UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
☒
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2024
or
☐
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
(510) 474-0170
(Address of registrant’s
principal executive offices, including zip code)
(Registrant’s telephone number,
including area code)
Securities registered pursuant to Section 12(b) of the Act:
Title of each class
Trading Symbol
Name of each exchange on which registered
Common Stock, $0.00001 par value
PTGX
The Nasdaq Stock Market LLC
Securities registered pursuant to Section 12(g) of the Act:
None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. Yes ☒ No ☐
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act. Yes ☐ No ☒
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
☐
Non-Accelerated Filer
☐
Smaller Reporting Company
☐
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 has filed a report on and attestation to its management’s assessment of the effectiveness of its internal control over
financial reporting under Section 404(b) of the Sarbanes-Oxley Act (15 U.S.C. 7262(b)) by the registered public accounting firm that prepared or issued its audit report. ☒
If securities are registered pursuant to Section 12(b) of the Act, indicate by check mark whether the financial statements of the registrant included in the filing reflect
the correction of an error to previously issued financial statements. ☐
Indicate by check mark whether any of those error corrections are restatements that required a recovery analysis of incentive-based compensation received by any of
the registrant’s executive officers during the relevant recovery period pursuant to §240.10D-1(b). ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act of 1934). Yes ☐ No ☒
The aggregate market value of the voting and non-voting common equity held by non-affiliates of the registrant was approximately $2.0 billion as of June 28, 2024,
based upon the closing sale price on The Nasdaq Stock Market LLC reported on June 28, 2024. Excludes an aggregate of 630,843 shares of the registrant’s common stock
held by officers, directors and affiliated stockholders. For purposes of determining whether a stockholder was an affiliate of the registrant at June 28, 2024, the registrant
assumed that a stockholder was an affiliate of the registrant if such stockholder (i) beneficially owned 10% or more of the registrant’s common stock, as determined based
on public filings and/or (ii) was an executive officer or director or was affiliated with an executive officer or director of the registrant. Exclusion of such shares should not be
construed to indicate that any such person possesses the power, direct or indirect, to direct or cause the direction of the management or policies of the registrant or that such
person is controlled by or under common control with the registrant.
There were 61,384,289 shares of registrant’s Common Stock, par value $0.00001 per share, outstanding as of February 19, 2025.
DOCUMENTS INCORPORATED BY REFERENCE:
Portions of the registrant’s definitive Proxy Statement for the registrant’s 2025 Annual Meeting of Stockholders are incorporated by reference into Part III of this
report. Such proxy statement will be filed with the Securities and Exchange Commission within 120 days after the end of the registrant’s fiscal year ended December 31,
2024.
Auditor Firm ID:
42
Auditor Name:
Ernst & Young LLP
Auditor Location:
San Mateo, California, USA
PROTAGONIST THERAPEUTICS, INC.
2024 FORM 10-K ANNUAL REPORT
TABLE OF CONTENTS
Page
Item 1.
Business . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4
Item 1A.
Risk Factors . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
35
Item 1B.
Unresolved Staff Comments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
58
Item 1C.
Cybersecurity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
58
Item 2.
Properties . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59
Item 3.
Legal Proceedings . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59
Item 4.
Mine Safety Disclosures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
59
PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer
Purchases of Equity Securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
60
Item 6.
Reserved . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
62
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations . . . .
62
Item 7A.
Quantitative and Qualitative Disclosures about Market Risk . . . . . . . . . . . . . . . . . . . . . . . . . . . .
76
Item 8.
Financial Statements and Supplementary Data . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
77
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure . . . .
112
Item 9A.
Controls and Procedures . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
112
Item 9B.
Other Information . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
114
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections . . . . . . . . . . . . . . . . . . . . .
114
PART III
Item 10.
Directors, Executive Officers, and Corporate Governance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
114
Item 11.
Executive Compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
114
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related
Stockholder Matters . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
114
Item 13.
Certain Relationships and Related Transactions, and Director Independence . . . . . . . . . . . . . . .
114
Item 14.
Principal Accountant Fees and Services . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
115
PART IV
Item 15.
Exhibits, Financial Statement Schedules . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
115
Item 16.
Form 10-K Summary . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
120
SIGNATURES . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
121
(This page has been left blank intentionally.)
1
PART I
This Annual Report on Form 10-K contains certain forward-looking statements within the meaning of Section 27A
of the Securities Act of 1933, as amended (the “Securities Act”), and Section 21E of the Securities Exchange Act of
1934, as amended (the “Exchange Act”). All statements other than statements of historical fact, including statements
concerning our plans, objectives, goals, strategies, future events, future revenues or performance, financing needs,
expectations, plans or intentions relating to clinical development, product candidates, the regulatory approval process,
products and markets, and business trends and other information referred to under the sections entitled “Risk Factors”
and “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” are forward-looking
statements. These statements are subject to substantial known and unknown risks, uncertainties and other factors that
may cause our actual results, outcomes, performance or achievements, or the timing of such results, outcomes,
performance or achievements, to be materially different from any results, outcomes, 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,” “assumes,” “believes,” “commitments,” “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, including, among other things, the potential for our programs; the timing, initiation, progress and expected
results of our clinical trials and research and development programs, including enrollment, data, costs and regulatory
submissions; our cash runway; our ability to advance product candidates into, and successfully complete, non-clinical
studies and clinical trials; the potential for eventual regulatory approval and commercialization of our product
candidates; the commercialization of our product candidates, if approved; our ability and the potential to successfully
manufacture and supply our product candidates for clinical trials and for commercial use, if approved; the pricing,
coverage, and reimbursement of our product candidates, if approved; our potential receipt of milestone payments and
royalties under our collaboration agreements; future operating results; our ability to generate sales, income or cash
flow; our estimates regarding expenses, capital requirements, and needs for additional financing and our ability to
obtain additional capital; our ability to retain the continued service of our key executives and to identify, hire, and retain
additional qualified professionals, the impact of any future outbreaks of disease, epidemics and pandemics; ongoing
military conflicts, including between Ukraine and Russia and in the Middle East; rising tensions between China and
Taiwan; developments relating to our competitors and our industry, including competing product candidates and
therapies; inflationary pressure and the availability of credit. 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 I, Item 1A, of this Annual Report on Form 10-K. These statements are based on information available
to us as of the date of this Annual 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 Annual 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. We caution investors that our
business and financial performance are subject to substantial risks and uncertainties. “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.
2
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 and uncertainties that we face. Additional discussion of the risks and
uncertainties summarized in this risk factor summary, and other risks and uncertainties 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
Annual Report on Form 10-K and our other filings with the SEC, before making an investment decision regarding our
common stock.
•
We have no approved products and no historical commercial revenue, which makes it difficult to assess our
future prospects and financial results.
•
We are heavily dependent on the success of our product candidates in clinical development.
•
Clinical development is a lengthy and expensive process with an uncertain outcome, and failure can occur
at any stage of clinical development.
•
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, to suspend or cease altogether further development of our product
candidates.
•
We have incurred a cumulative net loss since our inception and anticipate that we may incur significant
losses in the future.
•
We have never generated any revenue from product sales and may never be profitable.
•
Unstable market and macroeconomic conditions including elevated and sustained inflation and changes in
trade policies, including tariffs or other trade restrictions or the threat of such actions, may have serious
adverse consequences on our business, financial condition and stock price.
•
We may require additional funding.
•
Raising additional capital may cause dilution to our existing stockholders.
•
We rely on J&J Innovative Medicines (“JNJ”) to continue the development of product candidates subject to
our license and collaboration with JNJ, and to successfully commercialize any resulting products, and we
rely on Takeda Pharmaceuticals USA, Inc. (“Takeda”) to successfully commercialize any products
resulting from our collaboration agreement with Takeda.
•
Our existing or future collaborations with third parties may not be successful.
•
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.
•
We rely on third-party contract manufacturers to manufacture our drug substance and clinical drug product.
•
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.
3
•
If our partners do not satisfy their obligations under our agreements with them, or if they terminate our
partnerships with them, we may not be able to develop or successfully commercialize our partnered
product candidates successfully.
•
We face significant competition from other biotechnology and pharmaceutical companies.
•
We may face risks to our business arising from outbreaks of disease, epidemics and pandemics, including
risks to our ongoing and planned clinical trials and pre-clinical and discovery research.
•
Unstable market and economic conditions, including elevated and sustained inflation, may have serious
adverse consequences on our business, financial condition and stock price.
•
Our success depends on our ability to attract, retain and motivate qualified executives and other personnel.
•
We may experience difficulties in managing the growth of our organization.
•
We are subject to risks associated with information technology systems or breaches of data security.
•
Any misconduct by our employees, independent contractors, principal investigators, consultants and
vendors could have a material adverse effect on our business.
•
Our headquarters is located near known earthquake fault zones.
•
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 may be involved in lawsuits to protect or enforce our intellectual property, which could be expensive,
time consuming and ultimately unsuccessful.
•
Patents covering our product candidates could be found invalid or unenforceable.
•
Third-party claims of intellectual property infringement may prevent or delay our drug discovery and
development efforts.
•
Our stock price has been and will likely continue to be volatile and may decline, regardless of our operating
performance.
4
Item 1.
Business
OVERVIEW
We are a discovery through late-stage development biopharmaceutical company focused on peptide therapeutics.
Our clinical programs fall into two broad categories of diseases: (i) hematology and blood disorders, and
(ii) inflammatory and immunomodulatory (“I&I”) diseases. Two novel peptides derived from our proprietary discovery
technology platform, rusfertide and icotrokinra (formerly known as JNJ-2113), are currently in advanced Phase 3 clinical
development, with New Drug Application (“NDA”) submissions to the U.S. Food and Drug Administration (“FDA”)
potentially in 2025.
Rusfertide, an injectable mimetic of the natural hormone hepcidin, is currently in Phase 3 development for treatment
of the rare blood disorder polycythemia vera (“PV”). Rusfertide is being co-developed and will be co-commercialized
with Takeda Pharmaceuticals, Inc. (“Takeda”) and the Company remains primarily responsible for development through
NDA filing. Icotrokinra is a first-in-class investigational targeted oral peptide that selectively blocks the Interleukin-23
receptor (“IL-23R”) and is licensed to J&J Innovative Medicines (“JNJ”), formerly Janssen Biotech, Inc. Following
icotrokinra’s joint discovery by us and JNJ scientists pursuant to our IL-23R collaboration, we were primarily
responsible for the development of icotrokinra through Phase 1, with JNJ assuming responsibility for development in
Phase 2 and beyond.
We also have a number of pre-clinical stage oral drug discovery programs to address clinically and commercially
validated targets, including IL-17 oral peptide antagonist PN-881, an oral metabolic/obesity peptide program, and an oral
hepcidin mimetic/ferroportin blocker program.
2024 Key Highlights
Worldwide License and Collaboration Agreement for Rusfertide with Takeda
•
On January 31, 2024, we and Takeda announced a worldwide license and collaboration agreement for
rusfertide. We received an upfront cash payment of $300.0 million in April 2024, and we are eligible to
receive up to $330.0 million in development, regulatory, and sales milestones, for a potential deal value of
up to $630.0 million, as well as an equal share of profits and losses in the U.S. and royalties on net sales
outside the U.S.
•
Under the terms of the agreement, we have the right to opt-out of the 50:50 profit share. In that event, we
would be eligible to receive additional cash payments of up to $400.0 million and enhanced milestones of
up to $975.0 million, as well as royalties on worldwide net sales. Takeda would maintain full ex-U.S. rights
under either scenario.
Two articles published in the New England Journal of Medicine (“NEJM”) in February 2024
•
On February 7, 2024, the icotrokinra Phase 2b FRONTIER 1 trial results in adults living with moderate-to-
severe plaque psoriasis were published in the NEJM.
•
On February 21, 2024, the complete Phase 2 REVIVE trial results for rusfertide, including efficacy and
safety data, were published in the NEJM.
Addition to S&P SmallCap 600 Index
We joined the S&P SmallCap 600 Index on July 3, 2024.
5
Positive Phase 3 topline results from Phase 3 ICONIC studies of icotrokinra in plaque psoriasis
•
On November 18, 2024, we announced that in the ICONIC-LEAD study, once-daily icotrokinra showed
significant skin clearance versus placebo in adults and adolescents with moderate to severe plaque
psoriasis. At week 16, nearly two-thirds (64.7%) of patients treated with icotrokinra achieved Investigator’s
Global Assessment (“IGA”) scores of 0 or 1 (clear or almost clear skin), and 49.6% achieved PASI 90
(90% improvement in skin lesions as measured by the Psoriasis Area and Severity Index (“PASI”)),
compared to 8.3% and 4.4% on placebo, respectively.
•
Further increases in response rates continued to be observed at week 24, with 74.1% of patients treated
with icotrokinra achieving IGA scores of 0 or 1, and 64.9% achieving PASI 90. Safety data was found to
be consistent with the Phase 2 FRONTIER 1 and 2 studies. A similar proportion of patients experienced
adverse events between icotrokinra and placebo, with 49.3% and 49.1% of participants, respectively,
experiencing a treatment-emergent adverse event (“TEAE”) at week 16.
•
In addition, positive topline results from the Phase 3 ICONIC-TOTAL study showed that once-daily
icotrokinra met the primary endpoint of IGA of 0 or 1 at week 16 compared to placebo.
Nomination of PN-881, a potential best-in-class oral peptide IL-17 antagonist development candidate; additional
discovery programs announced
•
On November 21, 2024, we announced the nomination of PN-881 following extensive preclinical studies,
including oral stability, potency, tissue distribution, and pharmacokinetics measurements, and evaluation in
immunologic pharmacodynamics and preclinical efficacy models. PN-881 showed in vitro blockade of
IL-17 AA homodimer, FF homodimer and AF heterodimer. It showed approximately 100-fold greater
potency than secukinumab, and similar potency to the most potent approved antibody drugs and nanobody
therapeutics currently in development.
•
We expect to nominate an oral development candidate in the hepcidin mechanism-based hematology
program in the fourth quarter of 2025, and an oral peptide-based development candidate in the
metabolic/obesity program in the second quarter of 2025.
Achievement of an amended $165.0 million milestone
•
Under the terms of the icotrokinra license and collaboration agreement with J&J, as amended in
November 2024, we earned $165.0 million in milestone payments during the fourth quarter of 2024.
•
The $165.0 million payment was received in January 2025, and we remain eligible for up to $630.0 million
in future development and sales milestone payments, and tiered royalties of 6-10% on worldwide net sales.
The 10% royalty tier applies to net worldwide sales of $4 billion or more.
Significantly enhanced cash resources
We ended fiscal 2024 with cash, cash equivalents and marketable securities of approximately $559.2 million, a
significant increase from cash, cash equivalents and marketable securities of approximately $341.6 million as of
December 31, 2023.
6
Figure 1: Our Product Pipeline
Rusfertide
Rusfertide is currently in Phase 3 development for the treatment of PV. VERIFY (ClinicalTrials.gov identifier
NCT05210790) is a global double-blind, placebo-controlled Phase 3 clinical trial of rusfertide in PV for approximately
250 patients. The trial evaluates the efficacy, symptom burden and safety of once-weekly, subcutaneously self-
administered rusfertide in patients with uncontrolled hematocrit who are phlebotomy dependent despite standard of care
treatment. The trial enrolled patients across North and South America, Europe, Asia and Australia. We expect to
announce top-line data for the trial’s 32-week primary efficacy endpoint in March 2025, potentially leading to an NDA
filing in the fourth quarter of 2025.
Our rusfertide Phase 2 clinical trials include the following:
•
REVIVE (NCT04057040) – A Phase 2 proof of concept (“POC”) 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 is continuing in an ongoing open-label extension (“OLE”);
•
THRIVE (NCT06033586) – A Phase 2 long-term OLE for REVIVE patients on years three through five of
treatment; and
•
PACIFIC (NCT04767802) – 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.
Final results from the REVIVE trial presented at the American Society of Hematology (“ASH”) 2024 Annual
Meeting in December 2024 showed that 54% of patients with PV experienced more than 2.5 years of durable hematocrit
control (<45%), decreased phlebotomy use, long-term tolerability and improvements in patient-reported outcomes.
In January 2024, we entered into a worldwide license and collaboration agreement for rusfertide with Takeda (the
“Takeda Collaboration Agreement”). We are primarily responsible for the development of rusfertide through a potential
7
NDA filing. Under the terms of the agreement, we received a one-time, non-refundable upfront payment of $300.0
million in April 2024, and we are eligible to receive additional worldwide development, regulatory and commercial
milestone payments for rusfertide of up to $330.0 million, inclusive of the following potential upcoming milestones:
•
$25.0 million upon successful achievement of the primary endpoint in the Phase 3 VERIFY trial for
rusfertide in PV; and
•
$50.0 million upon FDA approval of an NDA for rusfertide in PV (or $75.0 million if we exercise our full
right to opt-out of the 50:50 U.S. profit and loss sharing arrangement).
We are also eligible to receive tiered royalties from 10% to 17% on ex-U.S. net sales of rusfertide and other
specified second-generation injectable hepcidin memetic compounds (the “Licensed Products”). We and Takeda will
also share equally in profits and losses (50% to us and 50% to Takeda) of the Licensed Products in the United States, if
approved. See Note 3 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K
for further details related to the agreement, including our right to opt-out of the 50:50 U.S. profit and loss sharing
arrangement.
Icotrokinra
Our IL-23R antagonist compound icotrokinra, licensed to J&J, is an orally delivered 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 and systemic compartments as needed. We believe that,
compared to antibody drugs, icotrokinra 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.
JNJ has initiated the following icotrokinra trials:
•
ICONIC-LEAD (NCT06095115) – A 684-patient randomized, controlled Phase 3 trial to evaluate the
safety and efficacy of icotrokinra compared with placebo in participants with moderate-to-severe plaque
psoriasis, with PASI-90 and IGA scores of 0 (clear) or 1 (almost clear) as co-primary endpoints;
•
ICONIC-TOTAL (NCT06095102) – A 311-patient randomized, controlled Phase 3 trial to evaluate the
efficacy and safety of icotrokinra 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 scores of 0 or 1 as the primary endpoint;
•
ICONIC-ADVANCE 1 (NCT06143878) – A 774-patient randomized, controlled Phase 3 trial to evaluate
the effectiveness of icotrokinra in participants with moderate-to-severe plaque psoriasis compared to
placebo and Sotyktu® (“deucravacitinib”). The trial’s primary co-endpoints are PASI-90 and IGA scores
of 0 or 1;
•
ICONIC-ADVANCE 2 (NCT06220604) – A 731-patient Phase 3 trial similarly designed to ICONIC
ADVANCE 1 in participants with moderate-to-severe plaque psoriasis;
•
Pustular/Erythrodermic Psoriasis (NCT06295692) – A 19-patient open label Phase 3 trial to evaluate the
effectiveness of icotrokinra in participants with pustular or erythrodermic psoriasis;
•
ICONIC-PsA 2 (NCT06807424) – A 750-patient randomized, controlled Phase 3 trial to evaluate the
efficacy and safety of icotrokinra compared with placebo in biologic-experienced patients with active
psoriatic arthritis (“PsA”); and
•
ANTHEM-UC (NCT06049017) – A 252-patient randomized, controlled Phase 2b trial to evaluate the
safety and effectiveness of icotrokinra compared with placebo in participants with moderate-to-severely
active ulcerative colitis (“UC”).
In the fourth quarter of 2024, we announced positive topline results for the ICONIC-LEAD and ICONIC-TOTAL
Phase 3 trials. In the ICONIC-LEAD trial, once daily icotrokinra showed significant skin clearance versus placebo in
adults and adolescents with moderate to-severe plaque psoriasis. At week 16, nearly two-thirds (64.7%) of patients
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treated with icotrokinra achieved IGA scores of 0 or 1 and 49.6% achieved PASI-90, compared to 8.3% and 4.4% on
placebo, respectively. In addition, topline results from the Phase 3 ICONIC-TOTAL trial showed that once daily
icotrokinra met the primary endpoint of IGA scores of 0 or 1 at week 16 as compared to placebo. Comprehensive results
from both ICONIC-LEAD and ICONIC-TOTAL are expected to be presented at upcoming medical congresses and
shared with health authorities in planned submissions.
Topline results for the ANTHEM trial are expected in the first quarter of 2025. Topline results for the ICONIC-
ADVANCE 1, ICONIC-ADVANCE 2, and pustular/erythrodermic psoriasis trials are expected in the second quarter of
2025.
On July 27, 2021, we entered into an Amended and Restated License and Collaboration Agreement with JNJ, which
amended and restated the License and Collaboration Agreement, effective July 13, 2017, by and between the Company
and JNJ, as amended by the first amendment, effective May 7, 2019 (together, the “JNJ License and Collaboration
Agreement”) for the development and commercialization of icotrokinra. During the fourth quarter of 2023, we earned
a $50.0 million milestone payment in connection with the dosing of the third patient in the ICONIC-TOTAL Phase 3
clinical trial of icotrokinra in patients with moderate-to-severe psoriasis and a $10.0 million milestone payment upon the
dosing of the third patient in the ANTHEM Phase 2b trial in patients with moderately-to-severely active UC. The JNJ
License and Collaboration Agreement was further amended in November 2024 to:
•
increase the milestone payment for a Phase 3 clinical trial of any licensed product for any indication
meeting its primary endpoint by $50.0 million, from $115.0 million to $165.0 million;
•
eliminate the $35.0 million milestone payment previously due for the acceptance of an NDA filing by the
FDA for a licensed product for any indication; and
•
eliminate the $15.0 million milestone payment previously due for the dosing of the third patient in the first
Phase 3 clinical trial of a licensed product for a second indication.
We earned the $165.0 million milestone payment described above during the fourth quarter of 2024. We have
earned a total of $337.5 million in nonrefundable payments from JNJ from 2017 through December 31, 2024. We are
eligible to receive up to $630.0 million in future development and sales milestone payments, inclusive of the following
potential upcoming milestones:
•
$50.0 million milestone upon approval of an NDA for icotrokinra in any indication;
•
$25.0 million milestone upon the acceptance of an NDA filing by the FDA for icotrokinra in a second
indication; and
•
$45.0 million milestone upon the approval of an NDA for icotrokinra in a second indication.
We also remain eligible to receive upward tiering royalties on net product sales at percentages ranging from 6%
percent to 10% percent, with 10% percent applicable for net sales over $4.0 billion. See Note 3 to the consolidated
financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
PN-881
In the fourth quarter of 2024, we announced the selection of PN-881, a potential best-in-class oral peptide IL-17
antagonist, as a development candidate for the treatment of immune-mediated skin diseases. PN-881 targets three IL-17
dimers (IL-17 AA, AF and FF), which may offer potential treatment options for hidradenitis suppurativa (“HS”),
spondyloarthritis, plaque psoriasis and psoriatic arthritis (“PsA”). Investigational New Drug (“IND”), or foreign
equivalent, enabling studies are ongoing, and we expect to initiate a PN-881 Phase 1 study in the fourth quarter of 2025.
Discovery Platform
Our clinical and pre-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 while overcoming many of their limitations as therapeutic agents.
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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, (ii) I&I diseases and (iii) metabolic diseases,
including obesity.
We have a pre-clinical stage program to identify an orally administered hepcidin mimetic/ferroportin blocker, which
we believe to be complementary to the injectable rusfertide for offering the best treatment options for PV and other
potential erythropoietic and iron imbalance disorders, and we expect to nominate a development candidate in the fourth
quarter of 2025. We also have an oral peptide-based metabolic/obesity program and expect to nominate a development
candidate in the second quarter of 2025.
RUSFERTIDE: AN INJECTABLE HEPCIDIN MIMETIC
Rusfertide, an injectable hepcidin mimetic, was discovered through our peptide technology platform. Hepcidin is a
natural hormone that regulates iron metabolism. We are developing rusfertide for the treatment of PV.
Polycythemia Vera
PV is a rare myeloproliferative neoplasm that is typically associated with a Janus Kinase (“JAK”) 2 mutation. PV is
primarily characterized by the overproduction of red blood cells (“RBCs”), which contributes to an elevated risk of
cardiovascular and thrombotic events, such as heart attack and stroke. PV is also associated with a risk of disease
progression to myelofibrosis or leukemia. According to National Comprehensive Cancer Network (“NCCN”) guidelines,
age and thrombosis history determine a patient’s risk classification as either low-risk or high-risk. Regardless of risk,
treatment guidelines for PV consistently emphasize the importance of controlling the patient’s hematocrit (RBCs as a
percentage of whole blood) below 45% to reduce thrombotic risk.
Early-stage patients are typically treated with low dose aspirin and therapeutic phlebotomy. Hydroxyurea may also
be used alone or in combination with phlebotomy. At later stages, patients may receive interferons, marketed as
Besremi® or Pegasys®, or ruxolitinib, a JAK inhibitor marketed as Jakafi®. Cytoreductive therapies such as
hydroxyurea, interferons and ruxolitinib impact all cell lines and can have challenging side effect profiles associated
with their cytoreductive mechanisms. We believe there are substantial PV patient groups that could benefit from a new
non-cytoreductive therapeutic option which specifically targets RBCs. Although NCCN guidelines state that hematocrit
levels should be maintained below 45% to reduce thrombotic risk, analysis of a large medical claims database indicated
that 78% of treated PV patients did not maintain hematocrit control below 45%. These findings showed that current
therapies do not offer adequate hematocrit control, highlighting a significant unmet need in the United States alone
where patients may have an elevated risk of cardiovascular and thrombotic events.
There are approximately 155,000 diagnosed (approximately 78,000 treated) patients living in the United States, with
a similar number in Europe, representing an estimated market opportunity of approximately $1.0 billion to $2.0 billion.
Patients are typically diagnosed between the ages of 50 and 70, and median survival is approximately 14 years.
Approximately 55% of treated PV patients receive frequent phlebotomy and high doses of hydroxyurea, which can cause
undue burden to the patient. Additionally, approximately 16% of patients experience a thrombotic event while receiving
treatment(s) for PV. We believe rusfertide can potentially benefit a broad spectrum of patients across the continuum of
care, either as monotherapy or in combination with other cytoreductive therapies.
We believe that rusfertide has the potential to provide a substantial benefit to patients by offering a treatment
focused on managing hematocrit in a consistent and predictable manner, dramatically decreasing the need for
phlebotomy. Rusfertide is a non-cytoreductive mimetic of the natural hormone hepcidin, the master regulator of iron
homeostasis in the body. Since high RBC production consumes iron stores, PV can cause iron deficiency, which is often
exacerbated by phlebotomy. Rusfertide has a unique iron regulatory mechanism, which data from our Phase 2 REVIVE
trial suggests allows for persistent control of hematocrit without causing iron deficiency. Rusfertide acts by
redistributing iron away from the bone marrow, where iron is essential for RBC production, thereby limiting excess RBC
production while still providing sufficient iron levels to support other normal cellular and organ functions.
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Cancers are common in PV patients. A retrospective analysis presented at the ASH 2023 Annual Meeting in
December 2023 on the incidence of cancers in PV patients not treated with rusfertide demonstrated the heightened
underlying cancer risk in this population, particularly among those treated with hydroxyurea. Additionally, the majority
of patients with prior TEAEs, who are at highest risk of developing a TEAE, did not experience recurrent TEAEs while
on rusfertide. The mechanisms contributing to the increased risk of cancers in PV patients are not well understood.
However, the subset of PV patients treated with hydroxyurea in this study of real-world claims data had nearly twice the
rate of cancers compared to phlebotomy-only treated patients.
Clinical Development of Rusfertide in PV
In the fourth quarter of 2019, we initiated REVIVE, a Phase 2 trial of rusfertide in PV designed to evaluate safety
and preliminary efficacy in patients requiring phlebotomy (“PHL”). The REVIVE trial was expected to enroll
approximately 60 patients and consisted of a 16-week open-label dose finding stage every 4 weeks from 10 mg to 80 mg
and a 12-week maintenance period at doses which generate desired hematocrit levels, followed by a 12-week
randomized and blinded withdrawal stage. The endpoints of this clinical POC trial include measurement of blood
parameters (hematocrit and hemoglobin levels), reductions or delay in phlebotomy requirements, and improvements in
quality-of-life symptoms. We initiated THRIVE, a Phase 2 long-term extension trial, to monitor long-term safety and
benefits of rusfertide for REVIVE patients on years three through five of treatment.
Figure 2. REVIVE and THRIVE: Rusfertide Phase 2 PV Trial Design
Preliminary results showed that the vast majority of patients treated with rusfertide in the REVIVE clinical trial
were able to eliminate therapeutic phlebotomies and maintain a target hematocrit level of less than 45 percent. Treatment
with rusfertide was also shown to reverse iron deficiency, an important side effect of regular therapeutic phlebotomies as
a treatment for PV. Preliminary results indicated that rusfertide therapy resulted in rapid, sustained and durable
hematocrit control without clinically meaningful changes in white blood cell and platelet counts. Rusfertide
demonstrated similar efficacy in all categories of patients, independent of the PV patient risk category or concurrent
therapy with hydroxyurea, interferon or ruxolitinib.
In March 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 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 trial, 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
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of the REVIVE trial were responders compared with placebo (69.2% versus 18.5%, p=0.0003). A trial 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,
92.3% of subjects on rusfertide (24 out of 26) were not phlebotomized.
In addition, in subjects with moderate or severe Myeloproliferative Neoplasm-Symptom Assessment Form (“MPN-
SAF”) symptom scores at baseline, the change from baseline was statistically significant in fatigue, problems with
concentration, inactivity and itching during the 28-week open label Part 1 of the trial. Meaningful comparison of
symptoms assessments in Part 2 are not possible since a majority of subjects randomized to placebo discontinued prior to
the 12-week assessment of MPN-SAF symptoms.
Rusfertide continued to be generally well tolerated in the REVIVE trial, with localized ISRs comprising the
majority of reported adverse events. No new safety signals were observed in safety data disclosed in connection with the
Part 2 efficacy results, relative to the safety data from the REVIVE trial presented at the December 2022 ASH Annual
Meeting, which indicated that 84% of TEAEs were Grade 2 or below. 16% of patients experienced Grade 3 TEAEs and
there were no Grade 4 TEAEs.
In December 2023, we presented two-year follow up data from patients in the Phase 2 REVIVE trial who continued
into the OLE at the ASH 2023 Annual Meeting. The Phase 2 trial consisted of three parts including 70 patients in the
dose-finding Part 1 (28 weeks), 59 patients in the placebo-controlled, randomized withdrawal Part 2 (13 weeks), and 58
patients in the OLE (52 weeks). At the end of Part 2, 69% (18/26) of rusfertide patients achieved hematocrit control and
remained phlebotomy free at 12 weeks, compared to only 19% (5 out of 27) on placebo (p=0.0003). Among the 58
patients that continued into the OLE, as of October 17, 2023 (data cut-off date for the ASH presentation), 57 had been
treated for over one year and 37 had been treated for over two years. The median follow-up was 2.1 years and data were
provided out to 2.5 years in 21 patients.
Results showed that rusfertide, when used in patients previously treated with phlebotomy with or without
cytoreductive therapy through two years, resulted in durable hematocrit control, decreased phlebotomy use, long-term
tolerability, and no new safety signals in patients with PV. An analysis of the PACIFIC Phase 2 trial was also presented
which showed that rusfertide improved markers of iron deficiency in patients with PV. In addition, data was presented
regarding the prevalence of thromboembolic events and secondary cancers in PV patients not treated with rusfertide.
In February 2024, the full Phase 2 REVIVE trial results, including efficacy and safety data, were published in the
NEJM. Updated long-term results from the REVIVE trial presented at the European Hematology Association Congress
in June 2024 continued to show a durable positive effect on PV symptomology and other benefits, including iron
deficiency as well as an encouraging safety profile.
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Figure 3. REVIVE: Clinical Efficacy of Rusfertide in REVIVE Trial
Data as of October 18, 2024
In November 2024, final data from the REVIVE trial was presented at the ASH 2024 Annual Meeting (Figure 3).
As of October 18, 2024 (the data cut-off date for presentation at ASH), 50 (71%), 38 (54%), and 17 (24%) patients
received rusfertide for ≥2, ≥2.5, or ≥3 years, respectively. Of the 58 patients who entered the REVIVE Part 3 OLE, the
median duration of therapy was 131.4 weeks (2.5 years). As of October 18, 2024, 46, or over 80%, of patients have
rolled over to the THRIVE trial and are eligible to receive up to two additional years of rusfertide treatment. Trial results
showed that rusfertide, when added to therapeutic phlebotomy with or without cytoreductive therapy, achieved long term
durable control of hematocrit below the 45% threshold for over three years.
Prior to enrollment, the estimated mean phlebotomy rate (“EPHL”) in patients who enrolled in the trial was >5 per
year. In Part 1, the EPHL was <1 per year in patients who received rusfertide (N=70). In Part 2 (randomized withdrawal
phase), the EPHL was <1 per year and approximately 6.1 per year in the rusfertide and placebo groups, respectively. For
patients who continued to Part 3 (Week 42+), the EPHL remained at <1 per year. Patients showed increased mean
corpuscular volume and continued improvement and normalization of serum ferritin levels. Platelet levels increased
following initiation of rusfertide therapy and stabilized over time and mean leukocyte counts remained stable throughout
the trial.
The MPN-SAF was used to assess mean change from baseline in the individual symptom score in patients with
moderate (score of 4-6 out of 10) or severe (score of 7-10 out of 10) symptoms at baseline. In patients who had moderate
or severe symptoms at baseline (score of ≥4 out of 10), there were significant improvements from baseline in fatigue,
early satiety, abdominal discomfort, inactivity, problems with concentration, night sweats, and itching at the end of Part
3.
