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PROTAGONIST THERAPEUTICS, INC.

(PTGX)
  Report
Delayed Nasdaq  -  04:00 2022-09-27 pm EDT
8.480 USD   +3.41%
09/20Protagonist Therapeutics Reports Granting of Inducement Award
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08/25JMP Securities Reinstates Protagonist Therapeutics at Market Outperform With $21 Price Target
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08/04Protagonist Therapeutics : Quarterly Report for Quarter Ending June 30, 2022 (Form 10-Q)
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PROTAGONIST THERAPEUTICS, INC MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (form 10-Q)

08/04/2022 | 05:01pm EDT
You should read the following discussion and analysis of our financial condition
and results of operations together with our Unaudited Condensed Consolidated
Financial Statements and related notes included in Part I, Item 1 of this
quarterly report (this "Quarterly Report") on Form 10-Q and with our Audited
Consolidated Financial Statements and related notes thereto for the year ended
December 31, 2021, included in our Annual Report on Form 10-K filed with the
Securities and Exchange Commission ("SEC") on February 28, 2022.

Forward-Looking Statements


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

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Overview
We are a biopharmaceutical company with peptide-based new chemical entities
rusfertide, PN-943 and PN-235 in different stages of development, all derived
from the Company's proprietary discovery technology platform. Our clinical
programs fall into two broad categories of diseases; (i) hematology and blood
disorders, and (ii) inflammatory and immunomodulatory diseases.

Our Product Pipeline


                           [[Image Removed: Graphic]]

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

REVIVE, a Phase 2 proof of concept ("POC") trial, was initiated in the third

quarter of 2019. We completed enrollment of patients in the ongoing REVIVE

? Phase 2 clinical trial of rusfertide in PV in the first quarter of 2022 with a

target of approximately 50 patients to be enrolled through the end of the

randomization portion of the trial.

PACIFIC, another Phase 2 trial for rusfertide patients diagnosed with PV and

? with routinely elevated hematocrit levels (>48%), was initiated during the

first quarter of 2021.

? A Phase 2 POC trial in hereditary hemochromatosis ("HH") was initiated in

January 2020 and was completed during the fourth quarter of 2021.

Based on ongoing end of Phase 2 feedback provided by the FDA's Division of
Nonmalignant Hematology and written comments from the European Medicines Agency
("EMA"), we activated sites and initiated patient screening for VERIFY, a global
Phase 3 clinical trial of rusfertide in PV for approximately 250 patients, in
the first quarter of 2022. It is our objective to complete enrollment in VERIFY
by the end of the first half of 2023, notwithstanding a slower than

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anticipated pace of initial enrollment. We have activated 35 sites globally to date and continue to implement measures to increase patient recruitment, screening and enrollment.

On September 16, 2021, the U.S. Food and Drug Administration ("FDA") placed a
clinical hold on our rusfertide clinical trials following our submission to the
FDA of findings in a 26-week rasH2 transgenic mouse carcinogenicity study. In
October 2021, we submitted a Complete Response to the FDA related to the
clinical hold, and the FDA removed the clinical hold on October 8, 2021. In our
Complete Response, we provided the individual patient clinical safety reports
the FDA requested for human cancers observed in rusfertide clinical trials,
updated the investigator brochure and patient informed consent forms for ongoing
rusfertide trials, proposed new safety and stopping rules in trial protocols for
our ongoing rusfertide clinical trials, and performed a comprehensive review of
our rusfertide safety database. Dosing of patients and enrollment in ongoing
clinical trials with rusfertide resumed in the fourth quarter of 2021.

The FDA granted orphan drug designation for rusfertide for the treatment of PV
in June 2020, and Fast Track designation for rusfertide for the treatment of PV
in December 2020. The EMA granted orphan drug designation for rusfertide for
treatment of PV in October 2020. The FDA granted Breakthrough Therapy
Designation for rusfertide for the treatment of PV in June 2021. In April 2022,
we received a letter from the FDA indicating the FDA's intent to rescind
Breakthrough Therapy Designation for rusfertide in PV. In June 2022, we
voluntarily withdrew our Breakthrough Therapy Designation following
correspondence with FDA and based on our internal analysis of the relative
utility of Breakthrough Therapy Designation for Phase 3 trials and beyond. The
FDA correspondence relating to the Breakthrough Therapy designation does not
address the rusfertide Fast Track Designation, which remains active.

