Form 10-Q - Quarterly report [Sections 13 or 15(d)]

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, 2023


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File No. 001-37852

PROTAGONIST THERAPEUTICS, INC.

(Exact name of registrant as specified in its charter)

Delaware		98-0505495
(State or other jurisdiction of incorporation or organization)		(I.R.S. Employer Identification No.)

7707 Gateway Boulevard, Suite 140 Newark, California		94560-1160
(Address of registrant’s principal executive offices)		(Zip code)
(510) 474-0170 (Registrant’s telephone number, including area code)

Securities registered pursuant to Section 12(b) of the Act:


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, par value $0.00001	PTGX	The Nasdaq Stock Market, LLC

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ⌧ No ◻

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ⌧ No ◻

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.



Large accelerated filer	☐	Accelerated filer	☐
		Smaller reporting company	☒
Non-accelerated filer	☒	Emerging growth company	☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of October 27, 2023, there were 57,678,122 shares of the registrant’s Common Stock, par value $0.00001 per share, outstanding.

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PROTAGONIST THERAPEUTICS, INC.

FORM 10-Q

TABLE OF CONTENTS

I
		Page

PART I	FINANCIAL INFORMATION

Item 1.	Condensed Consolidated Financial Statements (unaudited)
	Condensed Consolidated Balance Sheets	1
	Condensed Consolidated Statements of Operations	2
	Condensed Consolidated Statements of Comprehensive Loss	3
	Condensed Consolidated Statements of Stockholders’ Equity	4
	Condensed Consolidated Statements of Cash Flows	6
	Notes to Unaudited Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	18
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	32
Item 4.	Controls and Procedures	33

PART II	OTHER INFORMATION

Item 1.	Legal Proceedings	34
Item 1A.	Risk Factors	34
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	58
Item 3.	Defaults Upon Senior Securities	58
Item 4.	Mine Safety Disclosures	58
Item 5.	Other Information	58
Item 6.	Exhibits	58
	SIGNATURES	60

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PART I. – FINANCIAL INFORMATION

ITEM 1.FINANCIAL STATEMENTS

PROTAGONIST THERAPEUTICS, INC.

Condensed Consolidated Balance Sheets

(Unaudited)

(In thousands, except share and per share data)


	September 30,		December 31,
	2023		2022
Assets
Current assets:
Cash and cash equivalents	$	230,527	$	125,744
Marketable securities		90,224		111,611
Receivable from collaboration partner		—		10
Prepaid expenses and other current assets		4,130		5,712
Total current assets		324,881		243,077
Marketable securities - noncurrent		1,985		—
Property and equipment, net		1,421		1,565
Restricted cash - noncurrent		225		225
Operating lease right-of-use asset		1,504		3,061
Total assets	$	330,016	$	247,928
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,252	$	3,640
Payable to collaboration partner		3		69
Accrued expenses and other payables		24,809		24,955
Operating lease liability - current		1,803		2,515
Total current liabilities		27,867		31,179
Operating lease liability - noncurrent		—		1,141
Total liabilities		27,867		32,320
Commitments and contingencies
Stockholders’ equity:
Preferred stock, $0.00001 par value, 10,000,000 shares authorized; no shares issued and outstanding		—		—
Common stock, $0.00001 par value, 90,000,000 shares authorized; 57,647,476 and 49,339,252 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively		1		—
Additional paid-in capital		945,363		752,722
Accumulated other comprehensive loss		(170)		(359)
Accumulated deficit		(643,045)		(536,755)
Total stockholders’ equity		302,149		215,608
Total liabilities and stockholders’ equity	$	330,016	$	247,928

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

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PROTAGONIST THERAPEUTICS, INC.

Condensed Consolidated Statements of Operations

(Unaudited)

(In thousands, except share and per share data)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
License and collaboration revenue	$	—	$	—	$	—	$	26,581
Operating expenses:
Research and development		30,664		25,402		91,262		96,331
General and administrative		7,662		6,901		25,439		25,107
Total operating expenses		38,326		32,303		116,701		121,438
Loss from operations		(38,326)		(32,303)		(116,701)		(94,857)
Interest income		4,252		1,157		10,656		1,809
Other expense, net		(31)		(86)		(245)		(151)
Net loss	$	(34,105)	$	(31,232)	$	(106,290)	$	(93,199)
Net loss per share, basic and diluted	$	(0.58)	$	(0.64)	$	(1.91)	$	(1.90)
Weighted-average shares used to compute net loss per share, basic and diluted		59,182,899		49,107,639		55,542,543		48,971,329

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

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PROTAGONIST THERAPEUTICS, INC.

Condensed Consolidated Statements of Comprehensive Loss

(Unaudited)

(In thousands)


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Net loss	$	(34,105)	$	(31,232)	$	(106,290)	$	(93,199)
Other comprehensive loss:
(Loss) gain on translation of foreign operations		—		(79)		194		(193)
Unrealized gain (loss) on marketable securities		28		319		(5)		12
Comprehensive loss	$	(34,077)	$	(30,992)	$	(106,101)	$	(93,380)

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

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PROTAGONIST THERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share data)


						Accumulated
				Additional		Other				Total
	Common			Paid-In		Comprehensive		Accumulated		Stockholders’
	Stock			Capital		(Loss) Gain		Deficit		Equity
Three months ended September 30, 2023	Shares	Amount
Balance at June 30, 2023	57,494,185	$	1	$	903,205	$	(198)	$	(608,940)	$	294,068
Exercise of Warrants in exchange for issuance of Pre-funded Warrants	—		—		33,813		—		—		33,813
Issuance of common stock upon exercise of Warrants	44,748		—		559		—		—		559
Issuance of common stock under equity incentive and employee stock purchase plans	108,543		—		1,021		—		—		1,021
Stock-based compensation expense	—		—		6,765		—		—		6,765
Other comprehensive gain	—		—		—		28		—		28
Net loss	—		—		—		—		(34,105)		(34,105)
Balance at September 30, 2023	57,647,476	$	1	$	945,363	$	(170)	$	(643,045)	$	302,149


						Accumulated
				Additional		Other				Total
	Common			Paid-In		Comprehensive		Accumulated		Stockholders’
	Stock			Capital		(Loss) Gain		Deficit		Equity
Three months ended September 30, 2022	Shares	Amount
Balance at June 30, 2022	48,683,931	$	—	$	740,027	$	(720)	$	(471,329)	$	267,978
Issuance of common stock under equity incentive and employee stock purchase plans	114,483		—		680		—		—		680
Issuance of common stock upon exercise of Exchange Warrants	399,997		—		—		—		—		—
Stock-based compensation expense	—		—		5,950		—		—		5,950
Other comprehensive gain	—		—		—		240		—		240
Net loss	—		—		—		—		(31,232)		(31,232)
Balance at September 30, 2022	49,198,411	$	—	$	746,657	$	(480)	$	(502,561)	$	243,616

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

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PROTAGONIST THERAPEUTICS, INC.

Condensed Consolidated Statements of Stockholders’ Equity

(Unaudited)

(In thousands, except share data)


						Accumulated
				Additional		Other				Total
	Common			Paid-In		Comprehensive		Accumulated		Stockholders’
	Stock			Capital		(Loss) Gain		Deficit		Equity
Nine months ended September 30, 2023	Shares	Amount
Balance at December 31, 2022	49,339,252	$	—	$	752,722	$	(359)	$	(536,755)	$	215,608
Issuance of common stock pursuant to public offering, net of issuance costs	5,750,000		—		107,790		—		—		107,790
Issuance of common stock pursuant to at-the-market offering, net of issuance costs	1,749,199		1		24,301		—		—		24,302
Exercise of Warrants in exchange for issuance of Pre-funded Warrants	—		—		33,813		—		—		33,813
Issuance of common stock upon exercise of Warrants	44,748		—		559		—		—		559
Issuance of common stock under equity incentive and employee stock purchase plans	796,240		—		4,255		—		—		4,255
Shares withheld for net settlement of tax withholding upon vesting of restricted stock units	(31,963)		—		(769)		—		—		(769)
Stock-based compensation expense	—		—		22,692		—		—		22,692
Other comprehensive gain	—		—		—		189		—		189
Net loss	—		—		—		—		(106,290)		(106,290)
Balance at September 30, 2023	57,647,476	$	1	$	945,363	$	(170)	$	(643,045)	$	302,149


						Accumulated
				Additional		Other				Total
	Common			Paid-In		Comprehensive		Accumulated		Stockholders’
	Stock			Capital		(Loss) Gain		Deficit		Equity
Nine months ended September 30, 2022	Shares	Amount
Balance at December 31, 2021	47,838,330	$	—	$	709,682	$	(299)	$	(409,362)	$	300,021
Issuance of common stock pursuant to at-the-market offering, net of issuance costs	422,367		—		14,553		—		—		14,553
Issuance of common stock under equity incentive and employee stock purchase plans	545,443		—		3,895		—		—		3,895
Issuance of common stock upon exercise of Exchange Warrants	399,997		—		—		—		—		—
Shares withheld for net settlement of tax withholding upon vesting of restricted stock units	(7,726)		—		(188)		—		—		(188)
Stock-based compensation expense	—		—		18,690		—		—		18,690
Issuance costs related to prior period common stock offering	—		—		25		—		—		25
Other comprehensive loss	—		—		—		(181)		—		(181)
Net loss	—		—		—		—		(93,199)		(93,199)
Balance at September 30, 2022	49,198,411	$	—	$	746,657	$	(480)	$	(502,561)	$	243,616

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

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PROTAGONIST THERAPEUTICS, INC.

Condensed Consolidated Statements of Cash Flows

(Unaudited)

(In thousands)


	Nine Months Ended
	September 30,
	2023		2022
Cash Flows from Operating Activities
Net loss	$	(106,290)	$	(93,199)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation		22,692		18,690
Operating lease right-of-use asset amortization		1,751		1,751
(Accretion) amortization of discount/premium on marketable securities		(3,221)		365
Depreciation		729		778
Other		194		—
Changes in operating assets and liabilities:
Research and development tax incentive receivable		—		2,719
Receivable from collaboration partner		10		1,441
Prepaid expenses and other assets		1,582		413
Accounts payable		(2,271)		3,121
Payable to collaboration partner		(66)		(867)
Accrued expenses and other payables		(259)		(8,127)
Deferred revenue		—		(1,601)
Operating lease liability		(2,047)		(1,986)
Net cash used in operating activities		(87,196)		(76,502)
Cash Flows from Investing Activities
Purchase of marketable securities		(93,077)		(134,279)
Proceeds from maturities of marketable securities		115,696		222,537
Purchases of property and equipment		(590)		(725)
Net cash provided by investing activities		22,029		87,533
Cash Flows from Financing Activities
Proceeds from public offering of common stock, net of issuance costs		107,790		—
Proceeds from at-the-market offering, net of issuance costs		24,302		14,553
Proceeds from exercise of Warrants in exchange for issuance of Pre-funded Warrants		33,813		—
Proceeds from issuance of common stock upon exercise of Warrants		559		—
Proceeds from issuance of common stock upon exercise of stock options and purchases under employee stock purchase plan		4,255		3,895
Tax withholding payments related to net settlement of restricted stock units		(769)		(188)
Issuance costs related to prior period common stock offering		—		25
Net cash provided by financing activities		169,950		18,285
Effect of exchange rate changes on cash, cash equivalents and restricted cash		—		(165)
Net increase in cash, cash equivalents and restricted cash		104,783		29,151
Cash, cash equivalents and restricted cash, beginning of period		125,969		123,890
Cash, cash equivalents and restricted cash, end of period	$	230,752	$	153,041
Supplemental Disclosure of Non-Cash Financing and Investing Information:
Purchases of property and equipment in accounts payable and accrued liabilities	$	3	$	61

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

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PROTAGONIST THERAPEUTICS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1.Organization and Description of Business

Protagonist Therapeutics, Inc. (the “Company”) is headquartered in Newark, California. The Company is a biopharmaceutical company with peptide-based new chemical entities rusfertide and JNJ-2113 (formerly PN-235) in advanced stages of clinical development, both derived from the Company’s proprietary technology platform. The Company’s clinical programs fall into two broad categories of diseases; (i) hematology and blood disorders, and (ii) inflammatory and immunomodulatory diseases. The Company has one wholly-owned subsidiary, Protagonist Pty Limited (“Protagonist Australia”), located in Brisbane, Queensland, Australia.

Operating segments are components of an enterprise for which separate financial information is available and is evaluated regularly by the Chief Executive Officer, the Company’s chief operating decision maker, in deciding how to allocate resources and assessing performance. The Company operates and manages its business as one operating segment. The Company’s Chief Executive Officer reviews financial information on an aggregate basis for the purposes of allocating and evaluating financial performance.

Liquidity

As of September 30, 2023, the Company had cash, cash equivalents and marketable securities of $322.7 million. The Company has incurred net losses from operations since inception and had an accumulated deficit of $643.0 million as of September 30, 2023. The Company’s ultimate success depends upon the outcome of its research and development and collaboration activities. The Company expects to incur additional losses in the future and anticipates the need to raise additional capital to continue to execute its long-range business plan. Since the Company’s initial public offering in August 2016, it has financed its operations primarily through proceeds from offerings of common stock and payments received under license and collaboration agreements.

Risks and Uncertainties

The Company is currently operating in a period of economic uncertainty and capital markets disruption, which has been impacted by the direct and indirect effects of the COVID-19 pandemic (“COVID-19”), domestic and global monetary and fiscal policy, geopolitical instability, including ongoing military conflicts between Russia and Ukraine and in Israel and surrounding areas, rising tensions between China and Taiwan, a recessionary environment, historically high domestic and global inflation, the potential impact of a U.S. government shutdown, and instability in banks and other financial institutions. The Company has experienced delays in its existing and planned clinical trials due to worldwide impacts related to COVID-19, and its future results of operations and liquidity could be adversely impacted by outbreaks of disease, epidemics and pandemics, including further delays in existing and planned clinical trials, difficulty in recruiting patients for these clinical trials, delays in manufacturing and collaboration activities and supply chain disruptions. The conflict in Ukraine has exacerbated market disruptions, including significant volatility in commodity prices as well as supply chain interruptions, and has contributed to record inflation globally. The U.S. Federal Reserve and other central banks may be unable to contain inflation through more restrictive monetary policy and inflation may increase or continue for a prolonged period of time. Inflationary factors, such as increases in the cost of clinical supplies, interest rates, overhead costs and transportation costs may adversely affect the Company’s operating results. In addition, the failure of Silicon Valley Bank and other regional banks in the United States during the first half of 2023 has given rise to uncertainty in the security of amounts in deposit accounts uninsured by the Federal Deposit Insurance Corporation. The Company continues to monitor these events and the potential impact on its business. Although the Company does not believe that inflation has had a material impact on its financial position or results of operations to date, it may be adversely affected in the future due to global monetary and fiscal policy, macroeconomic factors, supply chain constraints, the ongoing conflicts between Russia and Ukraine and in Israel and surrounding areas and other factors, and such factors may lead to increases in the cost of manufacturing for and delays in the initiation of studies in the Company’s product candidates.

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Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”) regarding interim financial reporting. As permitted under those rules, certain footnotes or other financial information that are normally required by GAAP have been condensed or omitted, and accordingly the condensed consolidated balance sheet as of September 30, 2023 has been derived from the Company’s unaudited consolidated financial statements at that date but does not include all of the information required by GAAP for complete consolidated financial statements. These unaudited interim condensed consolidated financial statements have been prepared on the same basis as the Company’s annual consolidated financial statements and, in the opinion of management, reflect all adjustments (consisting of normal recurring adjustments) that are necessary for a fair presentation of the Company’s condensed consolidated financial statements. The results of operations for the three and nine months ended September 30, 2023 are not necessarily indicative of the results to be expected for the year ending December 31, 2023 or for any future period.

Effective January 1, 2023, the financial statements of Protagonist Australia use the U.S. dollar as the functional currency due to the expected nature of the ongoing operations of this subsidiary. The cumulative translation adjustment as of January 1, 2023 related to this subsidiary was not material. Prior to January 1, 2023, the financial statements of Protagonist Australia used the Australian dollar as the functional currency since the majority of expense transactions occurred in such currency. Foreign currency translation gains and losses are reported as a component of stockholders’ equity in accumulated other comprehensive loss on the condensed consolidated balance sheets.

The accompanying unaudited condensed consolidated financial statements and related financial information should be read in conjunction with the audited consolidated financial statements and the related notes thereto for the year ended December 31, 2022 included in the Company’s Annual Report on Form 10-K, filed with the SEC on March 15, 2023.

Principles of Consolidation

The accompanying unaudited interim condensed consolidated financial statements include the accounts of the Company and its wholly owned subsidiary. All intercompany transactions and balances have been eliminated upon consolidation.

Use of Estimates

The preparation of the condensed consolidated financial statements in conformity with GAAP requires management to make estimates, assumptions and judgments that affect the reported amounts of assets and liabilities and disclosure of contingent liabilities as of the date of the condensed consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. On an ongoing basis, management evaluates its estimates, including those related to revenue recognition, accruals for research and development activities, stock-based compensation, income taxes, marketable securities and leases. Estimates related to revenue recognition include actual costs incurred versus total estimated costs of the Company’s deliverables to determine percentage of completion in addition to the application and estimates of potential revenue constraints in the determination of the transaction price under its license and collaboration agreements. Management bases these estimates on historical and anticipated results, trends, and various other assumptions that the Company believes are reasonable under the circumstances, including assumptions as to forecasted amounts and future events. Actual results could differ materially from these estimates.

There has been uncertainty and disruption in the global economy and financial markets due to a number of factors, including the direct and indirect effects of COVID-19, geopolitical instability, inflationary pressures and domestic and global monetary and fiscal policy. The Company has taken into consideration any known impacts in its accounting estimates to date and is not aware of any additional specific events or circumstances that would require any additional updates to its estimates or judgments or a revision of the carrying value of its assets or liabilities as of the

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issuance of this report. These estimates may change as new events occur and additional information is obtained. Actual results could differ materially from these estimates under different assumptions or conditions.

Cash as Reported in Condensed Consolidated Statements of Cash Flows

Cash as reported in the condensed consolidated statements of cash flows includes the aggregate amounts of cash and cash equivalents and the restricted cash as presented on the condensed consolidated balance sheets.

Cash as reported in the condensed consolidated statements of cash flows consists of (in thousands):


	September 30,
	2023		2022
Cash and cash equivalents	$	230,527	$	152,816
Restricted cash – noncurrent		225		225
Total cash reported on condensed consolidated statements of cash flows	$	230,752	$	153,041

Investment Impairment

As of each reporting date, the Company assesses each of its investments in available-for-sale debt securities whose fair value is below its cost basis to determine if the investment’s impairment is due to credit-related factors or noncredit-related factors. Factors considered in determining whether an impairment is credit-related include the extent to which the investment’s fair value is less than its cost basis, declines in published credit ratings, issuer default on interest or principal payments, and declines in the financial condition and near-term prospects of the issuer. Credit-related impairments on available-for-sale debt securities are recognized as an allowance for credit losses with a corresponding adjustment to other income (expense), net. The portion of the impairment that is not credit-related is recorded as a reduction of other comprehensive income (loss), net of applicable taxes.

Pursuant to Accounting Standard Update (“ASU”) 2016-13, Financial Instruments - Credit Losses (Topic 326) (“ASU 2016-13”), the Company has elected to exclude accrued interest from both the fair value and the amortized cost basis of the available-for-sale debt securities for the purposes of identifying and measuring an impairment. The Company writes off accrued interest as a reduction of interest income when an issuer has defaulted on interest payments due on a security.

Stock-Based Compensation Expense

The Company measures its stock-based awards made to its equity plan participants based on the estimated fair values of the awards as of the grant date. For stock option awards, the Company uses the Black-Scholes option-pricing model to estimate fair values. For restricted stock unit awards, the estimated fair value is generally the fair market value of the underlying stock on the grant date. Stock-based compensation expense is recognized over the requisite service period and is based on the value of the portion of stock-based payment awards that is ultimately expected to vest. The Company recognizes forfeitures of stock-based awards as they occur.

The Company has granted performance share units (“PSUs”) to certain executives of the Company. Stock-based compensation expense associated with PSUs is based on the fair value of the Company’s common stock on the grant date, which equals the closing price of the Company’s common stock on the grant date. The Company recognizes compensation expense over the vesting periods of the awards that are ultimately expected to vest when the achievement of the related performance obligation becomes probable.

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Total stock-based compensation expense was as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Research and development	$	3,780	$	3,858	$	13,171	$	11,290
General and administrative		2,985		2,092		9,521		7,400
Total stock-based compensation expense	$	6,765	$	5,950	$	22,692	$	18,690

Significant Accounting Policies

Other than the change in Protagonist Australia functional currency from the Australian dollar to the U.S. dollar effective January 1, 2023 and the investment impairment policy, as discussed above, there have been no material changes to the Company’s significant accounting policies during the three and nine months ended September 30, 2023 as compared to those disclosed in Note 2. Summary of Significant Accounting Policies included in our Annual Report on Form 10-K for the year ended December 31, 2022.

Recently Adopted Accounting Pronouncements

In June 2016, the Financial Accounting Standard Board (“FASB”) issued ASU 2016-13. The guidance requires measurement and recognition of expected credit losses for financial assets at the time financial assets are initially recognized in the financial statements. The measurement of expected credit losses is based on historical credit loss information as well as current and future economic factors. ASU 2016-13 also eliminates the concept of “other-than-temporary” impairment when evaluating available-for-sale debt securities and instead focuses on determining whether any impairment is a result of credit loss or other factors. In November 2019, the FASB issued ASU 2019-10, Financial Instruments – Credit Losses (Topic 326): Effective Dates, which delayed the mandatory effective date of ASU 2016-13 for smaller reporting companies. The Company adopted ASU 2016-13 effective January 1, 2023. The adoption of this guidance did not have a material impact on the Company’s condensed consolidated financial statements or related disclosures.

Note 3. License and Collaboration Agreement

Agreement Terms

On July 27, 2021, the Company entered into an Amended and Restated License and Collaboration Agreement (the “Restated Agreement”) with Janssen Biotech, Inc., a Pennsylvania corporation (“Janssen”), which amended and restated the License and Collaboration Agreement, effective July 13, 2017, by and between the Company and Janssen (the “Original Agreement”), as amended by the first amendment, effective May 7, 2019 (the “First Amendment”). Prior to January 1, 2023, Janssen was a related party to the Company as Johnson & Johnson Innovation - JJDC, Inc. was a significant (greater than 5%) stockholder of the Company, and both companies are subsidiaries of Johnson & Johnson. Upon the effectiveness of the Original Agreement, the Company received a non-refundable, upfront cash payment of $50.0 million from Janssen. Upon the effectiveness of the First Amendment, the Company received a $25.0 million payment from Janssen in 2019. The Company received a $5.0 million payment triggered by the successful nomination of a second-generation oral Interleukin (“IL”)-23 receptor antagonist development compound (“second-generation compound”) during the first quarter of 2020 and received a $7.5 million payment triggered by the completion of data collection activities for the first Phase 1 clinical trial of a second-generation compound during the fourth quarter of 2021. The Company received a $25.0 million milestone payment in connection with the dosing of the third patient in the first Phase 2 clinical trial for a second-generation compound during the second quarter of 2022.

The Restated Agreement relates to the development, manufacture and commercialization of oral IL-23 receptor antagonist drug candidates. The candidates nominated for initial development pursuant to the Restated Agreement included PTG-200 (JNJ-67864238), PN-232 (JNJ-75105186) and JNJ-2113 (JNJ-77242113) (formerly PN-235). PTG-200 is an oral IL-23 receptor antagonist that was in Phase 2a development for the treatment of Crohn’s disease (“CD”). During the fourth quarter of 2021, following a pre-specified interim analysis criteria, a portfolio

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decision was made by Janssen to stop further development of both PTG-200 and PN-232 in favor of advancing JNJ-2113, based on its superior potency and overall pharmacokinetic and pharmacodynamic profile. Janssen is primarily responsible for the conduct of all future trials, including anticipated Phase 2 and Phase 3 trials, and the Company is primarily responsible for the conduct of the second-generation Phase 1 trials.

The Restated Agreement enables Janssen to develop collaboration compounds for multiple indications. Under the Restated Agreement, Janssen is required to use commercially reasonable efforts to develop at least one collaboration compound for at least two indications.

Upcoming potential development milestones for second-generation compounds include:

●

$50.0 million upon the dosing of the third patient in a Phase 3 clinical trial for a second-generation compound for any indication;

●

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

●

$35.0 million upon the filing of a New Drug Application (“NDA”) for a second-generation compound with the U.S. Food and Drug Administration (the “FDA”);

●

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

●

$10.0 million upon the dosing of the third patient in the first Phase 2 clinical trial for any second-generation compound for a second indication (i.e., an indication different than the indication which triggered the $25.0 million milestone received during the second quarter of 2022 described above); and

●

$15.0 million upon the dosing of the third patient in a Phase 3 clinical trial for a second-generation compound for a second indication.

Pursuant to the Restated Agreement, the Company remains eligible to receive tiered royalties on net product sales at percentages ranging from six percent to ten percent. The sales milestone payments in the Original Agreement also remain the same in the Restated Agreement.

Pursuant to both the Original and Restated Agreements, payments to the Company for research and development services are generally billed and collected as services are performed or assets are delivered, including research activities and Phase 1 and Phase 2 development activities. Janssen bills the Company for its share of the PTG-200 Phase 2a development costs as expenses are incurred by Janssen. Milestone payments are received after the related milestones are achieved.

Janssen retains exclusive, worldwide rights to develop and commercialize IL-23 receptor antagonist compounds derived from the research collaboration conducted under the Original Agreement, or Janssen’s further research under the Restated Agreement. Any further research and development will be conducted by Janssen. The Company will have the right to co-detail (for CD and ulcerative colitis indications) up to two of the IL-23 receptor antagonist compounds under the collaboration in the U.S. market.

The Restated Agreement remains in effect until the royalty obligations cease following patent and regulatory expiry, unless terminated earlier. Upon a termination of the Restated Agreement, all rights revert back to the Company, and in certain circumstances, if such termination occurs during ongoing clinical trials, Janssen would, if requested, provide certain financial and operational support to the Company for the completion of such trials.

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Revenue Recognition

The Restated Agreement contains a single performance obligation for the development license; Phase 1 development services for PTG-200, PN-232 and JNJ-2113 (formerly PN-235); the Company’s services associated with Phase 2a development for PTG-200 in CD; the initial year of second-generation compound research services; and all other such services that the Company may perform at the request of Janssen to support the development of PTG-200 through Phase 2a and PN-232 and JNJ-2113 through Phase 1. Under the Restated Agreement, development services performed by the Company for PTG-200 beyond Phase 2a and PN-232 and JNJ-2113 beyond Phase 1 are no longer required.

The contract duration is defined as the period in which parties to the contract have present enforceable rights and obligations. For revenue recognition purposes, the duration of the Restated Agreement for the identified single initial performance obligation began on the Original Agreement’s effective date of July 13, 2017 and ended upon the completion of Phase 1 clinical trials for PN-232 and JNJ-2113. Final activities related to these trials were completed as of June 30, 2022.

No license and collaboration revenue was recognized for the three and nine months ended September 30, 2023 because the Company completed its performance obligation under the collaboration as of June 30, 2022. For the three and nine months ended September 30, 2022, the Company recognized license and collaboration revenue of zero and $26.6 million, respectively. License and collaboration revenue for the nine months ended September 30, 2022 was primarily related to the transaction price recognized under the Restated Agreement based on proportional performance.

The following tables present changes in the Company’s contract assets and liabilities during the periods presented (in thousands):


	Balance at						Balance at
	Beginning of						End of
Nine Months Ended September 30, 2023	Period		Additions		Deductions		Period
Contract assets:
Receivable from collaboration partner	$	10	$	41		(51)	$	—
Contract liabilities:
Payable to collaboration partner	$	69	$	11		(77)	$	3


	Balance at						Balance at
	Beginning of						End of
Nine Months Ended September 30, 2022	Period		Additions		Deductions		Period
Contract assets:
Receivable from collaboration partner	$	1,566	$	25,165	$	(26,606)	$	125
Contract liabilities:
Deferred revenue	$	1,601	$	25,757	$	(27,358)	$	—
Payable to collaboration partner	$	899	$	52	$	(919)	$	32

During the three and nine months ended September 30, 2022, the Company recognized revenue of zero and $0.9 million from amounts included in the deferred revenue contract liability balance at the beginning of each period. None of the costs to obtain or fulfill the contract were capitalized.