Overall, 18 (26%) patients experienced serious adverse events (“SAEs”); most SAEs were unrelated and likely
associated with the underlying disease. One patient developed acute myeloid leukemia after treatment discontinuation.
After more than 150 patient-years of rusfertide exposure, malignancies were reported in 11 patients (nine patients had
skin malignancies); all of these patients had prior risk factors that may have contributed to development of these
malignancies. There was no obvious correlation between increased exposure to rusfertide and the malignancies reported.
Seven thrombotic events (six arterial and one venous) occurred in six patients who all had high-risk PV. No thrombotic
events have been reported in patients with low-risk PV as of October 18, 2024.
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These results indicate that rusfertide continued to demonstrate a positive clinical impact in the treatment of PV
patients. With more than three years of data showing strong and continued improvements in hematocrit as well as
encouraging evidence of symptoms improvement, we believe rusfertide continues to show its potential as a first-in-class
erythrocytosis-focused treatment option for patients with PV.
Figure 4. VERIFY: Rusfertide Phase 3 PV Trial Design
We initiated VERIFY, a global double-blind, placebo-controlled Phase 3 clinical trial of rusfertide in PV for
approximately 250 patients, in the first quarter of 2022 (Figure 4). We expect to announce top-line data for the trial’s
32-week primary efficacy endpoint in the first quarter of 2025, potentially leading to an NDA filing in the fourth quarter
of 2025.
We currently have the following designations for rusfertide in PV:
•
The FDA granted orphan drug designation for rusfertide for the treatment of PV in June 2020;
•
The European Medicines Agency (“EMA”) granted orphan drug designation for rusfertide for the treatment
of PV in October 2020; and
•
The FDA granted fast track designation for rusfertide for the treatment of PV in December 2020.
Rodent Carcinogenicity Studies
Rat carcinogenicity study. In the fourth quarter of 2024, we received the draft audited pathology report from our
two-year study evaluating the carcinogenicity potential of rusfertide when administered once weekly. The draft report
concluded that there were no carcinogenicity-related findings associated with rusfertide. We expect to receive the final
audited report during the first quarter of 2025 which will then be submitted to the FDA.
RasH2 mouse carcinogenicity study. In 2021, we completed a 26-week rasH2 transgenic mouse carcinogenicity
study related to rusfertide. In the rasH2 study, there were rusfertide related findings associated with benign squamous
cell papilloma and malignant squamous cell carcinoma. Our rusfertide clinical trials were placed on a brief clinical hold
from mid-September to early October 2021 following our receipt of the results of the RasH2 mouse study.
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Takeda Collaboration Agreement
In January 2024, we entered into a worldwide license and collaboration agreement for the development and
commercialization of rusfertide with Takeda. See Part II, Item 7. “Management’s Discussion and Analysis – Overview”
and Note 3 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K for
additional information.
OVERVIEW OF DISEASES DRIVEN BY IL-23 AND IL-17 PATHWAYS
IL-23 is a member of the Interleukin 12 (“IL-12”) family of cytokines with pro-inflammatory and immune
stimulatory properties. Cytokines are cell signaling proteins that are released by cells and affect the behavior of other
cells. Binding of the IL-23 ligand to the IL-23R receptor leads to an expression of pro-inflammatory cytokines involved
in the local tissue autocrine cascade that is an important pathway of many inflammatory diseases, including psoriasis,
PsA and inflammatory bowel disease (“IBD”). The injectable antibody drug Stelara® (marketed for psoriasis, PsA, UC
and CD) is a p40 antagonist antibody that inhibits both the IL-23 and IL-12 pathways. Next-generation antibody drugs,
such as Tremfya® and Skyrizi®, target the p19 subunit of the IL-23 ligand and are specific inhibitors of the IL-23
pathway, which is believed to be the critical driver of local tissue pathology. Tremfya® is approved in psoriasis, PsA and
UC and has completed successful Phase 3 clinical trials in CD. Skyrizi® is approved in psoriasis, PsA, UC and CD. The
anti-IL-23 antibody Omvoh® (mirikizumab) has been approved in UC and CD, and the anti-IL-23 antibody Ilumya®
trial (tildrakizumab) has been approved in psoriasis.
IL-23 is a pro-inflammatory cytokine with immune stimulatory properties. Binding of the IL-17 ligand to the
IL-17R receptor leads to an expression of pro-inflammatory cytokines involved in the local tissue autocrine cascade that
is an important pathway of many inflammatory diseases, including psoriasis, PsA, spondyloarthropathies, and HS). The
injectable antibody drugs Cosentyx® and Taltz® (marketed for psoriasis, PsA, ankylosing spondylitis (“AS”) and non-
radiographic axial spondyloarthropathies (“nr-axSpA”), with Cosentyx® also marketed for HS, and pediatric enthesitis-
related arthritis) are IL-17A antagonist antibodies that inhibit the IL-17 pathway. The injectable antibody drug Bimzelx®
blocks both IL-17A and IL-17F, thereby more completely blocking the IL-17 pathway by blocking its three dimeric
forms – IL-17AA, -AF, and -FF. Bimzelx® is approved in psoriasis, PsA, AS, nr-axSpA, and HS. The injectable
antibody Saliq® is an antibody that blocks the IL-17 receptor A, thereby blocking the IL-17 pathway, and is approved in
psoriasis.
Psoriasis
Psoriasis is a chronic inflammatory disease of the skin that affects 130 million people worldwide and over 8 million
in the United States, translating to 2-3% of the adult population. Psoriasis is associated with several comorbid conditions
including cardiovascular disease and obesity, and 30% of psoriasis patients develop arthritic complications. Psoriasis is
also associated with significantly decreased quality of life for patients.
Plaque psoriasis is the most common form of psoriasis, which is recognized as the most prevalent immune-mediated
inflammatory disease, involving skin and joints and associated with abnormalities of other systems. Several factors, such
as surface area covered and symptom burden, impact whether one’s psoriasis is considered mild, moderate, or severe.
Typically, 3-10% of affected body surface area is considered moderate psoriasis, and more than 10% is considered
severe psoriasis. Global market sales for psoriasis therapies in 2023 were $24.9 billion, with U.S. market sales of $18.4
billion. The global market forecast for 2033 anticipates sales of $32.0 billion, with U.S. market sales of $23.8 billion.
Identification of the IL-23/IL-17 axis as the key pathway driving psoriatic inflammation has led to the development of
more effective and safer systemic therapies that inhibit IL-17 (e.g., Taltz®, Cosentyx®, Bimzelx®, Saliq®) and IL-23
(e.g., Tremfya®, Skyrizi®, Ilumya®). These biologics have revolutionized the treatment of moderate-to-severe
psoriasis, with superior efficacy and safety compared to conventional oral therapies (e.g., methotrexate, cyclosporin),
and first-generation biologics (e.g., anti-TNFs, Stelara®). The anti-IL-17 class is ineffective in IBD, surprisingly
showing overall worsening of disease in Phase 2 trials, which is reflected in the product labels. There is still an unmet
need for new therapies. Only 25% of biologic eligible moderate-to-severe psoriasis patients are treated with a biologic.
The parenteral route of administration for these advanced biologics poses a patient level barrier to entry. Two
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oral medicines have been approved in moderate-to-severe psoriasis. Otezla® was approved in 2014. It is the least
effective of all drugs approved since 2004 but is used widely because of a perceived positive safety profile. In 2022, the
first TYK2 inhibitor, Sotyktu®, was approved. A second TYK2 inhibitor, TAK-279 is in Phase 3 trials for moderate-to-
severe plaque psoriasis. We believe there is still significant need for safe and effective oral therapies in moderate-to-
severe psoriasis.
Psoriatic Arthritis
PsA is an inflammatory disease of the peripheral and axial joints that complicates psoriasis in up to 30% of patients.
Among the over 8 million patients in the United States with psoriasis in 2024, it is estimated that approximately 1
million patients have PsA. Many patients with active PsA may have mild psoriasis and many patients with severe
psoriasis may have only mild PsA symptoms. PsA is associated with several chronic conditions. PsA may present even
before skin symptoms in 10% to 15% of patients. Cardiovascular comorbidities have a higher prevalence in PsA than
psoriasis and can impact lifespan and quality of life. Several new targeted therapies have been approved for use in PsA,
with additional therapies in development. These advances have improved outcomes, including reductions in
musculoskeletal symptoms, skin manifestations and radiographic joint damage. Many of the same drugs approved in
psoriasis are also approved in PsA. One notable exception is that the JAK inhibitors, Xeljanz® and Rinvoq®, are
approved in PsA without the respective label in psoriasis.
Hidradenitis Suppurativa
HS is a chronic, debilitating, inflammatory follicular skin disease with recurring painful flare-ups that affected
approximately 2.9 million people in the U.S. and 6.3 million worldwide in 2024. HS can progress and worsen over time,
with tunnels forming under the skin between abscesses, which can lead to scarring. HS symptoms typically affect
intertriginous areas of the skin, such as the breasts, buttocks, groin, inner thighs, and under the arms. The suppuration is
often accompanied by a foul smell, and the psychosocial burden, including isolation, can be severe. HS is associated
with frequent, long-term sick leave, often having a substantial socio-economic impact. Global market sales for HS
therapies in 2024 were $1.5 billion, with U.S. market sales of $1.2 billion. The global market forecast for 2034
anticipates sales of $6.5 billion, with U.S. market sales of $5.4 billion. Treatment for HS depends on the severity of the
disease and traditionally included skin care, topical medications, antibiotics, acitretin, hormonal medications, and, in
severe cases, surgical removal of the affected skin. Several new targeted therapies have more recently been approved,
including an injectable antibody drug Humira®, which binds to tumor necrosis factor alpha (“TNFα”), as well as the
anti-IL-17 drugs Cosentyx® and Bimzelx®. Though these advances have improved outcomes, there remains significant
unmet need for new therapies.
Axial Spondyloarthritis
Axial spondyloarthritis (“axSpA”) is a systemic disease leading to arthritis affecting the spine and the sacroiliac
joint that affected approximately 2.9 million people in the U.S. and 4.7 million patients worldwide in 2024. AxSpA has a
strong genetic predisposition most commonly associated with HLA-B27. Over time, the disease may progress from nr-
axSpA, which is associated with damage that may not be visible in X-rays but may be seen on magnetic resonance
images, to AS, also known as radiographic axSpA, with damage to the sacroiliac joints and spine visible on X-rays.
Severe disease can lead to fusion of the vertebrae, a condition referred to as bamboo spine. Men are more likely to
accrue radiographic joint damage, whereas women tend to experience comparatively worse quality of life and disease
activity. The disease can occur at any age but typically begins between ages 20 and 40. AS is more common in men than
in women. However, nr-axSpA may be just as common in women as in men. It is less common among African
Americans than people of other racial backgrounds. Global market sales for axSpA therapies in 2024 were $7.5 million,
with U.S. market sales of $6.0 million. The global market forecast for 2034 anticipates sales of $10.7 million, with U.S.
market sales of $8.7 million. Therapeutic options for patients with axSpA have expanded significantly over the past two
decades. Patients who have failed non-steroidal anti-inflammatory drugs have multiple therapeutic options, including
TNFα inhibitors (Enbrel®, Humira®, Remicade®, Simponi®, Cimzia®), IL-17 (Cosentyx®, Taltz®, Bimzelx®) and
JAK inhibitors (Xeljanz®, Rinvoq®).
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Inflammatory Bowel Disease (“IBD”)
IBD is a group of chronic autoimmune and inflammatory conditions of the colon and small intestine, consisting
primarily of UC and CD. In UC, inflammation may be limited to part of the colon or extend through its entirety. UC is
primarily characterized by ulceration of the intestinal surface, accompanied by rectal bleeding and frequent, urgent
bowel movements. CD occurs anywhere along the GI tract, commonly affecting the small intestine and the proximal
large intestine. CD complications may include strictures and fistula, which penetrate all layers of the intestine. UC is
usually diagnosed earlier than CD due to bleeding symptoms. Patients with CD may initially present with abdominal
pain, fatigue and anorexia, which can be misdiagnosed. Both diseases’ peak diagnosis years are in young adulthood and
are found about equally in both males and females. Management is lifelong and affects school attendance, graduation
rates, childbearing and work productivity. IBD prevalence is increasing worldwide and is correlated with the adoption of
western diets and lifestyle, as well as genetic factors (5-20% of affected patients have a first degree relative with the
disease).
According to the Crohn’s & Colitis Foundation, IBD is diagnosed in over 0.7% of Americans, resulting in a
population of approximately 2.4 million patients in the United States. In 2023, global sales for UC therapies were
approximately $7.8 billion, and the market is expected to grow to $13.2 billion by 2030. In 2023, global sales for CD
therapies were estimated to be $15.2 billion, with anticipated growth to $18.1 billion by 2030.
For many years, tumor necrosis factor-alpha (“TNF-α”) antibody drugs were the primary treatment for moderate-to-
severe IBD. Humira® and Remicade® are injectable and infused, respectively. Approximately one third of IBD patients
do not respond to TNF-α antibody drugs and approximately another 30% to 40% become refractory within the first year
of treatment. Additionally, TNF-α antibody drugs may predispose patients to an increased risk of serious infection and
the development of anti-drug antibodies, which over time can cause loss of drug response. More recently, antibody
products focused on potentially safer mechanisms of action have been gaining market share. One such product is
Takeda’s Entyvio®, which targets the α4β7 integrin pathway. Takeda reported 2023 sales of Entyvio® of approximately
$5.2 billion. Similarly, Johnson & Johnson’s Stelara®, which targets the IL-12 and IL-23 pathways, has gained
significant traction. Johnson & Johnson global sales of Stelara® (approved for psoriasis, PsA, moderate-to-severe CD
and UC) were $10.4 billion in 2024. Three anti-IL-23 mAbs have been evaluated in IBD. Skyrizi® and Omvoh® are
approved in UC and CD, and Tremfya® is approved in UC and recently completed successful Phase 3 clinical trials in
CD. The pan-JAK inhibitor Xeljanz® is approved in UC and the more selective JAK1/3 inhibitor Rinvoq® was
approved in 2022 for UC and CD. The S1P1 modulator class of oral small molecules has also demonstrated efficacy in
IBD, with Zeposia® approved in UC (but not CD) in 2021, and etrasimod approved in UC in 2023. The S1P1 class is
associated with immunosuppression, cardiac, pulmonary and ocular toxicities.
The development of new, potent and targeted orally delivered therapies for IBD may offer safer and more effective
treatment options, alone or in combination, for moderate-to-severe IBD patients. In addition, many clinicians continue to
advocate for earlier introduction of targeted therapeutics in mild-to-moderate IBD to prevent disease progression and
irreversible gastrointestinal damage. Given that the most effective agents in IBD induce remission in no more than 30%
of patients, there has been much recent interest in combination therapies to break through this “therapeutic ceiling.” In
2022, JNJ reported results of the VEGA study, the first randomized double bind clinical trial to assess the combination
of an anti-TNF (Simponi®) with an anti-IL-23 (Tremfya®) in moderate-to-severe UC. In the Phase 2a POC trial,
investigators found 83.1% of patients in the treatment group achieved a clinical response and 36.6% of patients treated
with the combination therapy achieved clinical remission. The high rates of clinical response and remission are both
higher than the response and remission rates of patients treated with guselkumab alone (74.6%; 21.1%) and golimumab
alone (61.1%; 22.2%). Hence, we believe the IL-23 inhibition mechanism is a potentially paradigm shifting combination
strategy to improve remission rates in UC.
ICOTROKINRA: AN ORAL IL-23 RECEPTOR ANTAGONIST
JNJ License and Collaboration Agreement
We have a worldwide license and collaboration agreement with JNJ to research, develop and co-detail IL-23R
antagonist compounds for all indications, including IBD. See Part II, Item 7. “Management’s Discussion and Analysis –
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Overview” and Note 3 to the Consolidated Financial Statements included elsewhere in this Annual Report on Form 10-K
for additional information. JNJ is an experienced innovator in therapeutics targeting the IL-23 pathway. Stelara® is a
monoclonal antibody targeting IL-12 and IL-23 through their common p40 subunit is approved in psoriasis, PsA, CD
and UC. Stelara® generated $10.4 billion in sales in 2024. Tremfya® is a specific IL-23 monoclonal antibody. It is
approved in psoriasis and PsA and has completed successful Phase 3 trials in UC and CD. Tremfya® generated $3.7
billion in sales in 2024. We believe that in both psoriasis and IBD, there is an urgent need for safe and effective oral
therapies. It is notable that Stelara® lost patent exclusivity in 2023 with biosimilar competition expected.
Icotrokinra, an orally delivered IL-23R specific antagonist for the potential treatment of psoriasis, PsA and IBD
indications, was discovered through our peptide technology platform. IL-23, a member of the IL-12 family of pro-
inflammatory cytokines, is a protein that regulates inflammatory and immune function and plays a key role in the
development of IBD. By blocking IL-23R, we believe icotrokinra may improve disease symptoms while potentially
minimizing the risk of systemic side effects. During the fourth quarter of 2021, a decision was made by JNJ to advance
development of icotrokinra. For icotrokinra, JNJ is primarily responsible for the conduct of all further development, and
we were primarily responsible for the discovery, IND-enabling studies and the initial Phase 1 study.
Clinical Development of Icotrokinra
In February 2022, JNJ initiated FRONTIER 1, a 255-patient Phase 2b clinical trial of icotrokinra in moderate-to-
severe plaque psoriasis, which was completed in December 2022. FRONTIER 1 was a randomized, multicenter, double-
blind, placebo-controlled trial that evaluated three once-daily dosages and two twice-daily dosages of icotrokinra taken
orally. The primary endpoint of the trial was the proportion of patients achieving PASI-75 at 16 weeks. In July 2023, we
announced updated positive topline results from the trial, which were presented by JNJ at the World Congress of
Dermatology in Singapore. Icotrokinra achieved the trial’s primary and secondary efficacy endpoints. A statistically
significant greater proportion of patients who received icotrokinra achieved PASI-75 responses as well as PASI-90 and
PASI-100 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. Treatment was well tolerated, with no meaningful difference in frequency
of adverse events across treatment groups versus placebo.
At JNJ’s Enterprise Business Review in December 2023, JNJ highlighted icotrokinra as a potential first- and best-
in-class targeted oral IL-23 peptide antagonist with potential across multiple indications, including plaque psoriasis, PsA
and inflammatory bowel disease, with potential peak year sales projected at greater than $5.0 billion. JNJ IL-23
monoclonal antibody drugs Stelara and Tremfya generated approximately $14.1 billion in revenues in 2024.
In February 2024, the icotrokinra Phase 2b FRONTIER 1 trial results in adults living with moderate-to-severe
plaque psoriasis were published in the NEJM. In March 2024, data presented at the American Academy of Dermatology
2024 Annual Meeting showed that, in the Phase 2b FRONTIER 2 trial, icotrokinra maintained high rates of skin
clearance through 52 weeks in adults with moderate-to-severe plaque psoriasis. In August 2024, positive pre-clinical and
clinical pharmacokinetic, pharmacodynamic and safety data for icotrokinra was published in the journal, Scientific
Reports. Three Company-sponsored poster presentations and one Company-sponsored oral presentation were delivered
at the 2024 European Academy of Dermatology and Venereology Congress in September 2024.
JNJ initiated six additional icotrokinra trials in psoriasis and one in UC, as discussed above. All of the trials in the
ICONIC program use the 200 mg q.d. immediate release formulation of icotrokinra from the FRONTIER 1 trial.
In November 2024, we announced positive topline results from ICONIC-LEAD and ICONIC-TOTAL Phase 3 trials
of icotrokinra in individuals 12 years of age and older with moderate to severe plaque psoriasis. In the ICONIC-LEAD
trial, once-daily icotrokinra showed significant skin clearance versus placebo in adults and adolescents with moderate to
severe plaque psoriasis. At week 16, nearly two-thirds (64.7%) of patients treated with icotrokinra achieved IGA scores
of 0/1, and 49.6% achieved PASI 90, compared to 8.3% and 4.4% on placebo, respectively. Further increases in response
rates continued to be observed at week 24, with 74.1% of patients treated with icotrokinra achieving IGA scores of 0/1,
and 64.9% achieving PASI 90. Safety data was found to be consistent with the Phase 2 FRONTIER 1 and 2 trials. A
similar proportion of patients experienced adverse events between icotrokinra and placebo, with 49.3% and
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49.1% of participants experiencing a TEAE at week 16. In addition, positive topline results from the Phase 3 ICONIC-
TOTAL trial showed once-daily icotrokinra met the primary endpoint of IGA of 0/1 at week 16 compared to placebo.
We believe these positive Phase 3 results confirm the efficacy and safety trends that were observed with the
previous Phase 2 FRONTIER 1 and 2 studies, highlighting icotrokinra’s potential as a best-in-class oral agent providing
a combination of significant skin clearance with demonstrated tolerability in a once-daily pill for treating plaque
psoriasis. We believe these results also continue to validate our innovative peptide technology platform and its
effectiveness in creating highly differentiated new chemical entities to address unmet needs in various disease areas.
Comprehensive results from both ICONIC-LEAD and ICONIC-TOTAL are being prepared for presentation at upcoming
medical congresses and we expect these to be shared with health authorities in planned submissions.
PN-881: AN ORAL IL-17 RECEPTOR ANTAGONIST
In the fourth quarter of 2024, we announced the selection of PN-881, a potential best-in-class oral peptide IL-17
antagonist, as a development candidate for the treatment of immune-mediated skin diseases. PN-881 has been evaluated
in extensive preclinical studies, including oral stability, potency, tissue distribution, and pharmacokinetics
measurements, and evaluation in immunologic pharmacodynamics and preclinical efficacy models.
Figure 5. PN-881 Potently Inhibits IL-17A and IL-17F
PN-881 has demonstrated in vitro blockade of IL-17 AA homodimer, FF homodimer and AF heterodimer. In assays
using the HT-1080 human fibrosarcoma cell line stimulated with a combination of IL-17 and TNF-a produce IL-6,
blocking IL-17 was shown to inhibit IL-6 production. In this assay, PN-881 inhibited 50% of IL-6 production (the IC50)
at a concentration of 120 picomoles (“pM”) and showed an IC 90, or 90% inhibition, at 560 pM. This potency was
approximately 100-fold greater than the potency of secukinumab, and similar potency to the most potent approved
antibody drugs and nanobody therapeutics in development (Figure 5). In multiple preclinical studies with oral dosing,
PN-881 showed effective blockade in vivo of IL-17 in serum and skin and achieved pre-clinical proof-of-concept in a
skin inflammation rodent disease model.
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IND-enabling, or foreign equivalent, studies of PN-881 are ongoing or planned, including 7-day and 3-month
toxicology studies. Planned clinical studies include a Phase 1 single ascending dose (“SAD”) and multiple ascending
dose (“MAD”) study expected to begin in the fourth quarter of 2025. Results of the Phase 1 trial are expected to inform
the design and dosing in a subsequent dose-ranging psoriasis trial. Rapid expansion into other IL-17 mediated diseases,
including PsA, HS and axSpA, is expected to be based on results observed in psoriasis studies.
We believe an IL-17 antagonist peptide like PN-881, with best-in-class potential as an oral targeted therapy, may
offer an attractive therapeutic option for patients with broad opportunity for multiple indications in addition to psoriasis.
We expect to initiate a PN-881 first-in-human Phase 1 study in fourth quarter of 2025.
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 do not
intend to dedicate further internal resources to clinical development or contract manufacturing activities for our PN-943
clinical program.
OUR PEPTIDE TECHNOLOGY PLATFORM
Our proprietary technology platform is purposefully built to exploit the advantages of constrained peptides, which
are much smaller than antibody-based drugs and may be delivered orally but are big enough to bind and block the
difficult targets that antibodies bind and modulate. The platform has been successfully applied to a diverse set of
biological targets that has led to several pre-clinical and clinical stage peptide-based new chemical entities, including our
clinical stage product candidates, for a variety of clinical indications. Our platform is comprised of a series of tools and
methods, including a combination of molecular design, phage display, stability assays, medicinal chemistry, surrogate
biomarkers, formulations, in vitro biochemical, cell and tissue-based assays, and in vivo pharmacology and
pharmacokinetic approaches. We apply this platform to the discovery and development of constrained peptides as new
drug candidates.
The platform is used to develop potential drug candidates (agonists and antagonists): (i) using the structure of a
target, when available, (ii) de novo when no target structure exists, or (iii) from publicly disclosed peptide starting
points. In a structure-based approach, our proprietary molecular design software and structural database of several
thousand constrained peptides, termed Vectrix™, are screened to identify suitable scaffolds. The scaffolds identified
form the basis of designing and constructing the first set of phage or chemical libraries. The initial hits are identified by
either panning or screening such libraries, respectively. When structural information is unavailable for a target, hits are
identified by panning a set of 34 proprietary cluster-based phage libraries consisting of millions of constrained peptides.
Once the hits are identified, they are optimized using a set of peptide, peptide mimetic and medicinal chemistry
techniques that include the incorporation of new or manipulation of existing cyclization-constraints, as well as natural or
unnatural amino acids and chemical conjugation or acylation techniques. These techniques are applied to optimize
potency, selectivity, stability, exposure and ultimately efficacy. For rusfertide, hit discovery and optimization relied
exclusively on medicinal and computational chemistry, with no phage display, to develop potent and selective injectable
candidates with enhanced stability and exposure in blood. For injectable products, stability in blood is determined using
in vitro assay techniques to identify chemical and biological sites of degradation, which are then optimized while still
maintaining potency and selectivity. Conjugation strategies are used to optimize the exposure of the injected peptide. For
icotrokinra, phage display is tightly coupled to medicinal chemistry, structural biology and oral stability techniques to
develop potent, selective and orally delivered molecules. Oral stability is profiled in a series of in vitro and ex vivo
assays that portray the chemical and metabolic barriers a peptide will encounter as it transits the GI and systemic
compartments as needed. These metabolically labile spots in the peptides are optimized using medicinal chemistry-based
approaches to engineer oral stability while maintaining selectivity and potency. Various in vivo pharmacology tools are
then used to quantify peptide exposure in relevant GI and systemic compartments. This data can be used to optimize
required exposure over the required time frame to achieve in vivo efficacy. This is complemented by formulation
technologies to enhance GI and systemic exposure by exploiting the intrinsic stability of our oral peptides. Finally,
various biomarkers are also developed to correlate exposure with efficacy to guide candidate selection, dose selection
and provide preliminary POC of target engagement in clinical trials.
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Discovery and Pre-clinical Activities
We believe we have built a versatile, well-validated and unique discovery platform. For example, this peptide
technology platform has been used to develop product candidates for diverse target classes including G-protein-coupled
receptors, ion channels, transporters, cytokines and their receptors for a variety of therapeutic areas. In the future we may
tackle other I&I, metabolic and blood disorders and expand our technology platform to provide potential opportunities to
pursue a wider variety of diseases that may include oral, topical and systemic approaches. We also intend to progress our
platform to achieve systemic bioavailability and activity with oral peptides, macrocycles and peptidomimetics, thereby
enabling us to address systemic diseases. Examples of this approach are the discovery and development of icotrokinra,
our IL-23R antagonist in collaboration with JNJ, and PN-881, our recently announced IL-17 peptide antagonist product
candidate, as described above.
Competition
The biotechnology and pharmaceutical industries are intensely competitive and subject to rapid and significant
technological change. While we believe that our product candidates, technology, knowledge and experience provide us
with certain competitive advantages, we face competition from established and emerging pharmaceutical and
biotechnology companies, academic institutions, governmental agencies and public and private research institutions,
among others.
Rusfertide
Ruxolitinib, marketed as Jakafi®, was approved in 2014 for the treatment of adults with PV who have inadequate
response to or are intolerant to hydroxyurea. Approximately 5,300 PV patients are treated with Jakafi® each year.
Besremi®, a ropeginterferon alfa-2b product indicated for the treatment of adults with PV, was approved with a black
box warning in November 2021.
We are aware of other investigational compounds under clinical development for treatment of PV, including short
interfering RNA approaches aimed at modulating or increasing endogenous hepcidin levels.
Icotrokinra
In psoriasis and PsA, competition will come from companies with approved injectable agents in the IL-17 and
IL-12/23 pathway, including Cosentyx®, Taltz®, Siliq®, Tremfya®, and Skyrizi®. Bimekizumab (anti-IL-17A and F,
UCB) has completed a positive Phase 3 program in psoriasis. Otezla® (Amgen) was the first oral agent approved in both
psoriasis and PsA. The oral JAK inhibitors Xeljanz® (Pfizer) and Rinvoq® are approved in PsA. Several oral small
molecules that inhibit the Janus kinase TYK2 are advancing in development. The Bristol Myers Squibb (“BMS”) TYK2
inhibitor, Sotyktu®, was approved for psoriasis in 2022. Second generation allosteric TYK2 inhibitors from Nimbus
Therapeutics (recently in-licensed by Takeda) are moving into Phase 3 development, and a molecule from Ventyx
Biosciences has initiated Phase 2 development. Several small molecules that inhibit IL-17 have completed Phase 1
development.
In IBD, competition will come from companies with injectable agents in the anti-integrin class (Entyvio®, Takeda,
approved) and the anti-IL-12/23 class that may be approved in the next several years, including JNJ’s Stelara®
(approved in UC and CD), Abbvie’s risankizumab (Skyrizi®) (UC and CD Phase 3), JNJ’s guselkumab (Tremfya®)
(UC and CD); and Eli Lilly’s mirikizumab (Omvoh®) (UC and CD).
In addition, orally delivered agents with novel mechanisms of action that are approved for or in development and
may be approved for UC and/or CD prior to or shortly after the launch of our product candidates can have significant
impact in the competitive environment, including:
•
JAK inhibitors: The pan-JAK tofacitinib (Xeljanz®) is approved in UC. The next-generation selective
JAK1/3 inhibitors, including Abbvie’s upadacitinib (Rinvoq®), were approved in UC and CD in 2022.
Pfizer’s selective JAK1/TEC inhibitor ritlecitinib is in Phase 2 development for UC and CD;
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•
S1P1 receptor modulators: BMS’s ozanimod (Zeposia®) and Pfizer’s etrasimod (Velsipity®) are approved
in UC. Etrasimod is being studied in CD, though ozanimod was not found to show efficacy in CD; and
•
Eli Lilly is developing MORF-057, an oral small molecule targeting α4β7, which is progressing in Phase 2
development in UC and CD. Other oral small molecules targeting α4β7 from Gilead and Ensho
Therapeutics are in early clinical development. Many other agents are in early-stage development in IBD,
including injectable anti-TLIA antibodies by Pfizer and Merck, and Teva and Sanofi which have recently
presented positive Phase 2 results in IBD.
PN-881
In competitive areas, we believe there is a strong need for a differentiated oral approach. The injectable mAbs
Cosentyx and Taltz targeting IL-17 AA and AF are approved in psoriasis, PsA, and SpA. Cosentyx was also recently the
first IL-17 inhibitor approved in HS. Siliq, a mAb to the IL-17 receptor, is approved in psoriasis only and carries a black
box warning for suicidal ideations. Bimzelx is a mAb that targets IL-17 AA, AF and FF. It is approved in psoriasis, PsA,
HS, SS and nr-axSpA. Sonelokimab (MoonLake) is an injectable nanobody with IL-17 AA, AF and FF activity and has
demonstrated POC in Phase 2 in psoriasis, PsA, and HS. There are several oral IL-17 small molecules in clinical
development with the most advanced, DC-853 (Lilly via acquisition of DICE Therapeutics) in a Phase 2b trial in
psoriasis. JNJ and Sanofi are also developing small molecules.
Material Agreements
Takeda Collaboration Agreement
In January 2024, we entered into the Takeda Collaboration Agreement. See Part II, Item 7, “Management’s
Discussion and Analysis – Overview” and Note 3 to the Consolidated Financial Statements included elsewhere in this
Annual Report on Form 10-K for additional information.
JNJ License and Collaboration Agreement
On July 27, 2021, we entered into an Amended and Restated License and Collaboration Agreement (the “JNJ
License and Collaboration Agreement”) with JNJ, which amended and restated the License and Collaboration
Agreement, effective July 13, 2017, by and between us and JNJ (the “Original Agreement”), as amended by the first
amendment, effective May 7, 2019 (the “First Amendment”). The JNJ License and Collaboration Agreement, which
relates to the development, manufacture and commercialization of oral IL-23 receptor antagonist drug candidates and
enables JNJ to develop collaboration compounds for multiple indications, was further amended in November 2024. See
Part II, Item 7, “Management’s Discussion and Analysis – Overview” and Note 3 to the Consolidated Financial
Statements included elsewhere in this Annual Report on Form 10-K for additional information.
Research Collaboration and License Agreement with Zealand Pharma A/S
In June 2012, we entered into a Research Collaboration and License Agreement (the “Zealand Agreement”) with
Zealand Pharma A/S (“Zealand”) to identify, optimize and develop novel disulfide-rich peptides to discover a hepcidin
mimetic. We amended this agreement on February 28, 2014, at which point we assumed responsibility for the
development program. See Part II, Item 7. “Management’s Discussion and Analysis – Contractual Obligations and Other
Commitments” and Note 7 and Note 9 to the Consolidated Financial Statements included elsewhere in this Annual
Report on Form 10-K for additional information.
Intellectual Property
We strive to protect and enhance the proprietary technology, inventions, and improvements that are commercially
important to the development of our business, including seeking, maintaining, and defending patent rights, whether
developed internally or licensed from third parties. We also rely on trade secrets relating to our proprietary technology
platform and on know-how, and continuing technological innovation to develop, strengthen, and maintain our
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proprietary position in the field of peptide-based therapeutics that may be important for the development of our business.
We will also take advantage of regulatory protection afforded through data exclusivity, market exclusivity and patent
term extensions where available.