Our alpha-4-beta-7 ("?4?7") antagonist PN-943 and our Interleukin-23 receptor
("IL-23R") antagonist compound PN-235 are orally delivered investigational drugs
that are designed to block biological pathways currently targeted by marketed
injectable antibody drugs. Our orally stable peptide approach may offer a
targeted therapeutic approach for GI and systemic compartments as needed. We
believe that, compared to antibody drugs, these product candidates have the
potential to provide improved safety due to minimal exposure in the blood,
increased convenience and compliance due to oral delivery, and the opportunity
for the earlier introduction of targeted oral therapy.

PN-943 is an investigational, orally delivered, gut-restricted ?4?7 specific
integrin antagonist for inflammatory bowel disease ("IBD"). We submitted a U.S.
Investigational New Drug application with the FDA for PN-943 in December 2019,
which took effect in January 2020. During the second quarter of 2020 we
initiated IDEAL, a 159 patient Phase 2 trial evaluating the safety, tolerability
and efficacy of PN-943 in patients with moderate to severe UC. This trial
includes a 12-week induction period and a 40-week extended treatment period.
Enrollment in IDEAL was completed during the first quarter of 2022. Patients
were randomized to either twice daily ("BID") with 150 mg or 450 mg PN-943, or
placebo, for 12 weeks and analyzed for outcome measures. Topline data from the
12-week induction period reported in April 2022 demonstrated that while the
higher 450 mg BID dose arm did not meet the prespecified primary endpoint, the
lower 150 mg BID dose arm achieved 27.5% clinical remission with a delta of 13%
versus placebo, with strong concordance across several key proxies including
histological and endoscopic endpoints for efficacy. Consistent with the goals of
a Phase 2 study and based on the safety and efficacy data from the 150 mg BID
arm, IDEAL achieved clinical POC and validation for an oral, gut-restricted
approach for UC via blockade of the ?4?7 pathway. We are currently finalizing
the study design for a registrational Phase 3 trial anchored around the 150 mg
BID dose of PN-943, pending regulatory guidance. We intend to pursue further
clinical development in collaboration with a large pharmaceutical partner and
have engaged an advisory firm to identify and evaluate such partnering
opportunities.

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

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In October 2020, we and Janssen announced the selection of two second-generation
IL23-R antagonists for advancement into clinical development, PN-232
(JNJ-75105186) and PN-235 (JNJ-77242113). During the fourth quarter of 2021,
following a pre-specified interim analysis criteria, a portfolio decision was
made by Janssen to stop further development of both PTG-200 and PN-232 favor of
advancing PN-235, based on its superior potency and overall pharmacokinetic and
pharmacodynamic profile. A PN-235 Phase 1 trial was completed in the fourth
quarter of 2021. Janssen initiated FRONTIER 1, a 240-patient Phase 2b clinical
trial of PN-235 in moderate-to-severe plaque psoriasis, in February 2022. Other
studies of PN-235 that Janssen has initiated or planned include the SUMMIT study
of PN-235 for the treatment of moderate-to-severe plaque psoriasis, FRONTIER 2,
a long-term extension study, and a Phase 1 study of PN-235 in healthy Japanese
and Chinese volunteers. Janssen is expected to initiate a separate Phase 2 trial
of PN-235 in IBD in 2023.

During the fourth quarter of 2021, we received a $7.5 million milestone payment
from Janssen triggered by the completion of data collection for PN-235 Phase 1
activities. In April 2022, we received a $25.0 million milestone payment in
connection with the dosing of a third patient in FRONTIER 1 during the first
quarter of 2022. We will be eligible to receive a $10.0 million milestone
payment in connection with the dosing of a third patient in the second Phase 2
trial of a second-generation candidate. We remain eligible for up to
approximately $855.0 million in future development and sales milestone payments,
in addition to the $112.5 million in milestone payments already received.

Our clinical assets are all derived from our proprietary discovery platform. Our
platform enables us to engineer novel, structurally constrained peptides that
are designed to retain key advantages of both orally delivered small molecules
and injectable antibody drugs in an effort to overcome many of their limitations
as therapeutic agents. Importantly, constrained peptides can be designed to
potentially alleviate the fundamental instability inherent in traditional
peptides to allow different delivery forms, such as oral, subcutaneous,
intravenous, and rectal. We continue to use our peptide technology platform to
discover product candidates against targets in disease areas with significant
unmet medical needs.