Note 4. Fair Value Measurements

Financial assets and liabilities are recorded at fair value. The accounting guidance for fair value provides a framework for measuring fair value, clarifies the definition of fair value and expands disclosures regarding fair value measurements. Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the reporting date. The accounting guidance

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establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.

Level 2—Inputs (other than quoted market prices included in Level 1) are either directly or indirectly observable for the asset or liability through correlation with market data at the measurement date and for the duration of the instrument’s anticipated life.

Level 3—Inputs reflect management’s best estimate of what market participants would use in pricing the asset or liability at the measurement date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

In determining fair value, the Company utilizes quoted market prices, broker or dealer quotations, or valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible and considers counterparty credit risk in its assessment of fair value.

The following tables present the fair value of the Company’s financial assets determined using the inputs defined above (in thousands):


	September 30, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	70,470	$	—	$	—	$	70,470
Certificates of deposit		—		4,799		—		4,799
Commercial paper		—		132,226		—		132,226
Corporate debt securities		—		1,980		—		1,980
U.S. Treasury and agency securities		—		108,786		—		108,786
Total financial assets	$	70,470	$	247,791	$	—	$	318,261


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	54,292	$	—	$	—	$	54,292
Commercial paper		—		110,227		—		110,227
Corporate debt securities		—		10,741		—		10,741
U.S. Treasury and agency securities				57,242		—		57,242
Total financial assets	$	54,292	$	178,210	$	—	$	232,502

The Company’s certificates of deposit, commercial paper, corporate debt securities, and U.S. Treasury and agency securities, including U.S. Treasury bills, are classified as Level 2 as they were valued based upon quoted market prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active and model-based valuation techniques, for which all significant inputs are observable in the market or can be corroborated by observable market data for substantially the full term of the assets.

The carrying amount of the Company’s remaining financial assets and liabilities, including cash, receivables and payables, approximates their fair value due to their short-term nature.

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Note 5. Cash Equivalents and Marketable Securities

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


	September 30, 2023
	Amortized		Gross Unrealized
	Cost		Gains		Losses		Fair Value
Money market funds	$	70,470	$	—	$	—	$	70,470
Certificates of deposit		4,798		1		—		4,799
Commercial paper		132,275		—		(49)		132,226
Corporate debt securities		1,982		—		(2)		1,980
U.S. Treasury and agency securities		108,794		9		(17)		108,786
Total cash equivalents and marketable securities	$	318,319	$	10	$	(68)	$	318,261
Classified as:
Cash equivalents							$	226,052
Marketable securities								90,224
Marketable securities - noncurrent								1,985
Total cash equivalents and marketable securities							$	318,261


	December 31, 2022
	Amortized		Gross Unrealized
	Cost		Gains		Losses		Fair Value
Money market funds	$	54,292	$	—	$	—	$	54,292
Commercial paper		110,257		—		(30)		110,227
Corporate debt securities		10,756		—		(15)		10,741
U.S. Treasury and agency securities		57,251		27		(36)		57,242
Total cash equivalents and marketable securities	$	232,556	$	27	$	(81)	$	232,502
Classified as:
Cash equivalents							$	120,891
Marketable securities								111,611
Total cash equivalents and marketable securities							$	232,502

Marketable securities of $90.2 million and $111.6 million held at September 30, 2023 and December 31, 2022, respectively, had contractual maturities of less than one year. Marketable securities – noncurrent of $2.0 million held at September 30, 2023 had contractual maturities of at least one year but less than two years. The Company did not hold any marketable securities – noncurrent at December 31, 2022. The Company does not intend to sell its securities that are in an unrealized loss position, and it is not more likely than not that the Company will be required to sell its securities before recovery of their amortized cost basis, which may be at maturity. There were no material realized gains or realized losses on marketable securities for the periods presented. The Company evaluated securities with unrealized losses to determine whether such losses, if any, are due to credit-related factors and determined that there were no credit-related losses to be recognized as of September 30, 2023.

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Note 6. Balance Sheet Components

Prepaid Expenses and Other Current Assets

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


	September 30,		December 31,
	2023		2022
Prepaid insurance	$	1,871	$	1,417
Prepaid clinical and research related expenses		578		2,746
Prepaid licenses		410		489
Other prepaid expenses		1,206		1,018
Other receivable		65		42
Prepaid expenses and other current assets	$	4,130	$	5,712

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):


	September 30,		December 31,
	2023		2022
Laboratory equipment	$	5,281	$	4,817
Furniture and computer equipment		1,123		1,089
Leasehold improvements		963		913
Total property and equipment		7,367		6,819
Accumulated depreciation		(5,946)		(5,254)
Property and equipment, net	$	1,421	$	1,565

Accrued Expenses and Other Payables

Accrued expenses and other payables consisted of the following (in thousands):


	September 30,		December 31,
	2023		2022
Accrued clinical and research related expenses	$	19,666	$	19,109
Accrued employee related expenses		4,528		4,967
Accrued professional service fees		471		464
Other		144		415
Total accrued expenses and other payables	$	24,809	$	24,955

Note 7. Stockholders’ Equity

In April 2023, the Company completed an underwritten public offering of 5,000,000 shares of its common stock at a public offering price of $20.00 per share and issued an additional 750,000 shares of common stock at a price of $20.00 per share following the underwriters’ exercise of their option to purchase additional shares. Net proceeds, after deducting underwriting commissions and offering costs paid by the Company, were approximately $107.8 million.

In August 2022, the Company entered into an Open Market Sale Agreement^SM(the “Sales Agreement”), pursuant to which the Company may offer and sell up to $100.0 million shares of common stock from time to time in “at-the-market” offerings (the “2022 ATM Facility”). There were no sales of the Company’s common stock under the 2022 ATM Facility during the year ended December 31, 2022. During the three months ended March 31, 2023, the

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Company sold 1,749,199 shares of its common stock under the 2022 ATM Facility for net proceeds of $24.3 million, after deducting issuance costs. There were no sales of the Company’s common stock under the 2022 ATM Facility during the three months ended June 30, 2023 and September 30, 2023.

In November 2019, the Company entered into an Open Market Sale Agreement(the “Prior Sales Agreement”), pursuant to which the Company could offer and sell up to $75.0 million of shares of common stock from time to time in “at-the-market” offerings (the “2019 ATM Facility”). During the year ended December 31, 2022, the Company sold 422,367 shares of its common stock under the 2019 ATM Facility for net proceeds of $14.6 million, after deducting issuance costs. The Prior Sales Agreement was terminated in connection with and replaced by the Sales Agreement in August 2022.

In August 2018, the Company entered into a Securities Purchase Agreement with certain accredited investors (each, an “Investor” and, collectively, the “Investors”), pursuant to which the Company sold an aggregate of 2,750,000 shares of its common stock at a price of $8.00 per share, for aggregate net proceeds of $21.7 million, after deducting offering expenses payable by the Company. In a concurrent private placement, the Company issued the Investors warrants to purchase an aggregate of 2,750,000 shares of its common stock (each, a “Warrant” and, collectively, the “Warrants”). Each Warrant was exercisable from August 8, 2018 through August 8, 2023. Warrants to purchase 1,375,000 shares of the Company’s common stock had an exercise price of $10.00 per share and Warrants to purchase 1,375,000 shares of the Company’s common stock had an exercise price of $15.00 per share. The exercise price and number of shares of common stock issuable upon the exercise of the Warrants (the “Warrant Shares”) were subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrants. Under certain circumstances, the Warrants were exercisable on a “cashless” basis. In connection with the issuance and sale of the common stock and Warrants, the Company granted the Investors certain registration rights with respect to the Warrants and the Warrant Shares. The common stock and Warrants were classified as equity in accordance with Accounting Standards Codification Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), and the net proceeds from the transaction were recorded as a credit to additional paid-in capital.

In August 2023, prior to the expiration of the Warrants, the Company entered into certain agreements with the Investors and their affiliates under which the Company agreed to allow the Warrants to be exercised in exchange for pre-funded warrants representing the same number of Warrant Shares underlying the Warrants with an exercise price of $0.001 per share (the “Pre-Funded Warrants”). Subsequent to the execution of the agreements and prior to the expiration of the Warrants, all outstanding Warrants were exercised for gross proceeds of $34.4 million in exchange for 44,748 shares of the Company’s common stock and Pre-Funded Warrants to purchase 2,705,252 shares of common stock (subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Pre-Funded Warrants) with an exercise price of $0.001 per share. The Pre-Funded Warrants will expire upon the day they are exercised in full. The Pre-Funded Warrants are exercisable at any time prior to expiration except that the Pre-Funded Warrants cannot be exercised by the Investors if, after giving effect thereto, the Investors would beneficially own more than 9.99% of the Company’s common stock, subject to certain exceptions. The common stock and Pre-Funded Warrants were classified as equity in accordance with ASC 480 and the net proceeds from the transaction were recorded as a credit to additional paid-in capital. In accordance with Accounting Standards Codification Topic 260, Earnings Per Share, outstanding Pre-Funded Warrants are included in the computation of basic net loss per share because the exercise price is negligible, and they are fully vested and exercisable after the original issuance date. As of September 30, 2023, none of the Pre-Funded Warrants have been exercised.

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Note 8. Net Loss per Share

As the Company had net losses for the three and nine months ended September 30, 2023 and 2022, all potential weighted average dilutive common shares were determined to be anti-dilutive. The following table sets forth the computation of basic and diluted net loss per share (in thousands, except share and per share data):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Numerator:
Net loss	$	(34,105)	$	(31,232)	$	(106,290)	$	(93,199)
Denominator:
Weighted-average shares used to compute net loss per common share, basic and diluted		59,182,899		49,107,639		55,542,543		48,971,329
Net loss per share, basic and diluted	$	(0.58)	$	(0.64)	$	(1.91)	$	(1.90)

The following outstanding shares of potentially dilutive securities have been excluded from diluted net loss per share computations for the periods presented because their inclusion would be anti-dilutive:


	September 30,
	2023	2022
Options to purchase common stock	8,030,007	6,441,415
Common stock warrants	—	2,750,000
Restricted stock units	708,872	694,414
Performance stock units	75,500	199,500
ESPP shares	42,472	79,960
Total	8,856,851	10,165,289

Note 9. Subsequent Event

The Company announced the achievement of a $50.0 million milestone event under its license and collaboration agreement with Janssen on November 1, 2023. The milestone was earned when the third patient was dosed in the ICONIC-TOTAL Phase 3 clinical trial of JNJ-2113 in patients with moderate-to-severe psoriasis.

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ITEM 2.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 Unaudited Condensed Consolidated Financial Statements and related notes included in Part I, Item 1 of this quarterly report on Form 10-Q (the “Quarterly Report”) and with our Audited Consolidated Financial Statements and related notes thereto for the year ended December 31, 2022, included in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 15, 2023.

Forward-Looking Statements

This Quarterly Report contains certain forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”). All statements other than statements of historical fact are forward-looking statements. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performances or achievements expressed or implied by the forward-looking statements. In some cases, you can identify forward-looking statements by terms such as “anticipates,” “believes,” “could,” “estimates,” “expects,” “forecasts,” “intends,” “may,” “plans,” “potential,” “predicts,” “projects,” “should,” “targets,” “will,” “would,” “seeks” and similar expressions intended to identify forward-looking statements. Forward-looking statements reflect our current views with respect to future events, are based on assumptions, and are subject to risks, uncertainties and other important factors. In particular, statements, whether expressed or implied, concerning, among other things, the potential for our programs, the timing of our clinical trials, the timing of enrollment in our clinical trials, our cash runway, the potential for eventual regulatory approval and commercialization of our product candidates, our potential receipt of milestone payments and royalties under our collaboration agreements, future operating results, our ability to generate sales, income or cash flow, the impact of any future outbreaks of disease, epidemics and pandemics, such as the COVID-19 pandemic (“COVID-19”), ongoing military conflicts, including between Ukraine and Russia and in Israel and surrounding areas; rising tensions between China and Taiwan, inflationary pressures, the impact of a potential U.S. government shutdown, the availability of credit and our exposure to banking or other financial institution instability are forward-looking statements. Forward-looking statements involve risks, uncertainties and assumptions that are beyond our ability to control or predict, including those risks, uncertainties and assumptions discussed in Part II, Item 1A, of this Quarterly Report. These statements are based on information available to us as of the date of this Quarterly Report and, while we believe such information provides a reasonable basis for these statements, the information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. Given these risks, uncertainties and other important factors, you should not place undue reliance on these forward-looking statements. Also, forward-looking statements represent our estimates and assumptions only as of the date of this Quarterly Report. Except as required by law, we assume no obligation to update any forward-looking statements publicly, or to update the reasons actual results could differ materially from those anticipated in any forward-looking statements, whether as a result of new information, future developments, changes in assumptions or otherwise. “Protagonist,” the Protagonist logo and other trademarks, service marks and trade names of Protagonist are registered and unregistered marks of Protagonist Therapeutics, Inc. in the United States and other jurisdictions.

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Overview

We are a biopharmaceutical company with peptide-based new chemical entities rusfertide and JNJ-2113 (formerly PN-235) in advanced stages of development, both derived from our proprietary discovery technology platform. Our clinical programs fall into two broad categories of diseases; (i) hematology and blood disorders, and (ii) inflammatory and immunomodulatory diseases.

Our Product Pipeline

Rusfertide

Our most advanced clinical asset, rusfertide (generic name for PTG-300), is an injectable hepcidin mimetic in development for the potential treatment of polycythemia vera (“PV”) and other blood disorders and is wholly owned. Hepcidin is a key hormone in regulating iron equilibrium and is critical to the proper development of red blood cells. Rusfertide mimics the effect of the natural hormone hepcidin, but with greater potency, solubility and stability. Data from our rusfertide Phase 2 clinical trials presented at medical conferences in 2021 and 2022 provided evidence regarding the potential of rusfertide for managing hematocrit, reducing thrombotic risk and improving iron deficiency symptoms. Rusfertide has a unique mechanism of action in the potential treatment of PV, which may enable it to specifically decrease and maintain hematocrit levels within the range of recommended clinical guidelines without causing the iron deficiency that can occur with frequent phlebotomy. Our rusfertide Phase 2 clinical trials include the following:

●

REVIVE, a Phase 2 proof of concept trial, was initiated in the fourth quarter of 2019. We completed enrollment of patients in the first quarter of 2022 and 70 patients were enrolled through the end of the randomized withdrawal portion of the trial, which was completed during the first quarter of 2023 and will continue in ongoing open label extension.

●

PACIFIC, another Phase 2 trial for rusfertide for patients diagnosed with PV and with routinely elevated hematocrit levels (>48%), was initiated during the first quarter of 2021, and the 52-week trial was completed during the second quarter of 2023.

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On March 15, 2023, we announced positive topline results from the blinded, placebo-controlled, randomized withdrawal portion of the REVIVE trial. Subjects receiving rusfertide achieved statistically significant improvements versus placebo in the trial’s primary endpoint. The double-blind, placebo-controlled, 12-week randomized withdrawal portion was included as Part 2 of the REVIVE trial study to evaluate rusfertide in PV patients with frequent phlebotomy requirements. In the REVIVE trial, subjects were initially enrolled in the 28-week open label dose-titration and efficacy evaluation Part 1 of the study, followed by 1:1 randomization of 53 subjects to placebo versus rusfertide therapy for a subsequent duration of 12 weeks. More subjects receiving rusfertide during the blinded randomized withdrawal portion of the REVIVE trial were responders compared with placebo (69.2% versus 18.5%, p=0.0003). A study subject was defined as a responder if the subject completed 12 weeks of double-blind treatment while maintaining hematocrit control without phlebotomy eligibility and without phlebotomy. During the 12 weeks of the blinded randomized withdrawal, only 2 of 26 subjects on rusfertide were phlebotomized.

Data from the REVIVE trial presented at the European Hematology Association Congress in June 2023 suggested that rusfertide treatment results in highly statistically significant reduction in the need for therapeutic phlebotomy in phlebotomy-dependent patients, leading to rapid, sustained and durable control of hematocrit levels below 45%. Rusfertide was well tolerated, with localized injection site reactions comprising the majority of adverse events.

VERIFY, a global double-blind, placebo-controlled Phase 3 clinical trial of rusfertide in PV for approximately 250 patients, was initiated in the first quarter of 2022. We expect enrollment completion in the first quarter of 2024.

JNJ-2113 (formerly PN-235)

Our partnered Interleukin-23 receptor (“IL-23R”) antagonist compound JNJ-2113 is an orally delivered investigational drug that is designed to block biological pathways currently targeted by marketed injectable antibody drugs. Our orally stable peptide approach may offer a targeted therapeutic approach for gastrointestinal (“GI”) and systemic compartments as needed. We believe that, compared to antibody drugs, JNJ-2113 has the potential to provide clinical improvement in an oral medication with increased convenience and compliance and the opportunity for the earlier introduction of targeted oral therapy.

In May 2017, we entered into a worldwide license and collaboration agreement with Janssen Biotech, Inc. (“Janssen”), a Johnson & Johnson company, to co-develop and co-detail our IL-23R antagonist compounds, including PTG-200 (JNJ-67864238) and certain related compounds for all indications, including inflammatory bowel disease (“IBD”). PTG-200 was a first-generation investigational, orally delivered, IL-23R antagonist for the treatment of IBD. The agreement with Janssen was amended in May 2019 to expand the collaboration by supporting efforts towards second-generation IL-23R antagonists; and in July 2021 to, among other things, enable Janssen to independently research and develop collaboration compounds for multiple indications in the IL-23 pathway and further align our financial interests.

During the fourth quarter of 2021, following a pre-specified interim analysis criteria, a portfolio decision was made by Janssen to advance second-generation product candidate JNJ-2113 (JNJ-77242113) based on its superior potency and overall pharmacokinetic and pharmacodynamic profile. A JNJ-2113 Phase 1 trial was completed in the fourth quarter of 2021.

In February 2022, Janssen initiated FRONTIER1, a 255-patient Phase 2b clinical trial of JNJ-2113 in moderate-to-severe plaque psoriasis, which was completed in December 2022. FRONTIER1 was a randomized, multicenter, double-blind, placebo-controlled study that evaluated three once-daily dosages and two twice-daily dosages of JNJ-2113 taken orally. The primary endpoint of the trial was the proportion of patients achieving PASI-75 (a 75% improvement in skin lesions as measured by the Psoriasis Area and Severity Index (“PASI”)) at 16 weeks. In July 2023, we announced updated positive topline results from the trial, which were presented at the World Congress of Dermatology in Singapore. JNJ-2113 achieved the study’s primary and secondary efficacy endpoints. A statistically significant greater proportion of patients who received JNJ-2113 achieved PASI-75 as well as PASI-90 and PASI-100 (90% and 100% improvement, respectively, in skin lesions as measured by the PASI) responses compared to placebo at Week 16 in all five of the trial’s treatment groups. A clear dose response was observed across an eight-fold dose range.

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

In October 2023, Janssen initiated three JNJ-2113 studies, including:

●

ICONIC-LEAD – A randomized controlled Phase 3 trial to evaluate the safety and efficacy of JNJ-2113 compared with placebo in participants with moderate-to-severe plaque psoriasis, with PASI-90 and Investigator’s Global Assessment (“IGA”) score of 0 (clear) or 1 (almost clear) as co-primary endpoints;

●

ICONIC-TOTAL – A randomized, controlled Phase 3 trial to evaluate the efficacy and safety of JNJ-2113 compared with placebo for the treatment of plaque psoriasis in participants with at least moderate severity affecting special areas (scalp, genital, and/or palms of the hands and soles of the feet) with overall IGA score of 0 or 1 as the primary endpoint; and

●

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

Additional Phase 3 studies are expected to be initiated in the first quarter of 2024 as part of the broader psoriasis ICONIC clinical program led by Janssen. All of the studies in the ICONIC program will use the once daily, immediate release formulation from the previously completed FRONTIER 1 study. Other Phase 2 studies of JNJ-2113 that Janssen has initiated include the SUMMIT study of JNJ-2113 for the treatment of moderate-to-severe plaque psoriasis, which was completed in the second quarter of 2023, and FRONTIER 2, a long-term extension study.

We earned a $50.0 million milestone payment upon dosing of the third patient in the ICONIC-LEAD Phase 3 trial in late October 2023. Under our agreement with Janssen,

●

we will qualify for a $10.0 million milestone payment upon the dosing of the third patient in the Phase 2b trial in UC;

●

we will qualify for a $115.0 million milestone payment upon JNJ-2113 meeting the primary endpoint in a Phase 3 trial;

●

we will qualify for a $35.0 million milestone payment upon the filing of a New Drug Application (“NDA”) for JNJ-2113 with the U.S. Food and Drug Administration (the “FDA”);

●

we will qualify for a $50.0 million milestone payment upon approval of the NDA by the FDA; and

●

we will qualify for a $15.0 million milestone payment upon the advancement of JNJ-2113 into a Phase 3 trial in a second indication.

We remain eligible for up to approximately $805.0 million in future development and sales milestone payments, inclusive of those future development milestones discussed above, in addition to the $112.5 million in nonrefundable payments from Janssen already received to date and the $50.0 million that was achieved in the fourth quarter of 2023. We also remain eligible to receive upward tiering royalties on net product sales at percentages ranging from six percent to ten percent, with ten percent being the royalty rate for over $4.0 billion in net sales.

PN-943

PN-943 is a wholly owned, investigational, orally delivered, gut-restricted alpha 4 beta 7 specific integrin antagonist for IBD. We completed a Phase 2 trial of PN-943 in patients with moderate to severe UC in early 2023. We

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do not intend to dedicate further internal resources to clinical development or contract manufacturing activities for our PN-943 clinical program.

Discovery Platform

Our clinical assets are all derived from our proprietary discovery platform. Our platform enables us to engineer novel, structurally constrained peptides that are designed to retain key advantages of both orally delivered small molecules and injectable antibody drugs in an effort to overcome many of their limitations as therapeutic agents. Importantly, constrained peptides can be designed to potentially alleviate the fundamental instability inherent in traditional peptides to allow different delivery forms, such as oral, subcutaneous, intravenous, and rectal. Our discovery pipeline has strategically focused on i) hematology and blood disorders and ii) inflammatory and immunomodulatory diseases. For example, we have a pre-clinical stage program to identify an orally active hepcidin mimetic, which we believe will be complementary to the injectable rusfertide for offering the best treatment options for PV, hereditary hemochromatosis and other potential erythropoietic and iron imbalance disorders.

Business Update

We are currently operating in a period of economic uncertainty and capital markets disruption, which has been impacted by the direct and indirect effects of COVID-19, domestic and global monetary and fiscal policy, geopolitical instability, ongoing military conflicts, including between Russia and Ukraine and in Israel and surrounding areas, rising tensions between China and Taiwan, a recessionary environment, historically high domestic and global inflation, the impact of a potential U.S. government shutdown and instability in banks and other financial institutions. We have experienced delays in our existing and planned clinical trials due to worldwide direct and indirect impacts related to COVID-19, and our future results of operations and liquidity could be adversely impacted by future outbreaks of disease, epidemics and pandemics, including further delays in existing and planned clinical trials, continued difficulty in recruiting patients for these clinical trials, delays in manufacturing and collaboration activities and supply chain disruptions. The conflict in Ukraine has exacerbated market disruptions, including significant volatility in commodity prices, as well as supply chain interruptions, and has contributed to record inflation globally. The U.S. Federal Reserve and other central banks may be unable to contain inflation through more restrictive monetary policy and inflation may increase or continue for a prolonged period of time. Inflationary factors, such as increases in the cost of clinical supplies, interest rates, overhead costs and transportation costs may adversely affect our operating results. Also, the failure of Silicon Valley Bank and other regional banks in the United States during the first half of 2023 has given rise to uncertainty in the security of amounts in deposit accounts uninsured by the Federal Deposit Insurance Corporation. We continue to monitor these events and the potential impact on our business. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may be adversely affected in the future due to domestic and global monetary and fiscal policy, supply chain constraints, consequences associated with ongoing military conflicts, including between Russia and Ukraine and in Israel and surrounding areas, and such factors may lead to increases in the cost of manufacturing our product candidates and delays in initiating trials.

Operations

We have incurred net losses in each year since inception, and we do not anticipate achieving sustained profitability in the foreseeable future. Our net loss was $34.1 million and $106.3 million for the three and nine months ended September 30, 2023, respectively. Our net loss was $31.2 million and $93.2 million for the three and nine months ended September 30, 2022, respectively. As of September 30, 2023, we had an accumulated deficit of $643.0 million. Substantially all of our net losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect to continue to incur significant research and development expenses and other expenses related to our ongoing operations, product development, and pre-commercialization activities. As a result, we expect to continue to incur losses in the future as we continue our development of, and seek regulatory approval for, our product candidates.

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Janssen License and Collaboration Agreement

On July 27, 2021, we entered into an Amended and Restated License and Collaboration Agreement (the “Restated Agreement”) with Janssen, which amended and restated the License and Collaboration Agreement, effective July 13, 2017, by and between us and Janssen (the “Original Agreement”), as amended by the first amendment, effective May 7, 2019 (the “First Amendment”). Prior to January 1, 2023, Janssen was a related party to us as Johnson & Johnson Innovation - JJDC, Inc. was a significant (greater than 5%) stockholder of the Company, and both companies are subsidiaries of Johnson & Johnson. Upon the effectiveness of the Original Agreement, we received a non-refundable, upfront cash payment of $50.0 million from Janssen. Upon the effectiveness of the First Amendment, we received a $25.0 million payment from Janssen in 2019. In the first quarter of 2020, we received a $5.0 million payment triggered by the successful nomination of a second-generation IL-23R antagonist development compound. In the fourth quarter of 2021, we received a $7.5 million milestone payment from Janssen triggered by completion of the data collection for JNJ-2113 Phase 1 activities. In the second quarter of 2022, we received a $25.0 million milestone payment in connection with the dosing of a third patient in FRONTIER1 during the first quarter of 2022. See Note 3 to the condensed consolidated financial statements included elsewhere in this report for additional information.

Critical Accounting Polices and Estimates

Our management’s discussion and analysis of our financial condition and results of operations is based on our unaudited condensed consolidated financial statements, which have been prepared in accordance with United States generally accepted accounting principles. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent liabilities at the date of the unaudited condensed consolidated financial statements, as well as the reported revenue generated, and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources.

There have been no material changes to our critical accounting policies during the three and nine months ended September 30, 2023, as compared to those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” in our Annual Report for the year ended December 31, 2022 filed with the SEC on March 15, 2023.

Components of Our Results of Operations

License and Collaboration Revenue

Our license and collaboration revenue is derived from payments we receive under the Restated Agreement with Janssen. See Note 3 to the condensed consolidated financial statements included elsewhere in this report for additional information.

Research and Development Expenses

Research and development expenses represent costs incurred to conduct research, such as the discovery and development of our product candidates. We recognize all research and development costs as they are incurred, unless there is an alternative future use in other research and development projects or otherwise. Non-refundable advance payments for goods and services that will be used in future research and development activities are expensed when the activity has been performed or when the goods have been received rather than when payment has been made. In instances where we enter into agreements with third parties to provide research and development services to us, costs are expensed as services are performed. Amounts due under such arrangements may be either fixed fee or fee for service and may include upfront payments, monthly payments, and payments upon the completion of milestones or the receipt of deliverables.

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Research and development expenses consist primarily of the following:

●

expenses incurred under agreements with clinical trial sites that conduct research and development activities on our behalf;

●

employee-related expenses, which include salaries, benefits and stock-based compensation;

●

laboratory vendor expenses related to the preparation and conduct of pre-clinical, non-clinical and clinical studies;

●

costs related to production of clinical supplies and non-clinical materials, including fees paid to contract manufacturers;

●

license fees and milestone payments under license and collaboration agreements; and

●

facilities and other allocated expenses, which include expenses for rent and maintenance of facilities, information technology, depreciation and amortization expense and other supplies.

We recognize the amounts related to our Australian research and development refundable cash tax incentive that are not subject to refund provisions as a reduction of research and development expenses. The research and development tax incentives are recognized when there is reasonable assurance that the incentives will be received, the relevant expenditure has been incurred and the amount of the consideration can be reliably measured. We evaluate our eligibility under the tax incentive program as of each balance sheet date and make accruals and related adjustments based on the most current and relevant data available. We may alternatively be eligible for a taxable credit in the form of a non-cash tax incentive. We recognize the amounts from grants under government programs as a reduction of research and development expenses when the related research costs are incurred.