Our commercial success may depend in part on our ability to obtain and maintain patent and other proprietary
protection for commercially important technology, inventions and know-how related to our business; defend and enforce
our patents; preserve the confidentiality of our trade secrets; and operate without infringing the valid enforceable patents
and proprietary rights of third parties. Our ability to stop third parties from making, using, selling, offering to sell or
importing our products may depend on the extent to which we have rights under valid and enforceable patents or trade
secrets that cover these activities. We cannot be sure that patents will be granted with respect to any of our pending
patent applications or with respect to any patent applications filed by us in the future, nor can we be sure that any of our
existing patents or any patents that may be granted to us in the future will be commercially useful in protecting our
commercial products and methods of manufacturing the same. For more information, please see Item 1A, “Risk
Factors—Risks Related to Our Intellectual Property.”
We own or co-own 30 issued U.S. patents, over 68 granted ex-U.S. patents, and numerous U.S. and ex-U.S. patent
applications related to our clinical assets. We possess substantial know-how and trade secrets relating to the discovery,
development and commercialization of peptide based therapeutic products. Our proprietary intellectual property,
including patent and non-patent intellectual property, is generally directed to, for example, peptide-based therapeutic
compounds and compositions, methods of using these peptide-based therapeutic compounds and compositions to treat or
prevent disease, methods of manufacturing peptide-based therapeutic compounds and compositions, and other
proprietary technologies and processes related to our lead product development candidates. Specific patents and patent
applications are directed to compositions of α4β7 integrin peptides, IL-23R antagonist peptides, IL-17 antagonist
peptides and hepcidin mimetics peptides, as well as methods of synthesizing and using these peptides to treat disorders.
Applications are currently pending in the United States and other major jurisdictions, including Australia, Canada,
China, Japan, and Europe. We expect our patents and patent applications, if issued, and if the appropriate maintenance,
renewal, annuity, or other governmental fees are paid, to expire from October 2033 to December 2044 (excluding
possible patent term extensions).
Our objective is to continue to expand our portfolio of patents and patent applications in order to protect our clinical
assets and related peptide-based drug technologies.
We also license patents and patent applications directed to processes and methods related to our technology
platform. These patents have issued in the United States and other major jurisdictions, including Australia and Europe.
Some licensed patents are expired. Material aspects of our technology platform are protected by trade secrets and
confidentiality agreements.
In addition to the above, we have established expertise and development capabilities focused in the areas of pre-
clinical research and development, manufacturing and manufacturing process scale-up, quality control, quality
assurance, regulatory affairs and clinical trial design and implementation. We believe that our focus and expertise will
help us develop products based on our proprietary intellectual property.
The term of individual patents depends upon the legal term of the patents in the countries in which they are
obtained. In most countries in which we file, the patent term is 20 years from the date of filing the non-provisional
application. In the United States, a patent’s term may be lengthened by patent term adjustment, which compensates a
patentee for administrative delays by the U.S. Patent and Trademark Office in granting a patent or may be shortened if a
patent is terminally disclaimed over an earlier-filed patent.
The term of a patent that covers an FDA-approved drug may also be eligible for patent term extension, which
permits patent term restoration of a U.S. patent as compensation for the patent term lost during the FDA regulatory
review process. The Hatch-Waxman Act permits a patent term extension of up to five years beyond the expiration of the
patent. The length of the patent term extension is related to the length of time the drug is under regulatory review. A
patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product
approval and only one patent applicable to an approved drug may be extended. Moreover, a patent can only be extended
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once, and thus, if a single patent is applicable to multiple products, it can only be extended based on one product. Similar
provisions are available in Europe and other foreign jurisdictions to extend the term of a patent that covers an approved
drug. When possible, we expect to apply for patent term extensions for patents covering our product candidates and their
methods of use.
Trade Secrets
We rely on trade secrets to protect certain aspects of our technology, particularly in relation to our technology
platform. However, trade secrets can be difficult to protect. We seek to protect our proprietary technology and processes,
in part, by entering into confidentiality agreements with our employees, consultants, scientific advisors and contractors.
We also seek to preserve the integrity and confidentiality of our data and trade secrets by maintaining physical security
of our premises and physical and electronic security of our information technology systems. While we have confidence
in these individuals, organizations and systems, agreements or security measures may be breached, and we may not have
adequate remedies for any breach. In addition, our trade secrets may otherwise become known or be independently
discovered by competitors. To the extent that our consultants, contractors or collaborators use intellectual property
owned by others in their work for us, disputes may arise as to the rights in related or resulting know-how and inventions.
For more information, please see Item 1A, “Risk Factors—Risks Related to Our Intellectual Property.”
Manufacturing
We contract with third parties for the manufacturing of our product candidates for pre-clinical studies and clinical
trials and eventually for commercial supplies and intend to continue to do so in the future. We do not own or operate any
manufacturing facilities and we have no plans to build any owned clinical or commercial scale manufacturing
capabilities. We believe that the use of contract manufacturing organizations (“CMOs”) eliminates the need for us to
directly invest in manufacturing facilities, equipment and additional staff. We have established a global supply chain for
raw material, active pharmaceutical ingredients (“API”), drug product manufacturing and distribution. We work with
contract manufacturers in the United States, Europe and Asia. Although we rely on contract manufacturers, our
personnel and consultants have extensive manufacturing and quality control experience overseeing CMOs. We regularly
consider second source or back-up manufacturers for both API and drug product manufacturing. To date, our third-party
manufacturers have met the manufacturing requirements for our product candidates. We expect third-party
manufacturers to be capable of providing supplies needed for our product candidates to meet anticipated full-scale
commercial demands, and we have selected CMOs that can manufacture our product candidates for our ongoing and
planned clinical trials as well as commercial supplies. We currently engage CMOs on a “fee for services” basis for our
current development and clinical supplies.
Government Regulation
The FDA and comparable regulatory authorities in state and local jurisdictions and in other countries impose
substantial requirements upon companies involved in the clinical development, manufacture, marketing and distribution
of drugs, such as those we are developing. These agencies and other federal, state and local entities regulate, among
other things, the research and development, testing, manufacture, quality control, safety, effectiveness, labeling, storage,
record keeping, approval, advertising and promotion, distribution, post-approval monitoring and reporting, sampling and
export and import of our product candidates.
U.S. Government Regulation
In the United States, the FDA regulates drugs under the Federal Food, Drug, and Cosmetic Act and its implementing
regulations. The process of obtaining regulatory approvals and the compliance with applicable federal, state, local and
foreign statutes and regulations requires the expenditure of substantial time and financial resources. Failure to comply
with the applicable U.S. requirements at any time during the product development process, approval process or after
approval may subject an applicant to a variety of administrative or judicial sanctions, such as the FDA’s refusal to
approve pending NDAs, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters, product
recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of
government contracts, restitution, disgorgement or civil or criminal penalties.
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The process required by the FDA before a drug may be marketed in the United States generally involves the
following:
•
completion of pre-clinical laboratory tests, animal studies and formulation studies in compliance with the
FDA’s good laboratory practices (“GLP”) regulations;
•
submission to the FDA of an IND application, which must become effective before human clinical trials
may begin;
•
approval by an independent institutional review board (“IRB”) at each clinical site before each trial may be
initiated;
•
performance of adequate and well-controlled human clinical trials in accordance with good clinical practice
(“GCP”) requirements to establish the safety and efficacy of the proposed drug product for each indication;
•
submission to the FDA of an NDA (or Biologics License Application (“BLA”) for a biologic product);
•
satisfactory completion of an FDA advisory committee review, if applicable;
•
satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the
product is produced to assess compliance with current good manufacturing practices (“cGMP”)
requirements and to assure that the facilities, methods and controls are adequate to preserve the drug’s
identity, strength, quality and purity;
•
satisfactory completion of an FDA inspection of one or more clinical trial sites to assure compliance with
GCP requirements and the clinical protocol; and
•
FDA review and approval of the NDA.
Pre-clinical Studies
Pre-clinical studies include laboratory evaluation of product chemistry, toxicity and formulation, as well as animal
studies to assess potential safety and efficacy. These pre-clinical studies must comply with GLP. An IND sponsor must
submit the results of the pre-clinical tests, together with manufacturing information, analytical data and any available
clinical data or literature to the FDA as part of an IND. Some pre-clinical testing may continue even after the IND is
submitted. An IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA raises concerns or
questions related to one or more proposed clinical trials and places the trial on a clinical hold. In such case, the IND
sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. As a result, submission
of an IND may not result in the FDA allowing clinical trials to commence.
Clinical Trials
Clinical trials involve the administration of the investigational new drug to human subjects under the supervision of
qualified investigators in accordance with GCP requirements. GCP requirements mandate that all research subjects
provide their informed consent in writing before their participation in any clinical trial. Clinical trials are conducted
under protocols detailing the objectives of the trial, the parameters to be used in monitoring safety, and the effectiveness
criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to
the FDA as part of the IND (or equivalent international submission). In addition, an IRB or ethics committee must
review and approve the plan for any clinical trial at all institutions participating in the clinical trial before it commences
at that site. Information about certain clinical trials must be submitted within specific time frames to the National
Institutes of Health for public dissemination on www.clinicaltrials.gov.
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Human clinical trials are typically conducted in three sequential phases, which may overlap or be combined:
•
Phase 1: The drug is initially introduced into healthy human subjects or patients with the target disease or
condition and is tested for safety, dosage tolerance, absorption, metabolism, distribution, excretion and, if
possible, to gain an early indication of its effectiveness.
•
Phase 2: The drug is administered to a limited patient population to identify possible adverse effects and
safety risks, and to preliminarily evaluate the efficacy of the investigational drug product for specific
targeted diseases and to determine dosage tolerance and optimal dosage.
•
Phase 3: The drug is administered to an expanded patient population to establish the overall risk-benefit
profile of the product, and to provide adequate labeling information (labeling) for the safe and efficacious
administration for the labeling of the product.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more
frequently if serious adverse events occur. Furthermore, the FDA or the sponsor may suspend or terminate a clinical trial
at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable
health risk. Similarly, an IRB or ethics committee can suspend or terminate approval of a clinical trial at its institution if
the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated
with unexpected serious harm to patients.
Marketing Approval
Following successful completion of the required clinical testing and the results of the pre-clinical and clinical
studies, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed
labeling, among other information, are submitted to the FDA as part of an NDA requesting approval to market the
product for one or more indications. In most cases, the submission of an NDA is subject to an application user fee.
Under the Prescription Drug User Fee Act (“PDUFA”) guidelines, the FDA has a target of ten months from the date of
“filing” of a standard NDA for a new molecular entity to review and act on the submission. This review typically takes
twelve months from the date the NDA is submitted to the FDA.
In addition, under the Pediatric Research Equity Act of 2003, certain NDAs or supplements to an NDA must contain
data that is adequate to assess the safety and effectiveness of the drug for the claimed indications in all relevant pediatric
subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe
and effective. The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of
some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric
data requirements.
The FDA also may require submission of a risk evaluation and mitigation strategy (“REMS”) plan to ensure that the
benefits of the drug outweigh its risks. REMS plans typically include medication guides, physician communication
plans, assessment plans, and/or elements to assure safe use, such as restricted distribution methods, patient registries, or
other risk minimization tools.
The FDA conducts a preliminary review of all NDAs within the first 60 days after submission, before accepting
them for filing, to determine whether they are sufficiently complete to permit substantive review. The FDA may request
additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the
requested information. The resubmitted application is also subject to review before the FDA accepts it for filing. After
the submission is accepted for filing, the FDA begins a substantive review. The FDA reviews an NDA to determine
whether the drug is safe and effective and whether the facility in which it is manufactured, processed, packaged or held
meets standards designed to assure the product’s continued safety, quality and purity.
The FDA may refer an application for a novel drug to an advisory committee. An advisory committee is a panel of
independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a
recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by
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the recommendations of an advisory committee, but it considers such recommendations carefully when making
decisions.
Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is
manufactured. The FDA will not approve an application unless it determines that the manufacturing processes and
facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within
required specifications. Additionally, before approving an NDA, the FDA may inspect one or more clinical trial sites to
assure compliance with GCP requirements.
After evaluating the NDA and all related information, including the advisory committee recommendation, if any,
and inspection reports regarding the manufacturing facilities and clinical trial sites, the FDA may issue an approval letter
or a complete response letter. A complete response letter generally contains a statement of specific conditions that must
be met in order to secure final approval of the NDA and may require additional clinical or pre-clinical testing for the
FDA to reconsider the application. Even after submission of this additional information, the FDA may decide that the
application does not satisfy the regulatory criteria for approval. If and when those conditions have been met to the
FDA’s satisfaction, the FDA will typically issue an approval letter. An approval letter authorizes commercial marketing
of the drug with specific prescribing information for specific indications.
Even if the FDA approves a product, it may limit the approved indications for use of the product. It may also require
that contraindications, warnings or precautions be included in the product labeling or require that post-approval studies,
including Phase 4 clinical trials, be conducted to further assess a drug’s safety after approval. In addition, the FDA may
mandate testing and surveillance programs to monitor the product after commercialization, or impose other conditions,
including distribution and use restrictions or other risk management mechanisms under a REMS. This can materially
affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product
based on the results of post-marketing studies or surveillance programs. After approval, some types of alterations, such
as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing
requirements and FDA review and approval.
Fast Track Designation
The FDA has various programs, such as fast track designation. These programs are intended to expedite or simplify
the process for the development and FDA review of drugs for the treatment of serious or life-threatening diseases or
conditions and demonstrate the potential to address unmet medical needs. The purpose of these programs is to provide
important new drugs to patients faster. The sponsor of a new drug may request fast track designation concurrent with, or
after, the filing of the IND. To be eligible for a fast track designation, the FDA must determine, based on the request of a
sponsor, that a product is intended to treat a serious or life threatening disease or condition and demonstrates the
potential to address an unmet medical need. A product will fill an unmet medical need if it will provide a therapy where
none exists or provide a therapy that may be potentially superior to existing therapy based on efficacy or safety. Fast
track designation provides additional opportunities for interaction with the FDA’s review team and may allow for rolling
review of NDA components before the completed application is submitted, if the sponsor provides a schedule for the
submission of the sections of the NDA, the FDA agrees to accept sections of the NDA and determines that the schedule
is acceptable, and the sponsor pays any required user fees upon submission of the first section of the NDA. However, the
FDA’s time goal for reviewing an application does not begin until the last section of the NDA is submitted. The FDA
may decide to rescind the fast track designation if it determines that the qualifying criteria no longer apply.
Orphan Designation
The FDA may grant orphan designation to drugs or biologics intended to treat a rare disease or condition that affects
fewer than 200,000 individuals in the United States. The FDA may also grant the designation if the disease affects more
than 200,000 individuals in the United States, and there is no reasonable expectation that the cost of developing and
marketing the product for this type of disease or condition will be recovered from sales in the United States. Orphan
designation must be requested before submitting an NDA or BLA. After the FDA grants orphan designation, the identity
of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Drugs or
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biologics with orphan designation are not subject to a PDUFA fee upon the submission of an NDA. Orphan designation
does not convey any advantage in or shorten the duration of the regulatory review and approval process.
In the United States, orphan designation entitles a party to financial incentives such as opportunities for grant
funding towards clinical trial costs, tax advantages and user-fee waivers. In addition, if a product receives the first FDA
approval for the indication for which it has orphan designation, the product is entitled to orphan exclusivity, which
means the FDA may not approve any other application to market the same product for the same indication for a period of
seven years, except in limited circumstances. Such circumstances include a showing of clinical superiority over the
product with orphan exclusivity or where the manufacturer with orphan exclusivity is unable to assure sufficient
quantities of the approved orphan designated product. Competitors, however, may receive approval of different products
for the indication for which the orphan product has exclusivity or obtain approval for the same product but for a different
indication for which the orphan product has exclusivity. Orphan product exclusivity also could block the approval of one
of our products for seven years if a competitor obtains approval of the same product as defined by the FDA or if our
product candidate is determined to be contained within the competitor’s product for the same indication or disease. If a
drug or biological product designated as an orphan product receives marketing approval for an indication broader than
what is designated, it may not be entitled to orphan product exclusivity.
There is some uncertainty with respect to the FDA’s interpretation of the scope of orphan drug exclusivity.
Historically, exclusivity was specific to the orphan indication for which the drug or biologic was approved. As a result,
the scope of exclusivity was interpreted as preventing approval of a competing product. However, in 2021, the federal
court in Catalyst Pharmaceuticals, Inc. v. Becerra, suggested that orphan drug exclusivity covers the full scope of the
orphan-designated “disease or condition” regardless of whether a drug obtained approval for a narrower use.
Breakthrough Therapy Designation
A sponsor can request designation of a drug candidate as a “breakthrough therapy.” A breakthrough therapy is
defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious or life-
threatening disease or condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial
improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects
observed early in clinical development. Drugs designated as breakthrough therapies are also eligible for accelerated
approval and priority review. The FDA must take certain actions, such as holding timely meetings and providing advice,
intended to expedite the development and review of an application for approval of a breakthrough therapy. The FDA
may decide to rescind the breakthrough designation if it determines that the qualifying criteria no longer apply.
Post-Approval Requirements
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by
the FDA. These regulations include requirements relating to recordkeeping, periodic reporting, product sampling and
distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most
changes to the approved product, such as adding new indications or other labeling claims, are subject to FDA review and
approval. There also are continuing, annual program user fee requirements for any marketed products.
The FDA may impose a number of post-approval requirements as a condition of approval of an NDA. For example,
the FDA may require post-marketing testing, including Phase 4 clinical trials, and surveillance to further assess and
monitor the product’s safety and effectiveness after commercialization.
In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs
are required to register their establishments with the FDA and state agencies. They are subject to periodic unannounced
inspections by the FDA and state agencies for compliance with cGMP requirements. Changes to the manufacturing
process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations require
investigation and correction of any deviations from cGMP requirements and impose reporting and documentation
requirements upon the sponsor and any third-party manufacturers. Accordingly, manufacturers must continue to expend
time, money, and effort in the area of production and quality control to maintain cGMP compliance.
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Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and
standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously
unknown problems with a product, including adverse side effects of unanticipated severity or frequency, problems with
manufacturing processes, or failure to comply with regulatory requirements may result in mandatory revisions to the
approved labeling to add new safety information, imposition of post-market studies or clinical trials to assess new safety
risks, or imposition of distribution or other restrictions under a REMS program. Other potential consequences include:
•
restrictions on the marketing or manufacturing of the product, complete withdrawal of the product from the
market or product recalls;
•
fines, warning letters or holds on post-approval clinical trials;
•
refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or
revocation of product approvals;
•
product seizure or detention, or refusal to permit the import or export of products; or
•
injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates marketing, labeling, advertising and promotion of products that are placed on the market.
Drugs may be promoted only for the approved indications and in accordance with the provisions of the approved
prescribing information. The FDA and other agencies enforce the laws and regulations prohibiting the promotion of off-
label uses, and a company that is found to have improperly promoted off-label uses may be subject to significant
liability.
Coverage and Reimbursement
Sales of our product candidates, if approved, will depend, in part, on the extent to which the cost of such products
will be covered and adequately reimbursed by third-party payors, such as government healthcare programs, commercial
insurance and managed health care organizations. These third-party payors are increasingly limiting coverage and
reducing reimbursements for medical products and services by challenging the prices and examining the medical
necessity and cost-effectiveness of medical products and services, in addition to their safety and efficacy. If these third-
party payors do not consider our products to be cost-effective compared to other therapies, they may not cover our
products after approval as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow us
to sell our products on a profitable basis.
There is no uniform policy requirement for coverage and reimbursement for drug products among third-party payors
in the United States. Therefore, coverage and reimbursement for drug products can differ significantly from payor to
payor. Coverage determination can be a time-consuming and costly process that may require us to provide scientific and
clinical support for the use of our products to each payor separately, with no assurance that coverage and adequate
reimbursement will be obtained or applied consistently. Even if reimbursement is provided, market acceptance of our
products may be adversely affected if the amount of payment for our products proves to be unprofitable for health care
providers or less profitable than alternative treatments, or due to administrative burdens.
In addition, the U.S. government, state legislatures and foreign governments have continued implementing cost-
containment programs, including price controls, restrictions on reimbursement and requirements for substitution of
generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in
jurisdictions with existing controls and measures, could further limit our net revenue and results. Decreases in third-party
reimbursement for our product candidates or a decision by a third-party payor to not cover our product candidates could
reduce physician usage of our products candidates, once approved, and have a material adverse effect on our sales.
The Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act
of 2010, collectively referred to as the ACA, enacted in March 2010, has had and is expected to continue to have a
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significant impact on the health care industry. The ACA imposes a significant annual fee on certain companies that
manufacture or import branded prescription drug products. The ACA also increased the Medicaid rebate rate and
expanded the rebate program to include Medicaid managed care organizations. It also contains substantial new
provisions intended to broaden access to health insurance, reduce the growth of health care spending, enhance remedies
against health care fraud and abuse, add new transparency requirements for the health care industry, impose new taxes
and fees on pharmaceutical manufacturers, and impose additional health policy reforms, any or all of which may affect
our business.
There have been executive, judicial and Congressional challenges to certain aspects of the ACA. For example,
President Trump signed several Executive Orders and other directives designed to delay the implementation of certain
ACA requirements or otherwise circumvent some of the health insurance mandates. Concurrently, Congress considered
legislation to repeal or repeal and replace all or part of the ACA. While Congress has not passed comprehensive repeal
legislation, several bills affecting the implementation of certain taxes under the ACA have been enacted. The Tax Cuts
and Jobs Act of 2017, or the Tax Act, included a provision repealing, effective January 1, 2019, the tax-based shared
responsibility payment imposed by the ACA on some individuals who do not maintain qualifying health coverage for all
or part of a year. Additionally, the 2020 federal spending package permanently eliminated, effective January 1, 2020, the
ACA-mandated “Cadillac” tax on high-cost employer-sponsored health coverage and the medical device tax, and also
eliminated the health insurance tax. The Bipartisan Budget Act of 2018 amends the ACA to close the coverage gap in
most Medicare drug plans, commonly referred to as the “donut hole,” and increase from 50% to 70% the point-of-sale
discount that is owed by pharmaceutical manufacturers who participate in the Medicare Part D program. The Inflation
Reduction Act (“IRA”), enacted August 16, 2022, aims to control prescription drug prices in the upcoming years. The
IRA will allow the Centers for Medicare & Medicaid Services (“CMS”) to cap out-of-pocket costs in 2025 and to
negotiate prescription drug prices in 2026 for the first time. Additionally, the IRA provides a new “inflation rebate”
covering Medicare patients beginning in 2023 to prevent rapid and arbitrary price increases in prescription drugs. These
and any other legislation or healthcare reform measures of the Biden administration may impact the ACA and our
business. There may also be further challenges to the ACA, and new laws may also result in additional reductions in
Medicare and other health care funding.
Further, there has been heightened governmental scrutiny over the manner in which manufacturers set prices for
their marketed products. This scrutiny has resulted in several Congressional inquiries and proposed and enacted federal
and state legislation designed to bring more transparency to product pricing, review the relationship between pricing and
manufacturer patient programs, and reform government program reimbursement methodologies for products. At the
federal level, the Trump administration implemented drug pricing reform through federal budget proposals, executive
orders and policy initiatives. For example, on July 24, 2020 and September 13, 2020, the Trump administration
announced several executive orders related to prescription drug pricing that attempt to implement several of the
administration’s proposals The FDA also released a final rule, effective November 30, 2020, implementing a portion of
the importation executive order providing guidance for states to build and submit importation plans for drugs from
Canada. Further, on November 20, 2020, the U.S. Department of Health and Human Services (“HHS”) finalized a
regulation removing safe harbor protection for price reductions from pharmaceutical manufacturers to plan sponsors
under Part D, either directly or through pharmacy benefit managers, unless the price reduction is required by law. The
implementation of the rule was delayed by the Biden administration from January 1, 2022 to January 1, 2023 in response
to ongoing litigation. The rule also creates a safe harbor for price reductions reflected at the point-of-sale, as well as a
safe harbor for certain fixed fee arrangements between pharmacy benefit managers and manufacturers.
Federal and state legislatures have become increasingly aggressive in passing legislation and implementing
regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement
constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures,
and, in some cases, designed to encourage importation from other countries and bulk purchasing. 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.
It is uncertain whether and how future legislation, whether domestic or foreign, could affect prospects for our
product candidates or what actions payors for health care treatment and services may take in response to such health care
reform proposals or legislation. Adoption of price controls and other cost-containment measures, and adoption of more
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restrictive policies in jurisdictions with existing controls and measures reforms may prevent or limit our ability to
generate revenue, attain profitability or commercialize our product candidates.
Other Health Care Laws and Compliance Requirements
We will also be subject to health care regulation and enforcement by the federal and state government and foreign
governments in which we will conduct our business once our products are approved. The laws that may affect our ability
to operate include the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”), as amended by
the Health Information Technology for Economic and Clinical Health Act, which governs the conduct of certain
electronic health care transactions and protects the security and privacy of protected health information; the criminal
health care fraud statutes under HIPAA also prohibit persons and entities from knowingly and willfully executing a
scheme to defraud any health care benefit program, including private payors, or knowingly and willfully falsifying,
concealing or covering up a material fact or making any materially false, fictitious or fraudulent statement in connection
with the delivery of or payment for health care benefits, items or services; the Anti-Kickback Statute, which prohibits
persons from knowingly and willfully soliciting, receiving, offering or paying remuneration, directly or indirectly, in
exchange for or to induce either the referral of an individual for, or the purchase, order or recommendation of, any good
or service for which payment may be made under federal health care programs such as the Medicare and Medicaid
programs; federal false claims laws and civil monetary penalties laws that prohibit any person or entity from knowingly
presenting, or causing to be presented, a false claim for payment to the federal government, or knowingly making, or
causing to be made, a false statement to have a false claim paid; and the Physician Payments Sunshine Act, which
requires certain manufacturers of drugs, devices, biologics, and medical supplies for which payment is available under
Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report annually to the
CMS information related to payments and other transfers of value made to various healthcare professionals including
physicians, physician assistants, nurse practitioners, clinical nurse specialists, certified nurse anesthetists, certified nurse-
midwives and teaching hospitals, and ownership and investment interests held by physicians and their immediate family
members. Beginning on January 1, 2023, California Assembly Bill 1278 requires California physicians and surgeons to
notify patients of the Open Payments database established under the federal Physician Payments Sunshine Act.
The majority of states also have statutes or regulations similar to the federal anti-kickback and false claims laws,
which apply to items and services reimbursed under Medicaid and other state programs, or, in several states, apply
regardless of the payor. We may be subject to state laws governing the privacy and security of health information in
certain circumstances, such as California’s Confidentiality of Medical Information Act and Washington’s My Health My
Data Act, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus
complicating compliance efforts. In addition, we may be subject to reporting requirements under state transparency laws,
as well as state laws that require pharmaceutical companies to comply with the industry’s voluntary compliance
guidelines and the applicable compliance guidance promulgated by the federal government that otherwise restricts
certain payments that may be made to health care providers and entities. In addition, certain states and local jurisdictions
require the registration of pharmaceutical sales representatives.
Even when HIPAA and state health information privacy laws do not apply, according to the FTC and state
Attorneys General, violating consumers’ privacy rights or failing to take appropriate steps to keep consumers’ personal
information secure may constitute unfair acts or practices in or affecting commerce in violation of Section 5(a) of the
Federal Trade Commission Act and state consumer protection laws.
Because of the breadth of these laws and the narrowness of available statutory and regulatory exceptions, it is
possible that some of our business activities could be subject to challenge under one or more of such laws. If we are
found to be in violation of any of the laws described above or any other governmental regulations that apply to us, we
may be subject to penalties, including significant administrative, civil and criminal penalties, damages, fines,
imprisonment, disgorgement, additional reporting requirements and oversight if we become subject to a corporate
integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, exclusion of products
from reimbursement under U.S. federal or state health care programs, and the curtailment or restructuring of our
operations.
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Government Regulation Outside of the United States
In addition to regulations in the United States, we will be subject to a variety of regulations in other jurisdictions
governing clinical studies and any commercial sales and distribution of our products.
Drug and Biologic Development Process in the European Union (“EU”)
All clinical trials included in applications for marketing authorization for human medicines in the EU must be
carried out in accordance with EU regulations. This means that such clinical trials must comply with EU clinical trial
legislation, as well as ethical principles equivalent to those set out in the EU and in Iceland, Norway and Liechtenstein
(together, the European Economic Area, or “EEA”), including adhering to international good clinical practice and the
Declaration of Helsinki. The conduct of clinical trials in the EU is governed by the EU Clinical Trials Regulation
(EU) No. 536/2014 (“CTR”) which entered into force on January 31, 2022.
Under the CTR, a sponsor may submit a single application for approval of a clinical trial through a centralized EU
clinical trials portal. One national regulatory authority (the reporting EU Member State proposed by the applicant) will
take the lead in validating and evaluating the application consult and coordinate with the other concerned Member
States. If an application is rejected, it may be amended and resubmitted through the EU clinical trials portal. If an
approval is issued, the sponsor may start the clinical trial in all concerned Member States. However, a concerned EU
Member State may in limited circumstances declare an “opt-out” from an approval and prevent the clinical trial from
being conducted in such Member State. The CTR also aims to streamline and simplify the rules on safety reporting and
introduces enhanced transparency requirements such as mandatory submission of a summary of the clinical trial results
to the EU Database (“CTIS”). Since January 31, 2023, submission of initial clinical trial applications via CTIS is
mandatory, and by January 31, 2025, all ongoing trials approved under the former Clinical Trials Directive will need to
comply with the CTR and have to be transitioned to CTIS.
National laws, regulations, and the applicable GCP and Good Laboratory Practice standards must also be respected
during the conduct of the trials, including the International Council for Harmonization of Technical Requirements for
Pharmaceuticals for Human Use (“ICH”) guidelines on GCP and the ethical principles that have their origin in the
Declaration of Helsinki.
Drug Marketing Authorization
In the EEA, after completion of all required clinical testing, pharmaceutical products may only be placed on the
market after obtaining a Marketing Authorization (“MA”). To obtain an MA of a drug under EU regulatory systems, an
applicant can submit a Marketing Authorization Application (“MAA”) through, amongst others, a centralized or
decentralized procedure.
The centralized procedure provides for the grant of a single MA that is issued by the European Commission (“EC”)
following the scientific assessment of the application by the EMA that is valid for all EU Member States as well as in the
three additional EEA Member States. The centralized procedure is compulsory for specific medicinal products, including
for medicines developed by means of certain biotechnological processes, products designated as orphan medicinal
products, advanced therapy medicinal products (gene therapy, somatic cell therapy or tissue engineered medicines), and
medicinal products with a new active substance indicated for the treatment of certain diseases (HIV/AIDS, cancer,
neurodegenerative disorders, diabetes, autoimmune and viral diseases). For medicinal products containing a new active
substance not yet authorized in the EEA before May 20, 2004 and indicated for the treatment of other diseases,
medicinal products that constitute significant therapeutic, scientific or technical innovations or for which the grant of an
MA through the centralized procedure would be in the interest of public health at EU level, an applicant may voluntarily
submit an application for an MA through the centralized procedure.
Under the centralized procedure, the Committee for Medicinal Products for Human Use (“CHMP”), established at
the EMA, is responsible for conducting the initial assessment of a drug. The CHMP is also responsible for several post-
authorization and maintenance activities, such as the assessment of modifications or extensions to an existing MA.
Under the centralized procedure, the timeframe for the evaluation of an MAA by the CHMP is, in principle, 210 days
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from receipt of a valid MAA. However, this timeline excludes clock stops, when additional written or oral information is
to be provided by the applicant in response to questions asked by the CHMP, so the overall process typically takes a year
or more, unless the application is eligible for an accelerated assessment. Accelerated evaluation might be granted by the
CHMP in exceptional cases, when a medicinal product is expected to be of a major public health interest, particularly
from the point of view of therapeutic innovation. Upon request, the CHMP can reduce the time frame to 150 days if the
applicant provides sufficient justification for an accelerated assessment. The CHMP will provide a positive opinion
regarding the application only if it meets certain quality, safety and efficacy requirements. This opinion is then
transmitted to the EC, which has the ultimate authority for granting an MA within 67 days after receipt of the CHMP
opinion.
Medicines that fall outside the mandatory scope of the centralized procedure have three routes to authorization:
(i) they can be authorized under the centralized procedure if they concern a significant therapeutic, scientific or technical
innovation, or if their authorization would be in the interest of public health; (ii) they can be authorized under a
decentralized procedure where an applicant applies for simultaneous authorization in more than one EU Member State;
or (iii) they can be authorized in an EU Member State in accordance with that state’s national procedures and then be
authorized in other EU countries by a procedure whereby the countries concerned agree to recognize the validity of the
original, national marketing authorization (mutual recognition procedure).
The decentralized procedure permits companies to file identical MA applications for a medicinal product to the
competent authorities in various EU Member States simultaneously if such medicinal product has not received marketing
approval in any EU Member State before. This procedure is available for pharmaceutical products not falling within the
mandatory scope of the centralized procedure. The competent authority of a single EU Member State, known as the
reference EU Member State, is appointed to review the application and provide an assessment report. Under this
procedure, an applicant submits an application based on identical dossiers and related materials, including a draft
summary of product characteristics, and draft labeling and package leaflet, to the reference EU Member State and
concerned EU Member States. The reference EU Member State prepares a draft assessment report and drafts of the
related materials within 120 days after receipt of a valid application. Subsequently, each concerned EU Member State
must decide whether to approve the assessment report and related materials. If an EU Member State cannot approve the
assessment report and related materials on the grounds of potential serious risk to public health, the disputed points are
subject to a dispute resolution mechanism and may eventually be referred to the EC, whose decision is binding for all
EU Member States.