Business Update

We are subject to risks and uncertainties as a result of the ongoing
COVID-19 pandemic. The severity of the impact of the COVID-19 pandemic on our
activities depends on a number of factors, including, but not limited to, the
duration and severity of the pandemic, the development and spread of COVID-19
variants, the timing, extent, effectiveness and durability of COVID-19 vaccine
programs or other treatments; and new or continuing travel and other
restrictions and public health measures. We have experienced delays in our
existing and planned clinical trials due to the worldwide impacts of the
pandemic. Our future results of operations and liquidity could be adversely
impacted by further delays in existing and planned clinical trials, continued
difficulty in recruiting patients for these clinical trials, delays in
manufacturing and collaboration activities, supply chain disruptions, and the
ongoing impact on our operating activities and employees. The extent of the
impact of the COVID-19 pandemic remains difficult to predict as this event is
ongoing and information continues to evolve. As of the date of issuance of these
condensed consolidated financial statements, the extent to which
the COVID-19 pandemic may materially impact our future financial condition,
liquidity or results of operations remains uncertain.

We are currently operating in a period of economic uncertainty and capital
markets disruption, which has been significantly impacted by domestic and global
monetary and fiscal policy, geopolitical instability, an ongoing military
conflict between Russia and Ukraine, and historically high domestic and global
inflation. In particular, the conflict in Ukraine has exacerbated market
disruptions, including significant volatility in commodity prices, as well as
supply chain interruptions, and has contributed to record inflation globally.
The U.S. Federal Reserve and other central banks may be unable to contain
inflation through more restrictive monetary policy and inflation may increase or
continue for a prolonged period of time. Inflationary factors, such as increases
in the cost of clinical supplies, interest rates, overhead costs and
transportation costs may adversely affect our operating results. We continue to
monitor these events and the potential impact on our business. Although we do
not believe that inflation has had a material impact on our financial position
or results of operations to date, we may be adversely affected in the future due
to domestic and global monetary and fiscal policy, supply chain constraints,
consequences associated with COVID-19 and the ongoing conflict between Russia
and Ukraine, and such factors may lead to increases in the cost of manufacturing
our product candidates and delays in initiating trials.

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Operations

We have incurred net losses in each year since inception and we do not
anticipate achieving sustained profitability in the foreseeable future. Our net
loss was $41.0 million and $62.0 million for the three and six months ended June
30, 2022, respectively. Our net loss was $30.8 million and $54.8 million for the
three and six months ended June 30, 2021, respectively. As of June 30, 2022, we
had an accumulated deficit of $471.3 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, development
and other expenses related to our ongoing operations, product development, and
pre-commercialization activities. As a result, we expect to continue to incur
losses in the future as we continue our development of, and seek regulatory
approval for, our product candidates.

Janssen License and Collaboration Agreement


On July 27, 2021, we entered into an amended and restated License and
Collaboration Agreement ("Restated Agreement") with Janssen. The Restated
Agreement amends and restates the License and Collaboration Agreement, dated May
26, 2017, by and between us and Janssen (as amended by the First Amendment
thereto, effective May 7, 2019, the "Original Agreement"). Janssen is a related
party to us as Johnson & Johnson Innovation - JJDC, Inc., a significant
stockholder of ours, and Janssen are both subsidiaries of Johnson & Johnson. The
Original Agreement became effective on July 13, 2017. Upon the effectiveness of
the Original Agreement, we received a non-refundable, upfront cash payment of
$50.0 million from Janssen. Upon the effectiveness of the First Amendment, we
received a $25.0 million payment from Janssen in 2019. We also received a $5.0
million payment triggered by the successful nomination of a second-generation
IL-23R antagonist development compound during the first quarter of 2020. In the
fourth quarter of 2021, we received a $7.5 million milestone payment from
Janssen triggered by completion of the data collection for PN-235 Phase 1
activities. In April 2022, we received a $25.0 million milestone payment in
connection with the dosing of a third patient in FRONTIER 1 during the first
quarter of 2022. See Note 3 to the condensed consolidated financial statements
included elsewhere in this report for additional information.

Critical Accounting Polices and Estimates


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

There have been no material changes to our critical accounting policies during
the three and six months ended June 30, 2022, as compared to those disclosed
in "Management's Discussion and Analysis of Financial Condition and Results of
Operations-Critical Accounting Policies and Estimates" in our Annual Report for
the year ended December 31, 2021 filed with the SEC on February 28, 2022.

Components of Our Results of Operations

License and Collaboration Revenue


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

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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, non-clinical and clinical studies;

? costs related to production of clinical supplies and non-clinical materials,

including fees paid to contract manufacturers;

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

and

facilities and other allocated expenses, which include expenses for rent and

? maintenance of facilities, information technology, depreciation and

amortization expense and other supplies.