We allocate direct costs and indirect costs incurred to product candidates when they enter clinical development. For product candidates in clinical development, direct costs consist primarily of clinical, pre-clinical, and drug discovery costs, costs of supplying drug substance and drug product for use in clinical and pre-clinical studies, including clinical manufacturing costs, contract research organization fees, and other contracted services pertaining to specific clinical and pre-clinical studies. Indirect costs allocated to our product candidates on a program-specific basis include research and development employee salaries, benefits, and stock-based compensation, and indirect overhead and other administrative support costs. Program-specific costs are unallocated when the clinical expenses are incurred for our early-stage research and drug discovery projects as our internal resources, employees and infrastructure are not tied to any one research or drug discovery project and are typically deployed across multiple projects. As such, we do not provide financial information regarding the costs incurred for early-stage pre-clinical and drug discovery programs on a program-specific basis prior to the clinical development stage.

We expect our fourth quarter 2023 research and development expenses to remain relatively flat as compared to the first nine months of 2023 as we continue to focus our resources toward progressing our rusfertide program into later stage clinical trials and preparing for commercialization. We do not intend to dedicate further internal resources to clinical development or contract manufacturing activities for our PN-943 clinical program. The process of conducting research, identifying potential product candidates and conducting pre-clinical and clinical trials necessary to obtain regulatory approval and commencing pre-commercialization activities is costly and time intensive. We may never succeed in achieving marketing approval for our product candidates regardless of our costs and efforts. The probability of success of our product candidates may be affected by numerous factors, including pre-clinical data, clinical data, competition, manufacturing capability, our cost of goods to be sold, our ability to receive, and the timing of, regulatory approvals, market conditions, and our ability to successfully commercialize our products if they are approved for marketing. As a result, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of any of our product candidates. Our research and development programs are subject to change from time to time as we evaluate our priorities and available resources.

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General and Administrative Expenses

General and administrative expenses consist of personnel costs, allocated facilities costs and other expenses for outside professional services, including legal, human resources, audit and accounting services, and pre-commercialization expenses, including selling and marketing costs. Personnel costs consist of salaries, benefits and stock-based compensation. Allocated expenses consist of expenses for rent and maintenance of facilities, information technology, depreciation and amortization expense and other administrative supplies. We expect to continue to incur expenses supporting our continued operations as a public company, including expenses related to compliance with the rules and regulations of the SEC and those of the national securities exchange on which our securities are traded, insurance expenses, investor relations expenses, audit fees, professional services and general overhead and administrative costs.

Interest Income

Interest income consists of interest earned on our cash, cash equivalents and marketable securities, which is comprised of contractual interest, premium amortization and discount accretion.

Other Expense, Net

Other expense, net consists primarily of amounts related to foreign exchange gains and losses and related items.

Results of Operations

Comparison of the Three Months Ended September 30, 2023 and 2022


	Three Months Ended
	September 30,				Dollar		%
	2023		2022		Change		Change

	(Dollars in thousands)
Operating expenses:
Research and development ⁽¹⁾	$	30,664	$	25,402	$	5,262	21
General and administrative ⁽²⁾		7,662		6,901		761	11
Total operating expenses		38,326		32,303		6,023	19
Loss from operations		(38,326)		(32,303)		(6,023)	19
Interest income		4,252		1,157		3,095	268
Other expense, net		(31)		(86)		55	(64)
Net loss	$	(34,105)	$	(31,232)	$	(2,873)	9

(1)	Includes $3.8 million and $3.9 million of non-cash stock-based compensation expense for the three months ended September 30, 2023 and 2022, respectively.

(2)	Includes $3.0 million and $2.1 million of non-cash stock-based compensation expense for the three months ended September 30, 2023 and 2022, respectively.

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Research and Development Expenses


	Three Months Ended
	September 30,				Dollar		%
	2023		2022		Change		Change

	(Dollars in thousands)
Clinical and development expense — rusfertide (PTG-300)	$	24,905	$	15,828	$	9,077	57
Clinical and development expense — PN-943		293		4,282		(3,989)	(93)
Clinical and development expense — JNJ-2113 (PN-235)		20		2		18	*
Clinical and development expense — other		—		(69)		69	(100)
Pre-clinical and drug discovery research expense		5,446		5,401		45	1
Grants and tax incentives expense reimbursement, net		—		(42)		42	(100)
Total research and development expenses	$	30,664	$	25,402	$	5,262	21

*Percentage not meaningful.

Research and development expenses increased $5.3 million, or 21%, from $25.4 million for the three months ended September 30, 2022 to $30.7 million for the three months ended September 30, 2023. The increase was primarily due to (i) an increase of $9.1 million in rusfertide clinical and contract manufacturing expenses primarily for the Phase 3 VERIFY clinical trial, partially offset by (ii) a decrease of $4.0 million in expenses for the PN-943 program where further development work was de-prioritized to optimize and focus resources toward the rusfertide program in PV.

We had 84 and 99 full-time equivalent research and development employees as of September 30, 2023 and 2022, respectively. Research and development personnel-related expenses for the three months ended September 30, 2023 decreased by $0.7 million as compared to the three months ended September 30, 2022 due primarily to a decrease in stock-based compensation expense.

General and Administrative Expenses

General and administrative expenses increased $0.8 million, or 11%, from $6.9 million for the three months ended September 30, 2022 to $7.7 million for the three months ended September 30, 2023 due primarily to increases in stock-based compensation expense and other personnel-related expenses, partially offset by decreases in consulting, marketing expense and other general expenses.

We had 27 and 23 full-time equivalent general and administrative employees as of September 30, 2023 and 2022, respectively.

Interest Income

Interest income increased $3.1 million from $1.2 million for the three months ended September 30, 2022 to $4.3 million for the three months ended September 30, 2023. This increase was due primarily to higher invested balances as well as higher yields on invested balances during a period of increasing interest rates compared to the prior year period.

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Comparison of the Nine Months Ended September 30, 2023 and 2022


	Nine Months Ended
	September 30,				Dollar		%
	2023		2022		Change		Change

	(Dollars in thousands)
License and collaboration revenue	$	—	$	26,581	$	(26,581)	(100)
Operating expenses:
Research and development ⁽¹⁾		91,262		96,331		(5,069)	(5)
General and administrative ⁽²⁾		25,439		25,107		332	1
Total operating expenses		116,701		121,438		(4,737)	(4)
Loss from operations		(116,701)		(94,857)		(21,844)	23
Interest income		10,656		1,809		8,847	489
Other expense, net		(245)		(151)		(94)	62
Net loss	$	(106,290)	$	(93,199)	$	(13,091)	14

(1)	Includes $13.2 million and $11.3 million of non-cash stock-based compensation expense for the nine months ended September 30, 2023 and 2022, respectively.

(2)	Includes $9.5 million and $7.4 million of non-cash stock-based compensation expense for the nine months ended September 30, 2023 and 2022, respectively.

License and Collaboration Revenue

License and collaboration revenue decreased $26.6 million, or 100%, from $26.6 million for the nine months ended September 30, 2022 to zero for the nine months ended September 30, 2023. License and collaboration revenue for the nine months ended September 30, 2022 included a $25.0 million milestone payment earned following the dosing of the third patient in the FRONTIER 1 clinical trial for JNJ-2113. We completed our performance obligation pursuant to the collaboration as of June 30, 2022.

Research and Development Expenses


	Nine Months Ended
	September 30,				Dollar		%
	2023		2022		Change		Change

	(Dollars in thousands)
Clinical and development expense — rusfertide (PTG-300)	$	74,387	$	43,378	$	31,009	71
Clinical and development expense — PN-943		1,487		33,642		(32,155)	(96)
Clinical and development expense — JNJ-2113 (PN-235)		74		237		(163)	(69)
Clinical and development expense — Other		(13)		756		(769)	(102)
Preclinical and drug discovery research expense		15,327		18,360		(3,033)	(17)
Grants and tax incentives expense reimbursement, net		—		(42)		42	(100)
Total research and development expenses	$	91,262	$	96,331	$	(5,069)	(5)

Research and development expenses decreased $5.1 million, or 5%, from $96.3 million for the nine months ended September 30, 2022 to $91.3 million for the nine months ended September 30, 2023. The decrease was primarily due to (i) a decrease of $32.2 million in expenses for the PN-943 program where further development work was de-prioritized to optimize and focus resources toward the rusfertide program in PV, and (ii) a decrease of $3.0 million in expenses related to pre-clinical and drug discovery research expense, partially offset by (iii) an increase of $31.0 million in rusfertide clinical and contract manufacturing expenses primarily for the Phase 3 VERIFY clinical trial.

We had 84 and 99 full-time equivalent research and development employees as of September 30, 2023 and 2022, respectively. Research and development personnel-related expenses for the nine months ended September 30, 2023 increased by $0.4 million as compared to the nine months ended September 30, 2022 due to an increase of $1.9

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million in stock-based compensation expense, partially offset by a decrease of $1.5 million in other personnel-related expenses.

General and Administrative Expenses

General and administrative expenses increased $0.3 million, or 1%, from $25.1 million for the nine months ended September 30, 2022 to $25.4 million for the nine months ended September 30, 2023 due primarily to an increase in stock-based compensation expense during the current year period, partially offset by one-time costs incurred during the first quarter of 2022.

We had 27 and 23 full-time equivalent general and administrative employees as of September 30, 2023 and 2022, respectively.

Interest Income

Interest income increased $8.8 million from $1.8 million for the nine months ended September 30, 2022 to $10.6 million for the nine months ended September 30, 2023. This increase was due primarily to higher invested balances as well as higher yields on invested balances during a period of increasing interest rates compared to the prior year period.

Liquidity and Capital Resources

Sources of Liquidity

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

Proceeds from Sales of Our Common Stock

In April 2023, we completed an underwritten public offering of 5,000,000 shares of our common stock at a public offering price of $20.00 per share and issued an additional 750,000 shares of common stock at a price of $20.00 per share following the underwriters’ exercise of their option to purchase additional shares. Net proceeds, after deducting underwriting commissions and offering costs paid by us, were approximately $107.8 million.

In August 2022, we entered into an Open Market Sale Agreement^SM(the “Sales Agreement”), pursuant to which we may offer and sell up to $100.0 million shares of our common stock from time to time in “at-the-market” offerings (the “2022 ATM Facility”). There were no sales under the 2022 ATM Facility during the year ended December 31, 2022. During the three months ended March 31, 2023, we sold 1,749,199 shares of our common stock under the 2022 ATM Facility for net proceeds of $24.3 million, after deducting issuance costs. There were no sales of our common stock under the 2022 ATM Facility during the three months ended June 30, 2023 and September 30, 2023.

In August 2018, we entered into a Securities Purchase Agreement with certain accredited investors (each, an “Investor” and, collectively, the “Investors”), pursuant to which we sold an aggregate of 2,750,000 shares of our common stock at a price of $8.00 per share, for aggregate net proceeds of $21.7 million, after deducting offering expenses payable by us. In a concurrent private placement, we issued the Investors warrants to purchase an aggregate of 2,750,000 shares of our common stock (each, a “Warrant” and, collectively, the “Warrants”). Each Warrant was exercisable from August 8, 2018 through August 8, 2023. Warrants to purchase 1,375,000 shares of our common stock had an exercise price of $10.00 per share and Warrants to purchase 1,375,000 shares of our common stock had an exercise price of $15.00 per share. The exercise price and number of shares of our common stock issuable upon the exercise of the Warrants (the “Warrant Shares”) were subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Warrants. Under certain circumstances, the Warrants were exercisable on a “cashless” basis. In connection with the issuance and sale of the common stock and Warrants, we granted the Investors certain registration rights with respect to the Warrants and the Warrant Shares. The common stock and Warrants were classified as equity in accordance with Accounting

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Standards Codification Topic 480, Distinguishing Liabilities from Equity (“ASC 480”), and the net proceeds from the transaction were recorded as a credit to additional paid-in capital.

In August 2023, prior to the expiration of the Warrants, we entered into certain agreements with the Investors and their affiliates under which we agreed to allow the Warrants to be exercised in exchange for pre-funded warrants representing the same number of Warrant Shares underlying the Warrants with an exercise price of $0.001 per share (the “Pre-Funded Warrants”). Subsequent to the execution of the agreements and prior to the expiration of the Warrants, all outstanding Warrants were exercised for gross proceeds of $34.4 million in exchange for 44,748 shares of our common stock and Pre-Funded Warrants to purchase 2,705,252 shares of common stock (subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Pre-Funded Warrants) with an exercise price of $0.001 per share. The Pre-Funded Warrants will expire upon the day they are exercised in full. The Pre-Funded Warrants are exercisable at any time prior to expiration except that the Pre-Funded Warrants cannot be exercised by the Investors if, after giving effect thereto, the Investors would beneficially own more than 9.99% of our common stock, subject to certain exceptions. The common stock and Pre-Funded Warrants were classified as equity in accordance with ASC 480 and the net proceeds from the transaction were recorded as a credit to additional paid-in capital. In accordance with Accounting Standards Codification Topic 260, Earnings Per Share, outstanding Pre-Funded Warrants are included in the computation of basic net loss per share because the exercise price is negligible, and they are fully vested and exercisable after the original issuance date. As of September 30, 2023, none of the Pre-Funded Warrants have been exercised.

Receipt of Payments Under Collaboration Agreements

We have received $112.5 million in non-refundable payments from Janssen since the inception of the Restated Agreement in 2017 through the date of this report as follows:

●

upon effectiveness of the Original Agreement, we received a non-refundable, upfront cash payment of $50.0 million from Janssen;

●

Upon effectiveness of the First Amendment, we became eligible to receive a $25.0 million payment from Janssen, which was received during the second quarter of 2019;

●

In December 2019, we became eligible to receive a $5.0 million payment triggered by the successful nomination of a second-generation development compound, which was received during the first quarter of 2020;

●

In October 2021, we became eligible to receive a $7.5 million milestone payment triggered by completion of the data collection for JNJ-2113 (formerly PN-235) Phase 1 activities, which was received during the fourth quarter of 2021;

●

In March 2022, we became eligible to receive a $25.0 million milestone payment in connection with the dosing of the third patient in the Phase 2b clinical trial of JNJ-2113 in moderate-to-severe plaque psoriasis, which was received during the second quarter of 2022; and

●

In late October 2023, we became eligible to receive a $50.0 million milestone payment in connection with the dosing of the third patient in the ICONIC-LEAD Phase 3 clinical trial of JNJ-2113 in moderate-to-severe plaque psoriasis. We have also received payments for services provided under the collaboration agreement and we may make in-kind payment reimbursements to Janssen for certain costs they have incurred pursuant to the cost sharing terms of the agreement.

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Pursuant to the Restated Agreement, we may be eligible to receive clinical development, regulatory and sales milestones, if and when achieved. Upcoming potential development milestones for second-generation products include:

●

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

●

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

●

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

●

$10.0 million upon the dosing of the third patient in the first Phase 2 clinical trial for any second-generation compound for a second indication (i.e. an indication different than the indication which triggered the $25.0 million milestone received during the second quarter of 2022 described above); and

●

$15.0 million upon the dosing of the third patient in a Phase 3 clinical trial for a second-generation compound for a second indication.

Capital Requirements

As of September 30, 2023, we had $322.7 million of cash, cash equivalents and marketable securities and an accumulated deficit of $643.0 million. Our capital expenditures were $0.6 million and $0.8 million for the nine months ended September 30, 2023 and the year ended December 31, 2022, respectively. Our primary uses of cash are to fund our operating expenses, including our research and development expenditures, general and administrative costs and pre- commercialization costs. Cash used in operating activities is impacted by the timing of when we pay these expenses. As of the date of this filing, we believe, based on our current operating plan and assumptions, that our existing cash, cash equivalents and marketable securities will be sufficient to meet our anticipated operating and capital expenditure requirements for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong. We could utilize our available capital resources sooner than we currently expect if, for instance, our planned pre-clinical and clinical trials are successful or expanded, our product candidates enter new and more advanced stages of clinical development, we experience significant delays or difficulties in commencing, enrolling or completing clinical studies, our newer product clinical trials advance beyond the discovery stage or various other factors. We expect that our cash burn will approximate current levels for the remainder of the year, but will increase in 2024. As we continue to focus our resources toward progressing our rusfertide program into later stage clinical trials and preparing for commercialization, we do not intend to dedicate further internal resources to clinical development or contract manufacturing activities for our PN-943 clinical program.

We anticipate that we will need to raise substantial additional funding to advance rusfertide through clinical development and toward potential regulatory approval and to develop, acquire, or in-license other potential product candidates. Our future funding requirements will depend on many factors, including:

●

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

●

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

●

our ability to successfully commercialize the product candidates we may identify and develop;

●

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

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●

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

●

the timing, receipt and amount of royalties under the Restated Agreement on worldwide net sales of IL-23 receptor antagonist compounds, upon regulatory approval or clearance, if any;

●

the amount and timing of sales and other revenues from our current product candidates and any other product candidates we may identify and develop, including the sales price and the availability of adequate third-party reimbursement;

●

the cash requirements of any future acquisitions or discoveries of product candidates;

●

the time and costs necessary to respond to technological and market developments;

●

the extent to which we may acquire or in-license other product candidates and technologies;

●

the costs necessary to attract, hire and retain qualified personnel;

●

the costs of maintaining, expanding and protecting our intellectual property portfolio; and

●

the costs of ongoing general and administrative activities to support the growth of our business.

Such additional funding may come from various sources, including raising additional capital, seeking access to debt, and seeking additional collaborative or other arrangements with partners, but such funding may not be available on terms acceptable to us, if at all. As discussed in Part II, Item1A. “Risk Factors,” we are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by domestic and global monetary and fiscal policy, geopolitical instability and banking and other financial institution instability, among other factors. A future recession or market correction, including those due to significant geopolitical or macroeconomic events, could materially affect our business and our access to credit and financial markets.

Any failure to raise capital as and when needed could have a negative impact on our financial condition and on our ability to pursue our business plans and strategies. Further, our operating plans may change, and we may need additional funds to meet operational needs and capital requirements for clinical trials, other research and development activities and pre-commercialization costs. If we do raise additional capital through public or private equity offerings or convertible debt securities, the ownership interest of our existing stockholders could be diluted, and the terms of these securities could include liquidation or other preferences that could adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we could be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to fully estimate the amounts of increased capital outlays and operating expenditures associated with our current and anticipated product development programs. For additional information, see Part II, Item 1A. “Risk Factors” – “Risks Related to our Financial Position and Capital Requirements.”

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


	Nine Months Ended
	September 30,
	2023		2022

Condensed Consolidated Statements of Cash Flows Data:	(Dollars in thousands)
Cash used in operating activities	$	(87,196)	$	(76,502)
Cash provided by investing activities	$	22,029	$	87,533
Cash provided by financing activities	$	169,950	$	18,285
Stock-based compensation	$	22,692	$	18,690

Cash Used in Operating Activities

Cash used in operating activities for the nine months ended September 30, 2023 was $87.2 million, consisting primarily of our net loss of $106.3 million and a net change of $3.1 million in net operating assets and liabilities, partially offset by certain non-cash items, including $22.7 million of stock-based compensation expense. The $10.7 million increase in cash flow used in operating activities during the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily due to a $13.1 million increase in our net loss and a $3.6 million increase in discount accretion on marketable securities, partially offset by a $4.0 million increase in stock-based compensation expense.

Cash Provided by Investing Activities

Cash provided by investing activities for the nine months ended September 30, 2023 was $22.0 million, consisting of primarily of proceeds from maturities of marketable securities of $115.7 million, partially offset by purchases of marketable securities of $93.1 million. The $65.5 million decrease in cash provided by investing activities for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily related to a decrease in the net activity of purchases and maturities of marketable securities.

Cash Provided by Financing Activities

Cash provided by financing activities for the nine months ended September 30, 2023 was $170.0 million, consisting primarily of net cash proceeds of $107.8 million from the April 2023 public offering of our common stock, $24.3 million from sales of our common stock under the 2022 ATM Facility, $34.4 million from the exercise of the Warrants in exchange for issuance of Pre-funded Warrants and common stock, and $4.3 million in proceeds from the issuance of common stock upon exercise of stock options and purchases of common stock under our employee stock purchase plan. The $151.7 million increase in cash provided by financing activities for the nine months ended September 30, 2023, as compared to the nine months ended September 30, 2022, was primarily due to a $107.8 million increase in net cash proceeds from the public offerings, a $9.7 million increase in ATM sales of our common stock and a $34.4 million increase in net cash proceeds from the exercise of the Warrants.

Contractual Obligations and Other Commitments

During the three and nine months ended September 30, 2023, there were no material changes to our material cash requirements, including commitments for capital expenditures, described under Management’s Discussion and Analysis of Financial Condition and Results of Operations in our Annual Report on Form 10-K for the year ended December 31, 2022 filed with the SEC on March 15, 2023.

ITEM 3.QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

We are exposed to market risks in the ordinary course of our business. These risks primarily include interest rate sensitivities related to our interest-earning investments and inflation risk affecting labor costs and clinical trial costs.

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Interest Rate Fluctuation Risk

We had $322.7 million and $237.4 million in cash, cash equivalents and marketable securities at September 30, 2023 and December 31, 2022, respectively. Our cash and cash equivalents consist of cash, money market funds, commercial paper and government bonds. Marketable securities consist of corporate bonds, commercial paper and government bonds. A portion of our investments are interest-bearing instruments carrying a degree of interest rate risk. However, because our investments are of high-quality credit rating and short term in duration, we believe that our exposure to interest rate risk is not significant and that a hypothetical 100 basis point change in interest rates would not have a significant impact on the total value of our portfolio.

Approximately $1.2 million and $2.5 million of our cash balance was located in Australia at September 30, 2023 and December 31, 2022, respectively. Our expenses, except those related to our Australian operations, are generally denominated in U.S. dollars. For our operations in Australia, the majority of our expenses are denominated in Australian dollars. To date, we have not had a formal hedging program with respect to foreign currency, but we may do so in the future if our exposure to foreign currency becomes more significant. A 10% increase or decrease in current exchange rates would not have a material effect on the results of our operations.

Inflation Fluctuation Risk

The inflationary environment has fluctuated over the period covered by this report. Inflation generally affects us by increasing our costs, such as the cost of labor and research and development contract costs. We do not believe inflation has had a material effect on the results of our operations during the three and nine months ended September 30, 2023.

ITEM 4.CONTROLS AND PROCEDURES

Evaluation of Disclosure Controls and Procedures

Management, under the supervision and with the participation of our Chief Executive Officer (Principal Executive Officer) and Chief Financial Officer (Principal Financial Officer), has evaluated the effectiveness of our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act) as of the end of the period covered by this report. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief Financial Officer have concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective at the reasonable assurance level.

Limitations on Effectiveness of Controls and Procedures and Internal Control over Financial Reporting

In designing and evaluating the disclosure controls and procedures and internal control over financial reporting, management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving the desired control objectives. In addition, the design of disclosure controls and procedures and internal control over financial reporting must reflect the fact that there are resource constraints, and that management is required to apply judgment in evaluating the benefits of possible controls and procedures relative to their costs.

Changes in Internal Control over Financial Reporting

There have been no changes in our internal control over financial reporting that occurred during the most recent fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II – OTHER INFORMATION

ITEM 1.LEGAL PROCEEDINGS

From time to time, we may become subject to litigation and claims arising in the ordinary course of business. We are not currently a party to any material legal proceedings, and we are not aware of any pending or threatened legal proceeding against us that we believe could have a material adverse effect on our business, operating results, financial condition or cash flows.

ITEM 1A.RISK FACTORS

We have identified the following risks and uncertainties that may have a material adverse effect on our business, financial condition or results of operations. Investors should carefully consider the risks described below before making an investment decision. Our business faces significant risks and the risks described below may not be the only risks we face. If any of these risks occur, our business, results of operations or financial condition could suffer, and the market price of our common stock could decline.

Summary of Risk Factors

Below is a summary of the principal factors that make an investment in our common stock speculative or risky. This summary does not address all of the risks that we face. Additional discussion of the risks summarized in this risk factor summary, and other risks that we face, can be found below under the heading “Item 1A. Risk Factors” and should be carefully considered, together with other information in this Quarterly Report on Form 10-Q and our other filings with the SEC, before making an investment decision regarding our common stock.

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We have no approved products and no historical commercial revenue, which makes it difficult to assess our future prospects and financial results.

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We are heavily dependent on the success of our product candidates in clinical development.

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Clinical development is a lengthy and expensive process with an uncertain outcome, and failure can occur at any stage of clinical development.

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Our product candidates may cause undesirable side effects or have other properties adversely impacting safety that delay or prevent their regulatory approval, restrict their approved labeling, or otherwise limit their commercial opportunity, including being required by an independent data monitoring committee or regulatory authorities to, delay or halt or clinical trials, or if such side effects or adverse events are sufficiently severe or prevalent, order us to suspend or cease altogether further development of our product candidates.

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We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.

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We have never generated any revenue from product sales and may never be profitable.

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We expect to require substantial additional funding.

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Raising additional capital may cause dilution to our existing stockholders.

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We rely on Janssen to continue the development of product candidates subject to our license and collaboration with Janssen, and to successfully commercialize any resulting products.

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Our existing or future collaborations with third parties may not be successful.

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We rely on third parties to conduct our pre-clinical studies and clinical trials and are subject to risks associated with their businesses and performance of their obligations to us.

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We rely on third-party contract manufacturers to manufacture our drug substance and clinical drug product.

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If we are ultimately unable to obtain regulatory approval for our product candidates in the United States or other jurisdictions, our business will be substantially harmed.

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We have no marketing and sales organization and may not be able to effectively market and sell any products or generate product revenue if any of our product candidates are approved for marketing.

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If we commercialize our product candidates abroad, we will be subject to the risks of doing business outside of the United States.

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We face significant competition from other biotechnology and pharmaceutical companies.

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We may face risks to our business arising from outbreaks of disease, epidemics and pandemics, such as the COVID-19 pandemic, including risks to our ongoing and planned clinical trials and pre-clinical and discovery research.

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Unstable market and economic conditions, including elevated and sustained inflation, may have serious adverse consequences on our business, financial condition and stock price.

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Our success depends on our ability to attract, retain and motivate qualified executives and other personnel.

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We may experience difficulties in managing the growth of our organization.

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We are subject to risks associated with information technology systems or breaches of data security.

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Any misconduct by our employees, independent contractors, principal investigators, consultants and vendors could have a material adverse effect on our business.

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Our headquarters is located near known earthquake fault zones.

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If we are unable to obtain or protect intellectual property rights related to our product candidates and technologies, we may not be able to compete effectively in our markets.

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We may be involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and ultimately unsuccessful.

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Patents covering our product candidates could be found invalid or unenforceable.

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Third party claims of intellectual property infringement may prevent or delay our drug discovery and development efforts.

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Our stock price has been and will likely continue to be volatile and may decline, regardless of our operating performance.

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Risks Related to Clinical Development

We are a biopharmaceutical company with no approved products and no historical commercial revenue, which makes it difficult to assess our future prospects and financial results.

We are a biopharmaceutical company with a somewhat limited operating history as a publicly traded company. Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of uncertainty. Our operations to date have been limited to developing our technology, undertaking pre-clinical studies and clinical trials of our pipeline candidates and conducting research to identify additional product candidates. We have not yet successfully developed an approved product or generated revenue from product sales or successfully conducted a pivotal registration trial for one of our product candidates. Consequently, the ability to accurately assess our future operating results or business prospects is significantly more limited than if we had a longer operating history or approved products on the market.

We expect that our financial condition and operating results will fluctuate significantly from period to period due to a variety of factors, many of which are beyond our control, including the success of our programs, decisions by regulatory bodies, actions taken by competitors or current or future licensees or collaborative partners, market and macroeconomic conditions and other factors identified in these risk factors. Accordingly, the likelihood of our success must be evaluated in light of many potential challenges and variables associated with a clinical-stage biopharmaceutical company, many of which are outside of our control, and past results, including operating or financial results, should not be relied on as an indication of future results.

We are heavily dependent on the success of our product candidates in clinical development, and if any of these products fail to receive regulatory approval or are not successfully commercialized, our business would be adversely affected.