All new MAAs must include a Risk Management Plan (“RMP”), describing the risk management system that the
company will put in place and documenting measures to prevent or minimize the risks associated with the product.
RMPs are continually modified and updated throughout the lifetime of the medicine as new information becomes
available. An updated RMP must be submitted: (i) at the request of EMA or a national competent authority, or
(ii) whenever the risk-management system is modified, especially as the result of new information being received that
may lead to a significant change to the benefit-risk profile or as a result of an important pharmacovigilance or risk-
minimization milestone being reached. The regulatory authorities may also impose specific obligations as a condition of
the MA. Since October 20, 2023, all RMPs for centrally authorized products are published by the EMA, subject only to
limited redactions.
MAs have an initial duration of five years. After these five years, the authorization may subsequently be renewed on
the basis of a reevaluation of the risk-benefit balance. Once renewed, the MA is valid for an unlimited period unless the
EC or the national competent authority decides on justified grounds relating to pharmacovigilance to proceed with only
one additional five-year renewal. Applications for renewal must be made to the EMA at least nine months before the
five-year period expires.
European Data Protection Laws
The collection and use of personal health data and other personal data in the EU is governed by the provisions of the
European General Data Protection Regulation (EU) 2016/679 (“GDPR”) and related data protection laws in individual
EU Member States. The GDPR imposes strict requirements on the processing of personal data, including the legal basis
for the processing, the information that has to be provided to individuals before their data is processed,
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personal data breaches which may have to be notified to national data protection authorities and data subjects, the
measures to be taken when engaging processors, and the technical and organization measures to ensure the security and
confidentiality of the personal data. EU Member States may also have additional requirements for health, genetic, and
biometric data through their national legislation. The GDPR also imposes restrictions on the transfer of personal data to
countries outside of the EU that do not provide an adequate level of data protection. To enable such transfers,
appropriate safeguards, such as standard contractual clauses (“SCCs”) must be in place. When relying on SCCs, data
exporters are also required to conduct a transfer risk assessment to verify if anything in the law and/or practices of the
third country may impinge on the effectiveness of the SCCs in the context of the transfer at stake and, if so, to identify
and adopt supplementary measures that are necessary to bring the level of protection of the data transferred to the EU
standard of essential equivalence. Where no supplementary measure is suitable, the data exporter should avoid, suspend
or terminate the transfer. Alternatively, such transfers can be based on an adequacy decision by the EU commission.
Regarding transfers to the US, the EU commission issued an adequacy decision for transfers to companies that are
certified under the new EU-US Data Privacy Framework, which entered into force on June 10, 2023.
Failure to comply with the requirements of the GDPR and the related national data protection laws of the EU
Member States may result in significant monetary fines for noncompliance of up to €20 million or 4% of the annual
global revenues of the noncompliant company, whichever is greater, other administrative penalties and a number of
criminal offenses for organizations and, in certain cases, their directors and officers, as well as civil liability claims from
individuals whose personal data was processed.
Sustainability, Corporate Responsibility and Human Capital Disclosures
Governance and Leadership
Our Board of Directors (“Board”) plays a pivotal role in overseeing our strategic direction, risk management related
to sustainability and corporate responsibility matters and our overall governance framework. Our Board composition
reflects a wide range of backgrounds, skills and experiences. Our executive leadership team is responsible for driving
our performance and guiding our long-term growth initiatives. We believe in fostering a culture of integrity, ethical
decision making, and responsible corporate citizenship.
Business Ethics
We are committed to creating an environment where we are able to excel in our business while maintaining high
standards of business conduct and ethics. Our Code of Business Conduct and Ethics (“Code of Conduct”) reflects the
business practices and principles of behavior that supports this commitment, including our policies on bribery,
corruption, conflicts of interest, insider trading, and our whistleblower program. We expect all of our directors, officers,
and employees to read, understand, and comply with the Code of Conduct and its application to the performance of his
or her business responsibilities.
Environmental Commitment
We are committed to protecting the environment and attempt to mitigate any negative impact of our operations,
promoting reuse and recycling and conserving resources, where feasible. We have safety protocols in place for handling
biohazardous waste in our operations, including in our clinical trials, and we use third-party vendors for biohazardous
waste and chemical disposal.
Social Responsibility
We are committed to providing patients with access to our investigational therapies, to the extent appropriate at the
development stage. We are currently focused on our clinical programs and getting our therapies through the approval
process and approved as rapidly as possible provided they are shown to be safe and effective. We provide access to our
investigational therapies through our clinical trials, including in some cases long-term extensions of those trials that
provide access to our therapies for up to several years. We also support educational efforts related to therapeutic areas in
focus for our company, and life sciences education more broadly. In addition to financial support of continuing
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education, we are active sponsors, mentors, and hosts for students seeking to broaden their understanding of life sciences
in the interest of advancing human health.
Human Capital
We recognize that our success is driven by the knowledge, skills and dedication of our employees. Our human
capital is fundamental to our ability to innovate and develop life-changing peptide drug therapies. We invest in our
employees by seeking to foster a supportive and inclusive workplace. We offer competitive compensation and benefits
and provide opportunities for professional growth and development.
As of December 31, 2024, our total global workforce consisted of 126 full-time equivalent employees, 98 of whom
were in research and development. The remaining 28 employees worked in finance, legal, business development, human
resources, information technology (“IT”) and administrative support. 117 of our full-time equivalent employees are
located in the United States and 9 are located in Australia. None of our employees are represented by a labor union or
covered by a collective bargaining agreement. We consider our relationship with our employees to be good.
Attracting, developing and retaining talented employees to support the growth of our business is an integral part of
our human capital strategy and critical to our long-term success. We have robust recruitment and retention processes in
place that are designed to attract and retain individuals who possess the necessary expertise, innovative drive and
commitment to contribute to our mission. We offer competitive compensation packages, including performance-based
incentives, equity awards, and robust benefits, including 401(k) plan matching contributions and an employee stock
purchase plan for U.S. employees. The principal purpose of our equity incentive and annual bonus programs is to attract,
retain and motivate personnel through the granting of stock-based compensation awards and cash-based performance
bonus awards. As a biopharmaceutical company, we recognize the importance of access to high quality healthcare and as
such we currently cover 100% of our U.S. employees’ monthly healthcare premiums. For the year ended December 31,
2024, our employee turnover rate was approximately 11%.
We have a performance development review process in which managers provide regular feedback to assist with the
development of our employees, including the use of individual plans to assist with career development. We also invest in
the growth and development of our employees through various training and development programs that help build and
strengthen our employees’ leadership and professional skills. This reflects the quality and readiness of our people to take
on new roles, as well as our intentional focus on growing and developing careers, as well as promoting from within.
Safeguarding the health and safety of our employees is a top priority. We are committed to providing a safe working
environment for all of our employees. Our cross-functional safety committee meets regularly to discuss policies and
protocols, strategic planning, business continuity and other matters. We invest in initiatives aimed at promoting
employee well-being. To support our employees personally and professionally, we have Employee Assistance Programs
to address employee challenges and needs. We value feedback from our employees and use it to improve our workplace
policies and practices.
Corporate and Other Information
Our website address is www.protagonist-inc.com. References to our website address do not constitute incorporation
by reference of the information contained on the website, and the information contained on the website is not part of this
document.
We make available, free of charge on our corporate website, copies of our Annual Reports on Form 10-K, Quarterly
Reports on Form 10-Q, Current Reports on Form 8-K, Proxy Statements, and all amendments to these reports, as soon as
reasonably practicable after such material is electronically filed with or furnished to the SEC pursuant to Section 13(a) or
15(d) of the Securities Exchange Act of 1934, as amended (“Exchange Act”).
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Item 1A.
Risk Factors
In evaluating our business, you should carefully consider the following discussion of material risks, events and
uncertainties that make an investment in us speculative or risky in addition to the other information included in this
Annual Report. A manifestation of any of the following risks and uncertainties could, in circumstances we may or may
not be able to accurately predict, materially and adversely affect our business and operations, growth, reputation,
prospects, operating and financial results, financial condition, cash flows, liquidity and stock price. Some of the factors,
events and contingencies discussed below may have occurred in the past, but the disclosures below are not
representations as to whether or not the factors, events or contingencies have occurred in the past and instead reflect our
beliefs and opinions as to the factors, events, or contingencies that could materially and adversely affect us in the future.
The risks and uncertainties described below are not the only ones we face. Our operations could also be affected by
factors, events or uncertainties that are not presently known to us or that we currently do not consider to present
significant risks to our business. Therefore, you should not consider the following risks to be a complete statement of all
the potential risks or uncertainties that we face.
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 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 an 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.
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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.
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. Other companies
targeting the same patient populations as our clinical trials for such medicines may make it more difficult for us to
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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.
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 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.
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.
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, in September 2021, our clinical studies for rusfertide were placed on a brief full clinical hold by the
FDA following a non-clinical finding in a rasH2 transgenic mouse model indicating benign and malignant subcutaneous
skin tumors. Any similar findings in human clinical trials may adversely impact regulatory approval, product labeling or
commercialization of rusfertide.
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 and the product candidates subject to our JNJ collaboration.
We have an ongoing commitment to optimize and focus resources toward our rusfertide program in PV. In
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addition, in 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 the 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 a cumulative net loss since our inception and anticipate that we may incur significant losses in the
future. We have never generated any revenue from product sales and may never be profitable.
We have incurred a cumulative net operating loss since inception and may continue to incur operating losses in the
future. As of December 31, 2024, we had an accumulated deficit of $340.5 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 collaborations with JNJ, Takeda, 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 may require 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 may require 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 JNJ License and Collaboration Agreement or the Takeda Collaboration
Agreement is terminated, we may not receive any additional fees or milestone payments under these agreements. Absent
the funding support obtained under these agreements, 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 December 31, 2024, we had cash, cash equivalents and marketable securities of $559.2 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 may need to have access
to 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 have in the past and may in the future 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, including as a result of public health crises; changes in
trade policies, including tariffs or other trade restrictions or the threat of such actions; political instability, including the
ongoing conflict between Russia and Ukraine and in the Middle East and rising tensions between China and Taiwan; and
high interest rates. The incurrence of indebtedness and/or the issuance of certain equity securities could result in fixed
39
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 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 will experience additional dilution and, as a result, our stock
price may decline.
Risks Related to our Reliance on Third Parties
If JNJ does not elect to continue the development of icotrokinra, or if Takeda does not elect to develop and
commercialize rusfertide, our business and business prospects would be adversely affected.
Icotrokinra, the product candidate in development pursuant to our JNJ collaboration, and rusfertide, the product
candidate in development pursuant to the Takeda Collaboration Agreement, 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 JNJ License and Collaboration Agreement, JNJ 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, JNJ will generally have control over the further clinical development of icotrokinra and any other licensed
compounds. JNJ’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, a decision was made by JNJ to
stop further development of both PTG-200 and PN-232 in favor of icotrokinra.
Under the terms of the Takeda Collaboration Agreement, Takeda may terminate the agreement for convenience in
its entirety or as to a major region by providing advance written notice following the earliest of (i) the receipt of Phase 3
data with respect to the VERIFY clinical trial, (ii) the third anniversary of the effective date of the agreement or (iii) the
occurrence of certain specified adverse events related to the clinical development of rusfertide.
If the JNJ License and Collaboration Agreement or the Takeda Collaboration Agreement is terminated early, or if
JNJ’s or Takeda’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 JNJ during the term of the JNJ License and Collaboration Agreement or Takeda
under the Takeda 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 JNJ regarding the development of icotrokinra or other
matters under the JNJ License and Collaboration Agreement and Takeda regarding the development of rusfertide or
other matters under the Takeda Collaboration Agreement, such as the interpretation of such agreement or ownership of
proprietary rights. Also, because the period of collaborative development under the agreement has ended, JNJ has sole
decision-making authority for product candidates resulting from the collaboration, which could lead to disputes with
JNJ. Disagreements with JNJ or Takeda could lead to litigation or arbitration, which would be expensive and would be
time-consuming for our management and employees.
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Our current and future development and commercialization collaborations may not be successful.
Other than our collaboration with JNJ License and Collaboration Agreement and our collaboration with Takeda
under the Takeda Collaboration Agreement, we have no active collaborations for any of our product candidates. Our
collaborations with JNJ and Takeda and any future collaboration arrangements may not ultimately be successful, which
could have a negative impact on our business, results of operations, financial condition and growth prospects. We do not
maintain significant rights or control of future development and commercialization activities under our collaboration
with JNJ, or in ex-U.S. territories under our collaboration with Takeda. This could lead to potential disputes in the future
over the terms of the collaborations and the respective rights of the parties, and these risks and uncertainties could be
present with respect to our potential future collaborations as well.
If our strategic collaborations do not result in the successful development and commercialization of product
candidates or if one of our collaborators fails to fulfill its obligations under the collaboration agreement or terminates its
agreement with us, we may not receive any future milestone, royalty or other 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.
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 GCPs, which are regulations and
guidelines promulgated by the FDA, the 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 and will force us to rely heavily on CROs for 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 required manufacturing processes for cost-effective, large-scale
41
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, 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
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 Process and Other Legal Compliance Matters
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:
•
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;
•
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;
•
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;
•
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;
42
•
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
•
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 or 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.
We may fail to obtain additional 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, and have only a limited number of employees engaged in those activities. In order to
commercialize or co-commercialize any of our product candidates that receive marketing approval, we will have to build
adequate marketing, sales, distribution, managerial and other non-technical capabilities or make arrangements with third
parties to perform these services. We may not be successful in doing so. In the event of the 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. As we have done with Takeda with respect to rusfertide, 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. In the
case of the JNJ License and Collaboration Agreement or the Takeda Collaboration Agreement, we may elect to exercise
our right to co-detail products, which would require us to establish a U.S. sales team. If we are not successful in
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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.
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 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. See Item 1. “Business – Government
Regulation” for additional information.
Pharmaceutical and biological product marketing is subject to substantial regulation in the U.S. and EU, and any
failure by us or our future commercial and collaborative partners to comply with applicable statutes or regulations
can adversely affect our business.
Any marketing activities associated with our product candidates, if approved for commercialization, will be subject
to numerous federal, state and equivalent foreign laws governing the marketing and promotion of pharmaceutical and
biological products. The FDA and EMA regulates post-approval promotional labeling and advertising in the United
States and EU, respectively, to ensure that they conform to statutory and regulatory requirements. In addition to FDA
and EMA restrictions, the marketing of prescription drugs is subject to laws and regulations prohibiting fraud and abuse
under government healthcare programs. Similarly, many states have similar statutes or regulations that apply to items
and services reimbursed under Medicaid and other state programs, and, in some states, such statutes or regulations apply
regardless of the payor. In addition, government authorities may also seek to hold us responsible for any failure of our
future commercialization or collaborative partners to comply with applicable statutes or regulations. If we, or our
commercial or collaborative partners, fail to comply with applicable FDA or EMA regulations or other laws or
regulations relating to the marketing of our product candidates, if approved for commercialization, we could be subject
to criminal prosecution, civil penalties, seizure of products, injunctions and exclusion of our product candidates from
reimbursement under government programs, as well as other regulatory or investigatory actions against our future
product candidates, our commercial or collaborative partners or us.
The healthcare system is under significant financial pressure to reduce costs, which could reduce payment and
reimbursement rates for drugs.
Throughout the world and particularly in the United States, the healthcare system is under significant financial
pressure to reduce costs. The price of pharmaceuticals has been a topic of considerable public discussion that could lead
to price controls or other price-limiting strategies by payors that have the effect of lowering payment and reimbursement
rates for drugs or otherwise making the commercialization of pharmaceuticals less profitable. Many federal and state
legislatures have considered, and adopted, healthcare policies intended to curb rising healthcare costs, such as the
Inflation Reduction Act of 2022. These cost-containment measures may include, among other measures: requirements
for pharmaceutical companies to negotiate prescription drug prices with government healthcare programs; controls on
government-funded reimbursement for drugs; new or increased requirements to pay prescription drug rebates to
government healthcare programs, including if drug prices increase at a higher rate than inflation; controls on healthcare
providers; challenges to or limits on the pricing of drugs, including pricing controls or limits or prohibitions on
reimbursement for specific products through other means; requirements to try less expensive products or generics before
a more expensive branded product; and public funding for cost effectiveness research, which may be used by
government and private third-party payors to make coverage and payment decisions. Political, economic and regulatory
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developments may further complicate developments in healthcare systems and pharmaceutical drug pricing. These
developments could, for example, impact our potential licensing agreements as commercial and collaborative partners
may also consider the impact of these pressures on their licensing strategies.
Any new laws or regulations that have the effect of imposing additional costs or regulatory burden on
pharmaceutical manufacturers, or otherwise negatively affect the industry, could adversely affect our ability to
successfully commercialize our product candidates. The implementation of any price controls, caps on prescription drugs
or price transparency requirements could adversely affect our business, operating results and financial condition.
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:
•
the safety and efficacy of the product in clinical trials, and potential advantages over competing treatments;
•
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;
•
the clinical indications for which approval is granted;
•
recognition and acceptance of our product candidates over our competitors’ products;
•
prevalence of the disease or condition for which the product is approved;
•
the cost of treatment, particularly in relation to competing treatments;
•
the willingness of the target patient population to try our therapies and of physicians to prescribe these
therapies;
•
the strength of marketing and distribution support and timing of market introduction of competitive
products;
•
the extent to which the product is approved for inclusion on formularies of hospitals and managed care
organizations;
•
publicity concerning our products or competing products and treatments;
•
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;
•
our ability to maintain compliance with regulatory requirements; and
•
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.
If the market opportunities for our approved product candidates, if any, are smaller than we expect, it could
materially adversely affect our financial condition and results of operations.
If the market opportunity for our products, if approved, is smaller than we expect, we may never become or remain
profitable nor generate sufficient revenue growth to sustain our business even if we obtain significant market share for
them. The potentially addressable patient population for our products may be limited or may not be amenable to
treatment with our products, and new patients may become increasingly difficult to identify or access, which would
adversely affect our results of operations and our business.
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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 or our collaboration partners 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 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.
See Item 1, “Business – Competition” for additional information.
Outbreaks of disease, epidemics and pandemics have and could continue to adversely impact our business, including
our ongoing and planned clinical trials and pre-clinical and discovery research.
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 and
receiving the supplies, materials and services needed to conduct clinical trials and pre-clinical research.
A continued and prolonged public health crisis could have a material negative impact on our business, financial
condition, and operating results.
Unstable market and macroeconomic 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 macroeconomic uncertainty and capital
markets disruption, which has been significantly impacted by domestic and global monetary and fiscal policy, trade
regulations, including changes in trade policies, tariffs or other trade restrictions or the threat of such actions,
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geopolitical instability, including ongoing military conflicts between Russia and Ukraine and in the Middle East, rising
tensions between China and Taiwan, and high interest rates. 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, our financial position or results of operations may be adversely affected in the future due to the
macroeconomic factors discussed above, 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.
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 generally 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:
•
the federal Anti-Kickback Statute;
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•
the federal false claims laws, including the False Claims Act;
•
the federal Health Insurance Portability and Accountability Act of 1996 (“HIPAA”);
•
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;
•
the federal civil monetary penalties statute;
•
the federal Physician Payments Sunshine Act; and
•
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, we or our collaboration partners
are unable to comply with these regulations, our ability to earn potential royalties from sales of product candidates under
our collaboration agreements 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 arrangements or cause our collaboration partners to terminate the related license and collaboration
agreement, either of which would materially and adversely affect our business, financial condition and results of
operations.
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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 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 December 31, 2024, we had 126 full-time equivalent employees, including 98 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 cybersecurity incidents 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
partners, and other third parties on which we rely may make them potentially vulnerable to breakdown,
telecommunications and electrical failures, and malicious intrusion such as ransomware and computer viruses that may
result in the impairment of key business processes. Our systems are potentially vulnerable to cybersecurity breaches, by
employees or others, which may expose sensitive data to unauthorized persons. Such cybersecurity breaches or other
cybersecurity incidents may allow hackers access to our pre-clinical compounds, strategies, discoveries, trade secrets
and/or other confidential information. Additionally, sensitive data could be leaked, disclosed or revealed as a result of or
in connection with our employees’, personnel’s, vendors’ or partners’ use of generative artificial intelligence
technologies. Any disruption or cybersecurity incident, to the extent it was to result in the loss, destruction,
unavailability, alteration or dissemination of, or damage to, our data or applications, or for it to be believed or reported
that any of these occurred, 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. The risk of a cybersecurity incident or other informational technology disruption, particularly through cyber-
attacks, has generally increased as the number, intensity and sophistication of attempted attacks and intrusions from
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around the world has increased. If we are unable to prevent such cybersecurity incidents 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 waste.
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.
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.
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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, extreme weather, 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 wildfires. 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
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
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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, this increase can be reduced or eliminated based on certain
delays caused by the patent applicant during patent prosecution. If we encounter 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.
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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 from using or
commercializing our platform technology and products. Any such adverse result or determination could have a material
adverse effect on our business, financial condition and results of operations.
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 our collaboration partners or us to litigation, or otherwise preventing the commercialization of
product candidates in the relevant jurisdiction(s); or
•
requiring our collaboration partners 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 collaborations or cause our collaboration partners
to terminate their respective agreements.
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.
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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 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.
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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 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”).
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;
•
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;
56
•
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.
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, 2024 through
December 31, 2024, the reported sale price of our common stock has fluctuated between $21.43 and $48.89 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 Annual Report.
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
independent registered public accounting firm is required to attest to the effectiveness of our internal control over
financial reporting.
Maintaining adequate internal controls in place so that we can produce accurate financial statements on a timely
basis is a costly and time-consuming effort that will need to be evaluated frequently. 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. In addition, if we have a material weakness, we will receive an adverse opinion regarding our internal control
over financial reporting from our independent registered public accounting firm. 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. If we are not able to comply with the requirements of Section 404 or if we or our
independent registered public accounting firm are unable to attest to the effectiveness of our internal control over
57
financial reporting, investors may lose confidence in the accuracy and completeness of our financial reports, the market
price of our stock could decline and we could be subject to sanctions or investigations by Nasdaq, the SEC, or other
regulatory authorities, which would require additional financial and management resources.
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 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.
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, 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
58
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.
If the estimates we make, or the assumptions on which we rely, in preparing our consolidated financial statements
prove inaccurate, our actual results may vary from those reflected in our accruals.
Our consolidated financial statements have been prepared in accordance with accounting principles generally
accepted in the United States. The preparation of these consolidated financial statements requires us to make estimates
and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses, the amounts of charges
accrued by us and related disclosure of contingent assets and liabilities. We base our estimates on historical experience
and on various other assumptions that we believe to be reasonable under the circumstances. We cannot assure you,
however, that our estimates, or the assumptions underlying them, will be correct.
Item 1B.
Unresolved Staff Comments
None.
Item 1C.
Cybersecurity
In the ordinary course of our business, we collect, use, store, and transmit confidential, sensitive, proprietary, and
personal information. The secure maintenance of this information and our IT systems is important to our operations and
business strategy. We understand the growing challenges associated with cybersecurity threats and have established a
strong cybersecurity program intended to continue to monitor and improve our cybersecurity posture.
Risk Management Approach
We have documented cybersecurity policies and standards, and we assess risks from cybersecurity threats and
monitor information systems for potential cybersecurity issues. These processes are managed and monitored by a
dedicated cybersecurity team, including third-party service providers, and led by our Head of IT, and include
mechanisms, controls, technologies, systems, and other processes designed to help prevent or mitigate data loss, theft,
misuse, or other security incidents or vulnerabilities affecting the data and help maintain a stable information technology
environment. For example, we use processes, tools and external services to conduct regular vulnerability testing,
penetration testing, data recovery testing, security audits, and ongoing risk assessments, including due diligence on and
audits of our key technology vendors, CROs, and other contractors and suppliers.
We work to maintain a strong cybersecurity posture through a multi-layered approach. Our endpoint detection and
response (“EDR”) system helps monitor and analyze endpoint devices, and is designed to assist us in quickly identifying
and responding to emerging threats. Complementing our EDR capabilities, our managed detection and response service
assists with threat monitoring, proactive threat hunting, and rapid incident response. Furthermore, we employ data loss
prevention tools to help enforce strict data security policies, prevent unauthorized access and protect the transmission of
sensitive information. These integrated technologies help us to detect, mitigate, and respond to cyber threats, with the
goal of minimizing potential disruptions to our business operations.
We have an incident response plan designed to help quickly detect, contain and remediate cybersecurity incidents.
This plan outlines clear escalation procedures, roles and responsibilities to help us respond in a timely manner to
potential threats. We also conduct regular employee training on matters such as phishing and email security best
practices, among other topics. In addition, we consult with outside advisors and experts when appropriate to assist with
assessing, identifying, and managing cybersecurity risks, including to help anticipate future threats and trends, and their
impact on our risk environment.
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Governance
Our current Head of IT reports directly to our Chief Financial Officer and has over twenty years of experience
managing information technology and cybersecurity matters, holds a Master of Science degree in Telecommunications
and Computer Networks and is Project Management Professional, Certified Scrum Master and IT Infrastructure Library
certified. We have established a cybersecurity council, facilitated by the Head of IT, which includes senior leadership
from various departments. The council meets quarterly to review cybersecurity strategies, assess emerging threats, and
receive updates on regulatory and industry best practices.
Our Board as a whole has oversight for the most significant risks facing us and for our processes to help identify,
prioritize, assess, manage, and mitigate those risks, including oversight of cybersecurity risks. Our Board receives at
least two updates each year on cybersecurity and information technology matters and related risk exposures from our
Head of IT as well as other members of our senior leadership team.
We consider cybersecurity, along with other significant risks that we face, within our overall enterprise risk
management framework. Since the beginning of the last fiscal year, we have identified and mitigated certain known
cybersecurity threats, which we determined are not reasonably likely to materially affect us and have strengthened our
cybersecurity ecosystem. However, cybersecurity attack techniques change frequently, and with increased volume and
sophistication of such attacks, there can be no guarantee that we will not be the subject of future successful attacks,
threats or incidents that could materially affect us. Additional information on the cybersecurity risks we face is discussed
in Part I, Item 1A, “Risk Factors - Significant disruptions of information technology systems or cybersecurity incidents
could adversely affect our business.”
Item 2.
Properties
We lease approximately 75,600 square feet of office and laboratory space in Newark, California under a lease
agreement, as amended, that expires in November 2029. We believe that our existing facilities are adequate to meet our
current business needs. We anticipate that additional space will be available on commercially reasonable terms, if
required.
Item 3.
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 currently 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. Refer to Note 9 to the Consolidated Financial Statements included elsewhere in this
Annual Report on Form 10-K for additional information on our historical legal proceedings.
Item 4.
Mine Safety Disclosures
Not applicable.
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PART II
Item 5.
Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of
Equity Securities
Market Information
Our common stock trades on The Nasdaq Stock Market, LLC under the symbol “PTGX.”
Stockholders
As of the close of business on February 19, 2025, there were two stockholders of record of our common stock. The
number of stockholders of record is based upon the actual number of stockholders registered at such date and does not
include holders of shares in “street names” or persons, partnerships, associates, or corporations, or other entities
identified in security listings maintained by depositories.
Dividends
We have never declared or paid any cash dividends. We currently expect to retain all future earnings, if any, for use
in the operation and expansion of our business, and therefore do not anticipate paying any cash dividends in the
foreseeable future.
61
Performance Graph
The following is not deemed “filed” with the Securities and Exchange Commission and shall not be incorporated by
reference into any filing we make under the Exchange Act or the Securities Act of 1933, as amended, whether made
before or after the date hereof and irrespective of any general incorporation by reference language in such filing. The
graph below shows the cumulative total stockholder return assuming an investment on December 31, 2019 in each of our
common stock, the Nasdaq Composite Index and the Nasdaq Biotechnology Index. The graph compares the performance
of a $100 investment in our common stock and in each index (assuming reinvestment of all dividends) from
December 31, 2019 to December 31, 2024.
Recent Sales of Unregistered Securities
None.
Issuer Purchases of Equity Securities
None.
62
Item 6.
Reserved
Item 7.
Management’s Discussion and Analysis of Financial Condition and Results of Operations
OVERVIEW
We are a discovery through late-stage development biopharmaceutical company focused on peptide therapeutics.
Our clinical programs fall into two broad categories of diseases: (i) hematology and blood disorders, and
(ii) inflammatory and immunomodulatory (“I&I”) diseases. Two novel peptides derived from our proprietary discovery
technology platform, rusfertide and icotrokinra (formerly known as JNJ-2113), are currently in advanced Phase 3 clinical
development, with New Drug Application (“NDA”) submissions to the U.S. Food and Drug Administration (“FDA”)
potentially in 2025.
Rusfertide, an injectable mimetic of the natural hormone hepcidin, is currently in Phase 3 development for treatment
of the rare blood disorder polycythemia vera (“PV”). Rusfertide is being co-developed and will be co-commercialized
with Takeda Pharmaceuticals, Inc. (“Takeda”) and the Company remains primarily responsible for development through
NDA filing. Icotrokinra is a first-in-class investigational targeted oral peptide that selectively blocks the Interleukin-23
receptor (“IL-23R”) and is licensed to J&J Innovative Medicines (“JNJ”), formerly Janssen Biotech, Inc. Following
icotrokinra’s joint discovery by us and JNJ scientists pursuant to our IL-23R collaboration, we were primarily
responsible for the development of icotrokinra through Phase 1, with JNJ assuming responsibility for development in
Phase 2 and beyond.
We also have a number of pre-clinical stage oral drug discovery programs to address clinically and commercially
validated targets, including IL-17 oral peptide antagonist PN-881, an oral metabolic/obesity peptide program, and an oral
hepcidin mimetic/ferroportin blocker program.
Rusfertide
Rusfertide is currently in Phase 3 development for the treatment of PV. VERIFY (ClinicalTrials.gov identifier
NCT05210790) is a global double-blind, placebo-controlled Phase 3 clinical trial of rusfertide in PV for approximately
250 patients. The trial evaluates the efficacy, symptom burden and safety of once-weekly, subcutaneously self-
administered rusfertide in patients with uncontrolled hematocrit who are phlebotomy dependent despite standard of care
treatment. The trial enrolled patients across North and South America, Europe, Asia and Australia. We expect to
announce top-line data for the trial’s 32-week primary efficacy endpoint in March 2025, potentially leading to an NDA
filing in the fourth quarter of 2025.
Our rusfertide Phase 2 clinical trials include the following:
•
REVIVE (NCT04057040) – A Phase 2 proof of concept (“POC”) 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 is continuing in an ongoing open-label extension (“OLE”);
•
THRIVE (NCT06033586) – A Phase 2 long-term OLE for REVIVE patients on years three through five of
treatment; and
•
PACIFIC (NCT04767802) – 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.
Final results from the REVIVE trial presented at the American Society of Hematology (“ASH”) 2024 Annual
Meeting in December 2024 showed that 54% of patients with PV experienced more than 2.5 years of durable hematocrit
control (<45%), decreased phlebotomy use, long-term tolerability and improvements in patient-reported outcomes.
63
In January 2024, we entered into a worldwide license and collaboration agreement for rusfertide with Takeda (the
“Takeda Collaboration Agreement”). We are primarily responsible for the development of rusfertide through a potential
NDA filing. Under the terms of the agreement, we received a one-time, non-refundable upfront payment of $300.0
million in April 2024, and we are eligible to receive additional worldwide development, regulatory and commercial
milestone payments for rusfertide of up to $330.0 million, inclusive of the following potential upcoming milestones:
•
$25.0 million upon successful achievement of the primary endpoint in the Phase 3 VERIFY trial for
rusfertide in PV; and
•
$50.0 million upon FDA approval of an NDA for rusfertide in PV (or $75.0 million if we exercise our full
right to opt-out of the 50:50 U.S. profit and loss sharing arrangement).
We are also eligible to receive tiered royalties from 10% to 17% on ex-U.S. net sales of rusfertide and other
specified second-generation injectable hepcidin memetic compounds (the “Licensed Products”). We and Takeda will
also share equally in profits and losses (50% to us and 50% to Takeda) of the Licensed Products in the United States, if
approved. See Note 3 to the consolidated financial statements included elsewhere in this Annual Report on Form 10-K
for further details related to the agreement, including our right to opt-out of the 50:50 U.S. profit and loss sharing
arrangement.
Icotrokinra
Our IL-23R antagonist compound icotrokinra, licensed to J&J, is an orally delivered 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 and systemic compartments as needed. We believe that,
compared to antibody drugs, icotrokinra 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.
JNJ has initiated the following icotrokinra trials:
•
ICONIC-LEAD (NCT06095115) – A 684-patient randomized, controlled Phase 3 trial to evaluate the
safety and efficacy of icotrokinra compared with placebo in participants with moderate-to-severe plaque
psoriasis, with PASI-90 (90% improvement in skin lesions as measured by the Psoriasis Area and Severity
Index (“PASI”) and Investigator’s Global Assessment (“IGA”) scores of 0 (clear) or 1 (almost clear) as co-
primary endpoints;
•
ICONIC-TOTAL (NCT06095102) – A 311-patient randomized, controlled Phase 3 trial to evaluate the
efficacy and safety of icotrokinra 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 scores of 0 or 1 as the primary endpoint;
•
ICONIC-ADVANCE 1 (NCT06143878) – A 774-patient randomized, controlled Phase 3 trial to evaluate
the effectiveness of icotrokinra in participants with moderate-to-severe plaque psoriasis compared to
placebo and Sotyktu® (“deucravacitinib”). The trial’s primary co-endpoints are PASI-90 and IGA scores
of 0 or 1;
•
ICONIC-ADVANCE 2 (NCT06220604) – A 731-patient Phase 3 trial similarly designed to ICONIC
ADVANCE 1 in participants with moderate-to-severe plaque psoriasis;
•
Pustular/Erythrodermic Psoriasis (NCT06295692) – A 19-patient open label Phase 3 trial to evaluate the
effectiveness of icotrokinra in participants with pustular or erythrodermic psoriasis;
•
ICONIC-PsA 2 (NCT06807424) – A 750-patient randomized, controlled Phase 3 trial to evaluate the
efficacy and safety of icotrokinra compared with placebo in biologic-experienced patients with active
psoriatic arthritis (“PsA”); and
•
ANTHEM-UC (NCT06049017) – A 252-patient randomized, controlled Phase 2b trial to evaluate the
safety and effectiveness of icotrokinra compared with placebo in participants with moderate-to-severely
active ulcerative colitis (“UC”).