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

We allocate direct costs and indirect costs incurred to product candidates when
they enter clinical development. For product candidates in clinical development,
direct costs consist primarily of clinical, pre-clinical, and drug discovery
costs, costs of supplying drug substance and drug product for use in clinical
and pre-clinical studies, including clinical manufacturing costs, contract
research organization fees, and other contracted services pertaining to specific
clinical and pre-clinical studies. Indirect costs allocated to our product
candidates on a program specific basis include research and development employee
salaries, benefits, and stock-based compensation, and indirect overhead and
other administrative support costs. Program-specific costs are unallocated when
the clinical expenses are incurred for our early-stage research and drug
discovery projects, 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.

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The following table summarizes our research and development expenses incurred during the periods indicated:

                                                       Three Months Ended            Six Months Ended
                                                            June 30,                    June 30,
                                                       2022           2021          2022          2021

                                                                   (Dollars in thousands)
Clinical and development expense - rusfertide
(PTG-300)                                           $    14,173    $   12,168    $   27,550    $   22,247
Clinical and development expense - PN-943                13,619         7,751        29,360        15,475
Clinical and development expense - PN-235                    14         1,433           235         3,232
Clinical and development expense - PN-232                   377            39           445            39
Clinical and development expense - PTG-200                    -             1           (6)             2
Clinical and development expense - PTG-100                  196           141           386           250
Pre-clinical and drug discovery research expense          6,232         5,884        12,959        11,245
Grants and tax incentives expense reimbursement,
net                                                           -         (985)             -       (1,813)
Total research and development expenses             $    34,611    $   

26,432 $ 70,929 $ 50,677



We expect our research and development expenses will increase as we progress our
product candidates into later stage clinical trials and prepare for the
commercialization of our product candidates. The process of conducting research,
identifying potential product candidates and conducting pre-clinical and
clinical trials necessary to obtain regulatory approval and commencing
pre-commercialization activities is costly and time intensive. We may never
succeed in achieving marketing approval for our product candidates regardless of
our costs and efforts. The probability of success of our product candidates may
be affected by numerous factors, including pre-clinical data, clinical data,
competition, manufacturing capability, our cost of goods to be sold, our ability
to receive, and the timing of, regulatory approvals, market conditions, and our
ability to successfully commercialize our products if they are approved for
marketing. As a result, we are unable to determine the duration and completion
costs of our research and development projects or when and to what extent we
will generate revenue from the commercialization and sale of any of our product
candidates. Our research and development programs are subject to change from
time to time as we evaluate our priorities and available resources.

General and Administrative Expenses


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

Interest Income

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

Other Expense, Net

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

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Results of Operations

Comparison of the Three Months Ended June 30, 2022 and 2021

                                                        Three Months Ended
                                                            June 30,               Dollar        %
                                                        2022          2021         Change      Change

                                                             (Dollars in thousands)
License and collaboration revenue - related party    $      859    $    2,265    $  (1,406)      (62)
Operating expenses:
Research and development (1)                             34,611        26,432         8,179        31
General and administrative (2)                            7,691         6,715           976        15
Total operating expenses                                 42,302        33,147         9,155        28
Loss from operations                                   (41,443)      (30,882)      (10,561)        34
Interest income                                             484            97           387       399
Other expense, net                                         (78)          (57)          (21)        37
Net loss                                             $ (41,037)    $ (30,842)    $ (10,195)        33

(1) Includes $4.1 million and $2.2 million of non-cash stock-based compensation

expense for the three months ended June 30, 2022 and 2021, respectively.

(2) Includes $2.7 million and $1.8 million of non-cash stock-based compensation

expense for the three months ended June 30, 2022 and 2021, respectively.

License and Collaboration Revenue

License and collaboration revenue decreased $1.4 million, or 62%, from $2.3
million for the three months ended June 30, 2021 to $0.9 million for the three
months ended June 30, 2022. The decrease was primarily related to a decrease in
services provided under the Restated Agreement with Janssen, with associated
revenue recognized based on proportional performance. The level of services we
provided has decreased as we completed our performance obligation pursuant to
the collaboration as of June 30, 2022.

We determined that the transaction price of the initial performance obligation
under the Restated Agreement was $131.7 million as of June 30, 2022, an increase
of $0.2 million from the transaction price of $131.5 million as of March 31,
2022. In order to determine the transaction price, we evaluated all payments to
be received during the duration of the contract, net of development costs
reimbursement expected to be payable to Janssen. The transaction price as of
June 30, 2022 includes $112.5 million of nonrefundable payments received to
date, $17.9 million of reimbursement from Janssen for services performed for
IL-23 receptor antagonist compound research costs and other services, and
variable consideration consisting of $8.2 million of development cost
reimbursement from Janssen, partially offset by $6.9 million of net cost
reimbursement due to Janssen for services performed.