We currently have no product candidates that are approved for commercial sale, and we may never develop a marketable product. We expect that a substantial portion of our efforts and expenditures over the next few years will be devoted to our current product candidates and the development of other product candidates. We cannot be certain that our product candidates will receive regulatory approval or, if approved, be successfully commercialized. The research, testing, manufacturing, labeling, approval, sale, marketing and distribution of our product candidates will be subject to extensive regulation by the U.S. Food and Drug Administration (the “FDA”) and other regulatory authorities in the United States and other countries. In addition, even if approved, our pricing and reimbursement will be subject to further review and discussions with payors. We are not permitted to market any product candidate in the United States until after approval of a new drug application (“NDA”) from the FDA, or in any foreign countries until approval by corresponding regulatory authorities. We will need to successfully conduct and complete large, extensive clinical trials in the target patient populations to support a potential application for regulatory approval by the FDA or corresponding regulatory authorities. Those trials, such as our ongoing VERIFY Phase 3 trial evaluating rusfertide for the treatment of PV or subsequent late-stage product candidates, may not demonstrate the safety and efficacy of our product candidates to support a marketing approval in the United States or other jurisdictions.

Our product candidates require additional clinical development, regulatory approval and secure sources of commercial manufacturing supply prior to commercialization. We cannot assure you that our clinical trials for our product candidates will be initiated or completed in a timely manner or successfully, or at all. Further we cannot be certain that we plan to advance any other product candidates into clinical trials. Moreover, any delay or setback in the development of any product candidate would be expected to adversely affect our business and cause our stock price to fall. For example, our stock price dropped significantly in September 2021 following the announcement of a full clinical hold imposed by the FDA on our rusfertide clinical studies. Our stock price also dropped significantly in April 2022 following the announcement of our voluntary withdrawal of Breakthrough Therapy Designation for rusfertide, and the announcement of topline data from our Phase 2 clinical trial evaluating PN-943 in UC.

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Clinical development is a lengthy and expensive process with an uncertain outcome, and results of earlier studies and trials may not be predictive of future trial results. Clinical failure can occur at any stage of clinical development.

Clinical testing is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical development process. The results of pre-clinical studies and early clinical trials of our product candidates and studies and trials of other products may not be predictive of the results of later-stage clinical trials. Any hypothesis formed from pre-clinical or early clinical observations for any of our product candidates may prove to be incorrect, and the data generated in animal models or observed in limited patient populations may be of limited value and may not be applicable in clinical trials conducted under the controlled conditions required by applicable regulatory requirements.

In addition to our planned pre-clinical studies and clinical trials, we will be required to complete one or more large scale, well-controlled clinical trials to demonstrate substantial evidence of efficacy and safety for each product candidate we intend to commercialize. Further, given the patient populations for which we are developing therapeutics, we expect to have to evaluate long-term exposure to establish the safety of our therapeutics in a chronic-dose setting. We have not yet completed a Phase 3 clinical trial or submitted an NDA. As a result, we have no corporate history or track record of successfully completing these phases of the development cycle. Product candidates in later stages of clinical trials may fail to show the desired safety and efficacy traits despite having progressed through pre-clinical studies and initial clinical trials. Clinical trial failures may result from a multitude of factors including, but not limited to, flaws in trial design, dose selection, placebo effect, patient enrollment criteria and failure to demonstrate favorable safety and/or efficacy traits of the product candidate. Based upon negative or inconclusive results, we may decide, or regulators may require us, to conduct additional clinical trials or pre-clinical studies.

We may experience delays in ongoing clinical trials, and we do not know whether planned clinical trials will begin on time, need to be redesigned, enroll patients on time or be completed on schedule, if at all. For example, we initially experienced slower than expected patient enrollment in VERIFY, a global Phase 3 clinical trial of rusfertide in PV. Clinical trials can be delayed for a variety of reasons, including if a clinical trial is modified, suspended or terminated by us. For example, in keeping with our organizational prioritization of rusfertide in PV, plans to initiate trials of rusfertide in other indications have been paused. Clinical trials can also be delayed by the institutional review boards or ethics committees of the institutions in which such clinical trials are being conducted, by a Data Safety Monitoring Board, for such trial or by the FDA or other regulatory authorities. Such authorities may impose a modification, suspension or termination due to a number of factors.

For example, our rusfertide clinical studies were subject to a three-week clinical hold by the FDA beginning in September 2021. The clinical hold was triggered by a non-clinical finding in a 26-week rasH2 transgenic mouse model indicating benign and malignant subcutaneous skin tumors. Also, in April 2022, the FDA indicated that it intended to rescind Breakthrough Therapy Designation for rusfertide in PV, and we voluntarily withdrew our request. For additional information, see the risk factor entitled “Our product candidates may cause undesirable side effects or have other properties adversely impacting safety that delay or prevent their regulatory approval, restrict their approved labeling, or otherwise limit their commercial opportunity” below.

In addition, there are a significant number of global clinical trials in hematologic disorders that are currently ongoing, especially in Phases 2 and 3, making it highly competitive and challenging to recruit subjects. Additionally, other companies targeting the same patient populations as our clinical trials for such medicines may make it more difficult for us to complete enrollment in our clinical trials. Furthermore, any negative results we may report in clinical trials of our product candidate may make it difficult or impossible to recruit and retain patients in other ongoing or subsequent clinical trials of that same product candidate. Delays or failures in planned patient enrollment or retention may result in increased costs, program delays or both. In addition, we are subject to risks and uncertainties as a result of the ongoing military conflict in Ukraine and Russia. For example, in 2022 we closed down clinical trial sites in Russia and Ukraine at which a limited number of subjects were enrolled in our PN-943 Phase 2 IDEAL trial.

If we experience material delays in the completion of any clinical trial, the reduction in remaining patent term would harm the commercial prospects for that product candidate and our ability to generate product revenue from any

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of these product candidates will be delayed. Any of these occurrences may harm our business, financial condition and prospects significantly.

If we are unable to discover and develop new product candidates, our business will be adversely affected.

As part of our strategy, we seek to discover and develop new product candidates. Research programs to identify appropriate biological targets, pathways and product candidates require substantial scientific, technical, financial and human resources, whether or not any product candidates are ultimately identified. Our research programs may initially show promise in identifying potential product candidates yet fail to yield product candidates for clinical development for many reasons.

Our proprietary peptide platform may not result in any products of commercial value.

We have developed a proprietary peptide technology platform to enable the identification, testing, design and development of new product candidates. Our peptide platform may not yield additional product candidates that enter clinical development and, ultimately, become commercially valuable. Although we expect to continue to enhance the capabilities of our platform by developing and integrating existing and new research technologies, our enhancement and development efforts may not succeed. As a result, we may not be able to advance our drug discovery capabilities as quickly as we expect or identify as many potential drug candidates as we desire.

If undesirable side effects or adverse events are caused by our product candidates or by other companies’ similar approved drugs or product candidates, then we may elect to, or be required by an independent data monitoring committee or regulatory authorities to, delay or halt our clinical trials. If such side effects or adverse events are sufficiently severe or prevalent, the FDA or comparable foreign regulatory authorities could order us to suspend or cease altogether further development of our product candidates. Even if our product candidates are approved, side effects or adverse events could result in significant delay in or denial of, regulatory approval, restrictive labeling, or potential product liability claims. Moreover, for our product candidates that are in development for indications for which injectable antibody drugs have been approved, clinical trials for those product candidates may need to show a risk/benefit profile that is competitive with those existing products in order to obtain regulatory approval or, if approved, a product label that is favorable for commercialization.

For example, on September 16, 2021, our clinical studies for rusfertide were placed on a full clinical hold by the FDA. On October 8, 2021, the FDA lifted the full clinical hold and dosing in all clinical studies of rusfertide could be resumed after we provided the FDA with all requested information as the basis for a Complete Response and subsequent removal of the clinical hold. In particular, we provided the requested individual patient clinical safety reports, updated the investigator brochure and patient informed consent forms, performed a comprehensive review of the most recent safety database, and included new safety and stopping rules in the study protocols. The clinical hold was initially triggered by a non-clinical finding in a 26-week rasH2 transgenic mouse model indicating benign and malignant subcutaneous skin tumors. The rasH2 signal also prompted a re-examination of the four cases of cancer observed across all rusfertide clinical trials involving over 160 patients, and a comprehensive review of the safety database, including cases of suspected unexpected serious adverse reactions.

We have focused our limited resources to pursue particular product candidates and indications, and consequently, we may fail to capitalize on product candidates or indications that may be more profitable or for which there is a greater likelihood of success.

Because we have limited financial and managerial resources, we have historically focused on research programs and product candidates mainly on the development of rusfertide, the product candidates subject to our Janssen collaboration and, through early 2022, PN-943. Going forward, we have no plans to devote further resources to PN-943 as part of our ongoing commitment to optimize and focus resources toward our rusfertide program in PV. In addition, in

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keeping with our organizational prioritization of rusfertide in PV, plans to initiate trials of rusfertide in additional disease indications have been paused. As a result, we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration partnerships, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such product candidate.

Risks Related to our Financial Position and Capital Requirements

We have incurred significant losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future. We have never generated any revenue from product sales and may never be profitable.

We have incurred significant operating losses every year since inception and expect to continue to incur operating losses for the foreseeable future. As of September 30, 2023, we had an accumulated deficit of $643.0 million. We expect to continue to incur significant research, development and other expenses related to our ongoing operations and product development. As a result, we expect to continue to incur losses in the future as we continue our development of, and seek regulatory approvals for, our product candidates.

We do not anticipate generating revenue from sales of products for a number of years, if ever, and we have not yet successfully completed registrational or pivotal clinical trials for our product candidates. If any of our product candidates fail in clinical trials or do not gain regulatory approval or fail to achieve market acceptance, we may never become profitable. Revenue we generate from our collaboration with Janssen, and any future collaboration arrangements may not be sufficient to sustain our operations. Failure to become and remain profitable may adversely affect the market price of our common stock and our ability to raise capital and continue operations.

We expect to require substantial additional funding, which may not be available to us on acceptable terms, or at all.

Our operations have consumed substantial amounts of cash since inception. Developing pharmaceutical product candidates, including conducting pre-clinical studies and clinical trials, is expensive. We expect to require substantial additional future capital in order to complete clinical development and, if we are successful, to commercialize any of our current product candidates. Further, in the event that the Restated Agreement with Janssen is terminated, we may not receive any additional fees or milestone payments under that agreement. Absent the funding support obtained under the Restated Agreement, our further development of the collaboration product candidates would require significant additional capital from us, or the establishment of alternative collaborations with third parties, which may not be possible.

As of September 30, 2023, we had cash, cash equivalents and marketable securities of $322.7 million. Based upon our current operating plan and expected expenditures, we believe that our existing cash, cash equivalents, and marketable securities will be sufficient to fund our operations for at least the next 12 months. However, we expect that we will need to have access to substantial additional funds in the future in order to complete clinical development or commercialize our product candidates to a point where our operations generate net cash inflows.

Raising additional capital may cause dilution to our existing stockholders, restrict our operations or require us to relinquish rights to our product candidates or technologies.

We may seek additional funding through a combination of equity offerings, including the use of the 2022 ATM facility, debt financings, collaborations and/or licensing arrangements. Additional funding may not be available to us on acceptable terms, or at all. Our ability to raise additional capital may be adversely impacted by adverse economic conditions and market volatility. The incurrence of indebtedness and/or the issuance of certain equity securities could result in fixed payment obligations and could also result in certain additional restrictive covenants, such as limitations on our ability to incur debt and/or issue additional equity, limitations on our ability to acquire or license

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intellectual property rights and other operating restrictions that could adversely impact our ability to conduct our business. In addition, the issuance of additional equity securities by us, or the possibility of such issuance, may cause the market price of our common stock to decline. In the event that we enter into additional collaborations and/or licensing arrangements in order to raise capital, we may be required to accept unfavorable terms, including relinquishing or licensing to a third party on unfavorable terms our rights to our proprietary technology platform or product candidates. To the extent that we raise additional capital through the sale of equity securities, your ownership interest will be diluted, and the terms may include liquidation or other preferences that adversely affect your rights as a stockholder. If we issue common stock or securities convertible into common stock, our common stockholders would experience additional dilution and, as a result, our stock price may decline.

Risks Related to our Reliance on Third Parties

If Janssen does not elect to continue the development of JNJ-2113 (formerly PN-235), our business and business prospects would be adversely affected.

JNJ-2113, the product candidate in development pursuant to our Janssen collaboration, may prove to have undesirable or unintended side effects or other characteristics adversely affecting its safety, efficacy or cost effectiveness that could prevent or limit its approval for marketing and successful commercial use, or that could delay or prevent the commencement and/or completion of clinical trials. Under the terms of the Restated Agreement with Janssen, Janssen may terminate the agreement for convenience and without cause on written notice of a certain period. In addition, prior to any termination of the agreement, Janssen will generally have control over the further clinical development of JNJ-2113 and any other licensed compounds. Janssen’s decisions with respect to such development will affect the timing and availability of potential future payments under the agreement, if any. For example, during the fourth quarter of 2021, following a pre-specified interim analysis criteria, a portfolio decision was made by Janssen to stop further development of both PTG-200 and PN-232 in favor of JNJ-2113. If the Restated Agreement with Janssen is terminated early, or if Janssen’s development activities are terminated early or suspended for an extended period of time, or are otherwise unsuccessful, our business and business prospects would be materially and adversely affected.

We may have disagreements with Janssen during the term of the Janssen License and Collaboration Agreement, and if they are not settled amicably or in the favor of Protagonist, the result may harm our business.

We are subject to the risk of possible disagreements with Janssen regarding the development of JNJ-2113 or other matters under the Restated Agreement with Janssen, such as the interpretation of the agreement or ownership of proprietary rights. Also, because the period of collaborative development under the agreement has ended, Janssen has sole decision-making authority for product candidates resulting from the collaboration, which could lead to disputes with Janssen. Disagreements with Janssen could lead to litigation or arbitration, which would be expensive and would be time-consuming for our management and employees.

We may not be successful in obtaining or maintaining development and commercialization collaborations, any collaboration arrangements we enter into in the future may not be successful.

Other than our Restated Agreement with Janssen, we have no active collaborations for any of our product candidates. Even if we establish other collaboration arrangements, any such collaboration may not ultimately be successful, which could have a negative impact on our business, results of operations, financial condition and growth prospects. If we enter into collaborations limited to certain territories, we may not maintain significant rights or control of future development and commercialization of any product candidate subject to the collaboration and potential disputes could develop in the future over the terms of the collaboration and the respective rights of the parties.

If our strategic collaborations do not result in the successful development and commercialization of product candidates or if one of our collaborators fails to act under the collaboration agreement or terminates its agreement with us, we may not receive any future research funding or milestone or royalty payments under the applicable collaboration agreement. In addition, if a collaboration is terminated, it may result in a need for additional capital to pursue further development or commercialization of the applicable product candidates.

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We rely on third parties to conduct our pre-clinical studies and clinical trials. If these third parties do not successfully carry out their contractual obligations or do not meet regulatory requirements or expected deadlines, we may not be able to obtain timely regulatory approval for or commercialize our product candidates and our business could be substantially harmed.

We have relied upon and plan to continue to rely upon third-party contract research organizations (“CROs”) to execute, monitor and manage clinical trials and collect data for our pre-clinical studies and clinical programs. We control only certain aspects of their activities. We and our CROs are required to comply with good clinical practice requirements (“GCPs”), which are regulations and guidelines promulgated by the FDA, the European Medicines Agency (“EMA”) and comparable foreign regulatory authorities for all of our product candidates in clinical development. If we or any of our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, the EMA or comparable foreign regulatory authorities may not accept the data or require us to perform additional clinical trials before considering our filing for regulatory approval or approving our marketing application. In addition, significant portions of the clinical studies for our product candidates are expected to be conducted outside of the United States, which will make it more difficult for us to monitor CROs and perform visits of our clinical trial sites (particularly during the ongoing pandemic) and will force us to rely heavily on CROs to ensure the proper and timely conduct of our clinical trials and compliance with applicable regulations, including GCPs.

If any of our relationships with these third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or do so on commercially reasonable terms. If CROs do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols, regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated and we may not be able to obtain regulatory approval for or successfully commercialize our product candidates. As a result, our results of operations and the commercial prospects for our product candidates would be harmed, our costs could increase substantially and our ability to generate revenue could be delayed significantly.

We face a variety of manufacturing risks and rely on third parties to manufacture our drug substance and clinical drug product and we intend to rely on third parties to produce commercial supplies of any approved product candidate.

We rely on contract manufacturers to manufacture and provide product for us that meets applicable regulatory requirements. We do not currently have, nor do we plan to develop, the infrastructure or capability internally to manufacture our drug supplies and we expect to continue to depend on contract manufacturers for the foreseeable future. As we proceed with the development and potential commercialization of our product candidates, we will need to increase the scale at which the drug is manufactured which will require the development of new manufacturing processes to potentially reduce the cost of goods. We will rely on our internal process research and development efforts and those of contract manufacturers to develop the good manufacturing processes (“GMPs”) required for cost-effective, large-scale production. If we and our contract manufacturers are not successful in converting to commercial-scale manufacturing, then our product costs may not be competitive and the development and/or commercialization of our product candidates would be materially and adversely affected. Moreover, our contract manufacturers are the sole source of supply for our clinical product candidates. If we were to experience an unexpected loss of supply for any reason, whether as a result of manufacturing, supply or storage issues, natural disasters, geopolitical conflict, outbreaks of disease, epidemics and pandemics, such as the COVID-19 pandemic, or otherwise, we could experience delays, disruptions, suspensions or termination of our clinical trial and planned development program, or be required to restart or repeat, any ongoing clinical trials.

We also rely on our contract manufacturers to purchase from third-party suppliers the materials necessary to produce our product candidates for our clinical trials. There are a limited number of suppliers for raw materials that our vendors use to manufacture our drugs and there may be a need to assess alternate suppliers to prevent a possible disruption of the manufacture of the materials necessary to produce our product candidates for our clinical trials, and if approved, for commercial sale. Moreover, we currently do not have any agreements for the commercial production of these raw materials. Although we generally do not begin a clinical trial unless we believe we have a sufficient supply of

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a product candidate to complete the clinical trial, any significant delay in the supply of a product candidate, or the raw material components thereof, for an ongoing clinical trial due to the need to replace a contract manufacturer or other third-party manufacturer could considerably delay completion of our clinical trials, product testing and potential regulatory approval of our product candidates.

Risks Related to Regulatory Approval

The regulatory approval processes of the FDA and comparable foreign authorities are lengthy and time consuming, and if we are ultimately unable to obtain regulatory approval for our product candidates, our business will be substantially harmed.

Our business is substantially dependent on our ability to successfully develop, obtain regulatory approval for and then successfully commercialize our product candidates. We are not permitted to market or promote any of our product candidates before we receive regulatory approval from the FDA, the EMA or any other foreign regulatory authority, and we may never receive such regulatory approval for any of our product candidates. The time required to obtain approval by the FDA and comparable foreign authorities is difficult to predict, typically takes many years following the commencement of clinical trials and depends upon numerous factors. Approval policies, regulations and the types and amount of clinical and manufacturing data necessary to gain approval may change during the course of clinical development and may vary among jurisdictions. We have not obtained regulatory approval for any product candidate and it is possible that none of our existing product candidates or any product candidates we have in development or may seek to develop in the future will ever obtain regulatory approval.

Our product candidates could fail to receive regulatory approval for many reasons, including the following:

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the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials, or our interpretation of the data submitted in support of regulatory approval;

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we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a product candidate is safe and effective for its proposed indication or that a product candidate’s clinical and other benefits outweigh its safety risks;

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the results of clinical trials may fail to achieve the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;

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the data collected from pre-clinical studies and clinical trials of our product candidates may not be sufficient to support the submission of an NDA, supplemental NDA, or other regulatory submissions necessary to obtain regulatory approval;

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we or our contractors may not meet the GMP and other applicable requirements for manufacturing processes, procedures, documentation and facilities necessary for approval by the FDA or comparable foreign regulatory authorities; and

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changes to the approval policies or regulations of the FDA or comparable foreign regulatory authorities with respect to our product candidates may result in our clinical data becoming insufficient for approval.

In addition, even if we were to obtain regulatory approval, regulatory authorities may approve our product candidates for fewer or more limited indications than what we requested approval for, may include safety warnings or other restrictions that may negatively impact the commercial viability of our product candidates, including the potential for a favorable price or reimbursement at a level that we would otherwise intend to charge for our products. Likewise, regulatory authorities may grant approval contingent on the performance of costly post-marketing clinical trials or the conduct of an expensive risk-evaluation and mitigation system, which could significantly reduce the potential for commercial success or viability of our product candidates. Any of the foregoing possibilities could materially harm the prospects for our product candidates and business and operations.

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We may fail to obtain orphan drug designations from the FDA and/or the EMA for our product candidates, as applicable, and even if we obtain such designations, we may be unable to maintain the benefits associated with orphan drug designation, including the potential for market exclusivity.

Our strategy includes filing for orphan drug designation where available for our product candidates. Rusfertide has received orphan drug designation for the treatment of patients with PV from the FDA and the EMA. Despite this designation, we may be unable to maintain the benefits associated with orphan drug status, including market exclusivity. We may not be the first to obtain regulatory approval of a product candidate for a given orphan-designated indication. In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to assure sufficient quantities of the product to meet patient needs. Further, even if we obtain orphan drug designation exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties may receive and be approved for the same condition, and only the first applicant to receive approval for a given active ingredient will receive the benefits of marketing exclusivity. Even after an orphan-designated product is approved, the FDA can subsequently approve a later drug with the same active moiety for the same condition if the FDA concludes that the later drug is clinically superior if it is shown to be safer, more effective or makes a major contribution to patient care.

Risks Related to Commercialization of our Product Candidates

We currently have no marketing and sales organization. To the extent any of our product candidates for which we maintain commercial rights is approved for marketing, if we are unable to establish marketing and sales capabilities or enter into agreements with third parties to market and sell our product candidates, we may not be able to effectively market and sell any products or generate product revenue.

We currently do not have a marketing or sales organization for the marketing, sales and distribution of pharmaceutical products. In order to commercialize any of our product candidates that receive marketing approval, we will have to build marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third parties to perform these services, and we may not be successful in doing so. In the event of successful development of any of our product candidates, we may elect to build a targeted specialty sales force which will be expensive and time consuming. Any failure or delay in the development of our internal sales, marketing and distribution capabilities would adversely impact the commercialization of these products. With respect to our product candidates, we may choose to partner with third parties that have direct sales forces and established distribution systems, either to augment our own sales force and distribution systems or in lieu of our own sales force and distribution systems, and in the case of the Restated Agreement with Janssen, we may elect to exercise our Co-Detailing Option (allows us to elect to provide up to 30% of the selling effort in the United States for any IL-23R antagonist compounds approved for commercial sale), which would require us to establish a U.S. sales team. If we are not successful in commercializing our product candidates, either on our own or through collaborations with one or more third parties, our future revenue will be materially and adversely impacted.

Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.

In the United States and some foreign jurisdictions, there have been, and we expect there will continue to be, a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of our product candidates, restrict or regulate post-approval activities and affect our ability to profitably sell any product candidates for which we obtain marketing approval. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare therapies, which could result in reduced demand for us.

Legislative and regulatory proposals have also been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of

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such changes on the marketing approvals of our product candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

We currently conduct, and intend to continue to conduct, a substantial portion of the clinical trials for our product candidates outside of the United States. If approved, we may commercialize our product candidates abroad. We will thus be subject to the risks of doing business outside of the United States.

We currently conduct, and intend to continue to conduct, a substantial portion of our clinical trials outside of the United States and, if approved, we intend to also market our product candidates outside of the United States. We are thus subject to risks associated with doing business outside of the United States. Our business and financial results in the future could be adversely affected due to a variety of factors associated with conducting development and marketing of our product candidates, if approved, outside of the United States, including varying medical standards and practices, geopolitical risks, uncertainty around intellectual property protection, and regulatory risks, such as compliance with the Foreign Corrupt Practices Act. If we are unable to anticipate and address these risks properly, our business and financial results will be harmed.

We may fail or elect not to commercialize our product candidates, even if approved.

We cannot be sure that, if our clinical trials for any of our product candidates are successfully completed, we will be able to submit an NDA to the FDA or that any NDA we submit will be approved by the FDA in a timely manner, if at all. After completing clinical trials for a product candidate in humans, a drug dossier is prepared and submitted to the FDA as an NDA, and includes all pre-clinical studies and clinical trial data relevant to the safety and effectiveness of the product at the suggested dose and duration of use for the proposed indication as well as manufacturing information, in order to allow the FDA to review such drug dossier and to consider a product candidate for approval for commercialization in the United States. If we are unable to submit an NDA with respect to any of our current product candidates, if any NDA we submit is not approved by the FDA, or we elect not to file an NDA, or if we are unable to obtain any required state and local distribution licenses or similar authorizations, we will be unable to commercialize that product. The FDA can and does reject NDAs and require additional clinical trials, even when product candidates achieve favorable results in Phase 3 clinical trials. Also, we may be subject to pricing pressures from competitive products that could make it difficult or impossible for us to commercialize the product candidate successfully. If we fail to commercialize any of our product candidates, our business, financial condition, results of operations and prospects may be materially and adversely affected.

The commercial success of any current or future product candidate will depend upon the degree of market acceptance by physicians, patients, third-party payors and others in the medical community.

We or our collaboration partners in any potential commercial launch of our product candidates may not be successful in achieving widespread patient or physician awareness or acceptance of such product candidate. Even though we expect that our product candidate will be priced responsibly, if approved, there is no guarantee that it or any other product that we bring to the market directly or through a strategic partner will gain market acceptance by physicians, patients, third-party payors and others in the medical community. The degree of market acceptance of any of our product candidates, if approved for commercial sale, will depend on a number of factors, including but not limited to:

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the safety and efficacy of the product in clinical trials, and potential advantages over competing treatments;

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the publication of unfavorable safety or efficacy data concerning our product by third parties;

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the prevalence and severity of any side effects, including any limitations or warnings contained in a product’s approved labeling;

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the clinical indications for which approval is granted;

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recognition and acceptance of our product candidates over our competitors’ products;

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prevalence of the disease or condition for which the product is approved;

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the cost of treatment, particularly in relation to competing treatments;

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the willingness of the target patient population to try our therapies and of physicians to prescribe these therapies;

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the strength of marketing and distribution support and timing of market introduction of competitive products;

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the extent to which the product is approved for inclusion on formularies of hospitals and managed care organizations;

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publicity concerning our products or competing products and treatments;

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the extent to which third-party payors provide coverage and adequate reimbursement for the product candidate, or any other product candidates we may pursue, if approved;

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our ability to maintain compliance with regulatory requirements; and

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labeling or naming imposed by FDA or other regulatory agencies.

Even if a product candidate we may develop in the future displays an equivalent or more favorable efficacy and safety profile in pre-clinical and clinical trials, market acceptance of the product candidate will not be fully known until after it is launched and may be negatively affected by a potential poor safety experience and the track record of other product candidates. Our efforts, or those of any strategic licensing or collaboration partner, to educate the medical community and third-party payors on the benefits of our product candidates may require significant resources, may be under-resourced compared to large well-funded pharmaceutical entities and may never be successful. If ay product candidates we may develop in the future are approved but fail to achieve an adequate level of acceptance by physicians, patients, third-party payors and others in the medical community, we will not be able to generate sufficient revenue to become or remain profitable.

Risks Related to our Business and Industry

We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.

The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant technological change. We have competitors worldwide, including major multinational pharmaceutical companies, biotechnology companies, specialty pharmaceutical and generic pharmaceutical companies as well as universities and other research institutions.

Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff, and experienced marketing and manufacturing organizations. As a result, these companies may obtain regulatory approval more rapidly than we are able and may be more effective in selling and marketing their products. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Competition may increase further as a result of advances in the commercial applicability of newer technologies and greater availability of capital for investment in these industries. Our competitors may succeed in developing, acquiring or licensing, on an exclusive basis, pharmaceutical products that are easier to develop, more effective or less costly than any product candidates that we are

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currently developing or that we may develop. If approved, our product candidates are expected to face competition from commercially available drugs as well as drugs that are in the development pipelines of our competitors.

Pharmaceutical companies may invest heavily to accelerate discovery and development of novel compounds or to in-license novel compounds that could make our product candidates less competitive. In addition, any new product that competes with an approved product must demonstrate advantages in efficacy, convenience, tolerability or safety in order to overcome price competition and to be commercially successful. If our competitors succeed in obtaining FDA, EMA or other regulatory approval or discovering, developing and commercializing drugs before we do, there would be a material adverse impact on the future prospects for our product candidates and business. For example, in November 2021, the FDA approved a Biologics License Application for ropeginterferon alfa-2b for use in treatment for patients with PV in the absence of symptomatic splenomegaly from PharmaEssentia Corporation, the manufacturer of the novel pegylated interferon. We also face competition in certain instances from the existing standards of care, which may be significantly less expensive than our expected drug prices. For example, one widely used treatment for patients is phlebotomy and/or chelation therapy. While patients may not like therapies that involve frequent blood draws, these therapies are inexpensive and may present pricing challenges for us if our drug candidates are successfully developed and approved.