64
In the fourth quarter of 2024, we announced positive topline results for the ICONIC-LEAD and ICONIC-TOTAL
Phase 3 trials. In the ICONIC-LEAD trial, once daily icotrokinra showed significant skin clearance versus placebo in
adults and adolescents with moderate to-severe plaque psoriasis. At week 16, nearly two-thirds (64.7%) of patients
treated with icotrokinra achieved IGA scores of 0 or 1 and 49.6% achieved PASI-90, compared to 8.3% and 4.4% on
placebo, respectively. In addition, topline results from the Phase 3 ICONIC-TOTAL trial showed that once daily
icotrokinra met the primary endpoint of IGA scores of 0 or 1 at week 16 as compared to placebo. Comprehensive results
from both ICONIC-LEAD and ICONIC-TOTAL are expected to be presented at upcoming medical congresses and
shared with health authorities in planned submissions.
Topline results for the ANTHEM trial for icotrokinra in UC are expected in the first quarter of 2025. Topline results
for the ICONIC-ADVANCE 1, ICONIC-ADVANCE 2, and pustular/erythrodermic psoriasis trials are expected in the
second quarter of 2025.
On July 27, 2021, we entered into an Amended and Restated License and Collaboration Agreement with JNJ, which
amended and restated the License and Collaboration Agreement, effective July 13, 2017, by and between the Company
and JNJ, as amended by the first amendment, effective May 7, 2019 (together, the “JNJ License and Collaboration
Agreement”) for the development and commercialization of icotrokinra. During the fourth quarter of 2023, we earned
a $50.0 million milestone payment in connection with the dosing of the third patient in the ICONIC-TOTAL Phase 3
clinical trial of icotrokinra in patients with moderate-to-severe psoriasis and a $10.0 million milestone payment upon the
dosing of the third patient in the ANTHEM Phase 2b trial in patients with moderately-to-severely active UC. The JNJ
License and Collaboration Agreement was further amended in November 2024 to:
•
increase the milestone payment for a Phase 3 clinical trial of any licensed product for any indication
meeting its primary endpoint by $50.0 million, from $115.0 million to $165.0 million;
•
eliminate the $35.0 million milestone payment previously due for the acceptance of an NDA filing by the
FDA for a licensed product for any indication; and
•
eliminate the $15.0 million milestone payment previously due for the dosing of the third patient in the first
Phase 3 clinical trial of a licensed product for a second indication.
We earned the $165.0 million milestone payment described above during the fourth quarter of 2024. We have
earned a total of $337.5 million in nonrefundable payments from JNJ from 2017 through December 31, 2024. We are
eligible to receive up to $630.0 million in future development and sales milestone payments, inclusive of the following
potential upcoming milestones:
•
$50.0 million milestone upon approval of an NDA for icotrokinra in any indication;
•
$25.0 million milestone upon the acceptance of an NDA filing by the FDA for icotrokinra in a second
indication; and
•
$45.0 million milestone upon the approval of an NDA for icotrokinra in a second indication.
We also remain eligible to receive upward tiering royalties on net product sales at percentages ranging from 6%
percent to 10% percent, with 10% percent applicable for net sales over $4.0 billion. See Note 3 to the consolidated
financial statements included elsewhere in this Annual Report on Form 10-K for additional information.
PN-881
In the fourth quarter of 2024, we announced the selection of PN-881, a potential best-in-class oral peptide IL-17
antagonist, as a development candidate for the treatment of immune-mediated skin diseases. PN-881 targets three IL-17
dimers (IL-17 AA, AF and FF), which may offer potential treatment options for hidradenitis suppurativa (“HS”),
spondyloarthritis, plaque psoriasis and psoriatic arthritis (“PsA”). Investigational New Drug (“IND”), or foreign
equivalent, enabling studies are ongoing, and we expect to initiate a PN-881 Phase 1 study in the fourth quarter of 2025.
65
Discovery Platform
Our clinical and pre-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 while overcoming 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, (ii) I&I diseases and (iii) metabolic diseases,
including obesity.
We have a pre-clinical stage program to identify an orally administered hepcidin mimetic/ferroportin blocker, which
we believe to be complementary to the injectable rusfertide for offering the best treatment options for PV and other
potential erythropoietic and iron imbalance disorders, and we expect to nominate a development candidate in the fourth
quarter of 2025. We also have an oral peptide-based metabolic/obesity program and expect to nominate a development
candidate in the second quarter of 2025.
Risks and Uncertainties
We describe the respective risks, uncertainties and assumptions that could affect our business, financial condition
and/or results of operations in Part I, Item 1A. “Risk Factors” herein.
Operations
We have incurred cumulative net losses from inception through December 31, 2024 of $340.5 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, pre-clinical
discovery programs and pre-commercialization activities. As a result, we may incur losses in the future as we continue
the development of, and seek regulatory approval for, our product candidates.
Critical Accounting Polices and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our
consolidated financial statements, which have been prepared in accordance with U.S. generally accepted accounting
principles (“GAAP”). The preparation of these 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 consolidated financial statements, as well as the reported revenue generated, and the 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, and 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. Actual results may differ from these
estimates under different assumptions or conditions. We believe that the accounting policies discussed below are critical
to understanding our historical and future performance, as these policies relate to the more significant areas involving
management’s judgments and estimates.
Use of Estimates
The preparation of the 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 consolidated financial statements and the reported amounts of revenues and
expenses during the reporting period. On an ongoing basis, we evaluate our 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 assumptions used to determine standalone selling
price utilized to allocate the transaction price between distinct performance obligations, assumptions used to recognize
revenue over time for certain performance obligations for which a cost-based input method is used as the measure of
66
progress and estimates of whether contingent consideration should be included in the transaction price at each reporting
period. We base these estimates on historical and anticipated results, trends and various other assumptions that we
believe are reasonable under the circumstances, including assumptions as to forecasted amounts and future events.
Actual results may 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 geopolitical instability, inflationary pressures, high interest rates, a recessionary environment, domestic and
global monetary and fiscal policy, changes in trade policies, including tariffs or other trade restrictions or the threat of
such actions, banking and other financial institution instability and other factors. We have taken into consideration any
known impacts in our accounting estimates to date and are not aware of any additional specific events or circumstances
that would require any additional updates to our estimates or judgments or a revision of the carrying value of our assets
or liabilities as of the date of the filing of this Annual Report on Form 10-K. These estimates may change as new events
occur, circumstances change, and additional information is obtained. Actual results could differ materially from these
estimates under different assumptions or conditions.
Revenue Recognition
Accounting Standards Codification Topic 606, Revenue from Contracts with Customers requires us to allocate the
arrangement consideration on a relative standalone selling price basis for each performance obligation after determining
the transaction price of the contract and identifying the performance obligations to which that amount should be
allocated. The relative standalone selling price is defined as the price at which an entity would sell a promised good or
service separately to a customer. If other observable transactions in which we have sold the same performance obligation
separately are not available, we estimate the standalone selling price of each performance obligation. Key assumptions to
determine the standalone selling price may include forecasted revenues, development timelines, reimbursement rates for
personnel costs, discount rates and probabilities of technical and regulatory success.
Whenever we determine that goods or services promised in a contract should be accounted for as a combined
performance obligation over time, we determine the period over which the performance obligations will be performed
and revenue will be recognized. Revenue is recognized using the proportional performance method. Costs incurred or
labor hours are typically used as the measure of performance. Management’s judgment is required in determining the
level of effort required under an arrangement and the period over which we expect to complete our performance
obligations. If we determine that the performance obligation is satisfied over time, any upfront payment received is
initially recorded as deferred revenue on our consolidated balance sheets.
Research and Development Costs
Research and development costs are expensed as incurred, unless there is an alternate future use in other research
and development projects or otherwise. Research and development costs include salaries and benefits, stock-based
compensation expense, laboratory supplies and facility-related overhead, outside contracted services, including clinical
and pre-clinical trial costs, manufacturing and process development costs for both clinical and preclinical materials,
research costs, development milestone payments under license and collaboration agreements, and other consulting
services.
We accrue for estimated costs of research and development activities conducted by third-party service providers,
which include the conduct of pre-clinical studies and clinical trials, and contract manufacturing activities. We record the
estimated costs of research and development activities based upon the estimated services provided but not yet invoiced
and we include these costs in accrued expenses and other payables in our consolidated balance sheets and within
research and development expense in our consolidated statements of operations. We accrue for these costs based on
various factors such as estimates of the work completed and in accordance with agreements established with our third-
party service providers. As actual costs become known, we adjust our accrued liabilities. We have not experienced any
material differences between accrued liabilities and actual costs incurred. However, the status and timing of actual
services performed, number of patients enrolled, the rate of patient enrollment and the number and location of sites
activated may vary from our estimates and may result in adjustments to our research and development expenses in future
67
periods. Changes in these estimates that result in material changes to our accruals could materially affect the results of
our operations.
Recent Accounting Pronouncements
Information regarding recent accounting pronouncements applicable to us is included in Note 2 to the Consolidated
Financial Statements included elsewhere in this Annual Report on Form 10-K.
Components of Our Results of Operations
License and Collaboration Revenue
Our license and collaboration revenue is derived from payments we receive under the Takeda Collaboration
Agreement and the JNJ License and Collaboration Agreement. See Note 3 to the Consolidated Financial Statements
included elsewhere in this Annual Report on Form 10-K 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.
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 studies and clinical trials;
•
costs related to production of clinical supplies and pre-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 administrative and other supplies.
We recognize the amounts related to our Australian research and development refundable tax offset that are not
subject to refund provisions as a reduction in research and development expenses. The research and development tax
offsets are recognized when there is reasonable assurance that the offset 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 nonrefundable tax offset.
68
We allocate direct 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 related 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 research and development expenses to increase in the near term as compared to prior year periods as
we continue to focus our resources toward (i) progressing our rusfertide program into late stage clinical trials and
preparing for regulatory filings and commercialization, and (ii) advancing our pre-clinical and drug discovery research
programs, including progressing our recently nominated product development candidate PN-881 through IND-enabling
studies, or foreign equivalents. 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, conducting pre-clinical studies 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 be able to 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.
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, IT 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 to support 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 Income (Expense), Net
Other income (expense), net consists primarily of amounts related to foreign exchange gains and losses and related
items.
69
Results of Operations
Comparison of the Years Ended December 31, 2024 and 2023
Year Ended December 31,
Dollar
%
2024
2023
Change
Change
(Dollars in thousands)
Revenue:
License and collaboration revenue . . . . . . . . . . . . . . . . . . . . . $
434,433 $
60,000 $ 374,433
*
Operating expenses:
Research and development (1) . . . . . . . . . . . . . . . . . . . . . .
138,128
120,161
17,967
15
General and administrative (2) . . . . . . . . . . . . . . . . . . . . . .
43,462
33,491
9,971
30
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . .
181,590
153,652
27,938
18
Income (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . .
252,843
(93,652)
346,495
*
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,315
14,898
11,417
77
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . .
250
(201)
451
*
Income (loss) before income tax expense . . . . . . . . . . . . . . .
279,408
(78,955)
358,363
*
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,220
—
4,220
*
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
275,188 $
(78,955) $ 354,143
*
*Percentage not meaningful.
(1) Includes $20.9 million and $17.1 million of non-cash stock-based compensation expense for the years ended
December 31, 2024 and 2023, respectively.
(2) Includes $16.6 million and $12.2 million of non-cash stock-based compensation expense for the years ended
December 31, 2024 and 2023, respectively.
License and Collaboration Revenue
License and collaboration revenue was comprised of the following for the years presented:
Year Ended December 31,
Dollar
%
2024
2023
Change
Change
(Dollars in thousands)
License and collaboration revenue:
Takeda Collaboration Agreement revenue . . . . . . . . . . . . . $
269,433 $
— $ 269,433
*
JNJ License and Collaboration Agreement revenue . . . . . .
165,000
60,000
105,000
175
Total license and collaboration revenue . . . . . . . . . . . . . $
434,433 $
60,000 $ 374,433
*
*Percentage not meaningful.
License and collaboration revenue increased by $374.4 million from $60.0 million for the year ended December 31,
2023 to $434.4 million for the year ended December 31, 2024.
Takeda Collaboration Agreement revenue of $269.4 million for the year ended December 31, 2024 was comprised
of (i) $254.1 million of the $300.0 million upfront cash payment allocated to the delivery of the rusfertide license to
Takeda upon effectiveness of the agreement in March 2024, and (ii) $15.3 million allocated to development services
provided by us during the period based on the cost input method. The remaining balance of $30.6 million was recorded
as deferred revenue as of December 31, 2024, which will be recognized over time based on a measure of our efforts
toward satisfying our performance obligation relative to the total expected efforts or inputs to satisfy the performance
obligation (e.g. costs incurred compared to total budget).
JNJ License and Collaboration Agreement revenue represents the achievement of non-refundable milestone
payments pursuant to the JNJ License and Collaboration Agreement, as amended in November 2024, of $165.0 million
and $60.0 million for the years ended December 31, 2024 and 2023, respectively.
70
We do not have any commercialized products, and our revenue is derived from licensing and collaboration
agreements. Revenue from licensing and collaboration agreements, by its very nature, is highly variable and dependent
upon factors such as the timing of when regulatory and sales milestones are achieved, if at all, and the accounting for any
upfront payments and performance obligations associated with any existing or new agreements.
As discussed above, our revenue for the year ended December 31, 2024 was significantly higher than in prior years
due to the partial recognition of an upfront payment of $300.0 million upon execution of the Takeda Collaboration
Agreement and the achievement of a $165.0 million milestone pursuant to the terms of the JNJ License and
Collaboration Agreement, as amended in November 2024. Our revenue for the year ended December 31, 2025 is
expected to be comprised of (i) the proportionate recognition of the $30.6 million recorded in deferred revenue as of
December 31, 2024, and (ii) any milestones achieved during the year, which are expected to be substantially lower than
in 2024. Accordingly, revenue in 2025 is expected to reduce significantly, which will also impact our net income.
Research and Development Expenses
Year Ended December 31,
Dollar
%
2024
2023
Change
Change
(Dollars in thousands)
Clinical and development expense — rusfertide . . . . . . . . . . .
$
97,862 $
98,060 $
(198)
-
Clinical and development expense — PN-943 . . . . . . . . . . . .
150
1,058
(908)
(86)
Clinical and development expense — other . . . . . . . . . . . . . .
176
99
77
78
Pre-clinical and drug discovery research expense . . . . . . . . . .
39,940
20,944
18,996
91
Total research and development expenses . . . . . . . . . . . . . . . .
$
138,128 $
120,161 $
17,967
15
Research and development expenses increased $18.0 million, or 15%, from $120.2 million for the year ended
December 31, 2023 to $138.1 million for the year ended December 31, 2024. The increase was primarily due to an
increase of $19.0 million in pre-clinical and drug discovery research expense, including costs related to PN-881, our
recently nominated IL-17 development candidate, partially offset by a decrease of $0.9 million in expenses for our
PN-943 program as further development work was deprioritized in 2023.
We had 98 and 85 full-time equivalent research and development employees as of December 31, 2024 and 2023,
respectively. Research and development personnel-related expenses for the year ended December 31, 2024 increased by
$10.0 million as compared to the year ended December 31, 2023, including increases of $6.1 million in personnel-related
expenses and $3.9 million in stock-based compensation expense.
General and Administrative Expenses
General and administrative expenses increased $10.0 million, or 30%, from $33.5 million for the year ended
December 31, 2023 to $43.5 million for the year ended December 31, 2024. This increase was primarily due to a $4.6
million increase in advisory and legal fees related to the Takeda Collaboration agreement and a $4.4 million increase in
stock-based compensation expense.
We had 28 and 27 full-time equivalent general and administrative employees as of December 31, 2024 and 2023,
respectively.
Interest Income
Interest income increased $11.4 million, or 77%, from $14.9 million for the year ended December 31, 2023 to $26.3
million for the year ended December 31, 2024. This increase was primarily due to higher invested balances, including
the $300.0 million one-time, nonrefundable upfront payment received under the Takeda Collaboration Agreement in
April 2024.
71
Income Tax Expense
Income tax expense was $4.2 million and $0 for the year ended December 31, 2024 and 2023, respectively. Income
tax expense for the year ended December 31, 2024 was a result of taxable income from the recognition of revenue in
connection with the Takeda Collaboration Agreement and the JNJ License and Collaboration Agreement. The effective
tax rate was 1.5% and 0.0% for the years ended December 31, 2024 and 2023, respectively.
Comparison of the Years Ended December 31, 2023 and 2022
See Part II, Item 7—Results of Operations—Comparison of the Years Ended December 31, 2023 and 2022 in our
Annual Report on Form 10-K for the year ended December 31, 2023, filed on February 17, 2024, for a discussion of our
results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.
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 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 AgreementSM , 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”).
During the year ended December 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 years ended December 31, 2024 and 2022.
Pre-Funded Warrants
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.
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
72
own more than 9.99% of our common stock, subject to certain exceptions. The common stock and Pre-Funded Warrants
met the criteria for equity classification and the net proceeds from the transaction were recorded as a credit to additional
paid-in capital. In accordance with Accounting Standards 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. During the year ended December 31, 2024, Pre-Funded
Warrants to purchase 1,205,252 shares were net exercised, resulting in the issuance of 1,205,225 shares of common
stock. As of December 31, 2024, Pre-Funded Warrants to purchase 1,500,000 shares of common stock remained
outstanding.
Receipt of Payments Under Collaboration Agreements
In March 2024, we earned a $300.0 million one-time, nonrefundable upfront payment from Takeda upon the closing
of the Takeda Collaboration Agreement, which we received in April 2024.
Pursuant to the Takeda Collaboration Agreement, we may be eligible to receive clinical development, regulatory
and sales milestones, if and when achieved. Upcoming potential development milestones under the Takeda
Collaboration Agreement include:
•
$25.0 million upon successful achievement of the primary endpoint in the Phase 3 VERIFY trial for
rusfertide in PV; and
•
$50.0 million upon FDA approval of an NDA for rusfertide in PV (or $75.0 million if we exercise our full
right to opt out of the 50:50 U.S. profit and loss sharing arrangement in exchange for enhanced
economics).
Under the JNJ License and Collaboration Agreement, we earned a $50.0 million milestone payment upon the dosing
of the third patient in the ICONIC-TOTAL Phase 3 trial in late October 2023, which we received in December 2023. We
earned a $10.0 million milestone payment upon the dosing of the third patient in the ANTHEM Phase 2b trial in patients
with UC in December 2023, which we received in January 2024. The JNJ License and Collaboration Agreement was
further amended in November 2024 to:
•
increase the milestone payment for a Phase 3 clinical trial of any licensed product for any indication
meeting its primary endpoint by $50.0 million, from $115.0 million to $165.0 million;
•
eliminate the $35.0 million milestone payment previously due for the acceptance of an NDA filing by the
FDA for use of licensed product for any indication; and
•
eliminate the $15.0 million milestone payment previously due for the dosing of the third patient in the
first Phase 3 clinical trial of a licensed product for a second indication.
We earned the $165.0 million milestone payment described above during the fourth quarter of 2024. We earned a
total of $337.5 million in nonrefundable payments from JNJ from 2017 through December 31, 2024. We have also
received payments for services provided under the collaboration agreement and we may make in-kind payment
reimbursements to JNJ for certain costs they have incurred pursuant to the cost sharing terms of the agreement.
Pursuant to the JNJ License and Collaboration Agreement, we may be eligible to receive clinical development,
regulatory and sales milestones, if and when achieved. Upcoming potential development milestones under the JNJ
License and Collaboration Agreement include:
•
$50.0 million milestone upon approval of an NDA for icotrokinra in any indication;
•
$25.0 million milestone upon the acceptance of an NDA filing by the FDA for icotrokinra in a second
indication; and
•
$45.0 million milestone upon the approval of an NDA for icotrokinra in a second indication.
73
Capital Requirements
As of December 31, 2024, we had $559.2 million of cash, cash equivalents and marketable securities and an
accumulated deficit of $340.5 million. Our capital expenditures were $1.4 million, $0.6 million and $0.8 million for the
years ended December 31, 2024, 2023 and 2022, respectively. Our primary uses of cash are to fund our operating
expenses, including our research and development expenditures and general and administrative costs. We expect that our
existing cash, cash equivalents and marketable securities will be sufficient to fund our operations for at least the next
twelve months from the date of this Annual Report on Form 10-K based on current operating plans and financial
forecasts.
We may require additional funding to advance our early discovery pipeline 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 supplies for our current product candidates and any other
product candidates we may identify and develop;
•
our ability to successfully commercialize our current product candidates with our collaboration partners
and any other product candidates we may identify and develop;
•
the success of our existing or future collaborations with third parties;
•
the selling and marketing costs associated with rusfertide, which is being co-developed and co-
commercialized with Takeda under the Takeda Collaboration Agreement, and any other product candidates
we may identify and develop, including the costs and timing of expanding our sales and marketing
capabilities;
•
the achievement of development, regulatory and sales milestones resulting in payments to us from JNJ
under the JNJ License and Collaboration Agreement, Takeda under the Takeda Collaboration 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 from JNJ under the JNJ License and Collaboration Agreement
or Takeda under the Takeda Collaboration Agreement 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; and
•
the extent to which we may acquire or in-license other product candidates and technologies.
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 I, Item 1A, “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, changes in trade policies, including tariffs or other restrictions or the threat of such actions,
geopolitical instability, inflationary pressures, high interest rates 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.
74
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 I, Item 1A, “Risk Factors — Risks
Related to our Financial Position and Capital Requirements.”
The following table summarizes our cash flows for the periods indicated:
Year Ended December 31,
2024
2023
2022
Consolidated Statements of Cash Flows Data: . . . . . . . . . . . . . .
(Dollars in thousands)
Cash provided by (used) in operating activities . . . . . . . . . . . . . . . $
184,152 $
(70,236) $
(108,137)
Cash (used in) provided by investing activities . . . . . . . . . . . . . . . . $
(299,483) $
(39,258) $
91,468
Cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . $
25,853 $
170,477 $
18,838
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
37,554 $
29,293 $
24,202
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
30,567 $
— $
—
Cash Provided by (Used in) Operating Activities
Cash provided by operating activities for the year ended December 31, 2024 was $184.2 million and consisted
primarily of our net income of $275.2 million and certain non-cash items, including $37.6 million of stock-based
compensation, partially offset by a net change of $122.6 million in net operating assets and liabilities. The change in net
operating assets and liabilities was driven primarily by a change of $155.0 million in receivable from a collaboration
partner related to a milestone payment under the JNJ License and Collaboration Agreement, partially offset by a change
of $30.6 million in deferred revenue related to the Takeda Collaboration Agreement. The $254.4 million increase in cash
provided by operating activities during the year ended December 31, 2024, as compared to the year ended December 31,
2023, was primarily due to the receipt of a $300.0 million one-time, non-refundable upfront payment related to the
Takeda Collaboration Agreement.
Cash used in operating activities for the year ended December 31, 2023 was $70.2 million and consisted primarily
of our net loss of $79.0 million and a net change of $19.5 million in net operating assets and liabilities, partially offset by
certain non-cash items, including $29.2 million of stock-based compensation expense. The $37.9 million decrease in
cash used in operating activities for the year ended December 31, 2023, as compared to the year ended December 31,
2022, was primarily due to a $48.4 million decrease in our net loss and a $5.1 million increase in stock-based
compensation expense, partially offset by a $4.0 million decrease in accretion of discount on marketable securities and
an $11.7 million net change in net operating assets and liabilities.
Cash (Used in) Provided by Investing Activities
Cash used in investing activities for the year ended December 31, 2024 was $299.5 million and consisted of
purchases of securities of $621.7 million and purchases of property and equipment of $1.4 million, partially offset by
proceeds from maturities of marketable securities of $323.6 million. The $260.2 million increase in cash used in
investing activities for the year ended December 31, 2024, as compared to the year ended December 31, 2023, was
primarily due to the investment made with a portion of the proceeds from the $300.0 million payment from the Takeda
Collaboration Agreement. Purchases of property and equipment were primarily related to purchases of leasehold
improvements and laboratory equipment.
75
Cash used in investing activities for the year ended December 31, 2023 was $39.3 million and consisted of
purchases of marketable securities of $191.1 million and purchases of property and equipment of $0.6 million, partially
offset by proceeds from maturities of marketable securities of $152.4 million. The $130.7 million decrease in cash
provided by investing activities for the year ended December 31, 2023, as compared to the year ended December 31,
2022, was primarily related to a decrease in the net activity of purchases and maturities of marketable securities.
Purchases of property and equipment were primarily related to purchases of laboratory and computer equipment.
Cash Provided by Financing Activities
Cash provided by financing activities for the year ended December 31, 2024 was $25.9 million and consisted of net
cash proceeds of $26.5 million from the issuance of common stock upon exercises of stock options and purchases of
stock under our employee stock purchase plan (“ESPP”), partially offset by $0.6 million in tax withholding payments
related to the net settlement of restricted stock units. The $144.6 million decrease in cash provided by financing
activities for year ended December 31, 2024, as compared to the year ended December 31, 2023, was primarily due to
$107.8 million of proceeds received from a public offering of our common stock in April 2023, $24.3 million of
proceeds from ATM sales of our common stock in 2023, and $34.3 million in proceeds from exercises of warrants in
2023 in exchange for Pre-Funded Warrants and common stock. These changes were partially offset by a $21.7 million
increase in proceeds from the issuance of common stock upon exercise of options and purchases of common stock under
our ESPP.
Cash provided by financing activities for the year ended December 31, 2023 was $170.5 million and consisted
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 $4.8 million in proceeds from the issuance of
common stock upon exercise of stock options and purchases of common stock under our ESPP. The $151.6 million
increase in cash provided by financing activities for the year ended December 31, 2023, as compared to the year ended
December 31, 2022, was primarily due to a $107.8 million increase in net cash proceeds from the April 2023 public
offering, a $9.7 million increase in cash proceeds from ATM sales and a $34.4 million increase in net cash proceeds
from the exercise of the Warrants.
Contractual Obligations and Other Commitments
In the normal course of business, we enter into agreements with contract service providers to assist in the
performance of our research and development activities and clinical and commercial manufacturing activities. Subject to
the required notice periods and our obligations under certain binding commitments, we can elect to discontinue the work
under these agreements at any time. However, the financial terms of some of these agreements may include non-
refundable upfront payments, payments by us for options to acquire certain rights, contingent obligations by us for
potential development and regulatory milestone payments and/or sales-based milestone payments and royalty payments.
These obligations are recorded in our consolidated statements of operations as incurred, which is generally when the
corresponding events become probable. Certain payments are contingent upon the occurrence of various future events
that have a high degree of uncertainty. We expect to enter into additional clinical development, contract research,
clinical and commercial manufacturing, supplier and collaborative research agreements in the future, which may require
upfront payments and long-term commitments of capital resources.
Our contractual obligations include minimum lease payments under our operating lease obligations. In May 2024,
we entered into a third amendment to our facility lease agreement dated as of March 2017 to extend the lease term for
our existing office and laboratory space from one to 66 months and to lease approximately 17,700 rentable square feet of
additional office space. See Note 8 to the Consolidated Financial Statements elsewhere in this Annual Report on
Form 10-K for additional information.
Under the Takeda Collaboration Agreement, we may share with Takeda certain development, manufacturing and
commercialization costs. The actual amounts that we may pay Takeda or that Takeda may pay us will depend on a
number of factors, some of which are outside of our control and some of which are contingent upon the success, if
76
achieved, of certain development and regulatory activities. See Note 3 to the Consolidated Financial Statements
elsewhere in this Annual Report on Form 10-K for additional information.
In January 2020, we initiated arbitration proceedings with the International Court of Arbitration of the International
Chamber of Commerce against Zealand Pharma A/S (“Zealand”) related to a collaboration agreement we and Zealand
entered into in 2012 and terminated in 2014. The agreement provides for certain post-termination payment obligations to
Zealand with respect to compounds related to the collaboration that we elect to further develop and that meet specified
conditions. In August 2021, we and Zealand agreed to resolve the dispute and reached an Arbitration Resolution
Agreement. Under the Arbitration Resolution Agreement, we recognized $4.0 million in development milestone
payments to Zealand in the third quarter of 2021 and are obligated to pay Zealand certain milestone and royalty
payments for rusfertide. The potential future payments include (i) up to $2.75 million in future development milestone
payments, (ii) a low single digit royalty on worldwide net sales, and (iii) sales milestones for achievement of annual net
sales amounts in specific geographies. See Note 7 and Note 9 to the Consolidated Financial Statements included
elsewhere in this Annual Report on Form 10-K for additional information.
Item 7A.
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.
Interest Rate Fluctuation Risk
We had $559.2 million and $341.6 million in cash, cash equivalents and marketable securities at December 31, 2024
and 2023, respectively. Our cash and cash equivalents consist of cash, money market funds, commercial paper and
government bonds. Marketable securities consist of certificates of deposit, corporate bonds, commercial paper and
government bonds. A portion of our investments may be subject to interest rate risk and could decline in value if market
interest rates increase. Based on our interest rate sensitivity analysis, an immediate 100 basis point increase in interest
rates would increase our annual interest income by approximately $2.8 million, while an immediate 100 basis point
decrease in interest rates would decrease our annual interest income by approximately $2.8 million.
Approximately $0.6 million and $0.9 million of our cash balance was located in Australia at December 31, 2024 and
2023, 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
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 adverse effect on the results of our operations during the
year ended December 31, 2024.
77
Item 8.
Financial Statements and Supplementary Data
PROTAGONIST THERAPEUTICS, INC.
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
Audited Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . Page
Report of Independent Registered Public Accounting Firm (PCAOB ID: 42) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
78
Consolidated Balance Sheets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
80
Consolidated Statements of Operations . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
81
Consolidated Statements of Comprehensive Income (Loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
82
Consolidated Statements of Stockholders’ Equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
83
Consolidated Statements of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
84
Notes to the Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
85
78
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Protagonist Therapeutics, Inc.
Opinion on the Financial Statements
We have audited the accompanying consolidated balance sheets of Protagonist Therapeutics, Inc. (the Company) as of
December 31, 2024 and 2023, the related consolidated statements of operations, comprehensive income (loss),
stockholders' equity and cash flows for each of the three years in the period ended December 31, 2024, and the related
notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial
statements present fairly, in all material respects, the financial position of the Company at December 31, 2024 and 2023,
and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2024, in
conformity with U.S. generally accepted accounting principles.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the Company's internal control over financial reporting as of December 31, 2024, based on criteria
established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the
Treadway Commission (2013 framework), and our report dated February 21, 2025 expressed an unqualified opinion
thereon.
Basis for Opinion
These financial statements are the responsibility of the Company's management. Our responsibility is to express an
opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the
PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities
laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether the financial statements are free of material
misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material
misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those
risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the
financial statements. Our audits also included evaluating the accounting principles used and significant estimates made
by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits
provide a reasonable basis for our opinion.
Critical Audit Matter
The critical audit matter communicated below is a matter arising from the current period audit of the financial statements
that was communicated or required to be communicated to the audit committee and that: (1) relates to accounts or
disclosures that are material to the financial statements and (2) involved our especially challenging, subjective or
complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the
consolidated financial statements, taken as a whole, and we are not, by communicating the critical audit matter below,
providing separate opinion on the critical audit matter or on the accounts or disclosures to which it relates.
79
Takeda Collaboration Agreement
Description of
the Matter
As described in Note 3, the Company entered into a Collaboration and License Agreement with
Takeda Pharmaceuticals USA, Inc. (Takeda), pursuant to which the Company and Takeda will
collaborate on the development and commercialization of rusfertide (Takeda Agreement). As
further described in Note 3, the transaction price was allocated at the inception of the agreement
to all identified performance obligations based on the relative standalone selling price.
Auditing the Company’s revenue recognition for the Takeda Agreement was complex and
required the evaluation of significant judgments made by management, including the
determination of the standalone selling price of the license obligation. The estimated standalone
selling price for the performance obligation related to the license of intellectual property reflects
management’s assumptions, which includes forecasted revenues, development timelines, discount
rates and probabilities of technical and regulatory success. Changes to these assumptions can
have a material effect on the allocation of the transaction price to the performance obligations as
well as the amount and timing of revenue recognized.
How We
Addressed the
Matter in Our
Audit
We obtained an understanding, evaluated the design and tested the operating effectiveness of
controls addressing the risks of material misstatement related to the accounting for the Takeda
Agreement. For example, we tested management’s controls over the identification of
performance obligations, the determination of the significant assumptions described above with
respect to the estimation of the standalone selling price of the performance obligations related to
the licensed compounds, and the accuracy and completeness of underlying data used in
estimating the standalone selling price and the transaction price.
