normal course of business with CROs and clinical sites for the conduct of clinical trials, non-clinical research studies, professional

consultants for expert advice and other vendors for clinical supply manufacturing or other services.

These contracts generally provide

for termination on notice, and therefore are cancelable contracts.

Certain of these agreements

require us to pay milestones to such third parties upon achievement of certain development, regulatory or commercial milestones as further

described in Note 8 of our consolidated financial statements included in this Annual Report on Form 10-K.

Amounts related to contingent

milestone payments are not considered contractual obligations as they are contingent on the successful achievement of certain development,

regulatory approval and commercial milestones, which may not be achieved.

We also have obligations

to make future payments to third parties that become due and payable on the achievement of certain milestones, including future payments

to third parties with whom we have entered into research, development and commercialization agreements.

We have not included these commitments

on our consolidated balance sheet for the periods presented because the achievement and timing of these milestones is not fixed and determinable.

Quantitative and Qualitative Disclosures About Market

No disclosure required.

Financial Statements and Supplementary Data.

consolidated financial statements required pursuant to this item are included in Item 15 of this Annual Report on Form 10-K and are presented

beginning on page F-4.

Changes in and Disagreements With Accountants on Accounting and Financial Disclosure.

The consolidated financial

statements required pursuant to this item are included in Item 15 of this Annual Report on Form 10-K and are presented beginning on page

Changes in and Disagreements With Accountants on Accounting

and Financial Disclosure.

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-K

Item 7. Management’s Discussion and Analysis