Outbreaks of disease, epidemics and pandemics, such as the COVID-19 pandemic, have and could continue to adversely impact our business, including our ongoing and planned clinical trials and pre-clinical and discovery research.

We have experienced delays in our existing and planned clinical trials due to worldwide impacts related to the COVID-19 pandemic, and our future results of operations and liquidity could be adversely impacted by direct and indirect impacts of epidemics and pandemics. We have and could in the future experience additional disruptions or increased expenses that may adversely impact our business, including delays or difficulties in enrolling patients in our ongoing clinical trials and our future clinical trials; delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff, or maintaining ongoing operations at such sites; and delays in manufacturing, receiving the supplies, materials and services needed to conduct clinical trials and pre-clinical research.

A continued and prolonged public health crisis such as the COVID-19 pandemic could have a material negative impact on our business, financial condition, and operating results.

Unstable market and economic conditions, including elevated and sustained inflation, may have serious adverse consequences on our business, financial condition and stock price.

As has been widely reported, we are currently operating in a period of economic uncertainty and capital markets disruption, which has been significantly impacted by domestic and global monetary and fiscal policy, geopolitical instability, including ongoing military conflicts between Russia and Ukraine and in Israel and surrounding areas, rising tensions between China and Taiwan, and historically high domestic and global inflation. In particular, the conflict in Ukraine has exacerbated market disruptions, including significant volatility in commodity prices, as well as supply chain interruptions, and has contributed to record inflation globally. The U.S. Federal Reserve and other central banks may be unable to contain inflation through more restrictive monetary policy and inflation may increase or continue for a prolonged period of time. Inflationary factors, such as increases in the cost of clinical supplies, interest rates, overhead costs and transportation costs may adversely affect our operating results. We continue to monitor these events and the potential impact on our business. Although we do not believe that inflation has had a material impact on our financial position or results of operations to date, we may be adversely affected in the future due to domestic and global monetary and fiscal policy, supply chain constraints, consequences associated with COVID-19, the ongoing conflicts between Russia and Ukraine and in Israel and surrounding areas, and the impact of a potential U.S. government shutdown, and such factors may lead to increases in the cost of manufacturing our product candidates and delays in initiating trials. In addition, global credit and financial markets have experienced extreme volatility and disruptions in the past several years and the foregoing factors have led to and may continue to cause diminished liquidity and credit availability, declines in consumer confidence, declines in economic growth, uncertainty about economic stability and increased inflation.

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There can be no assurance that further deterioration in credit and financial markets and confidence in economic conditions will not occur. A future recession or market correction or other significant geopolitical events could materially affect our business and the value of our common stock. Our general business strategy may be adversely affected by any such economic downturn, volatile business environment or continued unpredictable and unstable market conditions. If the current equity and credit markets deteriorate, or do not improve, it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or abandon clinical development plans. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive these difficult economic times, which could directly affect our ability to attain our operating goals.

We maintain our cash at financial institutions, often in balances that exceed federally-insured limits. The failure of financial institutions could adversely affect our ability to pay our operational expenses or make other payments.

Our cash held in non-interest-bearing and interest-bearing accounts exceeds the Federal Deposit Insurance Corporation (the “FDIC”) insurance limits. If such banking institutions were to fail, we could lose all or a portion of those amounts held in excess of such insurance limitations. For example, the FDIC took control of Silicon Valley Bank on March 10, 2023. The Federal Reserve subsequently announced that account holders would be made whole. However, the FDIC may not make all account holders whole in the event of future bank failures. In addition, even if account holders are ultimately made whole with respect to a future bank failure, account holders’ access to their accounts and assets held in their accounts may be substantially delayed. Any material loss that we may experience in the future or inability for a material time period to access our cash and cash equivalents could have an adverse effect on our ability to pay our operational expenses or make other payments, which could adversely affect our business.

If we fail to comply with state and federal healthcare regulatory laws, we could face substantial penalties, damages, fines, disgorgement, integrity oversight and reporting obligations, exclusion from participation in governmental healthcare programs, and the curtailment of our operations, any of which could adversely affect our business, operations, and financial condition.

Healthcare providers, including physicians, and third-party payors will play a primary role in the recommendation and prescription of any future product candidates we may develop or any product candidates for which we obtain marketing approval. Our arrangements with third-party payors and customers may expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may affect the business or financial arrangements and relationships through which we would market, sell and distribute our products. Even though we do not and will not control referrals of healthcare services or bill directly to Medicare, Medicaid or other third-party payors, federal and state healthcare laws and regulations pertaining to fraud and abuse and patients’ rights are and will be applicable to our business. The laws that may affect our ability to operate include, but are not limited to:

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the federal Anti-Kickback Statute;

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the federal false claims laws, including the False Claims Act;

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the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”);

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HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and their implementing regulations, which also imposes obligations, including mandatory contractual terms, on HIPAA-covered entities, their business associates as well as their covered subcontractors with respect to safeguarding the privacy, security and transmission of individually identifiable health information;

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the federal civil monetary penalties statute;

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the federal Physician Payments Sunshine Act; and

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analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws.

Further, the ACA, among other things, amended the intent requirements of the federal Anti-Kickback Statute and certain criminal statutes governing healthcare fraud. Any violations of these laws, or any action against us for violation of these laws, even if we successfully defend against it, could result in a material adverse effect on our reputation, business, results of operations and financial condition.

We have entered into consulting and scientific advisory board arrangements with physicians and other healthcare providers, including some who could influence the use of our product candidates, if approved. While we have worked to structure our arrangements to comply with applicable laws, because of the complex and far-reaching nature of these laws, regulatory agencies may view these transactions as prohibited arrangements that must be restructured, or discontinued, or for which we could be subject to other significant penalties. We could be adversely affected if regulatory agencies interpret our financial relationships with providers who may influence the ordering of and use our product candidates, if approved, to be in violation of applicable laws.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform. Federal and state enforcement bodies have continued to increase their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of significant investigations, prosecutions, convictions and settlements in the healthcare industry. Additionally, as a result of these investigations, healthcare providers and entities may have to agree to additional onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any such investigation or settlement could significantly increase our costs or otherwise have an adverse effect on our business.

If our operations are found to be in violation of any of these laws or any other governmental laws and regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, disgorgement, imprisonment, integrity oversight and reporting obligations, exclusion from government funded healthcare programs, such as Medicare and Medicaid, disgorgement, contractual damages, reputational harm, diminished profits and the curtailment or restructuring of our operations. If, and to the extent that, Janssen or we are unable to comply with these regulations, our ability to earn potential royalties from worldwide net sales of Janssen collaboration product candidates would be materially and adversely impacted. If any of the physicians or other healthcare providers or entities with whom we expect to do business is found to be not in compliance with applicable laws, they may be subject to significant criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs. The imposition of any of these penalties or other commercial limitations could negatively impact our collaboration with Janssen or cause Janssen to terminate the Restated Agreement with Janssen, either of which would materially and adversely affect our business, financial condition and results of operations.

Our future success depends on our ability to retain our executive officers and to attract, retain and motivate qualified personnel. If we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.

We are highly dependent on our existing senior management team. The loss of the services of any of our executive officers or other key employees and our inability to find suitable replacements would harm our research and development efforts, our collaboration efforts, as well as our business, financial condition and prospects. Our success also depends on our ability to continue to attract, retain and motivate highly skilled and experienced personnel with scientific, medical, regulatory, manufacturing, marketing, sales, general and administrative and management training and skills.

We may not be able to attract or retain qualified personnel in the future due to the intense competition for a limited number of qualified personnel among biopharmaceutical, biotechnology, pharmaceutical and other businesses. Many of the other biopharmaceutical and pharmaceutical companies that we compete against for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do. Many are located in areas of the country with lower costs of living. Additionally, the United States has recently experienced historically high levels of inflation and an acute workforce shortage generally, which has created a hyper-competitive wage environment that may increase our operating costs. Any or all of these factors may limit our ability to continue to

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attract and retain high quality personnel, which could negatively affect our ability to successfully develop and commercialize product candidates and to grow our business and operations as currently contemplated.

We expect to expand the size of our organization in the future, and we may experience difficulties in managing this growth.

As of September 30, 2023, we had 111 full-time equivalent employees, including 84 full-time equivalent employees engaged in research and development. As our development and commercialization plans and strategies develop, we expect to need additional managerial, operational, scientific, sales, marketing, research, development, regulatory, manufacturing, financial and other resources. In addition, as our operations expand, we expect that we will need to manage relationships with strategic collaborators, CROs, contract manufacturers, suppliers, vendors and other third parties. Our future financial performance and our ability to develop and commercialize our product candidates and to compete effectively will depend, in part, on our ability to manage any future growth effectively. We may not be successful in accomplishing these tasks in growing our company, and our failure to accomplish any of them could adversely affect our business and operations.

Significant disruptions of information technology systems or breaches of data security could adversely affect our business.

Our business is increasingly dependent on critical, complex and interdependent information technology systems, including Internet-based systems, to support business processes as well as internal and external communications. The size and complexity of our internal computer systems and those of our CROs, contract manufacturers, collaboration partner, and other third parties on which we rely may make them potentially vulnerable to breakdown, telecommunications and electrical failures, malicious intrusion such as ransomware and computer viruses that may result in the impairment of key business processes. Our systems are potentially vulnerable to data security breaches, by employees or others, that may expose sensitive data to unauthorized persons. Such data security breaches could lead to the loss of trade secrets or other intellectual property or could lead to the public exposure of personally identifiable information (including sensitive personal information) of our employees, collaborators, clinical trial patients, and others. A malicious intrusion, email compromise or other data security breach or privacy violation that leads to disclosure or modification of or prevents access to patient information, including personally identifiable information or protected health information, could harm our reputation, compel us to comply with federal and/or state breach notification laws, subject us to mandatory corrective action, require us to verify the correctness of database contents and otherwise subject us to liability under laws and regulations that protect personal data, resulting in increased costs or loss of revenue. If we are unable to prevent such data security breaches or privacy violations or implement satisfactory remedial measures, our operations could be disrupted, and we may suffer loss of reputation, financial loss and other regulatory penalties.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials, and produce hazardous waste products. We generally contract with third parties for the disposal of these materials and wastes. We cannot eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from our use of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties.

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Our employees, independent contractors, principal investigators, consultants and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.

We are exposed to the risk that our employees, independent contractors, principal investigators, consultants or vendors may engage in fraudulent conduct or other illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates: (i) FDA laws and regulations or those of comparable foreign regulatory authorities, (ii) manufacturing standards, (iii) federal and state data privacy, security, fraud and abuse and other healthcare laws and regulations established and enforced by comparable foreign regulatory authorities, or (iv) laws that require the true, complete and accurate reporting of financial information or data. Additionally, we are subject to the risk that a person or government could allege such fraud or other misconduct, even if none occurred. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.

If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.

We may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during product testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability and a breach of warranties. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to stop development or, if approved, limit commercialization of our product candidates.

Our inability to obtain and retain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims could prevent or inhibit the development or commercialization of our product candidates. We currently carry clinical trial liability insurance for our clinical trials. Although we maintain such insurance, any claim that may be brought against us could result in a court judgment or settlement in an amount that is not covered, in whole or in part, by our insurance or that is in excess of the limits of our insurance coverage. Our insurance policies also have various exclusions, and we may be subject to a product liability claim for which we have no coverage. We will have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts.

Our headquarters is located near known earthquake fault zones. The occurrence of an earthquake, fire or any other catastrophic event could disrupt our operations or the operations of third parties who provide vital support functions to us, which could have a material adverse effect on our business and financial condition.

We and some of the third-party service providers on which we depend for various support functions are vulnerable to damage from catastrophic events, such as power loss, natural disasters, terrorism, pandemics and similar unforeseen events beyond our control. Our corporate headquarters, including our laboratory facilities, are located in the San Francisco Bay Area, which in the past has experienced severe earthquakes and fires. We do not carry earthquake insurance. Earthquakes or other natural disasters could severely disrupt our operations, and have a material adverse effect on our business, results of operations, financial condition and prospects.

The insurance coverage and reimbursement status of newly approved products is uncertain. Failure to obtain or maintain adequate coverage and reimbursement for our product candidates could limit our ability to generate revenue.

The availability and extent of reimbursement by governmental and private payors is essential for most patients to be able to afford medications and therapies. Sales of any of our product candidates that receive marketing approval will depend substantially, both in the United States and internationally, on the extent to which the costs of our product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management

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organizations, or reimbursed by government health administration authorities, private health coverage insurers and other third-party payors. If reimbursement is not available, or is available only to limited levels, we may not be able to successfully commercialize our product candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us to establish or maintain adequate pricing that will allow us to realize a sufficient return on our investment.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products as increasingly high barriers are being erected to the entry of new products into the healthcare markets. Coverage and reimbursement can differ significantly from payor to payor. It is difficult to predict what CMS will decide with respect to reimbursement for novel products such as ours since there is no body of established practices and precedents for these new products.

Outside the United States, international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries may cause us to price our product candidates on less favorable terms than we currently anticipate. In many countries, particularly the countries of the European Union, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidates to other available therapies. In general, the prices of products under such systems are substantially lower than in the United States. Additional foreign price controls or other changes in pricing regulation could restrict the amount that we are able to charge for our product candidates. Accordingly, in markets outside the United States, the reimbursement for our products may be reduced compared with the United States and may be insufficient to generate commercially reasonable revenues and profits.

Risks Related to our Intellectual Property

If we are unable to obtain or protect intellectual property rights related to our product candidates and technologies, we may not be able to compete effectively in our markets.

We rely upon a combination of patent protection, trade secret protection and confidentiality agreements to protect the intellectual property related to our product candidates and technologies. The strength of patents in the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. We may or may not file or prosecute all necessary or desirable patent applications. The patent applications that we own or license may fail to result in issued patents in the United States or in other foreign countries, or they may fail to result in issued patents with claims that cover our product candidates or technologies in the United States or in other foreign countries. Any failure to identify relevant prior art relating to a patent or patent applications can invalidate a patent or prevent a patent from issuing. Even if patents have been issued, third parties may challenge the validity, enforceability or scope thereof, which may result in such patents being narrowed, invalidated or held unenforceable. Furthermore, even if they are unchallenged, our patent and patent applications may not adequately protect our intellectual property, provide exclusivity for our product candidates and technologies, or prevent others from designing around our claims.

If the breadth or strength of protection provided by our patents is challenged, or if they fail to provide meaningful exclusivity for our product candidates, it could prevent us from asserting exclusivity over the covered product and allow generic competition. We cannot offer any assurances about which, if any, of our patent applications will issue, the breadth of any such issued patent, or whether any issued patents will be found invalid and unenforceable or will be threatened by third parties. Any successful opposition or other challenge to our patents or patent applications could significantly diminish the commercial prospects of any products that we develop.

In addition, patents have a limited lifespan. In the United States and in many other countries, the natural expiration of a patent is generally 20 years after it is filed, and once any patents covering a product expire, generic competitors may enter the market. Our granted U.S. patent covering rusfertide expires in 2034, but is eligible for extension of up to five years for a portion of the time spent in development. Although the life of a patent can be increased based on certain delays caused by the U.S. Patent and Trademark Office (the “PTO”), this increase can be reduced or eliminated based on certain delays caused by the patent applicant during patent prosecution. If we encounter

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delays in our clinical trials or in gaining regulatory approval, the period of time during which we could market any of our product candidates under patent protection, if approved, would be reduced.

We may not be able to protect our intellectual property rights throughout the world. Filing, prosecuting and defending patents on all of our product candidates throughout the world would be prohibitively expensive, and our intellectual property rights in some countries outside the United States may be less extensive than those in the United States. In addition, the laws of some foreign countries do not protect intellectual property rights, including trade secrets, to the same extent as federal and state laws of the United States and many countries limit the enforceability of patents against third parties, including government agencies or government contractors.

Competitors may use our technologies in jurisdictions where we have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we have patent protection but enforcement is not as strong as in the United States. These products may compete with our products in jurisdictions where we do not have any issued patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing. Also, if our trade secrets are disclosed in a foreign jurisdiction, competitors worldwide could have access to our proprietary information and we may be without satisfactory recourse. Such disclosure could have a material adverse effect on our business.

We also rely on trade secret protection and confidentiality agreements to protect proprietary scientific, business and technical information and know-how that is not or may not be patentable or that we elect not to patent. For example, we primarily rely on trade secrets and confidentiality agreements to protect our peptide therapeutics technology platform. Any disclosure to or misappropriation by third parties of our confidential proprietary information could enable competitors to quickly duplicate or surpass our technological achievements, thus eroding our competitive position in our market. If we are unable to protect the confidentiality of our trade secrets and proprietary know-how or if competitors independently develop viable competing products, our business and competitive position may be harmed.

Although we require all of our employees to assign their inventions to us, and endeavor to execute confidentiality agreements with all of our employees, consultants, advisors and any third parties who have access to our proprietary know-how and other confidential information related to such technology, we cannot be certain that we have executed such agreements with all third parties who may have helped to develop our intellectual property or who had access to our proprietary information, nor can be we certain that our agreements will not be breached. If any of the parties to these confidentiality agreements breaches or violates the terms of such agreements, we may not have adequate remedies for any such breach or violation, and we could lose our trade secrets as a result.

Even if we are able to adequately protect our trade secrets and proprietary information, our trade secrets could otherwise become known or could be independently discovered by our competitors. If our trade secrets are not adequately protected so as to protect our market against competitors’ products, others may be able to exploit our proprietary peptide product candidate discovery technologies to identify and develop competing product candidates, and thus our competitive position could be adversely affected, as could our business.

We may be involved in lawsuits and other legal proceedings to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful.

Competitors may infringe our issued patents or any patents issued as a result of our pending or future patent applications. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that a patent of ours is not valid or is unenforceable or may refuse to stop the other party in such infringement proceeding from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse result in any litigation or defense proceedings could put one or more of our patents at risk of being invalidated, held unenforceable or interpreted narrowly, and could put any of our patent applications at risk of not yielding an issued patent.

Issued patents and patent applications may be challenged in the courts and in the patent office in the United States and abroad. An adverse determination in any such challenge could prevent the issuance of, reduce the scope of, invalidate or render unenforceable our patent rights, result in the loss of exclusivity, or limit our ability to stop others

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from using or commercializing our platform technology and products. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

Any issued patents covering our product candidates, including any patent that may issue as a result of our pending or future patent applications, could be found invalid or unenforceable if challenged in court in the United States or abroad.

As more groups become engaged in scientific research and product development in fields related to our product candidates, such as hepcidin mimetics or IL-23R, the risk of our patents, or patents that we have in-licensed, being challenged through patent interferences, derivation proceedings, oppositions, re-examinations, litigation or other means will likely increase. An adverse outcome in a patent dispute could have a material adverse effect on our business by:

●

causing us to lose patent rights in the relevant jurisdiction(s);

●

subjecting Janssen or us to litigation, or otherwise preventing the commercialization of product candidates in the relevant jurisdiction(s); or

●

requiring Janssen or us to obtain licenses to the disputed patents, cease using the disputed technology or develop or obtain alternative technologies.

An adverse outcome in a patent dispute could severely harm our collaboration with Janssen or cause Janssen to terminate the Restated Agreement.

Litigation or other legal proceedings relating to intellectual property claims, with or without merit, are unpredictable and generally expensive and time-consuming and, even if resolved in our favor, are likely to divert significant resources from our core business, including distracting our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments and if securities analysts or investors perceive these results to be negative, it could have a substantial adverse effect on the market price of our common stock. We may not have sufficient financial or other resources to adequately conduct such litigation or proceedings. Some of our competitors may be able to sustain the costs of such litigation or proceedings more effectively than we can because of their greater financial resources and more mature and developed intellectual property portfolios. Accordingly, despite our efforts, we may not be able to prevent third parties from infringing upon or misappropriating or from successfully challenging our intellectual property rights. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could have a material adverse effect on our ability to compete in the marketplace.

Third party claims of intellectual property infringement may prevent or delay our drug discovery and development efforts.

Our commercial success depends in part on our ability to develop, manufacture, market and sell our drug candidates and use our proprietary technologies without infringing or otherwise violating the patents and proprietary rights of third parties. Numerous third-party U.S. and foreign issued patents and pending patent applications exist in the fields in which we are developing product candidates, and there may be third-party patents or patent applications with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates and technologies.

Third parties may initiate legal proceedings against us alleging that we are infringing or otherwise violating their patent or other intellectual property rights. Given the vast number of patents in our field of technology, marketing of our product candidates or practice of our technologies could infringe existing patents or patents granted in the future. There may be applications now pending of which we are unaware that may later result in issued patents that may be infringed by the practice of our peptide therapeutics technology platform or the manufacture, use or sale of our product candidates. If any third-party patents were to be held by a court of competent jurisdiction to cover the manufacturing process of any of our product candidates, any molecules formed during the manufacturing process or any final product

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or formulation itself, the holders of any such patents may be able to block our ability to commercialize such product candidate unless we obtained a license under the applicable patents, or until such patents expire. As our industry expands and more patents are issued, the risk increases that our product candidates or technologies may give rise to claims of infringement of the patent rights of others.

Parties making claims against us may obtain injunctive or other equitable relief, which could effectively block our ability to commercialize our product candidates. Even if we are successful in defending against any infringement claims, litigation is expensive and time-consuming and is likely to divert management’s attention and substantial resources from our core business. In the event of a successful claim of infringement against us, we may have to pay substantial damages, limit our uses, pay royalties or redesign our infringing product candidates, which may be impossible or require substantial time and monetary expenditure. We may choose to seek, or may be required to seek, a license from the third-party patent holder and would most likely be required to pay license fees or royalties or both, each of which could be substantial. These licenses may not be available on commercially reasonable terms, however, or at all. Even if we were able to obtain a license, the rights we obtain may be nonexclusive, which would provide our competitors access to the same intellectual property rights upon which we are forced to rely. Furthermore, even in the absence of litigation, we may need to obtain licenses from third parties to advance our research or allow commercialization of our product candidates, and we have done so from time to time. We may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In such an event, we would be unable to further practice our technologies or develop and commercialize any of our product candidates at issue, which could harm our business significantly.

We may be subject to claims that our employees, consultants or independent contractors have wrongfully used or disclosed confidential information of third parties or that our employees have wrongfully used or disclosed alleged trade secrets of former or other employers.

Many of our employees and consultants, including our senior management and our scientific founders, have been employed or retained at universities or by other biotechnology or pharmaceutical companies, including potential competitors. Some of our employees and consultants, including each member of our senior management and each of our scientific founders, executed proprietary rights, non-disclosure and non-competition agreements in connection with such previous employment or retention. We may be subject to claims that we or these employees, consultants or independent contractors have used or disclosed intellectual property, including trade secrets or other proprietary information, of any such employee’s or consultant’s former or other employer. If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

We may be subject to claims challenging the inventorship or ownership of our issued patents, any patents issued as a result of our pending or future patent applications and other intellectual property.

We may be subject to claims that former employees, collaborators or other third parties have an ownership interest in our issued patents, any patents issued as a result of our pending or future applications or other intellectual property. We have had in the past, and we may also have in the future, ownership disputes arising, for example, from conflicting obligations of consultants or others who are involved in developing our product candidates and technologies. Litigation may be necessary to defend against these and other claims.

In addition, some of our intellectual property rights were generated through the use of U.S. government funding and are therefore subject to certain federal regulations. As a result, the U.S. government may have certain rights to intellectual property embodied in our current or future product candidates pursuant to the Bayh-Dole Act of 1980 and implementing regulations. These U.S. government rights in certain inventions developed under a government-funded program include a non-exclusive, non-transferable, irrevocable worldwide license to use inventions for any governmental purpose. In addition, the U.S. government has the right to require us or our licensors to grant exclusive, partially exclusive, or non-exclusive licenses to any of these inventions to a third party in certain circumstances (also referred to as “march-in rights”).

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Our reliance on third parties requires us to share our trade secrets, which increases the possibility that a competitor will discover them or that our trade secrets will be misappropriated or disclosed.

Because we expect to rely on third parties in the development and manufacture of our product candidates, we must, at times, share trade secrets with them. We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to beginning research or disclosing proprietary information. These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets. Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements. Given that our proprietary position is based, in part, on our know-how and trade secrets, a competitor’s discovery of our trade secrets or other unauthorized use or disclosure would impair our competitive position and may have an adverse effect on our business and results of operations.

Intellectual property rights do not necessarily address all potential threats to our business.

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations and may not adequately protect our business. The following examples are illustrative:

●

others may be able to make compounds or formulations that are similar to our product candidates, but that are not covered by the claims of any patents that we own, license or control;

●

we or any strategic partners might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own;

●

we may not have been the first to file patent applications covering certain of our inventions;

●

others may independently develop the same, similar, or alternative technologies without infringing, misappropriating or violating our intellectual property rights;

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it is possible that our pending patent applications will not lead to issued patents;

●

issued patents may not provide us with any competitive advantages, or may be narrowed or held invalid or unenforceable, including as a result of legal challenges;

●

our competitors might conduct research and development activities in the United States and other countries that provide a safe harbor from patent infringement claims for certain research and development activities, as well as in countries where we do not have patent rights, and may then use the information learned from such activities to develop competitive products for sale in our major commercial markets;

●

we may choose not to file a patent in order to maintain certain trade secrets or know-how, and a third party may subsequently file a patent covering such trade secrets or know-how; and

●

the patents of others may have an adverse effect on our business.

Should any of these events occur, they could have a material adverse impact on our business and financial condition.

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Risks Related to Ownership of our Common Stock

Our stock price has been and will likely continue to be volatile and may decline regardless of our operating performance.

Our stock price has fluctuated in the past and is likely to be volatile in the future. From January 1, 2023 through September 30, 2023, the reported sale price of our common stock has fluctuated between $10.62 and $30.10 per share. The stock market in general and the market for biotechnology companies in particular have experienced extreme volatility that has often been unrelated to the operating performance of particular companies. As a result of this volatility, investors may experience losses on their investment in our common stock, including due to the factors discussed in these “Risk Factors” and elsewhere in this Quarterly Report on Form 10-Q.

Volatility in our share price could subject us to securities class action litigation.

Securities class action litigations have often been brought against companies following a decline in the market price of their securities. If we face such litigation, it could result in substantial costs and a diversion of management’s attention and resources, which could harm our business.

We are required to develop and maintain proper and effective internal controls over financial reporting and any failure to maintain the adequacy of these internal controls may adversely affect investor confidence in our company and, as a result, the value of our common stock.

We are required, pursuant to Section 404 of the Sarbanes-Oxley Act (Section 404), to furnish a report by management on the effectiveness of our internal control over financial reporting. This assessment needs to include disclosure of any material weaknesses identified by our management in our internal control over financial reporting. Our public float on June 30, 2023 was greater than $700.0 million, and our independent registered public accounting firm is required to attest to the effectiveness of our internal control over financial reporting beginning with our Annual Report on Form 10-K for the fiscal year ending December 31, 2023. If we have a material weakness, we would receive an adverse opinion regarding our internal control over financial reporting from our independent registered public accounting firm.

We currently do not have an internal audit group, and we may need to hire additional accounting and financial staff with appropriate public company experience and technical accounting knowledge and continue the costly and challenging process of compiling the system and processing documentation necessary to perform the evaluation needed to comply with Section 404. We may not complete our continued evaluation, testing and any required remediation in a timely fashion. During our evaluation of our internal control, if we identify one or more material weaknesses in our internal control over financial reporting or fail to remediate any material weaknesses, we will be unable to assert that our internal control over financial reporting is effective. Any material weakness or other failure to maintain internal control over financial reporting could severely inhibit our ability to accurately report our financial condition or results of operations.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation (“Certificate of Incorporation”) provides that the Court of Chancery of the State of Delaware will be the exclusive forum for certain actions and proceedings. Furthermore, Section 22 of the Securities Act of 1933, as amended, creates concurrent jurisdiction for federal and state courts over all Securities Act actions. Accordingly, both state and federal courts have jurisdiction to entertain such claims. The choice of forum provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes, which may discourage such lawsuits. Alternatively, if a court were to find the choice of forum provision contained in our Certificate of Incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions.