Our audit procedures included, among others, obtaining and reading the Takeda Agreement and
evaluating the completeness of the performance obligations identified by management. We also
evaluated management’s estimates of the standalone selling price for identified performance
obligations. For example, we evaluated the reasonableness and consistency of significant
assumptions used in the determination of standalone selling price. We also performed a
sensitivity analysis to evaluate the impact that changes in the significant assumptions would have
on the estimated standalone selling price of performance obligations and the resulting impact on
the allocation of transaction price to each performance obligation, as well as revenue recognized
during the period. We involved our valuation professionals to assist in the assessment of certain
assumptions used in the determination of the estimated standalone selling price of the license
performance obligation.
/s/ Ernst & Young LLP
We have served as the Company’s auditor since 2020.
San Mateo, California
February 21, 2025
80
PROTAGONIST THERAPEUTICS, INC.
Consolidated Balance Sheets
(In thousands, except share data)
December 31,
2024
2023
Assets
Current assets:
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
97,249 $
186,727
Marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
321,664
154,890
Receivable from collaboration partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
165,000
10,000
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
7,728
3,960
Total current assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
591,641
355,577
Marketable securities - noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
140,252
—
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
3,190
1,195
Restricted cash - noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
225
225
Operating lease right-of-use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
9,417
954
Total assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
744,725 $
357,951
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,615 $
772
Payable to collaboration partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
3
Accrued expenses and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
23,693
19,358
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
18,891
—
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,689
—
Operating lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
510
1,141
Total current liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
47,398
21,274
Deferred revenue - noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,676
—
Operating lease liability - noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,356
—
Total liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
69,430
21,274
Commitments and contingencies (Note 9)
Stockholders’ equity:
Preferred stock, $0.00001 par value, 10,000,000 shares authorized; no shares
issued and outstanding . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Common stock, $0.00001 par value, 180,000,000 and 90,000,000 shares
authorized as of December 31, 2024 and 2023, respectively; 61,035,139
and 57,708,613 shares issued and outstanding as of December 31, 2024
and 2023, respectively . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1
1
Additional paid-in capital . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,015,898
952,491
Accumulated other comprehensive loss . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(82)
(105)
Accumulated deficit . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(340,522)
(615,710)
Total stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
675,295
336,677
Total liabilities and stockholders’ equity . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
744,725 $
357,951
The accompanying notes are an integral part of these consolidated financial statements.
81
PROTAGONIST THERAPEUTICS, INC.
Consolidated Statements of Operations
(In thousands, except share and per share data)
Year Ended December 31,
2024
2023
2022
License and collaboration revenue . . . . . . . . . . . . . . . . . . . . . . . .
$
434,433
$
60,000 $
26,581
Operating expenses:
Research and development . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
138,128
120,161
126,215
General and administrative . . . . . . . . . . . . . . . . . . . . . . . . . . . .
43,462
33,491
31,739
Total operating expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
181,590
153,652
157,954
Income (loss) from operations . . . . . . . . . . . . . . . . . . . . . . . . . . .
252,843
(93,652)
(131,373)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,315
14,898
4,060
Other income (expense), net . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
250
(201)
(80)
Income (loss) before income tax expense . . . . . . . . . . . . . . . . . .
279,408
(78,955)
(127,393)
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,220
—
—
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
275,188
$
(78,955) $
(127,393)
Net income (loss) per share, basic . . . . . . . . . . . . . . . . . . . . . . . .
$
4.47
$
(1.39) $
(2.60)
Net income (loss) per share, diluted . . . . . . . . . . . . . . . . . . . . . . .
$
4.23
$
(1.39) $
(2.60)
Weighted-average shares used to compute net income
(loss) per share, basic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
61,566,989
56,763,559
49,042,232
Weighted-average shares used to compute net income
(loss) per share, diluted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
65,077,722
56,763,559
49,042,232
The accompanying notes are an integral part of these consolidated financial statements.
82
PROTAGONIST THERAPEUTICS, INC.
Consolidated Statements of Comprehensive Income (Loss)
(In thousands)
Year Ended December 31,
2024
2023
2022
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
275,188
$
(78,955)
$
(127,393)
Other comprehensive income (loss):
Unrealized gain on marketable securities . . . . . . . . . . . . . . . .
23
60
89
Gain (loss) on translation of foreign operations . . . . . . . . . . .
—
194
(149)
Comprehensive income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . .
$
275,211
$
(78,701)
$
(127,453)
The accompanying notes are an integral part of these consolidated financial statements.
83
PROTAGONIST THERAPEUTICS, INC.
Consolidated Statements of Stockholders’ Equity
(In thousands, except share data)
Accumulated
Additional
Other
Total
Common
Paid-In Comprehensive Accumulated Stockholders’
Stock
Capital (Loss) Gain
Deficit
Equity
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 . . . . . . .
686,284
—
4,448
—
—
4,448
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 . . . . . . . . . . . . . . . .
—
—
24,202
—
—
24,202
Issuance costs related to prior period common
stock offering . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
25
—
—
25
Other comprehensive income (loss) . . . . . . . . . . . . . . .
—
—
—
(60)
—
(60)
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
(127,393)
(127,393)
Balance at December 31, 2022 . . . . . . . . . . . . . . . . . . . . 49,339,252
— 752,722
(359)
(536,755)
215,608
Issuance of common stock pursuant to public
offerings, net of issuance costs . . . . . . . . . . . . . . . . . .
5,750,000
—
107,798
—
—
107,798
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 . . . . . . .
857,377
—
4,774
—
—
4,774
Shares withheld for net settlement of tax
withholding upon vesting of restricted stock units . . . .
(31,963)
—
(769)
—
—
(769)
Stock-based compensation expense . . . . . . . . . . . . . . . .
—
—
29,293
—
—
29,293
Other comprehensive income (loss) . . . . . . . . . . . . . . .
—
—
—
254
—
254
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
(78,955)
(78,955)
Balance at December 31, 2023 . . . . . . . . . . . . . . . . . . . . 57,708,613
1 952,491
(105)
(615,710)
336,677
Issuance of common stock under equity
incentive and employee stock purchase plans . . . . . . .
2,142,094
—
26,453
—
—
26,453
Issuance of common stock upon exercise of
Pre-Funded Warrants . . . . . . . . . . . . . . . . . . . . . . . . .
1,205,225
—
—
—
—
—
Shares withheld for net settlement of tax withholding
upon vesting of restricted stock units . . . . . . . . . . . . .
(20,793)
—
(600)
—
—
(600)
Stock-based compensation expense . . . . . . . . . . . . . . . .
—
—
37,554
—
—
37,554
Other comprehensive income (loss) . . . . . . . . . . . . . . .
—
—
—
23
—
23
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
—
275,188
275,188
Balance at December 31, 2024 . . . . . . . . . . . . . . . . . . . . 61,035,139 $
1 $ 1,015,898 $
(82) $ (340,522) $
675,295
The accompanying notes are an integral part of these consolidated financial statements.
84
PROTAGONIST THERAPEUTICS, INC.
Consolidated Statements of Cash Flows
(In thousands)
Year Ended December 31,
2024
2023
2022
Cash Flows from Operating Activities
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
275,188 $
(78,955) $
(127,393)
Adjustments to reconcile net income (loss) to net cash provided by
(used in) operating activities: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
37,554
29,293
24,202
Operating lease right-of-use asset amortization . . . . . . . . . . . . . . . . . . . . . . .
2,069
2,335
2,335
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
826
977
1,034
Accretion of discount on marketable securities . . . . . . . . . . . . . . . . . . . . . . .
(8,875)
(4,569)
(549)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
194
—
Changes in operating assets and liabilities:
Receivable from collaboration partner. . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(155,000)
(9,990)
1,556
Prepaid expenses and other assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3,768)
1,753
3,754
Research and development tax incentive receivable . . . . . . . . . . . . . . . . . .
—
—
2,686
Accounts payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
842
(2,868)
2,045
Payable to collaboration partner . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(3)
(66)
(830)
Accrued expenses and other payables . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,289
(5,597)
(12,715)
Deferred revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
30,567
—
(1,601)
Income taxes payable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,689
—
—
Operating lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,226)
(2,743)
(2,661)
Net cash provided by (used in) operating activities . . . . . . . . . . . . . . . . .
184,152
(70,236)
(108,137)
Cash Flows from Investing Activities
Purchase of marketable securities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(621,702)
(191,045)
(214,874)
Proceeds from maturities of marketable securities . . . . . . . . . . . . . . . . . . . . . .
323,574
152,396
307,137
Purchases of property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,355)
(609)
(795)
Net cash (used in) provided by investing activities . . . . . . . . . . . . . . . . .
(299,483)
(39,258)
91,468
Cash Flows from Financing Activities . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Proceeds from issuance of common stock upon exercise of stock
options and purchases under employee stock purchase plan . . . . . . . . . . . .
26,453
4,774
4,448
Tax withholding payments related to net settlement of restricted stock units . . .
(600)
(769)
(188)
Proceeds from public offering of common stock, net of issuance costs . . . . .
—
107,798
—
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
—
Issuance costs related to prior period common stock offering . . . . . . . . . . . . .
—
—
25
Net cash provided by financing activities . . . . . . . . . . . . . . . . . . . . . . . . .
25,853
170,477
18,838
Effect of exchange rate changes on cash, cash equivalents and restricted cash . .
—
—
(90)
Net (decrease) increase in cash, cash equivalents and restricted cash . . . . . . .
(89,478)
60,983
2,079
Cash, cash equivalents and restricted cash, beginning of period . . . . . . . . . . .
186,952
125,969
123,890
Cash, cash equivalents and restricted cash, end of period . . . . . . . . . . . . . $
97,474 $
186,952 $
125,969
Supplemental Disclosure of Cash Flow Information: . . . . . . . . . . . . . . . . .
Cash paid for taxes . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
1,530 $
— $
—
Supplemental Disclosure of Non-Cash Financing and Investing
Information: . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
Right-of-use asset obtained in exchange for lease obligation . . . . . . . . . . . . . $
10,511
$
— $
—
Leasehold improvements obtained under tenant improvement allowance . . . $
1,421
$
— $
—
Purchases of property and equipment in accounts payable and
accrued liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
46 $
61 $
19
The accompanying notes are an integral part of these consolidated financial statements.
85
PROTAGONIST THERAPEUTICS, INC.
Notes to Consolidated Financial Statements
Note 1. Organization and Description of Business
Protagonist Therapeutics, Inc. (the “Company”) is a discovery through late-stage development biopharmaceutical
company focused on peptide therapeutics. The Company’s clinical programs fall into two broad categories of diseases:
(i) hematology and blood disorders, and (ii) inflammatory and immunomodulatory (“I&I”) diseases. Two novel peptides
derived from the Company’s proprietary discovery technology platform, rusfertide and icotrokinra (formerly known as
JNJ-2113), are currently in advanced Phase 3 clinical development.
Rusfertide, an injectable mimetic of the natural hormone hepcidin partnered with Takeda Pharmaceuticals, Inc.
(“Takeda”), is currently in Phase 3 development for treatment of the rare blood disorder polycythemia vera (“PV”).
Icotrokinra is a first-in-class investigational targeted oral peptide that selectively blocks the Interleukin-23 receptor
(“IL-23R”), which is licensed to J&J Innovative Medicines (“JNJ”), formerly Janssen Biotech, Inc. Icotrokinra is an
orally delivered drug that is designed to block biological pathways currently targeted by marketed injectable antibody
drugs. Following Icotrokinra’s joint discovery by the Company and JNJ scientists pursuant to their IL-23R collaboration,
the Company was primarily responsible for the development of icotrokinra through Phase 1, with JNJ assuming
responsibility for development in Phase 2 and beyond.
The Company also has a number of pre-clinical stage oral drug discovery programs to address clinically and
commercially validated targets, including IL-17 oral peptide antagonist PN-881, an oral metabolic/obesity peptide
program, and an oral hepcidin mimetic/ferroportin blocker program.
The Company is headquartered in Newark, California and has one wholly owned subsidiary, Protagonist Pty
Limited (“Protagonist Australia”), located in Brisbane, Queensland, Australia.
Liquidity
As of December 31, 2024, the Company had cash, cash equivalents and marketable securities of $559.2 million. The
Company has incurred an accumulated deficit from inception through December 31, 2024 of $340.5 million. The
Company’s ultimate success depends upon the outcome of its research and development and collaboration activities. The
Company may incur additional losses in the future as it continues the development of rusfertide through Phase 3
development and a potential NDA filing and invests in its pre-clinical discovery programs and may need to raise
additional capital to continue to execute its long-range business plan. 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.
Note 2. Summary of Significant Accounting Policies
Basis of Presentation and Consolidation
The accompanying consolidated financial statements include the accounts of the Company and its wholly owned
subsidiary, Protagonist Australia, and have been prepared in conformity with accounting principles generally accepted in
the United States (“GAAP”) and applicable rules and regulations of the Securities and Exchange Commission (“SEC”).
All intercompany balances and transactions have been eliminated upon consolidation.
Use of Estimates
The preparation of the 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 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,
86
marketable securities and leases. Estimates related to revenue recognition include assumptions used to determine
standalone selling price utilized to allocate the transaction price between distinct performance obligations, assumptions
used to recognize revenue over time for certain performance obligations for which a cost-based input method is used as
the measure of progress and estimates of whether contingent consideration should be included in the transaction price at
each reporting period. 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.
There has been uncertainty and disruption in the global economy and financial markets due to a number of factors,
including geopolitical instability, inflationary pressures, high interest rates, a recessionary environment, domestic and
global monetary and fiscal policy, changes in trade policies, including tariffs or other trade restrictions or the threat of
such actions, banking and other financial institution instability and other factors. The Company has taken into
consideration any known impacts in its accounting estimates to date and is not aware of any additional specific events or
circumstances that would require any additional updates to its estimates or judgments or a revision of the carrying value
of its assets or liabilities as of the filing date of this Annual Report on Form 10-K. 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.
Concentrations of Credit Risk
Financial instruments that potentially subject the Company to a concentration of credit risk consist of cash, cash
equivalents and marketable securities. Substantially all of the Company’s cash is held by three financial institutions that
management believes are of high credit quality. Such deposits generally exceed federally insured limits. The primary
focus of the Company’s investment strategy is to preserve capital and to meet liquidity requirements. The Company’s
cash equivalents and marketable securities are managed by external managers within the guidelines of the Company’s
investment policy. The Company’s investment policy addresses the level of credit exposure by limiting concentration in
any one corporate issuer and establishing a minimum allowable credit rating. To manage its credit risk exposure, the
Company maintains its U.S. portfolio of cash equivalents and marketable securities in fixed income securities
denominated and payable in U.S. dollars. Permissible investments of fixed income securities include obligations of the
U.S. government and its agencies, money market instruments including commercial paper and negotiable certificates of
deposit, and highly rated corporate debt obligations and money market funds.
Cash Equivalents
Cash equivalents that are readily convertible to cash are stated at cost, which approximates fair value. The Company
considers all highly liquid investments purchased with an original maturity of three months or less to be cash
equivalents.
Restricted Cash
Restricted cash consists of cash balances held as security in connection with a letter of credit related to the
Company’s facility lease entered into in March 2017, as subsequently amended. The Company’s letter of credit balance
was $0.2 million at December 31, 2024, 2023 and 2022 pursuant to the terms of the facility lease.
Cash as Reported in Consolidated Statements of Cash Flows
Cash as reported in the consolidated statements of cash flows includes the aggregate amounts of cash and cash
equivalents and the restricted cash as presented on the consolidated balance sheets.
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Cash as reported in the consolidated statements of cash flows consisted of (in thousands):
December 31,
2024
2023
2022
Cash and cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
97,249
$
186,727 $
125,744
Restricted cash - noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
225
225
225
Total cash reported on consolidated statements of cash flows . . . . . . . . $
97,474
$
186,952 $
125,969
Marketable Securities
All marketable securities have been classified as “available-for-sale” and are carried at estimated fair value as
determined based upon quoted market prices or pricing models for similar securities. Management determines the
appropriate classification of its marketable securities at the time of purchase and reevaluates such designation as of each
balance sheet date. Short-term marketable securities have maturities greater than three months but not longer than 365
days as of the balance sheet date. Long-term marketable securities have maturities of 365 days or longer as of the
balance sheet date. Unrealized gains and losses are excluded from earnings and are reported as a component of
comprehensive income (loss). Realized gains and losses, if any, on available-for-sale securities are included in interest
income. The cost of securities sold is based on the specific-identification method. Interest on marketable securities is
included in interest income.
Fair Value of Financial Instruments
Fair value accounting is applied to all financial assets and liabilities that are recognized or disclosed at fair value in
the consolidated financial statements on a recurring basis (at least annually). The carrying amount of the Company’s
financial instruments, including cash equivalents, receivables from its collaboration partner, accounts payable, payables
to its collaboration partner and accrued expenses and other payables approximate fair value due to their short-term
maturities. See Note 4 to the Consolidated Financial Statements for additional information regarding the fair value of the
Company’s other financial assets and liabilities.
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 2016-13, Financial Instruments - Credit Losses (Topic 326), 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.
Property and Equipment
Property and equipment are stated at cost, net of accumulated depreciation. Depreciation is computed using the
straight-line method over the estimated useful lives of the assets, ranging from three to five years. Leasehold
improvements are amortized over the shorter of the lease term or the estimated useful lives of the assets. Maintenance
and repairs are charged to expense as incurred. When assets are retired or otherwise disposed of, the cost and
accumulated depreciation are removed from the consolidated balance sheet and any resulting gain or loss is reflected in
operations in the period realized.
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Leases
The Company determines if an arrangement is a lease at inception. Pursuant to Accounting Standards Codification
Topic 842, Leases (“ASC Topic 842”), operating leases are included in operating lease right-of-use (“ROU”) asset,
operating lease liability, and noncurrent operating lease liability on the consolidated balance sheets. Operating lease
ROU asset and operating lease liability are recognized based on the net present value of the future minimum lease
payments over the lease term at commencement date. If the Company’s leases do not provide an implicit rate, the
Company uses its incremental borrowing rate based on information available at the commencement date in determining
the present value of future payments. The operating lease ROU asset also includes any lease payments made and
excludes lease incentives and initial direct costs incurred. Lease terms include options to extend or terminate the lease
when it is reasonably certain that the Company will exercise that option. Lease expense for minimum lease payments is
recognized on a straight-line basis over the lease term.
The Company records tenant improvement allowances as a reduction to the ROU asset with the impact of the
decrease recognized prospectively over the remaining lease term. The leasehold improvements are amortized over the
shorter of their useful life or the remaining term of the lease.
Impairment of Long-Lived Assets
The Company reviews long-lived assets, primarily comprised of property, equipment and operating lease ROU
assets, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may
not be recoverable. Recoverability is measured by comparison of the carrying amount to the future net cash flows which
the assets are expected to generate. If such assets are considered to be impaired, the impairment to be recognized is
measured as the amount by which the carrying amount of the assets exceeds the projected discounted future net cash
flows arising from the asset. There have been no such impairments of long-lived assets for any of the periods presented.
Comprehensive Income (Loss)
Comprehensive income (loss) includes net income (loss) as well as other changes in stockholders’ equity that result
from transactions and economic events other than those from stockholders. The Company’s foreign currency translation
and unrealized gains and losses on available-for-sale securities represent the only components of other comprehensive
income (loss) that are excluded from reported net income (loss) and that are presented in the consolidated statements of
comprehensive income (loss).
Income Taxes
The Company uses the asset and liability method to account for income taxes in accordance with the authoritative
guidance for income taxes. Under this method, deferred tax assets and liabilities are determined based on future tax
consequences attributable to differences between the financial statement carrying amounts of existing assets and
liabilities and their respective tax bases, and tax loss and credit carryforwards. Deferred tax assets and liabilities are
measured using enacted tax rates applied to taxable income in the years in which those temporary differences are
expected to be recovered or settled. The effect on deferred tax assets and liabilities of a change in tax rates is recognized
in the period that includes the enactment date. A valuation allowance is established when necessary to reduce deferred
tax assets to the amount expected to be realized.
The Company recognizes the effect of income tax positions only if those positions are more likely than not of being
sustained. Recognized income tax positions are measured at the largest amount that is greater than a 50% likelihood of
being realized. Changes in recognition or measurement are reflected in the period in which the change in judgment
occurs. The Company records interest and penalties related to unrecognized tax benefits in income tax expense. To date,
there have been no interest or penalties recorded in relation to unrecognized tax benefits.
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Collaborative Arrangements
The Company analyzes its collaborative arrangements to assess whether such arrangements involve joint operating
activities performed by parties that are both active participants in the activities and exposed to significant risks and
rewards and therefore are within the scope of Accounting Standards Codification Topic 808, Collaborative
Arrangements (“ASC Topic 808”). For collaborative arrangements that contain multiple elements, the Company
determines which units of account are deemed to be within the scope of ASC Topic 808 and which units of account are
more reflective of a vendor-customer relationship and therefore are within the scope of Accounting Standards
Codification Topic 606, Revenue from Contracts with Customers (“ASC Topic 606”). For units of account that are
accounted for pursuant to ASC Topic 808, an appropriate recognition method is determined and applied consistently,
either by analogy to appropriate accounting literature or by applying a reasonable accounting policy election. For
collaborative arrangements that are within the scope of ASC Topic 808, the Company evaluates the income statement
classification for presentation of amounts due to or owed from other participants associated with multiple units of
account in a collaborative arrangement based on the nature of each activity. Payments or reimbursements that are the
result of a collaborative relationship instead of a customer relationship, such as co-development and co-
commercialization activities, are recorded as increases or decreases to research and development expense or general and
administrative expense, as appropriate.
Revenue Recognition
Under ASC Topic 606, the Company recognizes revenue when its customer obtains control of promised goods or
services, in an amount that reflects the consideration which the Company expects to receive in exchange for those goods
or services. To determine revenue recognition for arrangements that the Company determines are within the scope of
ASC Topic 606, the Company performs the following five steps: (i) identify the contract(s) with a customer; (ii) identify
the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the
performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies a performance
obligation. The Company applies the five-step model to contracts when it is probable that the Company will collect the
consideration it is entitled to in exchange for the goods or services it transfers to the customer. At contract inception, the
Company assesses the goods or services promised within each contract, determines those that are performance
obligations, and assesses whether each promised good or service is distinct. The Company then recognizes as revenue
the amount of the transaction price that is allocated to the respective performance obligations when (or as) the
performance obligations are satisfied. The Company constrains its estimate of the transaction price up to the amount (the
“variable consideration constraint”) that a significant reversal of recognized revenue is not probable.
Licenses of intellectual property: If a license to the Company’s intellectual property is determined to be distinct
from the other performance obligations identified in an arrangement, the Company recognizes revenue from non-
refundable, upfront fees allocated to the license when the license is transferred to the customer and the customer is able
to use and benefit from the license. For licenses that are bundled with other promises, the Company utilizes judgment to
assess the nature of the combined performance obligation to determine whether the combined performance obligation is
satisfied over time or at a point in time and, if over time, the appropriate method of measuring proportional performance
for purposes of recognizing revenue from non-refundable, upfront fees. The Company evaluates the measure of
proportional performance each reporting period and, if necessary, adjusts the measure of performance and related
revenue recognition.
Milestone payments: At the inception of each arrangement or amendment that includes development, regulatory or
commercial milestone payments, the Company evaluates whether the milestones are considered probable of being reached
and estimates the amount to be included in the transaction price. ASC Topic 606 suggests two alternatives to use when
estimating the amount of variable consideration: the expected value method and the most likely amount method. Under the
expected value method, an entity considers the sum of probability-weighted amounts in a range of possible consideration
amounts. Under the most likely amount method, an entity considers the single most likely amount in a range of possible
consideration amounts. Whichever method used should be consistently applied throughout the life of the contract;
however, it is not necessary for the Company to use the same approach for all contracts. The Company expects to use the
most likely amount method for development and regulatory milestone payments. If it is probable that a significant
revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone
payments that are not within the control of the Company or the licensee, such as regulatory approvals, are not considered
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probable of being achieved until those approvals are received. If there is more than one performance obligation, the
transaction price is then allocated to each performance obligation on a relative stand-alone selling price basis. The
Company recognizes revenue as or when the performance obligations under the contract are satisfied. At the end of each
subsequent reporting period, the Company re-evaluates the probability or achievement of each such milestone and any
related constraint, and if necessary, adjusts its estimates of the overall transaction price. Any such adjustments are
recorded on a cumulative catch-up basis, which would affect revenues and earnings in the period of adjustment.
Any potential milestone payments that the Company determines are not associated with performance obligations as
defined under the contract are excluded from the transaction price and are recognized as the triggering event occurs.
Royalties: For arrangements that include sales-based royalties, including milestone payments based on the level of
sales, where the license is deemed to be the predominant item to which the royalties relate, the Company recognizes
revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of
the royalty has been allocated has been satisfied (or partially satisfied).
Upfront payments and fees are recorded as deferred revenue upon receipt or when due and may require deferral of
revenue recognition to a future period until the Company performs its obligations under these arrangements. Amounts
payable to the Company are recorded as accounts receivable when the Company’s right to consideration is
unconditional. Amounts payable to the Company and not yet billed to the collaboration partner are recorded as contract
assets. The Company does not assess whether a contract has a significant financing component if the expectation at
contract inception is such that the period between payment by the customer and the transfer of the promised goods or
services to the customer will be one year or less.
Contractual cost sharing payments made to a customer or collaboration partner are accounted for as a reduction to
the transaction price if such payments are not related to distinct goods or services received from the customer or
collaboration partner.
Contracts may be amended to account for changes in contract specifications and requirements. Contract
modifications exist when the amendment either creates new, or changes existing, enforceable rights and obligations.
When contract modifications create new performance obligations and the increase in consideration approximates the
standalone selling price for goods and services related to such new performance obligations, as adjusted for specific facts
and circumstances of the contract, the modification is considered to be a separate contract. If a contract modification is
not accounted for as a separate contract, the Company accounts for the promised goods or services not yet transferred at
the date of the contract modification (the remaining promised goods or services) prospectively, as if it were a termination
of the existing contract and the creation of a new contract, if the remaining goods or services are distinct from the goods
or services transferred on or before the date of the contract modification. The Company accounts for a contract
modification as if it were a part of the existing contract if the remaining goods or services are not distinct and, therefore,
form part of a single performance obligation that is partially satisfied at the date of the contract modification. In such
case the effect that the contract modification has on the transaction price, and on the entity’s measure of progress toward
complete satisfaction of the performance obligation, is recognized as an adjustment to revenue (either as an increase in
or a reduction of revenue) at the date of the contract modification (the adjustment to revenue is made on a cumulative
catch-up basis).
Research and Development Costs
Research and development costs are expensed as incurred, unless there is an alternate future use in other research
and development projects or otherwise. Research and development costs include salaries and benefits, stock-based
compensation expense, laboratory supplies and facility-related overhead, outside contracted services, including clinical
trial costs, manufacturing and process development costs for clinical and pre-clinical materials, research costs,
development milestone payments under license and collaboration agreements, and other consulting services.
The Company accrues for estimated costs of research and development activities conducted by third-party service
providers, which include the conduct of pre-clinical and non-clinical studies, clinical trials and contract manufacturing
activities. The Company records the estimated costs of research and development activities based upon the estimated
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services provided but not yet invoiced and includes these costs in accrued expenses and other payables in the
consolidated balance sheets and within research and development expense in the consolidated statements of operations.
The Company accrues for these costs based on various factors such as estimates of the work completed and in
accordance with agreements established with its third-party service providers. As actual costs become known, the
Company adjusts its accrued liabilities. The Company has not experienced any material differences between accrued
liabilities and actual costs incurred. However, the status and timing of actual services performed, the number of patients
enrolled, the rate of patient enrollment and the number and location of sites activated may vary from the Company’s
estimate and may result in adjustments to research and development expenses in future periods. Changes in these
estimates that result in material changes to the Company’s accruals could materially affect the Company’s results of
operations.
Research and Development Tax Incentive
The Company is eligible under the AusIndustry research and development tax incentive program to obtain either a
refundable tax offset or a nonrefundable tax offset from the Australian Taxation Office. The refundable cash offset is
available to the Company on the basis of specific criteria with which the Company must comply. Specifically, the
Company must have aggregated annual turnover of less than AUD 20.0 million and cannot be controlled by income tax
exempt entities. The refundable tax offset is recognized as a reduction to research and development expense when the
right to receive has been attained and funds are considered to be collectible. The Company may alternatively be eligible
for a nonrefundable tax offset in years when the aggregated annual turnover exceeds AUD 20.0 million. The Company
evaluates its eligibility under tax incentive programs as of each balance sheet date and makes accrual and related
adjustments based on the most current and relevant data available. Unused nonrefundable tax offsets may be carried
forward to future years, subject to satisfying specific criteria.
Stock-based Compensation
The Company has granted stock options, restricted stock units (“RSUs”) and performance share units (“PSUs”).
Stock-based compensation expense associated with stock options is based on the estimated grant date fair value
using the Black-Scholes valuation model, which requires the use of subjective assumptions related to expected stock
price volatility, option term, risk-free interest rate and dividend yield. The Company recognizes compensation expense
over the vesting period of the awards that are ultimately expected to vest.
Stock-based compensation expense associated with RSUs is based on the fair value of the Company’s common
stock on the grant date, which equals the closing market price of the Company’s common stock on the grant date. For
RSUs, the Company recognizes compensation expense over the vesting period of the awards that are ultimately expected
to vest. PSUs allow the recipients of such awards to earn fully vested shares of the Company’s common stock upon the
achievement of pre-established performance objectives. 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 market price of the
Company’s common stock on the grant date and is recognized when the performance objective is expected to be
achieved. The Company evaluates the probability of achieving the performance criteria on a quarterly basis. The
cumulative effect on current and prior periods of a change in the estimated number of PSUs expected to be earned is
recognized as compensation expense or as reduction of previously recognized compensation expense in the period of the
revised estimate.
The Company recognizes forfeitures of stock-based awards as they occur.
If stock-based awards are granted in contemplation of or shortly before a planned release of material nonpublic
information, and such information is expected to result in a material increase in the Company’s share price, the
Company considers whether an adjustment to the observable market price is required when estimating fair values.
Net Income (Loss) per Share
The computation of basic net income (loss) per share of common stock is based on the weighted-average number of
shares of common stock outstanding during each period. The computation of diluted net income (loss) per share of
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common stock is based on the weighted-average number of shares of common stock outstanding during the period plus,
when their effect is dilutive, incremental shares consisting of shares subject to stock options, RSUs, PSUs, the Company’s
employee stock purchase plan (“ESPP”), and warrants. In accordance with Accounting Standards Codification Topic
260, Earnings Per Share (“ASC Topic 260”), outstanding Exchange and Pre-Funded Warrants (as defined in Note 10.
Stockholders’ Equity) are included in the computation of weighted-average shares of common stock, basic because the
exercise price was negligible, and they were fully vested and exercisable after the original issuance date.
In periods when the Company has net income, the dilutive effect of all potentially outstanding shares is computed using
the treasury stock method. In periods in which the Company reports a net loss, all common stock equivalents are deemed
anti-dilutive such that basic net loss per share of common stock and diluted net loss per share of common stock are equal.
Recently Adopted Accounting Pronouncements
In August 2020, the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update
No. 2020-06, Debt - Debt with Conversion and Other Options (Subtopic 470-20) and Derivatives and Hedging - Contracts
in Entity’s Own Equity (Subtopic 815-40): Accounting for Convertible Instruments and Contracts in an Entity’s Own
Equity (“ASU 2020-06”), which simplified accounting for convertible instruments by removing major separation models
required under current GAAP. ASU 2020-06 also removed certain settlement conditions that were required for equity-
linked contracts to qualify for the derivative scope exception, and it simplified the diluted earnings per share calculation in
certain areas. ASU 2020-06 is effective for the Company beginning January 1, 2024. The adoption of this guidance did not
have a material impact on the Company’s consolidated financial statements or related disclosures.
In November 2023, the FASB issued Accounting Standards Update No. 2023-07 Segment Reporting (Topic 280) –
Improvements to Reportable Segment Disclosures (“ASU 2023-07”), which requires public entities to disclose incremental
segment information on an annual and interim basis. ASU 2023-07 requires all public entities, including public entities with
a single reportable segment, to provide one or more measures of segment profit or loss used by the chief operating decision
maker to allocate resources and assess performance. Additionally, the guidance requires disclosures of significant segment
expenses and other segment items as well as incremental qualitative disclosures. ASU 2023-07 is effective for the Company
for fiscal years beginning on January 1, 2024, and interim periods within fiscal years beginning on January 1, 2025. The
Company currently operates as one reportable segment and the impact of the adoption of this standard was limited to certain
enhanced disclosures in the consolidated financial statements. See Note 15 to these consolidated financial statements for
disclosures related to the adoption of this guidance.
Recently Issued Accounting Pronouncements Not Yet Adopted as of December 31, 2024
In December 2023, the FASB issued Accounting Standards Update No. 2023-09 Income Taxes (Topic 740) –
Improvements to Income Tax Disclosures (“ASU 2023-09”), which requires public business entities to disclose specific
categories in the income tax rate reconciliation annually and provide additional information for reconciling items that meet
a qualitative threshold. ASU 2023-09 also requires that entities disclose annually additional information about income taxes
paid and disaggregated information for certain items. The standard can be applied prospectively or retrospectively. ASU
2023-09 is effective for the Company beginning on January 1, 2025. The Company will adopt this guidance in its 2025
Annual Report on Form 10-K but does not expect the adoption of this guidance to have a material impact on its financial
position, results of operations or cashflows.
In November 2024, the FASB issued Accounting Standards Update No. 2024-03 Income Statement – Reporting
Comprehensive Income – Expense Disaggregation Disclosures (Subtopic 220-40): Disaggregation of Income Statement
Expenses (“ASU 2024-03”), which requires detailed disclosures about specified categories of expenses (including employee
compensation, depreciation, and amortization) included in certain expense captions presented on the face of the income
statement. ASU 2024-03 is effective for the Company or fiscal years beginning on January 1, 2027, and for interim periods
within fiscal years beginning on January 1, 2028. Early adoption is permitted. The guidance may be applied either
(1) prospectively to financial statements issued for reporting periods after the effective date of ASU 2024-03 or
(2) retrospectively to all prior periods presented in the financial statements. The Company does not expect the adoption of
this guidance to have a material effect on its consolidated financial statements and continues to evaluate disclosure
presentation alternatives.
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Note 3. License and Collaboration Agreements
Takeda Collaboration Agreement
In January 2024, the Company entered into the Takeda Collaboration Agreement, which became effective in
March 2024.
Pursuant to the Takeda Collaboration Agreement, the Company and Takeda are jointly developing and
commercializing rusfertide and potentially other specified second-generation injectable hepcidin mimetic compounds
(the “Licensed Products”) in the United States (the “Profit-Share Territory”). Takeda is solely and exclusively
responsible for the development and commercialization of the Licensed Products in all other countries (the “Takeda
Territory”). The Company and Takeda share the costs of the development, manufacture and commercialization activities
for the Licensed Products in the Profit-Share Territory, provided that (i) the Company leads, and is solely responsible for
its costs associated with, completion of the ongoing Phase 3 VERIFY program evaluating rusfertide for the treatment of
PV as well as associated U.S. regulatory activities; (ii) Takeda leads, and is solely responsible for its costs associated
with, pre-commercialization activities related to rusfertide in the Profit-Share Territory; and (iii) Takeda leads
commercialization of rusfertide in the Profit-Share Territory, with the Company holding an option to co-detail. Takeda is
solely responsible for all costs for the development, manufacture and commercialization of the Licensed Products in the
Takeda Territory. The Company granted Takeda a non-transferable, sublicensable and, except for certain specified
exceptions, exclusive license to certain intellectual property of the Company to exercise its rights and perform its
obligations under the Takeda Collaboration Agreement.
The Company received a one-time, non-refundable upfront payment of $300.0 million in April 2024. In addition,
the Company is eligible to receive additional worldwide development, regulatory and commercial milestone payments
for rusfertide of up to $330.0 million, and tiered royalties from 10% to 17% on net sales of the Licensed Products in the
Takeda Territory. The Company and Takeda also share equally in profits and losses (50% to the Company and 50% to
Takeda) for Licensed Products in the Profit-Share Territory. Takeda will book sales of the Licensed Products globally.
The Company has the right to opt-out entirely of profit- and loss-sharing in the Profit-Share Territory for rusfertide
and all other Licensed Products (the “Full Opt-out Right”) (i) during the 90-day period beginning 120 days after the
filing of an NDA with the FDA for rusfertide for PV (the “Initial Opt-out Period”); and (ii) for convenience without
receipt of the Opt-out Payment (as defined below) (generally following the Initial Opt-out Period). In addition, if the
Company does not exercise the Full Opt-out Right, the Company may opt-out of any Licensed Product other than
rusfertide on a Licensed Product-by-Licensed Product basis (each, a “Partial Opt-out Right” and either the Full Opt-out
Right or a Partial Opt-out right being an “Opt-out Right”). Following the Company’s exercise of an Opt-out Right, the
Company has agreed to transition applicable development and commercial activities to Takeda, and Takeda has agreed
to assume sole operational and financial responsibility for such activities in the United States.
The Takeda Collaboration Agreement provides for aggregate development, regulatory and commercial milestone
payments from Takeda to the Company for rusfertide of up to $975 million if the Company exercises the Full Opt-out
Right. In addition to these milestone payments, in the event the Company exercises the Full Opt-out Right during the
Initial Opt-out Period, the Company will receive: (i) a $200 million payment following its exercise of the Full Opt-out
Right; and (ii) an additional $200 million payment following FDA approval of the NDA for rusfertide for PV (together,
the “Opt-out Payment”). If the Company exercises an Opt-out Right, Takeda has agreed to pay the Company royalties of
14% to 29% on worldwide net sales of the Licensed Products with respect to which the Company has exercised an Opt-
out Right.
Upcoming potential development and regulatory milestones under the Takeda Collaboration Agreement include:
•
$25.0 million upon successful achievement of the primary endpoint in the Phase 3 VERIFY clinical trial
for rusfertide in PV; and
•
$50.0 million upon FDA approval of an NDA for rusfertide in PV (or $75.0 million if the Company
exercises the Full Opt-out Right).
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The Company evaluated the Takeda Collaboration Agreement and concluded that it has elements that are within the
scope of ASC Topic 606 and ASC Topic 808. As of the effective date of the Takeda Collaboration Agreement, the
Company identified two distinct performance obligations: (i) the rusfertide license delivered upon the effectiveness of
the Takeda Collaboration Agreement and (ii) certain development services to be provided prior to the Initial Opt-out
Period, including the Company’s responsibilities to complete the VERIFY Phase 3 clinical trial in PV and to file an
NDA with the FDA upon successful completion of the VERIFY trial and associated manufacturing services.
The Company determined that the initial transaction price totaled $300.0 million, comprised of the upfront payment.
The Company has excluded any future estimated milestones or royalties from this transaction price to date, all of which
are either currently constrained or subject to the sales-and usage-based royalty exception. As part of the Company’s
evaluation of this variable consideration constraint, it determined that the potential payments are contingent upon
developmental and regulatory milestones that are uncertain and are highly susceptible to factors outside of its control.
The Company allocated $254.1 million of the initial transaction price to the license and $45.9 million to the development
services based upon the relative standalone selling price of each performance obligation. The estimate of standalone
selling price for the license was determined based on discounted cash flows for the expected development and
commercialization of rusfertide and includes assumptions for forecasted revenues, development timelines and expenses,
discount rates, and probabilities of technical and regulatory success. The estimate of standalone selling price for the
development services was determined based on forecasted costs and expenses over the expected development period.
For the license of rusfertide, the Company determined that Takeda could benefit from the license at the time the license
was granted and therefore, the related performance obligation was satisfied at a point in time.
The amount allocated to the license, which represents functional intellectual property that was transferred at a point
in time, was satisfied upon transfer of the license to Takeda. The amount allocated to development services will be
recognized over time based on a measure of the Company’s efforts toward satisfying the performance obligation relative
to the total expected efforts or inputs to satisfy the performance obligation (e.g., costs incurred compared to total
budget). The Company recognized $15.3 million of revenue allocated to development services with respect to the period
from the effective date of the contract through December 31, 2024.
The Company determined that the Takeda Collaboration Agreement met the definition of a collaborative
arrangement under ASC Topic 808. Both parties are active participants in directing and carrying out the development of
the Licensed Products and both are exposed to the significant risk and rewards related to the commercial success of the
Products. If the Company does not exercise an Opt-out Right (“Company Opt-in”), the Company and Takeda would co-
detail the Licensed Products in the U.S. and share in the economic results through a profit-sharing structure. The
Company determined that development costs subsequent to the Company Opt-in date are within the scope of ASC Topic
808, which does not provide recognition and measurement guidance. As such, the Company determined that Accounting
Standards Codification Topic 730, “Research and Development” was appropriate to analogize to based on the cost-
sharing provisions of the agreement. The Company concluded that payments to or reimbursements from Takeda related
to these services will be accounted for as an increase to or reduction of research and development expense, respectively.
JNJ License and Collaboration Agreement
On July 27, 2021, the Company entered into an Amended and Restated License and Collaboration Agreement with
JNJ, formerly Janssen Biotech, Inc., which amended and restated the License and Collaboration Agreement, effective
July 13, 2017, by and between the Company and JNJ, as amended effective May 7, 2019 and November 14, 2024
(together, the “JNJ License and Collaboration Agreement”). Prior to January 1, 2023, JNJ 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. The JNJ License and Collaboration Agreement relates to the
development, manufacture and commercialization of oral IL-23 receptor antagonist drug candidates and enables JNJ to
develop collaboration compounds for multiple indications. Under the JNJ License and Collaboration Agreement, JNJ is
required to use commercially reasonable efforts to develop at least one collaboration compound for at least two
indications.
During the fourth quarter of 2023, the Company earned a $50.0 million milestone payment in connection with the
dosing of the third patient in the ICONIC-TOTAL Phase 3 clinical trial of icotrokinra (formerly JNJ-2113) in patients
with moderate-to-severe psoriasis and a $10.0 million milestone payment upon the dosing of the third patient in the
95
ANTHEM Phase 2b trial moderately-to-severely active UC. The JNJ License and Collaboration Agreement was further
amended in November 2024 to:
•
increase the milestone payment for a Phase 3 clinical trial of any licensed product for any indication
meeting its primary endpoint by $50.0 million, from $115.0 million to $165.0 million;
•
eliminate the $35.0 million milestone payment previously due for the acceptance of an NDA filing by the
FDA for use of a licensed product for any indication; and
•
eliminate the $15.0 million milestone payment previously due for the dosing of the third patient in the first
Phase 3 clinical trial of a licensed product for a second indication.
The Company earned the $165.0 million milestone payment described above during the fourth quarter of 2024. The
Company has earned a total of $337.5 million in non-refundable payments from JNJ from inception in 2017 through
December 31, 2024.
Upcoming potential development and regulatory milestones include:
•
$50.0 million upon FDA approval of an NDA in any indication;
•
$25.0 million upon the acceptance of an NDA filing by the FDA for a second indication; and
•
$45.0 million upon FDA approval of an NDA for a second indication.
Pursuant to the agreement, the Company is eligible to receive future sales milestone payments and tiered royalties
on net product sales at percentages ranging from 6% to 10%.
Revenue Recognition
For the year ended December 31, 2024, the Company recognized $434.4 million of license and collaboration
revenue. This was comprised of $269.4 million related to the Takeda Collaboration Agreement, including (i) $254.1
million allocated to the rusfertide license delivered to Takeda upon the effectiveness of the agreement in March 2024
and (ii) $15.3 million for development services provided by the Company during the period based on the cost-based
input method, and $165.0 million related to the JNJ License and Collaboration Agreement, as described above.
For the year ended December 31, 2023, the Company recognized $60.0 million of collaboration revenue related to
the JNJ License and Collaboration Agreement, which included a $50.0 million milestone payment earned in
October 2023 in connection with the dosing of the third patient in the ICONIC-TOTAL Phase 3 trial of icotrokinra in
patients with moderate-to-severe psoriasis, and a $10.0 million milestone payment earned in December 2023 upon the
dosing of the third patient in the ANTHEM Phase 2b trial for patients with UC.
For the year ended December 31, 2022, the Company recognized $26.6 million of collaboration revenue related to
the JNJ License and Collaboration Agreement, which was primarily related to the transaction price under the Restated
Agreement recognized based on proportional performance. The Company completed its performance obligation under
the collaboration as of June 30, 2022.
During the years ended December 31, 2024 and 2023, no revenue was recognized from amounts included in the
deferred revenue balance at the beginning of the year. During the year ended December 31, 2022, the Company
recognized revenue of $0.9 million from amounts included in the deferred revenue balance at the beginning of the year.
None of the costs to obtain or fulfill the contracts were capitalized.
The remaining unrecognized transaction price amount of $30.6 million related to the Takeda Collaboration
Agreement was recorded as deferred revenue on the Company’s consolidated balance sheet as of December 31, 2024
and will be recognized over time based on a measure of the Company’s efforts toward satisfying the performance
obligation relative to the total expected efforts or inputs to satisfy the performance obligation (e.g. costs incurred
compared to total budget).
96
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
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):
December 31, 2024
Level 1
Level 2
Level 3
Total
Assets:
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . $
19,563 $
— $
— $
19,563
Certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . .
—
15,835
—
15,835
U.S. Treasury and agency securities . . . . . . . . . . . . . .
—
299,217
—
299,217
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
110,832
—
110,832
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . .
—
102,705
—
102,705
Total financial assets . . . . . . . . . . . . . . . . . . . . . . . . . $
19,563 $
528,589 $
— $
548,152
December 31, 2023
Level 1
Level 2
Level 3
Total
Assets:
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . $
19,212 $
— $
— $
19,212
Certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . .
—
13,004
—
13,004
U.S. Treasury and agency securities . . . . . . . . . . . . . .
—
145,085
—
145,085
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
130,296
—
130,296
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . .
—
7,672
—
7,672
Total financial assets . . . . . . . . . . . . . . . . . . . . . . . . . $
19,212 $
296,057 $
— $
315,269
The Company’s certificates of deposit, U.S. Treasury and agency securities, including U.S. Treasury bills,
commercial paper, and corporate debt securities 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.
97
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.
Note 5. Cash Equivalents and Marketable Securities
Cash equivalents and marketable securities consisted of the following (in thousands):
December 31, 2024
Amortized
Gross Unrealized
Cost
Gains
Losses
Fair Value
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . $
19,563 $
— $
— $
19,563
Certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . .
15,820
22
(7)
15,835
U.S. Treasury and agency securities . . . . . . . . . . . . . .
299,211
429
(423)
299,217
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
110,815
28
(11)
110,832
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . .
102,714
103
(112)
102,705
Total cash equivalents and marketable securities . $
548,123 $
582 $
(553) $
548,152
Classified as:
Cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
86,236
Marketable securities - current . . . . . . . . . . . . . . . . . .
321,664
Marketable securities - noncurrent . . . . . . . . . . . . . .
140,252
Total cash equivalents and marketable securities .
$
548,152
December 31, 2023
Amortized
Gross Unrealized
Cost
Gains
Losses
Fair Value
Money market funds . . . . . . . . . . . . . . . . . . . . . . . . . . . $
19,212 $
— $
— $
19,212
Certificates of deposit . . . . . . . . . . . . . . . . . . . . . . . . . .
12,998
6
—
13,004
U.S. Treasury and agency securities . . . . . . . . . . . . . .
145,024
63
(2)
145,085
Commercial paper . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
130,351
5
(60)
130,296
Corporate debt securities . . . . . . . . . . . . . . . . . . . . . . .
7,678
—
(6)
7,672
Total cash equivalents and marketable securities . $
315,263 $
74 $
(68) $
315,269
Classified as:
Cash equivalents . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
160,379
Marketable securities - current . . . . . . . . . . . . . . . . . .
154,890
Total cash equivalents and marketable securities .
$
315,269
All of the Company’s marketable securities are classified as available-for-sale. Current marketable securities of
$321.7 million and $154.9 million held as of December 31, 2024 and 2023, respectively, had contractual maturities of
less than one year. Noncurrent marketable securities of $140.3 million held as of December 31, 2024 had contractual
maturities of at least one year but no more than two years. The Company does not intend to sell its securities that are in
an unrealized loss position, and it is not more likely than not that the Company will be required to sell its securities
before recovery of their amortized cost basis, which may be at maturity. There were no material realized gains or
realized losses on marketable securities for the periods presented. The Company evaluated securities with unrealized
losses to determine whether such losses, if any, were due to credit-related factors and determined that there were no
credit-related losses to be recognized as of December 31, 2024 and 2023.
98
Note 6. Balance Sheet Components
Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consisted of the following (in thousands):
December 31,
2024
2023
Accrued interest receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
3,242 $
256
Prepaid clinical and research related expenses . . . . . . . . . . . . . . . . . . . . . . .
1,830
649
Prepaid insurance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,159
1,410
Prepaid licenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
600
529
Other prepaid expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
649
1,040
Other receivable . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
248
76
Prepaid expenses and other current assets . . . . . . . . . . . . . . . . . . . . . . . . . . $
7,728 $
3,960
Property and Equipment, Net
Property and equipment, net consisted of the following (in thousands):
December 31,
2024
2023
Laboratory equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
6,354
$
5,323
Furniture and computer equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
1,447
1,143
Leasehold improvements . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,424
963
Total property and equipment . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,225
7,429
Accumulated depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(7,035)
(6,234)
Property and equipment, net . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
3,190
$
1,195
Depreciation expense for the years ended December 31, 2024, 2023 and 2022, was $894,000, $977,000 and
$1,032,000, respectively. As of December 31, 2024, 2023 and 2022, $47,000, $56,000 and $156,000, respectively, of the
Company’s property and equipment, net, was located in Australia. The remainder of the Company’s property and
equipment, net was located in the United States.
Accrued Expenses and Other Payables
Accrued expenses and other payables consisted of the following (in thousands):
December 31,
2024
2023
Accrued clinical and research related expenses . . . . . . . . . . . . . . . . . . . . . .
$
11,923
$
11,841
Accrued employee related expenses . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,078
6,786
Accrued professional service fees . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
618
632
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
74
99
Total accrued expenses and other payables . . . . . . . . . . . . . . . . . . . . . . . .
$
23,693
$
19,358
Note 7. Research Collaboration and License Agreement
Pursuant to a collaboration agreement between the Company and Zealand Pharma A/S (“Zealand”) entered into in
June 2012 and a related arbitration resolution agreement entered into in August 2021, the Company is obligated to pay
Zealand certain milestone and royalty payments for rusfertide. The potential future payments include: (i) up to $2.75
million in future development milestone payments; (ii) a low single digit royalty on worldwide net sales; and (iii) sales
milestones for achievement of annual net sales amounts in specified geographies.
99
See Note 9. Commitments and Contingencies – Legal Proceedings for additional information on the results of
arbitration proceedings related to this research and collaboration agreement.
Milestone payments to collaboration partners are recorded as research and development expense in the period that
the expense is incurred. No expense was recorded under this agreement for the years ended December 31, 2024, 2023 or
2022.
Note 8. Lease
The Company applies ASC Topic 842 to recognize assets and liabilities for leases with lease terms of more than 12
months on the balance sheet. The Company has elected to account for each separate lease component and non-lease
component as one single component for all lease assets. Leases with terms of 12 months or less are not recorded on the
balance sheet, and the related lease expenses are recognized on a straight-line basis over the lease term.
The Company has one operating lease agreement originally entered into in March 2017 for approximately 42,900
square feet for laboratory and office space located in Newark, California. In July 2021, the Company entered into a
second amendment to its original facility lease agreement, as amended, for 15,000 square feet of additional office space
in Newark, California.
On May 6, 2024, the Company amended its facility lease agreement (the “Amended Lease”) to extend the lease term
for its existing office and laboratory space from one to 66 months and lease approximately 17,700 rentable square feet of
additional office space, all located in Newark, California. The Company began occupying the additional space under the
Amended Lease on July 1, 2024. The Amended Lease, which expires in November 2029, provides for an agreed-upon
period of rent abatement and a tenant improvement allowance of $1.8 million. As a result of this amendment, the
Company recorded an additional right-of-use-asset and the related liability of $10.5 million.
The Company provided the landlord with a $225,000 letter of credit collateralized by restricted cash as security
deposit for the operating lease agreement. No additional security deposit was required pursuant to the Amended Lease,
and the Company is responsible for its proportional share of operating expenses and tax obligations.
Balance sheet information related to the Company’s operating lease is as follows for the periods presented (in
thousands):
December 31,
Operating Lease:
2024
2023
Operating lease right-of-use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
9,417
$
954
Operating lease liability - current . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
510
$
1,141
Operating lease liability - noncurrent . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
10,356
—
Total operating lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
10,866
$
1,141
Weighted-average remaining lease term (years) . . . . . . . . . . . . . . . . . . . .
4.9
0.4
Weighted-average discount rate . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
5.7%
10.4%
Other information related to the Company’s operating lease is as follows for the periods presented (in thousands):
Year Ended December 31,
2024
2023
2022
Operating lease cost . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,459
$
2,335
$
2,335
Short-term rent expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
51
—
—
Less: Sublease income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(34)
(137)
(123)
Total lease expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
2,476
$
2,198
$
2,212
100
Supplemental cash flow information is as follows for the periods presented (in thousands):
Year Ended December 31,
2024
2023
2022
Operating cash flow used by operating leases . . . . . . . . . . . . . . . $
2,226 $
2,743 $
2,661
New operating lease asset obtained in exchange for
operating lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
10,511 $
— $
—
Future lease payments required under lease obligations as of December 31, 2024 are as follows (in thousands):
Year Ending December 31:
Amount
2025 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
1,159
2026 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,786
2027 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,882
2028 . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,983
Thereafter . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,825
Total future minimum lease payments . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
12,635
Less: Imputed interest . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(1,769)
Present value of lease liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
10,866
Note 9. Commitments and Contingencies
Contract Service Providers
In the normal course of business, the Company enters into agreements with contract service providers to assist in the
performance of its research and development activities and clinical and commercial manufacturing activities. Subject to
the required notice periods and the Company’s obligations under binding purchase orders, the Company can elect to
discontinue the work under these agreements at any time. However, the financial terms of some of these agreements may
include non-refundable upfront payments, payments by the Company for options to acquire certain rights, contingent
obligations by the Company for potential development and regulatory milestone payments and/or sales-based milestone
payments and royalty payments. These obligations are recorded in the Company’s consolidated statements of operations
as incurred, which is generally when the corresponding events become probable. Certain payments are contingent upon
the occurrence of various future events that have a high degree of uncertainty. The Company expects to enter into
additional clinical development, contract research, clinical and commercial manufacturing, supplier and collaborative
research agreements in the future, which may require upfront payments and long-term commitments of capital resources.
Indemnification Agreements
In the ordinary course of business, the Company enters into agreements that may include indemnification
provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party
for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from
third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The
maximum potential amount of future payments the Company could be required to make under these provisions is not
determinable. The Company has also entered into indemnification agreements with its directors and officers that may
require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or
service as directors or officers to the fullest extent permitted by law. The Company carries a directors’ and officers’
insurance policy. To date, the Company has not incurred material costs to defend lawsuits or settle claims related to the
indemnification agreements. The Company believes that the fair value of these indemnification agreements is minimal
and has not accrued any amounts for the obligations.
Legal Proceedings
The Company recognizes accruals for legal actions to the extent that it concludes that a loss is both probable and
reasonably estimable. The Company accrues for the best estimate of a loss within a range; however, if no estimate in the
101
range is better than any other, it accrues the minimum amount in the range. If the Company determines that a loss is
reasonably possible and the loss or range of loss can be estimated, it discloses the possible loss.
In January 2020, the Company initiated arbitration proceedings with the International Court of Arbitration of the
International Chamber of Commerce against Zealand related to a collaboration agreement the Company and Zealand
entered into in 2012 and terminated in 2014. The agreement provides for certain post-termination payment obligations to
Zealand with respect to compounds related to the collaboration that the Company elects to further develop and meet
specified conditions. In August 2021, the Company and Zealand agreed to resolve the dispute and reached an Arbitration
Resolution Agreement. Under the Arbitration Resolution Agreement, the Company recognized $4.0 million in
development milestone payments to Zealand in the third quarter of 2021 and is obligated to pay Zealand certain
milestone and royalty payments for rusfertide. The potential future payments include (i) up to $2.75 million in future
development milestone payments, (ii) a low single digit royalty on worldwide net sales, and (iii) sales milestones for
achievement of annual net sales amounts in specific geographies.
The Company considered the outcome of these arbitration proceedings as being related to its research and
development projects; therefore, payments or milestone payments were recorded as research and development expenses.
Note 10. Stockholders’ Equity
Shares of Common Stock Authorized for Issuance
At the Company’s 2024 Annual Meeting of Stockholders held on June 20, 2024, the Company’s stockholders
approved an amendment to the Company’s Amended and Restated Certificate of Incorporation (the “Certificate of
Incorporation”) to increase the number of authorized shares of the Company’s common stock from 90,000,000 to
180,000,000, which also has the effect of increasing the total number of authorized shares from 100,000,000 to
190,000,000 (the “Amendment”). On June 21, 2024, the Company filed a Certificate of Amendment to the Certificate of
Incorporation with the Secretary of State of the State of Delaware to effect the Amendment, which became effective
immediately upon such filing.
Public Offering
In April 2023, the Company completed an underwritten public offering of 5,000,000 shares of its common stock at a
public offering price of $20.00 per share and issued an additional 750,000 shares of common stock at a price of $20.00
per share following the underwriters’ exercise of their option to purchase additional shares. Net proceeds, after deducting
underwriting commissions and offering costs paid by the Company, were $107.8 million.
ATM Offering
In August 2022, the Company entered into an Open Market Sale AgreementSM , pursuant to which the Company
may offer and sell up to $100.0 million shares of its common stock from time to time in “at-the-market” offerings (the
“2022 ATM Facility”). During the year ended December 31, 2023, the Company sold 1,749,199 shares of its common
stock under the 2022 ATM Facility for net proceeds of $24.3 million, after deducting issuance costs. There were no sales
of the Company’s common stock under the 2022 ATM Facility during the years ended December 31, 2024 and 2022.
Exchange Warrants
In December 2018, the Company entered into an exchange agreement (the “Exchange Agreement”) with an investor
and its affiliates (the “Exchanging Stockholders”), pursuant to which the Company exchanged an aggregate of 1,000,000
shares of the Company’s common stock, par value $0.00001 per share, owned by the Exchanging Stockholders for pre-
funded warrants (the “Exchange Warrants”) to purchase an aggregate of 1,000,000 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 Exchange Warrants), with an exercise price of $0.00001 per share. The Exchange
Warrants expired ten years from the date of issuance. The Exchange Warrants were exercisable at any time prior to
expiration except that the Exchange Warrants could not be exercised by the Exchanging Stockholders if, after giving
102
effect thereto, the Exchanging Stockholders would beneficially own more than 9.99% of the Company’s common stock,
subject to certain exceptions. In accordance with Accounting Standards Codification Topic 505, Equity, the Company
recorded the retirement of the common stock exchanged as a reduction of common stock shares outstanding and a
corresponding debit to additional paid-in-capital at the fair value of the Exchange Warrants on the issuance date. The
Exchange Warrants met the criteria for equity classification and the fair value of the Exchange Warrants was recorded as
a credit to additional paid-in capital and was not subject to remeasurement. The Company determined that the fair value
of the Exchange Warrants was substantially similar to the fair value of the retired shares on the issuance date due to the
negligible exercise price for the Exchange Warrants. During the year ended December 31, 2022, the remaining Exchange
Warrants to purchase 400,000 shares of the Company’s common stock were net exercised, resulting in the issuance of
399,997 shares of common stock. As of December 31, 2024, there were no outstanding Exchange Warrants.
Pre-Funded Warrants
In August 2018, the Company entered into a Securities Purchase Agreement with certain accredited investors (each,
an “Investor” and, collectively, the “Investors”), pursuant to which the Company sold an aggregate of 2,750,000 shares
of its common stock at a price of $8.00 per share for aggregate net proceeds of $21.7 million, after deducting offering
expenses payable by the Company. In 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.
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 met the criteria for equity classification and the net proceeds
from the transaction were recorded as a credit to additional paid-in capital. In accordance with ASC Topic 260,
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. During the year ended
December 31, 2024, Pre-Funded Warrants to purchase 1,205,252 shares were net exercised, resulting in the issuance of
1,205,225 shares of common stock. As of December 31, 2024, Pre-Funded Warrants to purchase 1,500,000 shares of
common stock remained outstanding.
103
Note 11. Equity Plans
Equity Incentive Plan
In May 2007, the Company established the 2007 Stock Option and Incentive Plan (“2007 Plan”) which provided for
the granting of stock options to employees and consultants of the Company. Options granted under the 2007 Plan were
either incentive stock options (“ISOs”) or nonqualified stock options (“NSOs”). ISOs were granted only to Company
employees. NSOs were granted to Company employees, non-employee members of the Company’s Board of Directors
(“Board”) and consultants. Options under the 2007 Plan have a term of ten years and generally vested over a four-year
period.
In July 2016, the Company’s Board and stockholders approved the 2016 Equity Incentive Plan (“2016 Plan”) to
replace the 2007 Plan. Under the 2016 Plan, 1,200,000 shares of the Company’s common stock were initially reserved
for the issuance of stock options, restricted stock units and other awards to employees, directors and consultants.
Pursuant to the “evergreen” provision contained in the 2016 Plan, the number of shares reserved for issuance under the
2016 Plan automatically increases on January 1 of each year, starting on January 1, 2017 and continuing through (and
including) January 1, 2026, by 4% of the total number of shares of the Company’s capital stock outstanding on
December 31 of the preceding fiscal year, or a lesser number of shares determined by the Company’s Board. Upon
adoption of the 2016 Plan, no additional stock awards were issued under the 2007 Plan. Options granted under the 2007
Plan that were outstanding on the date the 2016 Plan became effective remain subject to the terms of the 2007 Plan. The
number of options available for grant under the 2007 Plan was ceased and the number was added to the common stock
reserved for issuance under the 2016 Plan. As of December 31, 2024, approximately 1,109,629 shares of common stock
were available for issuance under the 2016 Plan.
The 2016 Plan is administered by the Board, or a committee appointed by the Board, which determines the types of
awards to be granted, including the number of shares subject to the awards, the exercise price and the vesting schedule.
Options granted under the 2016 Plan expire no later than ten years from the date of grant. The exercise price of each
option may not be less than 100% of the fair market value of the common stock at the date of grant. Options may be
granted to stockholders possessing more than 10% of the total combined voting power of all classes of stocks of the
Company at an exercise price at least 110% of the fair value of the common stock at the date of grant and the options are
not exercisable after the expiration of 10 years from the date of grant. Employee stock options generally vest over a
period of approximately four years. Employee RSUs generally vest over a period of approximately three or four years.
Non-employee Board director initial stock options generally vest monthly over a period of approximately three years.
Non-employee Board director annual refresher options and RSUs generally vest over a period of approximately one
year.
Inducement Plan
In May 2018, the Company’s Board approved the 2018 Inducement Plan, as subsequently amended. The 2018
Inducement Plan is a non-stockholder approved stock plan, under which awards options and restricted stock unit
awards to persons that were not previously employees or directors of the Company, or following a bona fide period of
non-employment, as an inducement material to such persons entering into employment with the Company, within the
meaning of Rule 5635(c)(4) of the Nasdaq Listing Rules. The 2018 Inducement Plan is administered by the Board or the
Compensation Committee of the Board, which determines the types of awards to be granted, including the number of
shares subject to the awards, the exercise price and the vesting schedule. Awards granted under the 2018 Inducement
Plan expire no later than ten years from the date of grant. Employee stock options granted under the 2018 Inducement
Plan generally vest over a period of approximately four years. As of December 31, 2024, approximately 645,858 shares
of common stock were available for issuance under the 2018 Inducement Plan, as amended.
104
Stock Options
Stock option activity under the Company’s equity incentive and inducement plans is set forth below:
Weighted-
Weighted-
Average
Average
Exercise
Remaining
Aggregate
Options
Price Per
Contractual
Intrinsic
Outstanding
Share
Life (years)
Value (1)
(in millions)
Balances at December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . . .
7,922,043 $
17.21
Options granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,068,570
24.39
Options exercised . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . (1,766,092)
14.33
Options forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(407,365)
27.57
Balances at December 31, 2024 . . . . . . . . . . . . . . . . . . . . . . . . .
7,817,156 $
19.22
6.89 $
152.9
Options exercisable – December 31, 2024 . . . . . . . . . . . . .
4,877,064 $
18.60
5.96
98.5
Options vested and expected to vest – December 31, 2024 .
7,817,156 $
19.22
6.89 $
152.9
(1) The aggregate intrinsic values were calculated as the difference between the exercise price of the options and the
closing price of the Company’s common stock on December 31, 2024. The calculation excludes options with an
exercise price higher than the closing price of the Company’s common stock on December 31, 2024.
The aggregate intrinsic value of options exercised was $40.7 million, $3.3 million and $5.4 million for the years
ended December 31, 2024, 2023 and 2022, respectively.
During the years ended December 31, 2024, 2023 and 2022, the estimated weighted-average grant-date fair value of
common stock underlying options granted was $20.07, $10.81 and $17.52 per share, respectively.
For the years ended December 31, 2024, 2023 and 2022, the aggregate fair value of stock options that vested during
the year was $30.3 million, $25.9 million and $23.3 million, respectively.
Stock Options Valuation Assumptions
The fair value of stock option awards was estimated at the date of grant using a Black-Scholes option-pricing model
with the following assumptions:
Year Ended December 31,
2024
2023
2022
Expected term (in years) . . . . . . . . . . . . . . . . . . . . . .
5.27- 6.08
5.27- 6.08
5.27- 6.08
Expected volatility. . . . . . . . . . . . . . . . . . . . . . . . . . .
96.6% - 106.2%
105.7% - 110.1%
96.3% - 101.7%
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . .
3.46% - 4.71%
3.57% - 4.86%
1.64% - 4.23%
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
In determining the fair value of the options granted, the Company uses the Black-Scholes option-pricing model and
assumptions discussed below. Each of these inputs is subjective, and generally requires judgment to determine.
Expected Term—The Company’s expected term represents the period that the Company’s options granted are
expected to be outstanding and is determined using the simplified method (based on the mid-point between the vesting
date and the end of the contractual term). The Company has limited historical exercise information to develop reasonable
expectations about future exercise patterns and post-vesting employment termination behavior for its stock option grants.
Expected Volatility— Beginning January 1, 2023, the Company’s expected volatility is estimated based upon the
volatility of the Company’s stock price over a period equal to the expected term of the stock option grants. For the year
ended December 31, 2022, the Company’s expected volatility was estimated based upon a mix of 25% of the average
105
volatility for comparable publicly traded biopharmaceutical companies over a period equal to the expected term of the
stock option grants and 75% of the volatility of the Company’s stock price since its initial public offering in
August 2016.
Risk-Free Interest Rate—The risk-free interest rate is based on the U.S. Treasury zero coupon issues in effect at the
time of grant for periods corresponding with the expected term of the option.