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Some provisions of our charter documents and Delaware law may have anti-takeover effects that could discourage an acquisition of us by others, even if an acquisition would be beneficial to our stockholders and may prevent attempts by our stockholders to replace or remove our current management.

There are provisions in our Certificate of Incorporation and Bylaws, such as the existence of a classified board and the authorization of “blank-check” preferred stock, that may make it difficult for a third party to acquire, or attempt to acquire, control of our company, even if a change in control was considered favorable by our stockholders. These provisions may frustrate or prevent any attempts by our stockholders to replace or remove our current management by making it more difficult for stockholders to replace members of our board of directors, who are responsible for appointing the members of our management.

Moreover, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which prohibit a person who owns 15% or more of our outstanding voting stock from merging or combining with us for a period of three years after the date of the transaction in which the person acquired in excess of 15% of our outstanding voting stock, unless the merger or combination is approved in a prescribed manner. Any provision in our Certificate of Incorporation, our Bylaws or Delaware law that has the effect of delaying or deterring a change in control could limit the opportunity for our stockholders to receive a premium for their shares of our common stock and could also affect the price that some investors are willing to pay for our common stock.

General Risk Factors

Our ability to use net operating loss carryforwards to offset future taxable income, and our ability to use tax credit carryforwards, may be subject to certain limitations.

Our ability to use our federal and state net operating losses (“NOLs”) to offset potential future taxable income and related income taxes that would otherwise be due is dependent upon our generation of future taxable income, and we cannot predict with certainty when, or whether, we will generate sufficient taxable income to use our NOLs. To the extent that we continue to generate taxable losses, unused losses will carry forward to offset future taxable income, if any, until such unused losses expire.

Under Sections 382 and 383 of the Internal Revenue Code of 1986, as amended, if a corporation undergoes an “ownership change”, generally defined as a greater than fifty percentage point change (by value) in its equity ownership by certain stockholders over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards, or NOLs, and other pre-change tax attributes (such as research and development tax credits) to offset its post-change taxable income or tax liability may be limited. We have experienced ownership changes in the past, resulting in annual limitations in our ability to use our NOLs and credits. In addition, we may experience subsequent ownership changes as a result of future equity offerings or other changes in the ownership of our stock, some of which are beyond our control. As a result, the amount of the NOLs and tax credit carryforwards presented in our financial statements could be limited and may expire unused. Any such material limitation or expiration of our NOLs may harm our future operating results by effectively increasing our future tax obligations.

We may have additional tax liabilities.

We are regularly subject to audits by tax authorities in the jurisdictions in which we conduct business. Although we believe our tax positions are reasonable, the final outcome of tax audits and related litigation could be materially different than that reflected in our historical income tax provisions and accruals, and we could be subject to assessments of additional taxes and/or substantial fines or penalties. The resolution of any audits or litigation could have an adverse effect on our financial position and results of operations. We and our subsidiary are engaged in intercompany transactions, the terms and conditions of which may be scrutinized by tax authorities, which could result in additional tax and/or penalties becoming due.

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ITEM 2.UNREGISTERED SALES OF EQUITY SECURITIES AND USE OF PROCEEDS

Recent Sales of Unregistered Securities

None.

Repurchases of Shares or of Company Equity Securities

None.

ITEM 3.DEFAULTS UPON SENIOR SECURITIES

None.

ITEM 4.MINE SAFETY DISCLOSURES

Not applicable.

ITEM 5.OTHER INFORMATION

None.

ITEM 6.EXHIBITS

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EXHIBIT INDEX


Exhibit		Incorporation By Reference
Number	Exhibit Description	Form	SEC File No.	Exhibit	Filing Date
3.1	Amended and Restated Certificate of Incorporation	8-K	001-37852	3.1	8/16/2016
3.2	Amended and Restated Bylaws	S-1/A	333-212476	3.2b	8/1/2016
10.1+	Form of Pre-Funded Warrant
31.1+	Certification of Chief Executive Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
31.2+	Certification of Chief Financial Officer required by Rule 13a-14(a) or Rule 15d-14(a) of the Securities Exchange Act of 1934, as adopted pursuant to Section 302 of the Sarbanes-Oxley Act of 2002
32.1+*	Certification of Chief Executive Officer and Chief Financial Officer, as required by Rule 13a-14(b) or Rule 15d-14(b) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002
101.INS+	XBRL Instance Document - the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.
101.SCH+	Inline XBRL Taxonomy Extension Schema Document
101.CAL+	Inline XBRL Taxonomy Extension Calculation Linkbase Document
101.DEF+	Inline XBRL Taxonomy Extension Definition Linkbase Document
101.LAB+	Inline XBRL Taxonomy Extension Labels Linkbase Document
101.PRE+	Inline XBRL Taxonomy Extension Presentation Linkbase Document
104	Cover Page Interactive Data File - The cover page interactive data file does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document

+ Filed herewith.

* This certification attached as Exhibit 32.1 that accompanies this Quarterly Report on Form 10-Q is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Protagonist Therapeutics, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of the Form 10-Q, irrespective of any general incorporation language contained in such filing.

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SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.

	PROTAGONIST THERAPEUTICS, INC.


Date: November 2, 2023	By:	/s/ Dinesh V. Patel, Ph.D.
		Dinesh V. Patel, Ph.D.
		President, Chief Executive Officer and Director
		(Principal Executive Officer)

Date: November 2, 2023	By:	/s/ Asif Ali
		Asif Ali
		Executive Vice President, Chief Financial Officer
		(Principal Financial and Accounting Officer)

Exhibit 10.1

PROTAGONIST THERAPEUTICS, INC.

PRE-FUNDED WARRANT TO PURCHASE COMMON STOCK

Number of Shares: [ ]

(subject to adjustment)

Warrant No.

Original Issue Date: [ ]

Protagonist Therapeutics, Inc., a Delaware corporation (the “Company”), hereby certifies that, for good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, [ ] or its permitted registered assigns (the “Holder”), is entitled, subject to the terms set forth below, to purchase from the Company up to a total of [ ] shares of common stock, $0.00001 par value per share (the “Common Stock”), of the Company (each such share, a “Warrant Share” and all such shares, the “Warrant Shares”) at an exercise price per share equal to $0.001 per share (as adjusted from time to time as provided in Section 9 herein, the “Exercise Price”), upon surrender of this Pre-Funded Warrant to Purchase Common Stock (including any Pre-Funded Warrants to Purchase Common Stock issued in exchange, transfer or replacement hereof, the “Warrant”) at any time and from time to time on or after the date hereof (the “Original Issue Date”) and through the date on which this Warrant is exercised in full (the “Expiration Date”), and subject to the following terms and conditions. This Warrant is one of a series of warrants (collectively, the “Warrants”) issued upon exercise of certain Class A Warrants and Class B Warrants of the Company, dated August 8, 2018.

1.Definitions. For purposes of this Warrant, the following terms shall have the following meanings:

(a)“Affiliate” means any Person directly or indirectly controlled by, controlling or under common control with, a Holder, but only for so long as such control shall continue. For purposes of this definition, “control” (including, with correlative meanings, “controlled by,” “controlling” and “under common control with”) means, with respect to a Person, possession, direct or indirect, of (a) the power to direct or cause direction of the management and policies of such Person (whether through ownership of securities or partnership or other ownership interests, by contract or otherwise), or (b) at least 50% of the voting securities (whether directly or pursuant to any option, warrant or other similar arrangement) or other comparable equity interests.

(b)“Commission” means the United States Securities and Exchange Commission.

(c)“Closing Sale Price” means, for any security as of any date, the last trade price for such security on the Principal Trading Market for such security, as reported by Bloomberg Financial Markets, or, if such Principal Trading Market begins to operate on an extended hours basis and does not designate the last trade price, then the last trade price of such security prior to 4:00 P.M., New York City time, as reported by Bloomberg Financial Markets, or if the foregoing do not apply, the last trade price of such security in the over-the-counter market on the electronic bulletin board for such security as reported by Bloomberg Financial Markets, or, if no last trade price is reported for such security by Bloomberg Financial Markets, the average of the bid and ask prices, of any market makers for such security as reported in the “pink sheets” by Pink Sheets LLC. If the Closing Sale Price cannot be calculated for a security on a particular date on any of the foregoing bases, the Closing Sale Price of such security on such date shall be the fair market value as mutually determined by the Company and the Holder. If the Company and the Holder are unable to agree upon the fair market value of such security, then the Board of Directors of the Company shall use its good faith judgment to determine the fair market value. The Board of Directors’ determination shall be binding upon all parties absent demonstrable error. All such determinations shall be appropriately adjusted for any stock dividend, stock split, stock combination or other similar transaction during the applicable calculation period.

(d)“Principal Trading Market” means the national securities exchange or other trading market on which the Common Stock is primarily listed on and quoted for trading, which, as of the Original Issue Date, shall be The Nasdaq Global Market.

(e)“Securities Act” means the Securities Act of 1933, as amended.

(f)“Standard Settlement Period” means the standard settlement period, expressed in a number of Trading Days, for the Company’s Principal Trading Market or quotation system with respect to the Common Stock that is in effect on the date of delivery of an applicable Exercise Notice, which as of the Original Issuance Date was “T+2”.

(g)“Trading Day” means any weekday on which the Principal Trading Market is open for trading.

(h)“Transfer Agent” means American Stock Transfer & Trust Company, LLC, the Company’s transfer agent and registrar for the Common Stock, and any successor appointed in such capacity.

(i)“VWAP” means, for any security as of any date, the price determined by the first of the following clauses that applies: (a) if the Common Stock is then listed or quoted on a trading market, the daily volume weighted average price of the Common Stock for such date (or the nearest preceding date) on the Principal Trading Market on which the Common Stock is then listed or quoted as reported by Bloomberg L.P. (based on a Trading Day from 9:30 a.m. (New York City time) to 4:00 p.m. (New York City time)), (b) if OTCQB or OTCQX is not a trading market, the volume weighted average price of the Common Stock for such date (or the nearest preceding date) on OTCQB or OTCQX as applicable, (c) if the Common Stock is not then listed or quoted for trading on OTCQB or OTCQX and if prices for the Common Stock are then reported in the “Pink Sheets” published by OTC Markets Group, Inc. (or a similar organization or agency succeeding to its functions of reporting prices), the most recent bid price per share of the Common Stock so reported, or (d) in all other cases, the fair market value of a share of Common Stock as determined by an independent appraiser selected in good faith by the Holders of a majority in interest of the Warrants then outstanding and reasonably acceptable to the Company, the fees and expenses of which shall be paid by the Company.

2.Registration of Warrants. The Company shall register this Warrant, upon records to be maintained by the Company for that purpose (the “Warrant Register”), in the name of the record Holder (which shall include the initial Holder or, as the case may be, any registered assignee to which this Warrant is permissibly assigned hereunder) from time to time. The Company may deem and treat the registered Holder of this Warrant as the absolute owner hereof for the purpose of any exercise hereof or any distribution to the Holder, and for all other purposes, absent actual notice to the contrary. This Warrant may be, at the option of the Holder, either (x) represented by an original Warrant certificate or (y) issued by book-entry registration in the Warrant Register. For the avoidance of doubt, any Warrant issued by book-entry registration in the Warrant Register shall nonetheless be subject to the terms and conditions of such Warrant certificate to the same extent as if such Warrant were represented by an original Warrant certificate.

3.Registration of Transfers. Subject to compliance with all applicable securities laws, the Company shall, or will cause its Transfer Agent to, register the transfer of all or any portion of this Warrant in the Warrant Register, upon surrender of this Warrant, and payment for all applicable transfer taxes (if any). Notwithstanding the foregoing, no surrender of a Warrant shall be required if such Warrant is represented by book-entry registration in the Warrant Register. Upon any such registration or transfer, a new warrant to purchase Common Stock in substantially the form of this Warrant (any such new warrant, a “New Warrant”) evidencing the portion of this Warrant so transferred shall be issued to the transferee, and a New Warrant evidencing the remaining portion of this Warrant not so transferred, if any, shall be issued to the transferring Holder. The acceptance of the New Warrant by the transferee thereof shall be deemed the acceptance by such transferee of all of the rights and obligations in respect of the New Warrant that the Holder has in respect of this Warrant. The Company shall, or will cause its Transfer Agent to, prepare, issue and deliver at the Company’s own expense any New Warrant under this Section 3. Until due presentment for registration of transfer, the Company may treat the registered Holder hereof as the owner and holder for all purposes, and the Company shall not be affected by any notice to the contrary.

4.Exercise and Duration of Warrants.

(a)All or any part of this Warrant shall be exercisable by the registered Holder in any manner permitted by Section 10 of this Warrant at any time and from time to time on or after the Original Issue Date and through and including 5:30 P.M. New York City time, on the Expiration Date.

(b)The Holder may exercise this Warrant by delivering to the Company (i) an exercise notice, in the form attached as Schedule 1 hereto (the “Exercise Notice”), completed and duly signed, and (ii) payment of the Exercise Price for the number of Warrant Shares as to which this Warrant is being exercised (which may take the form of a “cashless exercise” if so indicated in the Exercise Notice pursuant to Section 10 below), and the date on which the last of such items is delivered to the Company (as determined in accordance with the notice provisions hereof) is an “Exercise Date.” The Holder shall not be required to deliver the original Warrant in order to effect an exercise hereunder nor shall any medallion guarantee (or other type of guarantee or notarization) of any Exercise Notice be required. Execution and delivery of the Exercise Notice shall have the same effect as cancellation of the original Warrant and issuance of a New Warrant evidencing the right to purchase the remaining number of Warrant Shares (if any).

5.Delivery of Warrant Shares.

(a)Upon exercise of this Warrant, the Company shall promptly (but in no event later than the number of Trading Days comprising the Standard Settlement Period), upon the request of the Holder, credit such aggregate number of shares of Common Stock to which the Holder is entitled pursuant to such exercise to the Holder’s or its designee’s balance account with The Depository Trust Company (“DTC”) through its Deposit Withdrawal Agent Commission system, or if the Transfer Agent is not participating in the Fast Automated Securities Transfer Program (the “FAST Program”) or if the certificates are required to bear a legend regarding restriction on transferability, issue and dispatch by overnight courier to the address as specified in the Exercise Notice, a certificate, registered in the Company’s share register in the name of the Holder or its designee, for the number of shares of Common Stock to which the Holder is entitled pursuant to such exercise. The Holder, or any natural person or legal entity (each, a “Person”) permissibly so designated by the Holder to receive Warrant Shares, shall be deemed to have become the holder of record of such Warrant Shares as of the Exercise Date, irrespective of the date such Warrant Shares are credited to the Holder’s DTC account or the date of delivery of the certificates evidencing such Warrant Shares, as the case may be.

(b)If within the Standard Settlement Period after the Exercise Date, the Company fails to deliver to the Holder or its designee the required number of Warrant Shares in the manner required pursuant to Section 5(a) or fails to credit the Holder’s or its designee’s balance account with DTC for such number of Warrant Shares to which the Holder is entitled, and if after such third Trading Day after the Exercise Date and prior to the receipt of such Warrant Shares, the Holder purchases (in an open market transaction or otherwise) shares of Common Stock to deliver in satisfaction of a sale by the Holder of the Warrant Shares which the Holder anticipated receiving upon such exercise (a “Buy-In”), then the Company shall (1) pay in cash to the Holder the amount, if any, by which (x) the Holder’s total purchase price (including brokerage commissions, if any) for the shares of Common Stock so purchased exceeds (y) the amount obtained by multiplying (A) the number of Warrant Shares that the Company was required to deliver to the Holder in connection with the exercise at issue times (B) the price at which the sell order giving rise to such purchase obligation was executed, and (2) at the option of the Holder, either reinstate the portion of the Warrant and equivalent number of Warrant Shares for which such exercise was not honored (in which case such exercise shall be deemed rescinded) or deliver to the Holder the number of shares of Common Stock that would have been issued had the Company timely complied with its exercise and delivery obligations hereunder. For example, if the Holder purchases Common Stock having a total purchase price of $11,000 to cover a Buy-In with respect to an attempted exercise of this Warrant with an aggregate sale price giving rise to such purchase obligation of $10,000, under clause (1) of the immediately preceding sentence the Company shall be required to pay the Holder $1,000. In connection with the foregoing, the Holder shall (i) use its reasonable efforts to notify the Company in advance of any pending exercise of this Warrant in order to enable to the Company to deliver the Warrant Shares within the Standard Settlement Period and (ii) provide the Company written notice within two Business Days after the occurrence of a Buy-In, indicating the amounts payable to the Holder in respect of the Buy-In and, upon request of the Company, evidence of the amount of such loss. The provisions of this Section 5(b) shall be the only remedy available to the Holder in the event the Company fails to deliver to the Holder or its designee the required number of Warrant Shares in the manner required pursuant to Section 5(a) and a Buy-In occurs. Irrespective of whether there is a Buy-In, no remedy shall be available, notwithstanding the requirements of Section 5(a), unless and until the Company fails to deliver to the Holder or its designee the required number of Warrant Shares within the Standard Settlement Period after the Exercise Date.

(c)To the extent permitted by law and subject to Section 5(b), the Company’s obligations to

issue and deliver Warrant Shares in accordance with and subject to the terms hereof (including the limitations set forth in Section 11 below) are absolute and unconditional, irrespective of any action or inaction by the Holder to enforce the same, any waiver or consent with respect to any provision hereof, the recovery of any judgment against any Person or any action to enforce the same, or any setoff, counterclaim, recoupment, limitation or termination, or any breach or alleged breach by the Holder or any other Person of any obligation to the Company or any violation or alleged violation of law by the Holder or any other Person, and irrespective of any other circumstance that might otherwise limit such obligation of the Company to the Holder in connection with the issuance of Warrant Shares. Subject to Section 5(b), nothing herein shall limit the Holder’s right to pursue any other remedies available to it hereunder, at law or in equity including, without limitation, a decree of specific performance and/or injunctive relief with respect to the Company’s failure to timely deliver shares of Common Stock upon exercise of the Warrant as required pursuant to the terms hereof.

6.Charges, Taxes and Expenses. Issuance and delivery of shares of Common Stock upon exercise of this Warrant shall be made without charge to the Holder for any issue or transfer tax, transfer agent fee or other incidental tax or expense (excluding any applicable stamp duties) in respect of the issuance of such shares, all of which taxes and expenses shall be paid by the Company; provided, however, that the Company shall not be required to pay any tax that may be payable in respect of any transfer involved in the registration of any Warrant Shares or the Warrants in a name other than that of the Holder or an Affiliate thereof. The Holder shall be responsible for all other tax liability that may arise as a result of holding or transferring this Warrant or receiving Warrant Shares upon exercise hereof.

7.Replacement of Warrant. If this Warrant is mutilated, lost, stolen or destroyed, the Company shall issue or cause to be issued in exchange and substitution for and upon cancellation hereof, or in lieu of and substitution for this Warrant, a New Warrant, but only upon receipt of evidence reasonably satisfactory to the Company of such loss, theft or destruction (in such case) and, in each case, a customary and reasonable indemnity and surety bond, if requested by the Company. Applicants for a New Warrant under such circumstances shall also comply with such other reasonable regulations and procedures and pay such other reasonable third-party costs as the Company may prescribe. If a New Warrant is requested as a result of a mutilation of this Warrant, then the Holder shall deliver such mutilated Warrant to the Company as a condition precedent to the Company’s obligation to issue the New Warrant.

8.Reservation of Warrant Shares. The Company covenants that it will at all times while this Warrant is outstanding reserve and keep available out of the aggregate of its authorized but unissued and otherwise unreserved Common Stock, solely for the purpose of enabling it to issue Warrant Shares upon exercise of this Warrant as herein provided, the number of Warrant Shares that are initially issuable and deliverable upon the exercise of this entire Warrant, free from preemptive rights or any other contingent purchase rights of persons other than the Holder (taking into account the adjustments and restrictions of Section 9). The Company covenants that all Warrant Shares so issuable and deliverable shall, upon issuance and the payment of the applicable Exercise Price in accordance with the terms hereof, be duly and validly authorized, issued and fully paid and nonassessable. The Company will take all such action as may be necessary to assure that such shares of Common Stock may be issued as provided herein without violation of any applicable law or regulation, or of any requirements of any securities exchange or automated quotation system upon which the Common Stock may be listed, or of any contract by which the Company is bound.

9.Certain Adjustments. The number of Warrant Shares issuable upon exercise of this Warrant is subject to adjustment from time to time as set forth in this Section 9.

(a)Stock Dividends and Splits. If the Company, at any time while this Warrant is outstanding, (i) pays a stock dividend on its Common Stock or otherwise makes a distribution on any class of capital stock that is payable in shares of Common Stock, (ii) subdivides its outstanding shares of Common Stock into a larger number of shares of Common Stock, (iii) combines its outstanding shares of Common Stock into a smaller number of shares of Common Stock or (iv) issues by reclassification of shares of capital stock any additional shares of Common Stock of the Company, then in each such case the number of Warrant Shares then underlying this Warrant shall be divided by a fraction, the numerator of which shall be the number of shares of Common Stock outstanding immediately before such event and the denominator of which shall be the number of shares of Common Stock outstanding immediately after such event. Any adjustment made pursuant to clause (i) of this paragraph shall

become effective immediately after the record date for the determination of stockholders entitled to receive such dividend or distribution, provided, however, that if such record date shall have been fixed and such dividend is not fully paid on the date fixed therefor, the number of Warrant Shares shall be recomputed accordingly as of the close of business on such record date and thereafter the Warrant Shares shall be adjusted pursuant to this paragraph as of the time of actual payment of such dividends. Any adjustment pursuant to clause (ii) or (iii) of this paragraph shall become effective immediately after the effective date of such subdivision or combination.

(b)Pro Rata Distributions. If the Company, at any time while this Warrant is outstanding, distributes to all holders of Common Stock for no consideration (i) evidences of its indebtedness, (ii) any security (other than a distribution of Common Stock covered by the preceding paragraph), (iii) options, convertible securities, rights or warrants to subscribe for, purchase or otherwise acquire any security, or (iv) cash or any other asset (in each case, “Distributed Property”), then, upon any exercise of this Warrant that occurs after the record date fixed for determination of stockholders entitled to receive such distribution, the Holder shall be entitled to receive, in addition to the Warrant Shares otherwise issuable upon such exercise (if applicable), the Distributed Property that such Holder would have been entitled to receive in respect of such number of Warrant Shares had the Holder been the record holder of such Warrant Shares immediately prior to such record date without regard to any limitation on exercise contained therein (provided, that to the extent that the Holder’s right to participate in any such distribution would result in the Holder (including its Attribution Parties (as defined below)) exceeding the Beneficial Ownership Limitation (as defined below), then the Holder shall not be entitled to participate in such distribution to such extent (and shall not be entitled to beneficial ownership of such shares of Common Stock as a result of such distribution (and beneficial ownership) to such extent) and the portion of such distribution shall be held in abeyance for the benefit of the Holder until such time or times as (all or a portion) of its right thereto would not result in the Holder (including its Attribution Parties) exceeding the Beneficial Ownership Limitation, at which time or times the Holder shall be granted (all or such portion of) such distribution (and any distributions declared or made on such initial distribution or on any subsequent distribution held similarly in abeyance) to the same extent as if there had been no such limitation).

(c)Fundamental Transactions. If, at any time while this Warrant is outstanding (i) the Company effects any merger or consolidation of the Company with or into another Person, in which the Company is not the surviving entity or the stockholders of the Company immediately prior to such merger or consolidation do not own, directly or indirectly, at least 50% of the voting power of the surviving entity immediately after such merger or consolidation, (ii) the Company effects any sale to another Person of all or substantially all of its assets in one transaction or a series of related transactions, (iii) pursuant to any tender offer or exchange offer (whether by the Company or another Person), holders of capital stock who tender shares representing more than 50% of the voting power of the capital stock of the Company and the Company or such other Person, as applicable, accepts such tender for payment, (iv) the Company consummates a stock purchase agreement or other business combination (including, without limitation, a reorganization, recapitalization, spin-off or scheme of arrangement) with another Person whereby such other Person acquires more than the 50% of the voting power of the capital stock of the Company (except for any such transaction in which the stockholders of the Company immediately prior to such transaction maintain, in substantially the same proportions, the voting power of such Person immediately after the transaction) or (v) the Company effects any reclassification of the Common Stock or any compulsory share exchange pursuant to which the Common Stock is effectively converted into or exchanged for other securities, cash or property (other than as a result of a subdivision or combination of shares of Common Stock covered by Section 9(a) above) (in any such case, a “Fundamental Transaction”), then following such Fundamental Transaction the Holder shall have the right to receive, upon exercise of this Warrant, the same amount and kind of securities, cash or property as it would have been entitled to receive upon the occurrence of such Fundamental Transaction if it had been, immediately prior to such Fundamental Transaction, the holder of the number of Warrant Shares then issuable upon exercise in full of this Warrant without regard to any limitations on exercise contained herein (the “Alternate Consideration”). The Company shall not effect any Fundamental Transaction in which the Company is not the surviving entity or the Alternate Consideration includes securities of another Person unless (i) the Alternate Consideration is solely cash and the Company provides for the simultaneous “cashless exercise” of this Warrant pursuant to Section 10 below or (ii) prior to or simultaneously with the consummation thereof, any successor to the Company, surviving entity or other Person (including any purchaser of assets of the Company) shall assume the obligation to deliver to the Holder, such Alternate Consideration as, in accordance with the foregoing provisions, the Holder may be entitled to receive, and the other obligations under this Warrant. The provisions of this paragraph (c) shall similarly apply to subsequent transactions analogous of a Fundamental Transaction type.

(d)Calculations. All calculations under this Section 9 shall be made to the nearest share.

(e)Notice of Adjustments. Upon the occurrence of each adjustment pursuant to this Section 9, the Company at its expense will, at the written request of the Holder, promptly compute such adjustment, in good faith, in accordance with the terms of this Warrant and prepare a certificate setting forth such adjustment, including a statement of the adjusted number or type of Warrant Shares or other securities issuable upon exercise of this Warrant (as applicable), describing the transactions giving rise to such adjustments and showing in detail the facts upon which such adjustment is based. Upon written request, the Company will promptly deliver a copy of each such certificate to the Holder and to the Company’s transfer agent.

(f)Notice of Corporate Events. If, while this Warrant is outstanding, (i) the Company declares a dividend (or any other distribution in whatever form) on the Common Stock, (ii) the Company declares a special nonrecurring cash dividend on or a redemption of the Common Stock, (iii) the approval of any stockholders of the Company is required in connection with any reclassification of the Common Stock, any consolidation or merger to which the Company is a party, any sale or transfer of all or substantially all of the assets of the Company, or any compulsory share exchange whereby the Common Stock is converted into other securities, cash or property, or (iv) the Company authorizes the voluntary or involuntary dissolution, liquidation or winding up of the affairs of the Company, then, in each case, the Company shall deliver by facsimile or email to the Holder at its last facsimile number or email address as it shall appear upon the Warrant Register of the Company, at least ten (10) calendar days prior to the applicable record or effective date hereinafter specified, a notice stating (x) the date on which a record is to be taken for the purpose of such dividend, distribution, redemption, rights or warrants, or if a record is not to be taken, the date as of which the holders of the Common Stock of record to be entitled to such dividend, distributions, redemption, rights or warrants are to be determined or (y) the date on which such reclassification, consolidation, merger, sale, transfer or share exchange is expected to become effective or close, and the date as of which it is expected that holders of the Common Stock of record shall be entitled to exchange their shares of the Common Stock for securities, cash or other property deliverable upon such reclassification, consolidation, merger, sale, transfer or share exchange; provided that the failure to deliver such notice or any defect therein or in the delivery thereof shall not affect the validity of the corporate action required to be specified in such notice. To the extent that any notice provided in this Warrant constitutes, or contains, material, non-public information regarding the Company or any of the subsidiaries, the Company shall simultaneously file such notice with the Commission pursuant to a Current Report on Form 8-K. The Holder shall remain entitled to exercise this Warrant during the period commencing on the date of such notice to the effective date of the event triggering such notice except as may otherwise be expressly set forth herein.

10.Payment of Exercise Price. Notwithstanding anything contained herein to the contrary, the Holder may, in its sole discretion, satisfy its obligation to pay the Exercise Price through a “cashless exercise,” in which event the Company shall issue to the Holder the number of Warrant Shares determined as follows:

X = Y [(A-B)/A]

where:

“X” equals the number of Warrant Shares to be issued to the Holder;

“Y” equals the total number of Warrant Shares with respect to which this Warrant is then being exercised;

“A” equals the VWAP on the Trading Day immediately preceding the date of the applicable Notice of Exercise; and

“B” equals the Exercise Price then in effect for the applicable Warrant Shares at the time of such exercise.

In the event that a registration statement registering the Warrant Shares (File No. 333-227216 or a subsequently filed registration statement) is not effective at the time of exercise of this Warrant, then this Warrant may only be

exercised on a cashless basis under this Section 10. For purposes of Rule 144 promulgated under the Securities Act, it is intended, understood and acknowledged that the Warrant Shares issued in a “cashless exercise” transaction shall be deemed to have been acquired by the Holder, and the holding period for the Warrant Shares shall be deemed to have commenced, on the date this Warrant was originally issued (provided that the Commission continues to take the position that such treatment is proper at the time of such exercise). Except as set forth in Section 5(b) (Buy-In remedy) and Section 12 (payment of cash in lieu of fractional shares), in no event will the exercise of this Warrant be settled in cash.

11.Limitations on Exercise.

(a)Notwithstanding anything to the contrary contained in any Section herein, the number of Warrant Shares that may be acquired by the Holder upon any exercise of this Warrant (or otherwise in respect hereof) shall be limited to the extent necessary to ensure that, following such exercise (or other issuance), the total number of shares of Common Stock then beneficially owned by the Holder and its Affiliates and any other Persons whose beneficial ownership of Common Stock would be aggregated with the Holder’s for purposes of Section 13(d) of the Exchange Act (such Affiliated and other Persons, “Attribution Parties”), does not exceed a percentage (the “Beneficial Ownership Limitation”), which initially shall be 9.99%, of the total number of then issued and outstanding shares of Common Stock (including for such purpose the shares of Common Stock issuable upon such exercise), it being acknowledged by the Holder that the Company is not representing to such Holder that such calculation is in compliance with Section 13(d) of the Exchange Act and such Holder is solely responsible for any schedules required to be filed in accordance therewith. To the extent that the limitation contained in this Section 11(a) applies, the determination of whether this Warrant is exercisable (in relation to other securities owned by the Holder) and of which a portion of this Warrant is exercisable shall be in the sole discretion of the Holder, and the submission of a Notice of Exercise shall be deemed to be the Holder’s determination of whether this Warrant is exercisable (in relation to other securities owned by such Holder) and of which portion of this Warrant is exercisable, in each case subject to the Beneficial Ownership Limitation, and the Company shall have no obligation to verify or confirm the accuracy of such determination. In addition, a determination under this Section 11(a) as to any group status shall be determined in accordance with Section 13(d) of the Exchange Act and the rules and regulations promulgated thereunder. For purposes of this Section 11(a), in determining the number of outstanding shares of Common Stock, the Holder may rely on the number of outstanding shares of Common Stock as reflected in (x) the Company’s most recent Form 10-Q or Form 10-K, as the case may be, (y) a more recent public announcement by the Company or (z) any other notice by the Company or the Transfer Agent setting forth the number of shares of Common Stock outstanding. Upon the written request of the Holder, the Company shall, within three (3) Trading Days, confirm orally and in writing to such Holder the number of shares of Common Stock then outstanding. By written notice to the Company, which will not be effective until the sixty-first (61^st) day after such notice is delivered to the Company, the Holder may increase the Beneficial Ownership Limitation to such percentage of the number of shares of the Common Stock outstanding immediately after giving effect to the issuance of shares of Common Stock upon exercise of this Warrant as the Holder shall determine (not to exceed 19.99%), in its sole discretion, subject to Section 11(b), and the provisions of this Section 11(a) shall continue to apply. Upon such a change by a Holder of the Beneficial Ownership Limitation, the Beneficial Ownership Limitation may not be further increased by such Holder without first providing the minimum notice required by this Section 11(a). Notwithstanding the foregoing, at any time following notice of a Fundamental Transaction under Section 9(f)(ii) with respect to a Section 9(c)(iii) Fundamental Transaction, the Holder may change the Beneficial Ownership Limitation effective immediately upon written notice to the Company and may reinstitute a Beneficial Ownership Limitation at any time thereafter effective immediately upon written notice to the Company.

(b)This Section 11 shall not restrict the number of shares of Common Stock which a Holder may receive or beneficially own in order to determine the amount of securities or other consideration that such Holder may receive in the event of a Fundamental Transaction as contemplated in Section 9 of this Warrant.

12.No Fractional Shares. No fractional Warrant Shares will be issued in connection with any exercise of this Warrant. In lieu of any fractional shares that would otherwise be issuable, the number of Warrant Shares to be issued shall be rounded down to the next whole number and the Company shall pay the Holder in cash the fair market value (based on the Closing Sale Price) for any such fractional shares.

13.Notices. Any and all notices or other communications or deliveries hereunder (including, without

limitation, any Exercise Notice) shall be in writing and shall be deemed given and effective on the earliest of (i) the date of transmission, if such notice or communication is delivered via facsimile or confirmed e-mail at the facsimile number or e-mail address specified below prior to 5:30 P.M., New York City time, on a Trading Day, (ii) the next Trading Day after the date of transmission, if such notice or communication is delivered via facsimile or confirmed e-mail at the facsimile number or e-mail address specified below on a day that is not a Trading Day or later than 5:30 P.M., New York City time, on any Trading Day, (iii) the Trading Day following the date of mailing, if sent by nationally recognized overnight courier service specifying next business day delivery, or (iv) upon actual receipt by the Person to whom such notice is required to be given, if by hand delivery.

14.Warrant Agent. The Company shall initially serve as warrant agent under this Warrant. Upon thirty (30) days’ notice to the Holder, the Company may appoint a new warrant agent. Any corporation into which the Company or any new warrant agent may be merged or any corporation resulting from any consolidation to which the Company or any new warrant agent shall be a party or any corporation to which the Company or any new warrant agent transfers substantially all of its corporate trust or shareholders services business shall be a successor warrant agent under this Warrant without any further act. Any such successor warrant agent shall promptly cause notice of its succession as warrant agent to be mailed (by first class mail, postage prepaid) to the Holder at the Holder’s last address as shown on the Warrant Register.

15.Miscellaneous.

(a)No Rights as a Stockholder. The Holder, solely in such Person’s capacity as a holder of this Warrant, shall not be entitled to vote or receive dividends or be deemed the holder of share capital of the Company for any purpose, nor shall anything contained in this Warrant be construed to confer upon the Holder, solely in such Person’s capacity as the Holder of this Warrant, any of the rights of a stockholder of the Company or any right to vote, give or withhold consent to any corporate action (whether any reorganization, issue of stock, reclassification of stock, consolidation, merger, amalgamation, conveyance or otherwise), receive notice of meetings, receive dividends or subscription rights, or otherwise, prior to the issuance to the Holder of the Warrant Shares which such Person is then entitled to receive upon the due exercise of this Warrant. In addition, nothing contained in this Warrant shall be construed as imposing any liabilities on the Holder to purchase any securities (upon exercise of this Warrant or otherwise) or as a stockholder of the Company, whether such liabilities are asserted by the Company or by creditors of the Company.

(b)Authorized Shares.

(i) Except and to the extent as waived or consented to by the Holder, the Company shall not by any action, including, without limitation, amending its certificate or articles of incorporation or through any reorganization, transfer of assets, consolidation, merger, dissolution, issue or sale of securities or any other voluntary action, avoid or seek to avoid the observance or performance of any of the terms of this Warrant, but will at all times in good faith assist in the carrying out of all such terms and in the taking of all such actions as may be necessary or appropriate to protect the rights of Holder as set forth in this Warrant against impairment. Without limiting the generality of the foregoing, the Company will (a) not increase the par value of any Warrant Shares above the amount payable therefor upon such exercise immediately prior to such increase in par value, (b) take all such action as may be necessary or appropriate in order that the Company may validly and legally issue fully paid and nonassessable Warrant Shares upon the exercise of this Warrant, and (c) use commercially reasonable efforts to obtain all such authorizations, exemptions or consents from any public regulatory body having jurisdiction thereof as may be necessary to enable the Company to perform its obligations under this Warrant.

(ii) Before taking any action which would result in an adjustment in the number of Warrant Shares for which this Warrant is exercisable or in the Exercise Price, the Company shall obtain all such authorizations or exemptions thereof, or consents thereto, as may be necessary from any public regulatory body or bodies having jurisdiction thereof.

(c)Successors and Assigns. Subject to the restrictions on transfer set forth in this Warrant and compliance with applicable securities laws, this Warrant may be assigned by the Holder. This Warrant may not be assigned by the Company without the written consent of the Holder except to a successor in the event of a

Fundamental Transaction. This Warrant shall be binding on and inure to the benefit of the Company and the Holder and their respective successors and assigns. Subject to the preceding sentence, nothing in this Warrant shall be construed to give to any Person other than the Company and the Holder any legal or equitable right, remedy or cause of action under this Warrant. This Warrant may be amended only in writing signed by the Company and the Holder, or their successors and assigns.

(d)Amendment and Waiver. This Warrant may be modified or amended or the provisions hereof waived, only with the written consent of the Company and the Holders of Warrants representing no less than a majority of the Warrant Shares obtainable upon exercise of the Warrants then outstanding.

(e)Acceptance. Receipt of this Warrant by the Holder shall constitute acceptance of and agreement to all of the terms and conditions contained herein.

(f)Governing Law; Jurisdiction. ALL QUESTIONS CONCERNING THE CONSTRUCTION, VALIDITY, ENFORCEMENT AND INTERPRETATION OF THIS WARRANT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK WITHOUT REGARD TO THE PRINCIPLES OF CONFLICTS OF LAW THEREOF. EACH OF THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY SUBMITS TO THE EXCLUSIVE JURISDICTION OF THE STATE AND FEDERAL COURTS SITTING IN THE CITY OF NEW YORK, BOROUGH OF MANHATTAN, FOR THE ADJUDICATION OF ANY DISPUTE HEREUNDER OR IN CONNECTION HEREWITH OR WITH ANY TRANSACTION CONTEMPLATED HEREBY OR DISCUSSED HEREIN (INCLUDING WITH RESPECT TO THE ENFORCEMENT OF ANY OF THE TRANSACTION DOCUMENTS), AND HEREBY IRREVOCABLY WAIVES, AND AGREES NOT TO ASSERT IN ANY SUIT, ACTION OR PROCEEDING, ANY CLAIM THAT IT IS NOT PERSONALLY SUBJECT TO THE JURISDICTION OF ANY SUCH COURT. EACH OF THE COMPANY AND THE HOLDER HEREBY IRREVOCABLY WAIVES PERSONAL SERVICE OF PROCESS AND CONSENTS TO PROCESS BEING SERVED IN ANY SUCH SUIT, ACTION OR PROCEEDING BY MAILING A COPY THEREOF VIA REGISTERED OR CERTIFIED MAIL OR OVERNIGHT DELIVERY (WITH EVIDENCE OF DELIVERY) TO SUCH PERSON AT THE ADDRESS IN EFFECT FOR NOTICES TO IT AND AGREES THAT SUCH SERVICE SHALL CONSTITUTE GOOD AND SUFFICIENT SERVICE OF PROCESS AND NOTICE THEREOF. NOTHING CONTAINED HEREIN SHALL BE DEEMED TO LIMIT IN ANY WAY ANY RIGHT TO SERVE PROCESS IN ANY MANNER PERMITTED BY LAW. EACH OF THE COMPANY AND THE HOLDER HEREBY WAIVES ALL RIGHTS TO A TRIAL BY JURY.

(g)Headings. The headings herein are for convenience only, do not constitute a part of this Warrant and shall not be deemed to limit or affect any of the provisions hereof.

(h)Severability. In case any one or more of the provisions of this Warrant shall be invalid or unenforceable in any respect, the validity and enforceability of the remaining terms and provisions of this Warrant shall not in any way be affected or impaired thereby, and the Company and the Holder will attempt in good faith to agree upon a valid and enforceable provision which shall be a commercially reasonable substitute therefor, and upon so agreeing, shall incorporate such substitute provision in this Warrant.

[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]

IN WITNESS WHEREOF, the Company has caused this Warrant to be duly executed by its authorized officer as of the date first indicated above.


PROTAGONIST THERAPEUTICS, INC.

By:
Name:
Title:

SCHEDULE 1

FORM OF EXERCISE NOTICE

[To be executed by the Holder to purchase shares of Common Stock under the Warrant]

Ladies and Gentlemen:

(1)	The undersigned is the Holder of Warrant No. ___ (the “Warrant”) issued by Protagonist Therapeutics, Inc., a Delaware corporation (the “Company”). Capitalized terms used herein and not otherwise defined herein have the respective meanings set forth in the Warrant.

(2)	The undersigned hereby exercises its right to purchase Warrant Shares pursuant to the Warrant.

(3)	The Holder intends that payment of the Exercise Price shall be made as (check one):



Cash Exercise



“Cashless Exercise” under Section 10 of the Warrant

(4)	If the Holder has elected a Cash Exercise, the Holder shall pay the sum of $ in immediately available funds to the Company in accordance with the terms of the Warrant.

(5)	Pursuant to this Exercise Notice, the Company shall deliver to the Holder Warrant Shares determined in accordance with the terms of the Warrant.

(6)

By its delivery of this Exercise Notice, the undersigned represents and warrants to the Company that in giving effect to the exercise evidenced hereby the Holder will not beneficially own in excess of the number of shares of Common Stock (as determined in accordance with Section 13(d) of the Securities Exchange Act of 1934, as amended) permitted to be owned under Section 11(a) or Section 11(b), as applicable, of the Warrant to which this notice relates.


Dated:


Name of Holder:


By:

Name:

Title:

(Signature must conform in all respects to name of Holder as specified on the face of the Warrant)

Exhibit 31.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Dinesh V. Patel, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Protagonist Therapeutics, Inc.:

2. Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;

3. Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules13a-15(f) and 15d-15(f)) for the registrant and we have:

a) Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;

b) Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;

c) Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and

d) Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and

5. The registrant’s other certifying officer(s) and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):

a) All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


		/s/ Dinesh V. Patel, Ph.D.
Date: November 2, 2023		Dinesh V. Patel, Ph.D.
		President, Chief Executive Officer (Principal Executive Officer)

Exhibit 31.2

CERTIFICATION OF CHIEF FINANCIAL OFFICER

Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002

I, Asif Ali, certify that:

1. I have reviewed this Quarterly Report on Form 10-Q of Protagonist Therapeutics, Inc.:

4. The registrant’s other certifying officer(s) and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and we have:

b) Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.


		/s/ Asif Ali
Date: November 2, 2023		Asif Ali
		Executive Vice President, Chief Financial Officer (Principal Financial and Accounting Officer)

Exhibit 32.1

CERTIFICATION OF CHIEF EXECUTIVE OFFICER AND CHIEF FINANCIAL OFFICER

Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002

Pursuant to Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. §1350), as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, Dinesh V. Patel, Chief Executive Officer of Protagonist Therapeutics, Inc. (the “Company”), and Asif Ali, Chief Financial Officer of the Company, each hereby certify that, to the best of his knowledge:

1. The Company’s Quarterly Report on Form 10-Q for the period ended September 30, 2023, to which this Certification is attached as Exhibit 32.1 (the “Periodic Report”), fully complies with the requirements of Section 13(a) or Section 15(d) of the Securities Exchange Act of 1934, as amended; and

2. The information contained in the Periodic Report fairly presents, in all material respects, the financial condition and results of operations of the Company for the periods presented herein.


Date: November 2, 2023		/s/ Dinesh V. Patel, Ph.D.
		Dinesh V. Patel, Ph.D.
		President, Chief Executive Officer

Date: November 2, 2023		/s/ Asif Ali
		Asif Ali
		Executive Vice President, Chief Financial Officer

This certification accompanies the Form 10-Q to which it relates, and is not deemed to be filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Protagonist Therapeutics, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Form 10-Q), irrespective of any general incorporation language contained in such filing.

Document and Entity Information - shares	9 Months Ended
Document and Entity Information - shares	Sep. 30, 2023	Oct. 27, 2023
Document And Entity Information
Document Type	10-Q
Document Quarterly Report	true
Document Period End Date	Sep. 30, 2023
Document Transition Report	false
Entity File Number	001-37852
Entity Registrant Name	PROTAGONIST THERAPEUTICS, INC.
Entity Incorporation, State or Country Code	DE
Entity Tax Identification Number	98-0505495
Entity Address, Address Line One	7707 Gateway Boulevard, Suite 140
Entity Address, City or Town	Newark
Entity Address, State or Province	CA
Entity Address, Postal Zip Code	94560-1160
City Area Code	510
Local Phone Number	474-0170
Title of 12(b) Security	Common Stock
Trading Symbol	PTGX
Security Exchange Name	NASDAQ
Entity Current Reporting Status	Yes
Entity Interactive Data Current	Yes
Entity Filer Category	Non-accelerated Filer
Entity Small Business	true
Entity Emerging Growth Company	false
Entity Shell Company	false
Entity Common Stock, Shares Outstanding		57,678,122
Entity Central Index Key	0001377121
Current Fiscal Year End Date	--12-31
Document Fiscal Year Focus	2023
Document Fiscal Period Focus	Q3
Amendment Flag	false

Condensed Consolidated Balance Sheets - USD ($)	Sep. 30, 2023	Dec. 31, 2022
Current assets:
Cash and cash equivalents	$ 230,527,000	$ 125,744,000
Marketable securities	90,224,000	111,611,000
Receivable from collaboration partner		10,000
Prepaid expenses and other current assets	4,130,000	5,712,000
Total current assets	324,881,000	243,077,000
Marketable securities - noncurrent	1,985,000	0
Property and equipment, net	1,421,000	1,565,000
Restricted cash - noncurrent	225,000	225,000
Operating lease right-of-use asset	1,504,000	3,061,000
Total assets	330,016,000	247,928,000
Current liabilities:
Accounts payable	1,252,000	3,640,000
Payable to collaboration partner	3,000	69,000
Accrued expenses and other payables	24,809,000	24,955,000
Operating lease liability - current	1,803,000	2,515,000
Total current liabilities	27,867,000	31,179,000
Operating lease liability - noncurrent		1,141,000
Total liabilities	27,867,000	32,320,000
Commitments and contingencies
Stockholders' equity:
Preferred stock, $0.00001 par value, 10,000,000 shares authorized; no shares issued and outstanding
Common stock, $0.00001 par value, 90,000,000 shares authorized; 57,647,476 and 49,339,252 shares issued and outstanding as of September 30, 2023 and December 31, 2022, respectively	1,000
Additional paid-in capital	945,363,000	752,722,000
Accumulated other comprehensive loss	(170,000)	(359,000)
Accumulated deficit	(643,045,000)	(536,755,000)
Total stockholders' equity	302,149,000	215,608,000
Total liabilities and stockholders' equity	$ 330,016,000	$ 247,928,000

Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares	Sep. 30, 2023	Dec. 31, 2022
Condensed Consolidated Balance Sheets
Preferred stock, par value	$ 0.00001	$ 0.00001
Preferred stock, shares authorized	10,000,000	10,000,000
Preferred stock, shares issued	0	0
Preferred stock, shares outstanding	0	0
Common stock, par value	$ 0.00001	$ 0.00001
Common stock, shares authorized	90,000,000	90,000,000
Common stock, shares issued	57,647,476	49,339,252
Common stock, shares outstanding	57,647,476	49,339,252

Condensed Consolidated Statements of Operations - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Condensed Consolidated Statements of Operations
License and collaboration revenue	$ 0	$ 0	$ 0	$ 26,581
Revenue from Contract with Customer, Product and Service [Extensible List]	License and Collaboration Agreement	License and Collaboration Agreement	License and Collaboration Agreement	License and Collaboration Agreement
Operating expenses:
Research and development	$ 30,664	$ 25,402	$ 91,262	$ 96,331
General and administrative	7,662	6,901	25,439	25,107
Total operating expenses	38,326	32,303	116,701	121,438
Loss from operations	(38,326)	(32,303)	(116,701)	(94,857)
Interest income	4,252	1,157	10,656	1,809
Other expense, net	(31)	(86)	(245)	(151)
Net loss	$ (34,105)	$ (31,232)	$ (106,290)	$ (93,199)
Net loss per share, basic	$ (0.58)	$ (0.64)	$ (1.91)	$ (1.90)
Net loss per share, diluted	$ (0.58)	$ (0.64)	$ (1.91)	$ (1.90)
Weighted-average shares used to compute net loss per share, basic	59,182,899	49,107,639	55,542,543	48,971,329
Weighted-average shares used to compute net loss per share, diluted	59,182,899	49,107,639	55,542,543	48,971,329

Condensed Consolidated Statements of Comprehensive Loss - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Condensed Consolidated Statements of Comprehensive Loss
Net loss	$ (34,105)	$ (31,232)	$ (106,290)	$ (93,199)
Other comprehensive loss:
(Loss) gain on translation of foreign operations		(79)	194	(193)
Unrealized gain (loss) on marketable securities	28	319	(5)	12
Comprehensive loss	$ (34,077)	$ (30,992)	$ (106,101)	$ (93,380)

Condensed Consolidated Statements of Stockholder's Equity - USD ($) $ in Thousands	Common Stock At-the-market offering	Common Stock Public offerings	Common Stock	Additional Paid-In Capital At-the-market offering	Additional Paid-In Capital Public offerings	Additional Paid-In Capital	Accumulated Other Comprehensive (Loss) Gain	Accumulated Deficit	At-the-market offering	Public offerings	Total
Balance, Beginning at Dec. 31, 2021						$ 709,682	$ (299)	$ (409,362)			$ 300,021
Balance, Beginning (in shares) at Dec. 31, 2021			47,838,330
Increase (Decrease) in Stockholders' Equity
Issuance of common stock, net of issuance costs				$ 14,553					$ 14,553
Issuance of common stock, net of issuance costs (in shares)	422,367
Issuance of common stock under equity incentive and employee stock purchase plans						3,895					3,895
Issuance of common stock under equity incentive and employee stock purchase plans (in shares)			545,443
Issuance of common stock upon exercise of Warrants (in shares)			399,997
Shares withheld for net settlement of tax withholding upon vesting of restricted stock units						(188)					(188)
Shares withheld for net settlement of tax withholding upon vesting of restricted stock units (in shares)			(7,726)
Stock-based compensation expense						18,690					18,690
Issuance costs related to prior period common stock offering						25					25
Other comprehensive gain (loss)							(181)				(181)
Net loss								(93,199)			(93,199)
Balance, Ending at Sep. 30, 2022						746,657	(480)	(502,561)			243,616
Balance, Ending (in shares) at Sep. 30, 2022			49,198,411
Balance, Beginning at Dec. 31, 2021						709,682	(299)	(409,362)			300,021
Balance, Beginning (in shares) at Dec. 31, 2021			47,838,330
Balance, Ending at Dec. 31, 2022						752,722	(359)	(536,755)			$ 215,608
Balance, Ending (in shares) at Dec. 31, 2022			49,339,252								49,339,252
Balance, Beginning at Jun. 30, 2022						740,027	(720)	(471,329)			$ 267,978
Balance, Beginning (in shares) at Jun. 30, 2022			48,683,931
Increase (Decrease) in Stockholders' Equity
Issuance of common stock under equity incentive and employee stock purchase plans						680					680
Issuance of common stock under equity incentive and employee stock purchase plans (in shares)			114,483
Issuance of common stock upon exercise of Warrants (in shares)			399,997
Stock-based compensation expense						5,950					5,950
Other comprehensive gain (loss)							240				240
Net loss								(31,232)			(31,232)
Balance, Ending at Sep. 30, 2022						746,657	(480)	(502,561)			243,616
Balance, Ending (in shares) at Sep. 30, 2022			49,198,411
Balance, Beginning at Dec. 31, 2022						752,722	(359)	(536,755)			$ 215,608
Balance, Beginning (in shares) at Dec. 31, 2022			49,339,252								49,339,252
Increase (Decrease) in Stockholders' Equity
Exercise of Warrants in exchange for issuance of Pre-funded Warrants						33,813					$ 33,813
Issuance of common stock, net of issuance costs	$ 1			$ 24,301	$ 107,790				$ 24,302	$ 107,790
Issuance of common stock, net of issuance costs (in shares)	1,749,199	5,750,000
Issuance of common stock under equity incentive and employee stock purchase plans						4,255					4,255
Issuance of common stock under equity incentive and employee stock purchase plans (in shares)			796,240
Issuance of common stock upon exercise of Warrants						559					559
Issuance of common stock upon exercise of Warrants (in shares)			44,748
Shares withheld for net settlement of tax withholding upon vesting of restricted stock units						(769)					(769)
Shares withheld for net settlement of tax withholding upon vesting of restricted stock units (in shares)			(31,963)
Stock-based compensation expense						22,692					22,692
Other comprehensive gain (loss)							189				189
Net loss								(106,290)			(106,290)
Balance, Ending at Sep. 30, 2023			$ 1			945,363	(170)	(643,045)			$ 302,149
Balance, Ending (in shares) at Sep. 30, 2023			57,647,476								57,647,476
Balance, Beginning at Jun. 30, 2023			$ 1			903,205	(198)	(608,940)			$ 294,068
Balance, Beginning (in shares) at Jun. 30, 2023			57,494,185
Increase (Decrease) in Stockholders' Equity
Exercise of Warrants in exchange for issuance of Pre-funded Warrants						33,813					33,813
Issuance of common stock under equity incentive and employee stock purchase plans						1,021					1,021
Issuance of common stock under equity incentive and employee stock purchase plans (in shares)			108,543
Issuance of common stock upon exercise of Warrants						559					559
Issuance of common stock upon exercise of Warrants (in shares)			44,748
Stock-based compensation expense						6,765					6,765
Other comprehensive gain (loss)							28				28
Net loss								(34,105)			(34,105)
Balance, Ending at Sep. 30, 2023			$ 1			$ 945,363	$ (170)	$ (643,045)			$ 302,149
Balance, Ending (in shares) at Sep. 30, 2023			57,647,476								57,647,476

Condensed Consolidated Statements of Cash Flows - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Cash Flows from Operating Activities
Net loss	$ (106,290)	$ (93,199)
Adjustments to reconcile net loss to net cash used in operating activities:
Stock-based compensation	22,692	18,690
Operating lease right-of-use asset amortization	1,751	1,751
(Accretion) Amortization of discount/premium on marketable securities	(3,221)	365
Depreciation	729	778
Other	194
Changes in operating assets and liabilities:
Research and development tax incentive receivable		2,719
Receivable from collaboration partner	10	1,441
Prepaid expenses and other assets	1,582	413
Accounts payable	(2,271)	3,121
Payable to collaboration partner	(66)	(867)
Accrued expenses and other payables	(259)	(8,127)
Deferred revenue		(1,601)
Operating lease liability	(2,047)	(1,986)
Net cash used in operating activities	(87,196)	(76,502)
Cash Flows from Investing Activities
Purchase of marketable securities	(93,077)	(134,279)
Proceeds from maturities of marketable securities	115,696	222,537
Purchases of property and equipment	(590)	(725)
Net cash provided by investing activities	22,029	87,533
Cash Flows from Financing Activities
Proceeds from public offering of common stock, net of issuance costs	107,790
Proceeds from at-the-market offering, net of issuance costs	24,302	14,553
Proceeds from exercise of Warrants in exchange for issuance of Pre-funded Warrants	33,813
Proceeds from issuance of common stock upon exercise of Warrants	559
Proceeds from issuance of common stock upon exercise of stock options and purchases under employee stock purchase plan	4,255	3,895
Tax withholding payments related to net settlement of restricted stock units	(769)	(188)
Issuance costs related to prior period common stock offering		25
Net cash provided by financing activities	169,950	18,285
Effect of exchange rate changes on cash, cash equivalents and restricted cash		(165)
Net increase in cash, cash equivalents and restricted cash	104,783	29,151
Cash, cash equivalents and restricted cash, beginning of period	125,969	123,890
Cash, cash equivalents and restricted cash, end of period	230,752	153,041
Supplemental Disclosure of Non-Cash Financing and Investing Information:
Purchases of property and equipment in accounts payable and accrued liabilities	$ 3	$ 61

Organization and Description of Business

9 Months Ended

Sep. 30, 2023

Organization and Description of Business

Organization and Description of Business

PROTAGONIST THERAPEUTICS, INC.