Expected Dividend—The Company has never paid dividends on its common stock and has no plans to pay
dividends on its common stock. Therefore, the Company used an expected dividend yield of zero.
RSUs
An RSU is an agreement to issue shares of the Company’s common stock at the time of vesting. RSUs generally
vest annually in equal installments over three or four years on approximately the anniversary of the grant date. RSUs
granted to certain non-executive employees in 2022 vested 100% on approximately the first anniversary of the grant
date.
RSU activity under the Company’s equity incentive plans is set forth below:
Weighted
Average
Number of
Grant Date
Shares
Fair Value
Unvested RSUs at December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . .
664,491
$
18.40
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
564,465
23.56
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(316,748)
18.93
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(67,500)
23.31
Unvested RSUs at December 31, 2024 . . . . . . . . . . . . . . . . . . . . . . . . . .
844,708
$
21.03
Stock-based compensation expense associated with RSUs is based on the fair value of the Company’s common
stock on the grant date, which equals the closing market price of the Company’s common stock on the grant date. For
RSUs, the Company recognizes compensation expense over the vesting period of the awards that are ultimately expected
to vest.
For the years ended December 31, 2024, 2023 and 2022, the aggregate fair value of RSUs that vested during the
year was $6.0 million, $5.9 million and $1.7 million, respectively.
PSUs
PSU activity under the Company’s equity incentive plans is set forth below:
Weighted
Average
Number of
Grant Date
Shares
Fair Value
Unvested PSUs at December 31, 2023 . . . . . . . . . . . . . . . . . . . . . . . . . .
75,500
$
23.57
Granted . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Vested . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Forfeited . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
Unvested PSUs at December 31, 2024 . . . . . . . . . . . . . . . . . . . . . . . . . .
75,500
$
23.57
The terms of the PSUs provide for 100% of shares to be earned based on the achievement of certain pre-determined
performance objectives, subject to the participant’s continued employment. The PSUs will vest, if at all, upon
certification by the Compensation Committee of the Board of the actual achievement of the performance objectives,
subject to specified change of control exceptions.
106
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 market price of the Company’s common stock on the grant date. The
Company recognizes compensation expense over the vesting period of the awards that are ultimately expected to vest
when the achievement of the related performance objective becomes probable.
During the year ended December 31, 2023, the Compensation Committee of the Board certified the actual
achievement of performance objectives related to certain PSUs. As a result, recipients earned a total of 114,000 shares of
common stock. The total fair market value of the PSUs at vest date during the year ended December 31, 2023
was $3.0 million. No PSUs vested during the years ended December 31, 2024 and 2022.
The total fair value of grant date fair value of unvested PSUs outstanding as of December 31, 2024 was $1.8
million. As of December 31, 2024, the achievement of the related performance objectives was deemed not probable and,
accordingly, no stock-based compensation expense for unvested PSUs has been recognized as of December 31, 2024.
Employee Stock Purchase Plan
In July 2016, the Company’s Board and stockholders approved the 2016 Employee Stock Purchase Plan (“2016
ESPP”). The 2016 ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Internal
Revenue Code of 1986, as amended, and is administered by the Company’s Board and the Compensation Committee of
the Board. Under the 2016 ESPP, 150,000 shares of the Company’s common stock were initially reserved for employee
purchases of the Company’s common stock. Pursuant to the “evergreen” provision contained in the 2016 ESPP, the
number of shares reserved for issuance automatically increases on January 1 of each year, starting on January 1, 2017
and continuing through (and including) January 1, 2026 by the lesser of (i) 1% of the total number of shares of common
stock outstanding on December 31 of the preceding fiscal year (ii) 300,000 shares, or (iii) such other number of shares
determined by the Board.
The 2016 ESPP allows eligible employees to purchase shares of the Company’s common stock at a discount
through payroll deductions of up to 15% of their eligible compensation. At the end of each offering period, eligible
employees are able to purchase shares at 85% of the lower of the fair market value of the Company’s common stock at
the beginning of the offering period or at the end of each applicable purchase period. During the year ended
December 31, 2024, a total of 59,254 shares of common stock were issued under the 2016 ESPP, and approximately
1,700,648 shares of common stock were available for issuance as of December 31, 2024.
The fair value of the rights granted under the 2016 ESPP was calculated using the Black-Scholes option-pricing
model with the following assumptions:
Year Ended December 31,
2024
2023
2022
Expected term (in years) . . . . . . . . . . . . . . . . . . . . . .
0.50
0.50
0.50
Expected volatility . . . . . . . . . . . . . . . . . . . . . . . . . . .
48.2% - 52.6%
82.6% - 128.2%
117.5% - 128.2%
Risk-free interest rate . . . . . . . . . . . . . . . . . . . . . . . .
4.65% - 5.35%
3.56% - 5.17%
0.75% - 3.56%
Dividend yield . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
Stock-Based Compensation
Total stock-based compensation expense was as follows (in thousands):
Year Ended December 31,
2024
2023
2022
Research and development . . . . . . . . . . . . . . . . . . . . . . .
$
20,919
$
17,061
$
14,719
General and administrative . . . . . . . . . . . . . . . . . . . . . . .
16,635
12,232
9,483
Total stock-based compensation expense . . . . . . . . . .
$
37,554
$
29,293
$
24,202
107
As of December 31, 2024, total unrecognized stock-based compensation expense was approximately $56.9 million,
which the Company expects to recognize over a weighted-average period of approximately 2.3 years.
Note 12. 401(k) Plan
The Company has a retirement and savings plan under Section of 401(k) of Internal Revenue Code (the
“401(k) Plan”) covering all U.S. employees. The 401(k) Plan allows employees to make pre- and post-tax contributions
up to the maximum allowable amount set by the Internal Revenue Service. The Company may make contributions to this
plan at its discretion. The Company matched 50% of each employee’s contribution up to a maximum of $4,000 for the
years ended December 31, 2024, 2023 and 2022, resulting in recognized expense of approximately $0.4 million, $0.4
million and $0.3 million for the years ended December 31, 2024, 2023 and 2022, respectively.
Note 13. Income Taxes
The following table presents domestic and foreign components of net loss before income taxes (in thousands):
Year Ended December 31,
2024
2023
2022
Domestic . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
279,379
$
(76,779)
$
(124,208)
Foreign . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
29
(2,176)
(3,185)
Total net income (loss) before taxes . . . . . . . . . . . . . . . . . .
$
279,408
$
(78,955)
$
(127,393)
The federal, state and foreign components of the income tax expense are summarized as follows (in thousands):
Year Ended December 31,
2024
2023
2022
Current:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,078
$
—
$
—
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
142
—
—
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
Total current tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . .
4,220
—
—
Deferred:
Federal . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
State . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
Total deferred tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
—
—
Total income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . $
4,220
$
—
$
—
The effective tax rate of the provision for income taxes differs from the federal statutory rate as follows:
Year Ended December 31,
2024
2023
2022
Federal statutory income tax rate . . . . . . . . . . . . . . . . . . . . . .
21.0 %
21.0 %
21.0 %
State taxes, net of federal benefit . . . . . . . . . . . . . . . . . . . . . .
2.1
8.1
1.4
Tax credits . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2.9)
8.5
5.9
Foreign tax rate difference . . . . . . . . . . . . . . . . . . . . . . . . . . .
—
0.2
0.2
Change in valuation allowance . . . . . . . . . . . . . . . . . . . . . . . .
(18.2)
(34.4)
(25.8)
Other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(0.5)
(3.4)
(2.7)
Provision for income taxes . . . . . . . . . . . . . . . . . . . . . . . . . .
1.5 %
— %
— %
108
The components of the deferred tax assets are as follows (in thousands):
December 31,
2024
2023
Deferred tax assets:
Net operating loss carryforwards . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
8,876
$
70,469
Depreciation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,717
950
Accruals and other . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,246
1,430
Operating lease liability . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
2,430
265
Research and development and foreign credits . . . . . . . . . . . . . . . . . . . . . . . . .
30,852
38,759
Section 174 capitalized research and development expenditures . . . . . . . . . . .
58,630
43,841
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
11,759
10,772
Total deferred tax assets. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
117,510
166,486
Deferred tax liabilities:
Operating right-of-use asset . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,105)
(221)
Total deferred tax liabilities . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(2,105)
(221)
Valuation allowance . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(115,405)
(166,265)
Net deferred tax assets . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
—
$
—
Accounting Standards Codification Topic 740, Income Taxes, requires that the tax benefit of net operating losses,
temporary differences and credit carryforwards be recorded as an asset to the extent that management assesses that
realization is “more likely than not.” Realization of the future tax benefits is dependent on the Company’s ability to
generate sufficient taxable income within the carryforward period. Because of the Company’s recent history of operating
losses, management believes that recognition of the deferred tax assets arising from the above-mentioned future tax
benefits is currently not likely to be realized and, accordingly, has provided a valuation allowance. The valuation
allowance decreased by approximately $50.9 million during the year ended December 31, 2024, and increased by $28.1
million and $34.2 million during the years ended December 31, 2023 and 2022, respectively.
Federal and state laws impose substantial restrictions on the utilization of net operating loss and tax credit
carryforwards in the event of an ownership change for tax purposes, as defined in Section 382 of the Internal Revenue
Code. As a result of such ownership changes, the annual limitation may result in the expiration of net operating losses
and credits before utilization. The Company performed a Section 382 analysis through December 31, 2024. The
Company has experienced ownership changes in the past. The ownership changes will not result in a limitation that will
materially reduce the total amount of net operating loss carryforwards and credits that can be utilized. Subsequent
ownership changes may affect the limitation in future years.
As of December 31, 2024, the Company had $29.2 million of federal net operating loss carryforwards and $215.8
million of state net operating loss carryforwards. $5.9 million of the federal net operating loss carryforwards will begin
to expire in 2037, if not utilized, and the remaining $23.3 million have no expiration date. The state net operating loss
carryforwards will begin to expire in 2035, if not utilized.
As of December 31, 2024, the Company had $35.6 million of federal and $7.7 million of state research and
development tax credit carryforwards available to reduce future income taxes. The federal research and development tax
credits will begin to expire in 2035, if not utilized. The state research and development tax credits have no expiration
date.
As of December 31, 2024, the Company had AUD 5.7 million ($3.5 million) of Australian research and
development tax credit carryforwards available to reduce future income taxes. The Australian research and development
tax credits have no expiration date.
109
A reconciliation of the beginning and ending amount of unrecognized tax benefits is as follows (in thousands):
Year Ended December 31,
2024
2023
2022
Balance at beginning of year . . . . . . . . . . . . . . . . . . . . . . . . . . . $
28,025 $
25,295 $
33,159
Decreases based on tax positions related to prior years . . . . .
(902)
—
(10,779)
Increases based on tax positions related to current year . . . .
3,450
2,730
2,915
Balance at end of year . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
30,573 $
28,025 $
25,295
At December 31, 2024, the Company had unrecognized tax benefits of $30.6 million, which are subject to a
valuation allowance and would not affect the effective tax rate if recognized. The Company does not anticipate that the
total amount of unrecognized tax benefits will significantly increase or decrease in the next 12 months. The Company’s
policy is to include interest and penalties related to unrecognized tax benefits within the provision for income taxes, as
necessary. Management determined that no accrual for interest or penalties was required as of December 31, 2024, 2023
and 2022.
The Company files income tax returns in the United States federal jurisdiction, the State of California, the State of
Florida, and Australia. The Company is not currently under examination by income tax authorities in federal, state or
other jurisdictions. The Company’s tax returns remain open for examination for all years.
Protagonist Australia had an accumulated deficit at December 31, 2024 and, accordingly, no provision has been
provided thereon for any unremitted earnings.
The Company has received orphan drug designation from the FDA for its clinical asset rusfertide (PTG-300) for the
treatment of polycythemia vera and beta-thalassemia and may qualify for a related 25% U.S. Federal income tax credit
on qualifying clinical trial expenditures.
Note 14. Net Income (Loss) per Share
The following table sets forth the computation of basic and diluted net income (loss) per share (in thousands, except
share and per share data):
Year Ended December 31,
2024
2023
2022
Numerator:
Net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . $
275,188 $
(78,955) $
(127,393)
Denominator:
Weighted-average shares of common stock, basic . . . . . . . . . .
61,566,989
56,763,559
49,042,232
Dilutive effect of common stock equivalents . . . . . . . . . . . . .
3,510,733
—
—
Weighted-average shares of common stock, dilutive . . . . . . . .
65,077,722
56,763,559
49,042,232
Net income (loss) per share of common stock
Basic net income (loss) per share of common stock . . . . . . . . $
4.47 $
(1.39) $
(2.60)
Diluted net income (loss) per share of common stock . . . . . . . $
4.23 $
(1.39) $
(2.60)
Approximately 2.9 million potentially dilutive shares of common stock (consisting of shares subject to outstanding
stock options, RSUs, and under the ESPP) were excluded from the diluted net income per share of common stock
computations for the year ended December 31, 2024 because their effect was anti-dilutive. Approximately 8.7 million
and 9.9 million potentially dilutive shares of common stock (consisting of shares subject to outstanding stock options,
RSUs, PSUs, warrants and under the ESPP, as applicable) were excluded from the diluted net loss per share of common
stock computations for the years ended December 31, 2023 and 2022, respectively, due to the Company’s net losses for
these periods.
110
Note 15. Segment Reporting
Operating segments are components of an enterprise for which separate financial information is available and which
are evaluated by a company’s chief operating decision maker (“CODM”), in deciding how to allocate resources and to
assess performance.
The Company operates and manages its business as one operating segment, which primarily focuses on the
discovery and development of innovative medicines in areas of unmet medical need. The Company’s Chief Executive
Officer serves as the Company’s CODM and manages and allocates resources to the operations of the Company on an
entity-wide basis. Managing and allocating resources on an entity-wide basis enables the CODM to assess the overall
level of resources available and how to best deploy these resources across functions and research and development
projects based on unmet medical need, scientific data, probability of technical and regulatory successful development,
market potential and other considerations, and, as necessary, reallocate resources among our internal research and
development portfolio and external opportunities to best support the long-term growth of our business. The Company’s
CODM reviews financial information on an aggregate basis for the purposes of allocating resources and evaluating
financial performance, including segment net income (loss), which is also reported on the consolidated statement of
operations as consolidated net income (loss).
The Company derives revenues from its collaboration partners, consisting of nonrefundable upfront and milestone
payments and cost sharing payments under its license and collaboration agreements. The Company’s customers are
comprised of its two collaboration partners, Takeda and JNJ, formerly Janssen Biotech. Takeda and JNJ accounted for
62% and 38% of the Company’s revenues for the year ended December 31, 2024, respectively. JNJ accounted for 100%
of the Company’s revenues for the years ended December 31, 2023 and 2022. All of the Company’s revenues for the
years ended December 31, 2024, 2023 and 2022 were generated in the United States. See Note 3 to the consolidated
financial statements for additional information.
111
Segment information was as follows for the years presented (dollars in thousands):
Year Ended December 31,
2024
2023
2022
Revenue . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
434,433
$
60,000
$
26,581
Discovery department expenses (1) . . . . . . . . . . . . . . . . . . . . .
(13,411)
(5,471)
(11,608)
Development department expenses (1) . . . . . . . . . . . . . . . . . . .
(62,262)
(65,574)
(66,941)
General and administrative department expenses (1) . . . . . . .
(24,249)
(19,620)
(21,702)
Employee wages and benefits - discovery . . . . . . . . . . . . . . .
(6,601)
(4,531)
(6,162)
Employee wages and benefits - development . . . . . . . . . . . .
(23,365)
(19,301)
(19,279)
Employee wages and benefits - general and administrative . .
(14,148)
(9,862)
(8,060)
Stock-based compensation . . . . . . . . . . . . . . . . . . . . . . . . . . .
(37,554)
(29,293)
(24,202)
Other segment items (2) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
250
(201)
(80)
Interest income . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
26,315
14,898
4,060
Income tax expense . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
(4,220)
—
—
Segment profit (loss) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
275,188
$
(78,955)
$
(127,393)
Reconciliation of profit (loss)
Adjustments and reconciling items . . . . . . . . . . . . . . . . . . . . . . .
$
—
$
—
$
—
Consolidated net income (loss) . . . . . . . . . . . . . . . . . . . . . . . . . .
$
275,188
$
(78,955)
$
(127,393)
Other segment information
Segment assets (3) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
744,725
$
357,951
$
247,928
Long-lived assets (4) . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .
$
12,607
$
2,149
$
4,626
Expenditures for long-lived assets . . . . . . . . . . . . . . . . . . . . .
$
1,355
$
609
$
795
(1) Amounts exclude employee wages and benefits, stock-based compensation and expense allocations.
(2) Other segment items include foreign currency related income (expense) and other miscellaneous income (expense).
(3) The measure of segment assets is reported on the consolidated balance sheet as total assets.
(4) Long-lived assets include property and equipment, net and operating lease right-of-use asset.
The accounting policies of the Company’s operating segment are the same as those described in the summary of
significant accounting policies. Substantially all of the Company’s long-lived assets are in the United States. See Note 6
to the consolidated financial statements for depreciation expense for the periods presented.
112
Item 9.
Changes in and Disagreements with Accountants on Accounting and Financial Disclosure
None.
Item 9A.
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 December 31,
2024. Based on the evaluation of our disclosure controls and procedures, our Chief Executive Officer and Chief
Financial Officer have concluded that our disclosure controls and procedures as of December 31, 2024 were effective at
the reasonable assurance level.
Management’s Annual Report on Internal Control over Financial Reporting.
Our management is responsible for establishing and maintaining adequate internal control over financial reporting,
as such term is defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act. Our management, including our Chief
Executive Officer and Chief Financial Officer, conducted an evaluation of the effectiveness of our internal control over
financial reporting based on the criteria set forth in Internal Control-Integrated Framework (2013) issued by the
Committee of Sponsoring Organizations of the Treadway Commission. Based on its evaluation under the criteria set
forth in Internal Control-Integrated Framework, our management concluded that our internal control over financial
reporting was effective as of December 31, 2024.
Our independent registered public accounting firm, Ernst & Young LLP, has audited the financial statements
included in the Annual Report and has issued a report on the effectiveness of our internal control over financial reporting
as of December 31, 2024. The report of Ernst & Young LLP is included below.
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 our most recent
fiscal quarter that have materially affected, or are reasonably likely to materially affect, our internal control over
financial reporting.
113
Report of Independent Registered Public Accounting Firm
To the Stockholders and the Board of Directors of Protagonist Therapeutics, Inc.
Opinion on Internal Control Over Financial Reporting
We have audited Protagonist Therapeutics, Inc.’s internal control over financial reporting as of December 31, 2024,
based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring
Organizations of the Treadway Commission (2013 framework), (the COSO criteria). In our opinion, Protagonist
Therapeutics, Inc. (the Company) maintained, in all material respects, effective internal control over financial reporting
as of December 31, 2024, based on the COSO criteria.
We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United
States) (PCAOB), the consolidated balance sheets of the Company as of December 31, 2024 and 2023, the related
consolidated statements of operations, comprehensive income (loss), stockholders’ equity and cash flows for each of the
three years in the period ended December 31, 2024, and the related notes and our report dated February 21, 2025
expressed an unqualified opinion thereon.
Basis for Opinion
The Company’s management is responsible for maintaining effective internal control over financial reporting and for its
assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s
Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the
Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with
the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal
securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.
We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and
perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was
maintained in all material respects.
Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a
material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the
assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that
our audit provides a reasonable basis for our opinion.
Definition and Limitations of Internal Control Over Financial Reporting
A company’s internal control over financial reporting is a process designed 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. A company’s internal control over financial reporting includes those policies
and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the
transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are
recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting
principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of
management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely
detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the
financial statements.
Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements.
Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become
inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may
deteriorate.
/s/ Ernst & Young LLP
San Mateo, California
February 21, 2025
114
Item 9B.
Other Information
b) Trading Plans
On December 15, 2024, William D. Waddill, a member of our Board, adopted a trading plan intended to satisfy
Rule 10b5-1(c) to sell up to 24,000 shares of the Company’s common stock through December 31, 2025, or such earlier
date when all transactions under the trading plan are completed, subject to certain conditions. During the quarter ended
December 31, 2024, none of our other Section 16 officers or directors adopted or terminated a Rule 10b5-1 trading
arrangement or a non-Rule 10b5-1 trading arrangement, as such terms are defined under Item 408(a) of Regulation S-K.
Item 9C.
Disclosure Regarding Foreign Jurisdictions that Prevent Inspections
Not applicable.
PART III
Item 10.
Directors, Executive Officers, and Corporate Governance
Except as set forth below, the information required by this item is incorporated herein by reference to information in
our Definitive Proxy Statement on Schedule 14A relating to our 2025 Annual Meeting of Stockholders, which we expect
to be filed with the SEC within 120 days of our fiscal year ended December 31, 2024 (the “Proxy Statement”), including
under the headings “Election of Class III Director Nominees,” “Executive Officers,” “Information Regarding
Committees of the Board,” “Insider Trading Policy,” and, if applicable, “Delinquent Section 16(a) Reports.”
We have adopted a Code of Business Conduct and Ethics that applies to all directors, officers and employees,
including our principal executive, principal financial and principal accounting officers, or persons performing similar
functions. The Code of Business Conduct and Ethics is posted on our website at www.protagonist-inc.com.
We intend to disclose future amendments to certain provisions of the Code of Business Conduct and Ethics, and
waivers of the Code of Business Conduct and Ethics granted to executive officers and directors, on our website listed
above within four business days following the date of the amendment or waiver.
Item 11.
Executive Compensation
The information required by this item is incorporated herein by reference to information in our Proxy Statement,
including under the headings “Information Regarding Committees of the Board – Compensation Committee Interlocks
and Insider Participation,” “Report of the Compensation Committee of the Board,” “Executive Compensation,” and
“Director Compensation.”
Item 12.
Security Ownership of Certain Beneficial Owners and Management and Related Stockholder
Matters
The information required by this item is incorporated herein by reference to information in our Proxy Statement,
including under the headings “Security Ownership of Certain Beneficial Owners and Management” and “Equity
Compensation Plan Information.”
Item 13.
Certain Relationships and Related Transactions, and Director Independence
The information required by this item is incorporated herein by reference to information in our Proxy Statement,
including under the headings “Transactions with Related Persons” and “Information Regarding the Board of Directors
and Corporate Governance – Independence of the Board of Directors.”
115
Item 14.
Principal Accountant Fees and Services
The information required by this item is incorporated by reference to information in our Proxy Statement, including
under the heading “Ratification of Selection of Independent Registered Public Accounting Firm.”
PART IV
Item 15.
Exhibits, Financial Statement Schedules
(a) The following documents are filed as part of this Annual Report on Form 10-K:
(1) FINANCIAL STATEMENTS
The financial statements filed as part of this Annual Report on Form 10-K are included in Part II, Item 8 of this
Annual Report on Form 10-K.
(2) FINANCIAL STATEMENT SCHEDULES
Financial statement schedules have been omitted in this Annual Report on Form 10-K because they are not
applicable, not required under the instructions, or the information requested is set forth in the financial
statements or related notes thereto.
(3) EXHIBITS
The exhibits listed in the accompanying Exhibit Index are filed as part of, or incorporated by reference into, this
Annual Report on Form 10-K.
116
(4) EXHIBIT INDEX
Incorporation By Reference
Exhibit
Filed or
Furnished
Number
Exhibit Description
Form
SEC File No.
Exhibit
Filing Date
Herewith
3.1
Amended and Restated Certificate of
Incorporation.
8-K
001-37852
3.1
8/16/2016
3.2
Certificate of Amendment to the
Amended and Restated Certificate of
Incorporation.
8-K
001-37852
3.1
6/26/2024
3.3
Amended and Restated Bylaws.
S-1/A
333-212476
3.2(b)
8/1/2016
4.1
Specimen stock certificate
evidencing the shares of common
stock.
S-1/A
333-212476
4.1
8/1/2016
4.2
Description of Protagonist
Therapeutics, Inc.’s Securities
Registered Pursuant to Section 12 of
the Exchange Act.
X
4.3
Form of Pre-Funded Warrant
10-Q
001-37852
10.1
11/2/2023
10.1+
Protagonist Therapeutics, Inc. 2007
Stock Option and Incentive Plan, as
amended and restated, and form of
option agreement, exercise notice,
joinder, and adoption agreement
thereunder.
S-1
333-212476
10.1
7/11/2016
10.2+
Protagonist Therapeutics, Inc. 2016
Equity Incentive Plan and forms of
stock option grant notice, option
agreement, notice of exercise,
restricted stock unit grant notice and
restricted stock unit agreement
thereunder.
S-1/A
333-212476
10.2
8/1/2016
10.3+
Protagonist Therapeutics, Inc. 2016
Employee Stock Purchase Plan.
S-1/A
333-212476
10.3
8/1/2016
10.4+
Form of Indemnity Agreement for
Directors and Officers.
S-1/A
333-212476
10.4
8/1/2016
10.5+
Protagonist Therapeutics, Inc.
Amended and Restated 2018
Inducement Plan, and forms of stock
option grant notice, option
agreement, restricted stock unit grant
notice and restricted stock unit
agreement thereunder.
S-8
333-263097
99.3
2/28/2022
10.6
Lease, dated March 6, 2017, by and
between the Registrant and BMR-
Pacific Research Center LP.
10-K
001-37852
10.9
3/7/2017
10.7+
Severance Agreement, dated
August 1, 2016, by and between the
Registrant and Dinesh Patel.
S-1/A
333-212476
10.9
8/1/2016
10.8†
Research and Collaboration
Agreement, dated June 16, 2012, by
and among the Registrant,
Protagonist Pty. Ltd. and Zealand
Pharma A/S.
S-1
333-212476
10.17
7/11/2016
117
Incorporation By Reference
Exhibit
Filed or
Furnished
Number
Exhibit Description
Form
SEC File No.
Exhibit
Filing Date
Herewith
10.9†
Contract Extension Letter of
Agreement, dated June 1, 2013, by
and among the Registrant,
Protagonist Pty. Ltd. and Zealand
Pharma A/S.
S-1
333-212476
10.18
7/11/2016
10.10†
Agreement on Addition of
Additional Collaboration Program,
dated September 16, 2013, by and
among the Registrant, Protagonist
Pty. Ltd. and Zealand Pharma A/S.
S-1
333-212476
10.19
7/11/2016
10.11†
Protagonist Assumption of
Responsibility, dated January 28,
2014, by and between the Registrant
and Zealand Pharma A/S.
S-1
333-212476
10.20
7/11/2016
10.12†
Agreement to Assign Patent
Applications, dated February 7,
2014, by and between the Registrant,
Protagonist Pty. Ltd. and Zealand
Pharma A/S.
S-1
333-212476
10.21
7/11/2016
10.13†
Abandonment Agreement, dated
February 28, 2014, by and among the
Registrant, Protagonist Pty. Ltd. and
Zealand Pharma A/S.
S-1
333-212476
10.22
7/11/2016
10.14
Registration Rights Agreement,
dated August 8, 2018, by and
between the Registrant and certain
parties identified on the signature
pages thereto.
8-K
001-37852
4.3
8/7/2018
10.15
Securities Purchase Agreement,
dated August 6, 2018, by and
between the Registrant and certain
purchasers identified on the signature
pages thereto.
S-3
333-227216
10.1
9/7/2018
10.16
Exchange Agreement, dated
December 21, 2018, by and between
the Registrant and Biotechnology
Value Fund, L.P., Biotechnology
Value Fund II, L.P. and
Biotechnology Value Trading Fund
OS, L.P.
8-K
001-37852
10.1
12/31/2018
10.17
First Amendment, dated January 31,
2019, to Lease, dated March 6, 2017,
by and between Protagonist
Therapeutics, Inc., as Tenant, and
BMR-Pacific Research Center LP, as
Landlord.
10-Q
001-37852
10.3
5/8/2019
10.18+
Severance Agreement, dated
March 14, 2019, by and among
Protagonist Therapeutics, Inc. and
Suneel Gupta, Ph.D.
10-Q
001-37852
10.4
5/8/2019
118
Incorporation By Reference
Exhibit
Filed or
Furnished
Number
Exhibit Description
Form
SEC File No.
Exhibit
Filing Date
Herewith
10.19
Open Market Sale AgreementSM,
dated August 5, 2022, by and
between Protagonist Therapeutics,
Inc. and Jefferies LLC.
S-3
333-266595
1.2
8/5/2022
10.20
Second Amendment, dated July 2,
2021, to Lease, dated March 6, 2017,
by and between Protagonist
Therapeutics, Inc., as Tenant, and
BMR-Pacific Research Center, LP as
Landlord.
10-Q
001-37852
10.3
11/3/2021
10.21†
Amended and Restated License and
Collaboration Agreement, dated
July 27, 2021, by and between
Protagonist Therapeutics, Inc. and
Janssen Biotech, Inc.
10-Q
001-37852
10.1
11/3/2021
10.22†
Arbitration Resolution Agreement,
dated August 4th, 2021, by and
among Protagonist Therapeutics, Inc.
and Zealand Pharma, A/S.
10-Q
001-37852
10.2
11/3/2021
10.23+
Employment Offer Letter, by and
between Protagonist Therapeutics
Inc. and Asif Ali, dated March 25,
2022.
10-Q
001-37852
10.1
5/5/2022
10.24+
Offer Letter, by and between
Protagonist Therapeutics Inc. and
Arturo Molina, M.D., Ph.D., dated
November 1, 2022.
10-K
001-37852
10.25
3/15/2022
10.25+
Severance Agreement, by and
between Protagonist Therapeutics
Inc. and Arturo Molina, M.D., Ph.D.,
dated November 7, 2022.
10-K
001-37852
10.26
3/15/2022
10.26†
License and Collaboration
Agreement by and between
Protagonist Therapeutics, Inc. and
Takeda Pharmaceuticals USA, Inc.,
dated January 31, 2024.
10-Q
001-37852
10.1
5/7/2024
10.27
Third Amendment, dated May 6,
2024, to Lease, dated March 6, 2017,
by and between Protagonist
Therapeutics, Inc. as Tenant and
BMR-Pacific Research Center, LP,
as Landlord.
10-Q
001-37852
10.1
8/6/2024
10.28†
Amendment 1, dated November 14,
2024, to Amended and Restated
License and Collaboration
Agreement, dated July 27, 2021, by
and between Protagonist
Therapeutics, Inc. and Janssen
Biotech, Inc.
X
19.1
Insider Trading Policy
X
21.1
List of Subsidiaries.
X
119
Incorporation By Reference
Exhibit
Filed or
Furnished
Number
Exhibit Description
Form
SEC File No.
Exhibit
Filing Date
Herewith
23.1
Consent of Independent Registered
Public Accounting Firm.
X
24.1
Power of Attorney (included in
signature page of this Form 10-K).
X
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.
X
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.
X
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.
X
97.1
Compensation Recoupment
(“Clawback”) Policy, adopted by
Protagonist Therapeutics Inc.
November 23, 2023.
Form 10-K
001-37852
97.1
2/27/2024
101.INS
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the instance document does not
appear in the Interactive Data File
because its XBRL tags are embedded
within the Inline XBRL Document.
X
101.SCH
Inline XBRL Taxonomy Extension
Schema Document.
X
101.CAL
Inline XBRL Taxonomy Extension
Calculation Linkbase Document.
X
101.DEF
Inline XBRL Taxonomy Extension
Definition Linkbase Document.
X
101.LAB
Inline XBRL Taxonomy Extension
Labels Linkbase Document.
X
101.PRE
Inline XBRL Taxonomy Extension
Presentation Linkbase Document.
X
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.
+ Indicates management contract or compensatory plan, contract or agreement.
120
† Certain identified information has been omitted by means of marking such information with asterisks in reliance on
Item 601(b)(10)(iv) of Regulation S-K because it is both (i) not material and (ii) the type that the registrant treats as
private or confidential.
* This certification attached as Exhibit 32.1 that accompanies this Annual Report on Form 10-K 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-K, irrespective of any general
incorporation language contained in such filing.
Item 16.
Form 10-K Summary
None.
121
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: February 21, 2025
By: /s/ Dinesh V. Patel, Ph.D.
Dinesh V. Patel, Ph.D.
President, Chief Executive Officer and Director
(Principal Executive Officer)
POWER OF ATTORNEY
KNOW ALL PERSONS BY THESE PRESENTS, that each person whose signature appears below constitutes and
appoints Dinesh V. Patel and Asif Ali, and each of them, his or her true and lawful attorneys-in-fact, with full power of
substitution, for him in any and all capacities, to sign any and all amendments to this Annual Report on Form 10-K, and
to file the same, with exhibits thereto and other documents in connection therewith with the Securities and Exchange
Commission, hereby ratifying and confirming all that said attorneys-in-fact or any of them or their substitute or
substitutes may lawfully do or cause to be done by virtue thereof.
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the
following persons on behalf of the registrant in the capacities and on the dates indicated:
Signature
Title
Date
/s/ Dinesh V. Patel, Ph.D.
President, Chief Executive Officer and Director
February 21, 2025
Dinesh V. Patel, Ph.D.
(Principal Executive Officer)
/s/ Asif Ali
Executive Vice President, Chief Financial Officer
February 21, 2025
Asif Ali
(Principal Financial and Accounting Officer)
/s/ Harold E. Selick, Ph.D.
Chairman of the Board of Directors
February 21, 2025
Harold E. Selick, Ph.D.
/s/ Bryan Giraudo
Director
February 21, 2025
Bryan Giraudo
/s/ Sarah O’Dowd
Director
February 21, 2025
Sarah O’Dowd
/s/ William D. Waddill
Director
February 21, 2025
William D. Waddill
/s/ Lewis T. Williams, M.D., Ph.D.
Director
February 21, 2025
Lewis T. Williams, M.D., Ph.D.
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