Notes to Unaudited Condensed Consolidated Financial Statements

Note 1.Organization and Description of Business

Liquidity

Risks and Uncertainties

Summary of Significant Accounting Policies

9 Months Ended

Sep. 30, 2023

Summary of Significant Accounting Policies

Summary of Significant Accounting Policies

Note 2. Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

Principles of Consolidation

Use of Estimates

Cash as Reported in Condensed Consolidated Statements of Cash Flows

Cash as reported in the condensed consolidated statements of cash flows consists of (in thousands):


	September 30,
	2023		2022
Cash and cash equivalents	$	230,527	$	152,816
Restricted cash – noncurrent		225		225
Total cash reported on condensed consolidated statements of cash flows	$	230,752	$	153,041

Investment Impairment

Stock-Based Compensation Expense

Total stock-based compensation expense was as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Research and development	$	3,780	$	3,858	$	13,171	$	11,290
General and administrative		2,985		2,092		9,521		7,400
Total stock-based compensation expense	$	6,765	$	5,950	$	22,692	$	18,690

Significant Accounting Policies

Recently Adopted Accounting Pronouncements

License and Collaboration Agreement

9 Months Ended

Sep. 30, 2023

License and Collaboration Agreement..

License and Collaboration Agreement

License and Collaboration Agreement

Note 3. License and Collaboration Agreement

Agreement Terms

Upcoming potential development milestones for second-generation compounds include:

●

$50.0 million upon the dosing of the third patient in a Phase 3 clinical trial for a second-generation compound for any indication;

●

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

●

$35.0 million upon the filing of a New Drug Application (“NDA”) for a second-generation compound with the U.S. Food and Drug Administration (the “FDA”);

●

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

●

$15.0 million upon the dosing of the third patient in a Phase 3 clinical trial for a second-generation compound for a second indication.

Revenue Recognition

The following tables present changes in the Company’s contract assets and liabilities during the periods presented (in thousands):


	Balance at						Balance at
	Beginning of						End of
Nine Months Ended September 30, 2023	Period		Additions		Deductions		Period
Contract assets:
Receivable from collaboration partner	$	10	$	41		(51)	$	—
Contract liabilities:
Payable to collaboration partner	$	69	$	11		(77)	$	3


	Balance at						Balance at
	Beginning of						End of
Nine Months Ended September 30, 2022	Period		Additions		Deductions		Period
Contract assets:
Receivable from collaboration partner	$	1,566	$	25,165	$	(26,606)	$	125
Contract liabilities:
Deferred revenue	$	1,601	$	25,757	$	(27,358)	$	—
Payable to collaboration partner	$	899	$	52	$	(919)	$	32

Fair Value Measurements

9 Months Ended

Sep. 30, 2023

Fair Value Measurements

Fair Value Measurements

Note 4. Fair Value Measurements

establishes a three-tiered hierarchy, which prioritizes the inputs used in the valuation methodologies in measuring fair value as follows:

Level 1—Inputs are unadjusted quoted prices in active markets for identical assets or liabilities at the measurement date.

The following tables present the fair value of the Company’s financial assets determined using the inputs defined above (in thousands):


	September 30, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	70,470	$	—	$	—	$	70,470
Certificates of deposit		—		4,799		—		4,799
Commercial paper		—		132,226		—		132,226
Corporate debt securities		—		1,980		—		1,980
U.S. Treasury and agency securities		—		108,786		—		108,786
Total financial assets	$	70,470	$	247,791	$	—	$	318,261


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	54,292	$	—	$	—	$	54,292
Commercial paper		—		110,227		—		110,227
Corporate debt securities		—		10,741		—		10,741
U.S. Treasury and agency securities				57,242		—		57,242
Total financial assets	$	54,292	$	178,210	$	—	$	232,502

The carrying amount of the Company’s remaining financial assets and liabilities, including cash, receivables and payables, approximates their fair value due to their short-term nature.

Cash Equivalents and Marketable Securities

9 Months Ended

Sep. 30, 2023

Cash Equivalents and Marketable Securities

Cash Equivalents and Marketable Securities

Note 5. Cash Equivalents and Marketable Securities

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


	September 30, 2023
	Amortized		Gross Unrealized
	Cost		Gains		Losses		Fair Value
Money market funds	$	70,470	$	—	$	—	$	70,470
Certificates of deposit		4,798		1		—		4,799
Commercial paper		132,275		—		(49)		132,226
Corporate debt securities		1,982		—		(2)		1,980
U.S. Treasury and agency securities		108,794		9		(17)		108,786
Total cash equivalents and marketable securities	$	318,319	$	10	$	(68)	$	318,261
Classified as:
Cash equivalents							$	226,052
Marketable securities								90,224
Marketable securities - noncurrent								1,985
Total cash equivalents and marketable securities							$	318,261


	December 31, 2022
	Amortized		Gross Unrealized
	Cost		Gains		Losses		Fair Value
Money market funds	$	54,292	$	—	$	—	$	54,292
Commercial paper		110,257		—		(30)		110,227
Corporate debt securities		10,756		—		(15)		10,741
U.S. Treasury and agency securities		57,251		27		(36)		57,242
Total cash equivalents and marketable securities	$	232,556	$	27	$	(81)	$	232,502
Classified as:
Cash equivalents							$	120,891
Marketable securities								111,611
Total cash equivalents and marketable securities							$	232,502

Balance Sheet Components

9 Months Ended

Sep. 30, 2023

Balance Sheet Components

Balance Sheet Components

Note 6. Balance Sheet Components

Prepaid Expenses and Other Current Assets

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


	September 30,		December 31,
	2023		2022
Prepaid insurance	$	1,871	$	1,417
Prepaid clinical and research related expenses		578		2,746
Prepaid licenses		410		489
Other prepaid expenses		1,206		1,018
Other receivable		65		42
Prepaid expenses and other current assets	$	4,130	$	5,712

Property and Equipment, Net

Property and equipment, net consisted of the following (in thousands):


	September 30,		December 31,
	2023		2022
Laboratory equipment	$	5,281	$	4,817
Furniture and computer equipment		1,123		1,089
Leasehold improvements		963		913
Total property and equipment		7,367		6,819
Accumulated depreciation		(5,946)		(5,254)
Property and equipment, net	$	1,421	$	1,565

Accrued Expenses and Other Payables

Accrued expenses and other payables consisted of the following (in thousands):


	September 30,		December 31,
	2023		2022
Accrued clinical and research related expenses	$	19,666	$	19,109
Accrued employee related expenses		4,528		4,967
Accrued professional service fees		471		464
Other		144		415
Total accrued expenses and other payables	$	24,809	$	24,955

Stockholders' Equity

9 Months Ended

Sep. 30, 2023

Stockholders' Equity

Stockholders' Equity

Note 7. Stockholders’ Equity

Net Loss per Share

9 Months Ended

Sep. 30, 2023

Net Loss per Share

Net Loss per Share

Note 8. Net Loss per Share


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Numerator:
Net loss	$	(34,105)	$	(31,232)	$	(106,290)	$	(93,199)
Denominator:
Weighted-average shares used to compute net loss per common share, basic and diluted		59,182,899		49,107,639		55,542,543		48,971,329
Net loss per share, basic and diluted	$	(0.58)	$	(0.64)	$	(1.91)	$	(1.90)


	September 30,
	2023	2022
Options to purchase common stock	8,030,007	6,441,415
Common stock warrants	—	2,750,000
Restricted stock units	708,872	694,414
Performance stock units	75,500	199,500
ESPP shares	42,472	79,960
Total	8,856,851	10,165,289

Subsequent Event

9 Months Ended

Sep. 30, 2023

Subsequent Event

Subsequent Event

Note 9. Subsequent Event

Summary of Significant Accounting Policies (Policies)

9 Months Ended

Sep. 30, 2023

Summary of Significant Accounting Policies

Basis of Presentation and Consolidation

Principles of Consolidation

Use of Estimates

Cash as Reported in Consolidated Statements of Cash Flows

Cash as Reported in Condensed Consolidated Statements of Cash Flows

Cash as reported in the condensed consolidated statements of cash flows consists of (in thousands):


	September 30,
	2023		2022
Cash and cash equivalents	$	230,527	$	152,816
Restricted cash – noncurrent		225		225
Total cash reported on condensed consolidated statements of cash flows	$	230,752	$	153,041

Investment Impairment

Stock-based Compensation

Stock-Based Compensation Expense

Total stock-based compensation expense was as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Research and development	$	3,780	$	3,858	$	13,171	$	11,290
General and administrative		2,985		2,092		9,521		7,400
Total stock-based compensation expense	$	6,765	$	5,950	$	22,692	$	18,690

Recently Adopted Accounting Pronouncement

Recently Adopted Accounting Pronouncements

Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2023

Summary of Significant Accounting Policies

Schedule of cash as reported in the consolidated statements of cash flows

Cash as reported in the condensed consolidated statements of cash flows consists of (in thousands):


	September 30,
	2023		2022
Cash and cash equivalents	$	230,527	$	152,816
Restricted cash – noncurrent		225		225
Total cash reported on condensed consolidated statements of cash flows	$	230,752	$	153,041

Schedule of stock-based compensation expense

Total stock-based compensation expense was as follows (in thousands):


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Research and development	$	3,780	$	3,858	$	13,171	$	11,290
General and administrative		2,985		2,092		9,521		7,400
Total stock-based compensation expense	$	6,765	$	5,950	$	22,692	$	18,690

License and Collaboration Agreement (Tables)

9 Months Ended

Sep. 30, 2023

License and Collaboration Agreement.

Schedule of changes in contract assets and liabilities


	Balance at						Balance at
	Beginning of						End of
Nine Months Ended September 30, 2023	Period		Additions		Deductions		Period
Contract assets:
Receivable from collaboration partner	$	10	$	41		(51)	$	—
Contract liabilities:
Payable to collaboration partner	$	69	$	11		(77)	$	3


	Balance at						Balance at
	Beginning of						End of
Nine Months Ended September 30, 2022	Period		Additions		Deductions		Period
Contract assets:
Receivable from collaboration partner	$	1,566	$	25,165	$	(26,606)	$	125
Contract liabilities:
Deferred revenue	$	1,601	$	25,757	$	(27,358)	$	—
Payable to collaboration partner	$	899	$	52	$	(919)	$	32

Fair Value Measurements (Tables)

9 Months Ended

Sep. 30, 2023

Fair Value Measurements

Schedule of fair value of financial assets


	September 30, 2023
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	70,470	$	—	$	—	$	70,470
Certificates of deposit		—		4,799		—		4,799
Commercial paper		—		132,226		—		132,226
Corporate debt securities		—		1,980		—		1,980
U.S. Treasury and agency securities		—		108,786		—		108,786
Total financial assets	$	70,470	$	247,791	$	—	$	318,261


	December 31, 2022
	Level 1		Level 2		Level 3		Total
Assets:
Money market funds	$	54,292	$	—	$	—	$	54,292
Commercial paper		—		110,227		—		110,227
Corporate debt securities		—		10,741		—		10,741
U.S. Treasury and agency securities				57,242		—		57,242
Total financial assets	$	54,292	$	178,210	$	—	$	232,502

Cash Equivalents and Marketable Securities (Tables)

9 Months Ended

Sep. 30, 2023

Cash Equivalents and Marketable Securities

Schedule of cash equivalents and marketable securities

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


	September 30, 2023
	Amortized		Gross Unrealized
	Cost		Gains		Losses		Fair Value
Money market funds	$	70,470	$	—	$	—	$	70,470
Certificates of deposit		4,798		1		—		4,799
Commercial paper		132,275		—		(49)		132,226
Corporate debt securities		1,982		—		(2)		1,980
U.S. Treasury and agency securities		108,794		9		(17)		108,786
Total cash equivalents and marketable securities	$	318,319	$	10	$	(68)	$	318,261
Classified as:
Cash equivalents							$	226,052
Marketable securities								90,224
Marketable securities - noncurrent								1,985
Total cash equivalents and marketable securities							$	318,261


	December 31, 2022
	Amortized		Gross Unrealized
	Cost		Gains		Losses		Fair Value
Money market funds	$	54,292	$	—	$	—	$	54,292
Commercial paper		110,257		—		(30)		110,227
Corporate debt securities		10,756		—		(15)		10,741
U.S. Treasury and agency securities		57,251		27		(36)		57,242
Total cash equivalents and marketable securities	$	232,556	$	27	$	(81)	$	232,502
Classified as:
Cash equivalents							$	120,891
Marketable securities								111,611
Total cash equivalents and marketable securities							$	232,502

Balance Sheet Components (Tables)

9 Months Ended

Sep. 30, 2023

Balance Sheet Components

Summary of prepaid expenses and other current assets

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


	September 30,		December 31,
	2023		2022
Prepaid insurance	$	1,871	$	1,417
Prepaid clinical and research related expenses		578		2,746
Prepaid licenses		410		489
Other prepaid expenses		1,206		1,018
Other receivable		65		42
Prepaid expenses and other current assets	$	4,130	$	5,712

Summary of property and equipment net

Property and equipment, net consisted of the following (in thousands):


	September 30,		December 31,
	2023		2022
Laboratory equipment	$	5,281	$	4,817
Furniture and computer equipment		1,123		1,089
Leasehold improvements		963		913
Total property and equipment		7,367		6,819
Accumulated depreciation		(5,946)		(5,254)
Property and equipment, net	$	1,421	$	1,565

Schedule of accrued expenses and other payables

Accrued expenses and other payables consisted of the following (in thousands):


	September 30,		December 31,
	2023		2022
Accrued clinical and research related expenses	$	19,666	$	19,109
Accrued employee related expenses		4,528		4,967
Accrued professional service fees		471		464
Other		144		415
Total accrued expenses and other payables	$	24,809	$	24,955

Net Loss per Share (Tables)

9 Months Ended

Sep. 30, 2023

Net Loss per Share

Schedule of computation of the basic and diluted net loss per share attributable to common stockholders


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
	2023		2022		2023		2022
Numerator:
Net loss	$	(34,105)	$	(31,232)	$	(106,290)	$	(93,199)
Denominator:
Weighted-average shares used to compute net loss per common share, basic and diluted		59,182,899		49,107,639		55,542,543		48,971,329
Net loss per share, basic and diluted	$	(0.58)	$	(0.64)	$	(1.91)	$	(1.90)

Schedule of potentially dilutive securities excluded from diluted net loss per share calculations


	September 30,
	2023	2022
Options to purchase common stock	8,030,007	6,441,415
Common stock warrants	—	2,750,000
Restricted stock units	708,872	694,414
Performance stock units	75,500	199,500
ESPP shares	42,472	79,960
Total	8,856,851	10,165,289

Organization and Description of Business - Liquidity (Details) $ in Thousands	9 Months Ended
	Sep. 30, 2023 USD ($) segment	Dec. 31, 2022 USD ($)
Organization and Description of Business
Number of operating segments \| segment	1
Net losses from operations since inception
Cash, cash equivalents and marketable securities	$ 322,700
Accumulated deficit	$ (643,045)	$ (536,755)

Summary of Significant Accounting Policies - Cash and Cash Equivalents and Restricted Cash (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022	Sep. 30, 2022	Dec. 31, 2021
Aggregate amounts of cash and cash equivalents and the restricted cash
Cash and cash equivalents	$ 230,527	$ 125,744	$ 152,816
Restricted cash - noncurrent	225	225	225
Total cash reported on condensed consolidated statements of cash flows	$ 230,752	$ 125,969	$ 153,041	$ 123,890

Summary of Significant Accounting Policies - Stock-based Compensation Expense (Details) - USD ($) $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 6,765	$ 5,950	$ 22,692	$ 18,690
Research and Development
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	3,780	3,858	13,171	11,290
General and Administrative
Share-based Compensation Arrangement by Share-based Payment Award, Compensation Cost [Line Items]
Total stock-based compensation expense	$ 2,985	$ 2,092	$ 9,521	$ 7,400

License and Collaboration Agreement - Narrative (Details) - USD ($) $ in Thousands		3 Months Ended		9 Months Ended
	Jul. 27, 2021	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Jun. 30, 2022	Dec. 31, 2021	Mar. 31, 2020	May 07, 2019	Jul. 13, 2017
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
License and collaboration revenue		$ 0	$ 0	$ 0	$ 26,581
Revenue from Contract with Customer, Product and Service [Extensible List]		License and Collaboration Agreement	License and Collaboration Agreement	License and Collaboration Agreement	License and Collaboration Agreement
Revenue recognized			$ 0		$ 900
Janssen \| License and Collaboration Agreement \| Three phase 1 studies of second-generation compounds
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Eligible amount received							$ 7,500
Janssen \| License and Collaboration Agreement \| 3rd patient in the first Phase 2 clinical trial for any second-generation compound for a second indication
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Eligible amount received						$ 25,000
Janssen \| Original Agreement \| Upfront cash payment
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Upfront payment										$ 50,000
Janssen \| Restated Agreement \| Second-generation Oral Interleukin ("IL")-23 Receptor Antagonist Development Compound
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Eligible amount received								$ 5,000
Janssen \| Restated Agreement \| Minimum
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Percentage of royalties on net product sales	6.00%
Janssen \| Restated Agreement \| Maximum
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Percentage of royalties on net product sales	10.00%
Janssen \| Restated Agreement \| License and Collaboration Agreement
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Eligible amount received									$ 25,000
Janssen \| Restated Agreement \| License and Collaboration Agreement \| Dosing of the 3rd patient in a Phase 3 clinical trial for a second-generation compound for any indication
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Upcoming potential development milestones		$ 50,000		$ 50,000
Janssen \| Restated Agreement \| License and Collaboration Agreement \| Phase 3 clinical trial for a second-generation compound for any indication
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Upcoming potential development milestones		115,000		115,000
Janssen \| Restated Agreement \| License and Collaboration Agreement \| Filing of New Drug Application ("NDA") for second-generation compound with the U.S. Food and Drug Administration
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Upcoming potential development milestones		35,000		35,000
Janssen \| Restated Agreement \| License and Collaboration Agreement \| FDA approval of NDA for second-generation compound
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Upcoming potential development milestones		50,000		50,000
Janssen \| Restated Agreement \| License and Collaboration Agreement \| Phase 2 studies for second-generation products
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Upcoming potential development milestones						$ 25,000
Janssen \| Restated Agreement \| License and Collaboration Agreement \| 3rd patient in the first Phase 2 clinical trial for any second-generation compound for a second indication
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Upcoming potential development milestones		10,000		10,000
Janssen \| Restated Agreement \| License and Collaboration Agreement \| Dosing Of Third Patient In Phase 3 Clinical Trial For Second Generation Compound For A Second Indication [Member]
Collaborative Arrangements and Non-collaborative Arrangement Transactions [Line Items]
Upcoming potential development milestones		$ 15,000		$ 15,000

License and Collaboration Agreement - Contract Assets and Liabilities (Details) - USD ($) $ in Thousands	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Contract assets:
Receivable from collaboration partner, Balance at Beginning of Period	$ 10	$ 1,566
Receivable from collaboration partner, Additions	41	25,165
Receivable from collaboration partner, Deductions	51	26,606
Receivable from collaboration partner, Balance at End of Period		125
Contract liabilities:
Payable to collaboration partner, Balance at Beginning of Period	69	899
Payable to collaboration partner, Additions	11	52
Payable to collaboration partner, Deductions	(77)	(919)
Payable to collaboration partner, Balance at End of Period	$ 3	32
Deferred revenue, Balance at Beginning of Period		1,601
Deferred revenue, Additions		25,757
Deferred revenue, Deductions		$ (27,358)

Fair Value Measurements (Details) - Recurring - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets	$ 318,261	$ 232,502
Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets	70,470	54,292
Certificates of deposit
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets	4,799
Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets	132,226	110,227
Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets	1,980	10,741
U.S. Treasury and agency securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets	108,786	57,242
Level 1
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets	70,470	54,292
Level 1 \| Money market funds
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets	70,470	54,292
Level 2
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets	247,791	178,210
Level 2 \| Certificates of deposit
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets	4,799
Level 2 \| Commercial paper
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets	132,226	110,227
Level 2 \| Corporate debt securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets	1,980	10,741
Level 2 \| U.S. Treasury and agency securities
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]
Total financial assets	$ 108,786	$ 57,242

Cash Equivalents and Marketable Securities - Cash Equivalents and Marketable Securities (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Cash Equivalents and Marketable Securities
Total cash equivalents and marketable securities, Amortized Cost	$ 318,319	$ 232,556
Total cash equivalents and marketable securities, Gross Unrealized Gains	10	27
Total cash equivalents and marketable securities, Gross Unrealized Losses	(68)	(81)
Total cash equivalents and marketable securities, Fair Value	318,261	232,502
Corporate debt securities
Cash Equivalents and Marketable Securities
Total cash equivalents and marketable securities, Amortized Cost	1,982	10,756
Total cash equivalents and marketable securities, Gross Unrealized Losses	(2)	(15)
Total cash equivalents and marketable securities, Fair Value	1,980	10,741
U.S. Treasury and agency securities
Cash Equivalents and Marketable Securities
Total cash equivalents and marketable securities, Amortized Cost	108,794	57,251
Total cash equivalents and marketable securities, Gross Unrealized Gains	9	27
Total cash equivalents and marketable securities, Gross Unrealized Losses	(17)	(36)
Total cash equivalents and marketable securities, Fair Value	108,786	57,242
Money market funds
Cash Equivalents and Marketable Securities
Total cash equivalents and marketable securities, Amortized Cost	70,470	54,292
Total cash equivalents and marketable securities, Fair Value	70,470	54,292
Commercial paper
Cash Equivalents and Marketable Securities
Total cash equivalents and marketable securities, Amortized Cost	132,275	110,257
Total cash equivalents and marketable securities, Gross Unrealized Losses	(49)	(30)
Total cash equivalents and marketable securities, Fair Value	132,226	$ 110,227
Certificates of deposit
Cash Equivalents and Marketable Securities
Total cash equivalents and marketable securities, Amortized Cost	4,798
Total cash equivalents and marketable securities, Gross Unrealized Gains	1
Total cash equivalents and marketable securities, Fair Value	$ 4,799

Cash Equivalents and Marketable Securities - Classification of Cash Equivalents and Marketable Securities (Details) - USD ($)	9 Months Ended	12 Months Ended
	Sep. 30, 2023	Dec. 31, 2022
Classified as:
Cash equivalents	$ 226,052,000	$ 120,891,000
Marketable securities - current	90,224,000	111,611,000
Marketable securities - noncurrent	1,985,000	0
Total cash equivalents and marketable securities	$ 318,261,000	$ 232,502,000
Contractual maturities
Maximum period of current contractual maturities	1 year	1 year
Minimum period of noncurrent contractual maturities	1 year	1 year
Maximum period of Noncurrent contractual maturities	2 years	2 years
Realized Gain (loss)	$ 0	$ 0
Credit-related losses to be recognized	$ 0

Balance Sheet Components - Prepaid Expenses and Other Current Assets (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Prepaid expenses and other current assets
Prepaid insurance	$ 1,871	$ 1,417
Prepaid clinical and research related expenses	578	2,746
Prepaid licenses	410	489
Other prepaid expenses	1,206	1,018
Other receivable	65	42
Prepaid expenses and other current assets	$ 4,130	$ 5,712

Balance Sheet Components - Property and Equipment, Net (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Property and Equipment
Total property and equipment	$ 7,367	$ 6,819
Accumulated depreciation	(5,946)	(5,254)
Property and equipment, net	1,421	1,565
Laboratory equipment
Property and Equipment
Total property and equipment	5,281	4,817
Furniture and computer equipment
Property and Equipment
Total property and equipment	1,123	1,089
Leasehold improvements
Property and Equipment
Total property and equipment	$ 963	$ 913

Balance Sheet Components - Accrued Expenses and Other Payables (Details) - USD ($) $ in Thousands	Sep. 30, 2023	Dec. 31, 2022
Accrued Expenses and Other Payables
Accrued clinical and research related expenses	$ 19,666	$ 19,109
Accrued employee related expenses	4,528	4,967
Accrued professional service fees	471	464
Other	144	415
Total accrued expenses and other payables	$ 24,809	$ 24,955

Stockholders' Equity (Details) - USD ($) $ / shares in Units, $ in Thousands		1 Months Ended						3 Months Ended				9 Months Ended		12 Months Ended
	Aug. 08, 2018	Aug. 31, 2023	Apr. 30, 2023	Aug. 31, 2022	Jan. 31, 2022	Nov. 30, 2019	Aug. 31, 2018	Sep. 30, 2023	Jun. 30, 2023	Mar. 31, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022	Dec. 31, 2022
Stock transactions
Common stock sold, price per share			$ 20.00
Warrants issued to purchase common stock, number of shares		2,705,252
Exercise Price (per share)		$ 0.001						$ 0				$ 0
Common stock issued (in shares)			5,000,000
Gross proceeds form exercise of warrants								$ 33,813				$ 33,813
Proceeds from exercise of Warrants in exchange for issuance of Pre-funded Warrants		$ 34,400										33,813
Minimum percentage of common stock held by investors for not exercise of warrants		9.99%
Number of shares issued upon exercise of warrants		44,748
Proceeds from public offering of common stock, net of issuance costs			$ 107,800									$ 107,790
2019 Sales Agreement
Stock transactions
Common stock issued (in shares)					422,367
Maximum aggregate offering price						$ 75,000
Proceeds from public offering of common stock, net of issuance costs					$ 14,600
2022 Sales Agreement
Stock transactions
Common stock issued (in shares)								0	0	1,749,199				0
Maximum aggregate offering price				$ 100,000
Aggregate net proceeds										$ 24,300
Over-Allotment Option
Stock transactions
Common stock sold, price per share			$ 20.00
Common stock issued (in shares)			750,000
Common Stock
Stock transactions
Number of shares issued upon exercise of warrants								44,748			399,997	44,748	399,997
Investors \| Private Placement
Stock transactions
Aggregate shares of common stock sold							2,750,000
Common stock sold, price per share							$ 8.00
Net proceeds from sale of common stock							$ 21,700
Warrants issued to purchase common stock, number of shares	2,750,000
Warrants exercisable date	Aug. 08, 2023
$10.00 per share \| Investors \| Private Placement
Stock transactions
Warrants to purchase common stock (in shares)	1,375,000
Exercise Price (per share)	$ 10.00
$15.00 per share \| Investors \| Private Placement
Stock transactions
Warrants to purchase common stock (in shares)	1,375,000
Exercise Price (per share)	$ 15.00

Net Loss per Share - Computation (Details) - USD ($) $ / shares in Units, $ in Thousands	3 Months Ended		9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022	Sep. 30, 2023	Sep. 30, 2022
Numerator:
Net loss	$ (34,105)	$ (31,232)	$ (106,290)	$ (93,199)
Denominator:
Weighted-average shares used to compute net loss per common share, Basic	59,182,899	49,107,639	55,542,543	48,971,329
Weighted-average shares used to compute net loss per common share, Diluted	59,182,899	49,107,639	55,542,543	48,971,329
Net loss per share, basic	$ (0.58)	$ (0.64)	$ (1.91)	$ (1.90)
Net loss per share, diluted	$ (0.58)	$ (0.64)	$ (1.91)	$ (1.90)

Net Loss per Share - Antidilutive Securities (Details) - shares	9 Months Ended
	Sep. 30, 2023	Sep. 30, 2022
Potentially dilutive securities have been excluded from diluted net loss per share calculations
Anti-dilutive securities (in shares)	8,856,851	10,165,289
Options to purchase common stock
Potentially dilutive securities have been excluded from diluted net loss per share calculations
Anti-dilutive securities (in shares)	8,030,007	6,441,415
Common stock warrants
Potentially dilutive securities have been excluded from diluted net loss per share calculations
Anti-dilutive securities (in shares)		2,750,000
Restricted stock units
Potentially dilutive securities have been excluded from diluted net loss per share calculations
Anti-dilutive securities (in shares)	708,872	694,414
Performance stock units
Potentially dilutive securities have been excluded from diluted net loss per share calculations
Anti-dilutive securities (in shares)	75,500	199,500
ESPP shares
Potentially dilutive securities have been excluded from diluted net loss per share calculations
Anti-dilutive securities (in shares)	42,472	79,960

Subsequent Event (Details) - USD ($) $ in Millions		3 Months Ended	9 Months Ended
Subsequent Event (Details) - USD ($) $ in Millions	Nov. 01, 2023	Sep. 30, 2022	Sep. 30, 2022
Subsequent Event [Line Items]
Revenue recognized		$ 0.0	$ 0.9
License and Collaboration Agreement \| Subsequent Event [Member]
Subsequent Event [Line Items]
Revenue recognized	$ 50.0