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Research and Development Expenses

                                                               Three Months Ended
                                                                    June 30,               Dollar        %
                                                              2022             2021        Change     Change

                                                                    (Dollars in thousands)
Clinical and development expense - rusfertide (PTG-300)    $    14,173      $   12,168   $    2,005        16
Clinical and development expense - PN-943                       13,619           7,751        5,868        76
Clinical and development expense - PN-235                           14           1,433      (1,419)      (99)
Clinical and development expense - PN-232                          377              39          338       867
Clinical and development expense - PTG-200                           -               1          (1)     (100)
Clinical and development expense - PTG-100                         196             141           55        39
Pre-clinical and drug discovery research expense                 6,232           5,884          348         6
Grants and tax incentives expense reimbursement, net                 -           (985)          985     (100)
Total research and development expenses                    $    34,611     

$ 26,432 $ 8,179 31



Research and development expenses increased $8.2 million, or 31%, from $26.4
million for the three months ended June 30, 2021 to $34.6 million for the
three months ended June 30, 2022. The increase was primarily due to an increase
of $5.9 million in PN-943 contract manufacturing costs and clinical expenses
related to the Phase 2 IDEAL trial in UC initiated in 2020 and an increase of
$2.0 million in rusfertide clinical and contract manufacturing expenses
primarily for VERIFY, the global Phase 3 clinical trial in PV initiated in the
first quarter of 2022.

We had 101 and 81 full-time equivalent research and development employees as of
June 30, 2022 and 2021, respectively. Research and development expenses for the
three months ended June 30, 2022 included increases of $2.0 million in
stock-based compensation expense and $1.6 million in other personnel-related
expenses compared to the three months ended June 30, 2021.

General and Administrative Expenses


General and administrative expenses increased $1.0 million, or 15%, from $6.7
million for the three months ended June 30, 2021 to $7.7 million for the
three months ended June 30, 2022 primarily due to an increase of $1.2 million in
personnel expenses, partially offset by a $0.2 million decrease in legal and
other expenses. The increase in personnel expenses was primarily due to
increases of $0.9 million in stock-based compensation expense and $0.3 million
in wages and benefits.

We had 26 and 20 full-time equivalent general and administrative employees as of June 30, 2022 and 2021, respectively.

Interest Income


Interest income increased $0.4 million from $0.1 million for the three months
ended June 30, 2021 to $0.5 million for the three months ended June 30, 2022.
This increase was due primarily to higher yields on invested balances during a
period of increasing interest rates compared to the prior year period.

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Comparison of the Six Months Ended June 30, 2022 and 2021

                                                         Six Months Ended
                                                            June 30,              Dollar        %
                                                        2022          2021        Change      Change

                                                            (Dollars in thousands)
License and collaboration revenue - related party    $   26,581    $    8,454    $  18,127       214
Operating expenses:
Research and development (1)                             70,929        50,677       20,252        40
General and administrative (2)                           18,206        12,680        5,526        44
Total operating expenses                                 89,135        63,357       25,778        41
Loss from operations                                   (62,554)      (54,903)      (7,651)        14
Interest income                                             652           199          453       228
Other expense, net                                         (65)         (136)           71      (52)
Net loss                                             $ (61,967)    $ (54,840)    $ (7,127)        13

(1) Includes $7.4 million and $3.6 million of non-cash stock-based compensation

expense for the six months ended June 30, 2022 and 2021, respectively.

(2) Includes $5.3 million and $3.0 million of non-cash stock-based compensation

expense for the six months ended June 30, 2022 and 2021, respectively.

License and Collaboration Revenue


License and collaboration revenue increased $18.1 million, or 214%, from $8.5
million for the six months ended June 30, 2021 to $26.6 million for the six
months ended June 30, 2022. The increase in revenue was primarily due to an
increase in transaction price and proportional performance resulting from the
$25.0 million milestone payment we received in April 2022 upon the dosing of the
third patient in the Janssen Phase 2b FRONTIER 1 trial of PN-235 for
moderate-to-severe plaque psoriasis in March 2022. We completed our performance
obligation pursuant to the collaboration as of June 30, 2022.

We determined that the transaction price of the initial performance obligation
under the Restated Agreement was $131.7 million as of June 30, 2022, an increase
of $25.2 million from the transaction price of $106.5 million as of December 31,
2021. In order to determine the transaction price, we evaluated all payments to
be received during the duration of the contract, net of development costs
reimbursement expected to be payable to Janssen. The transaction price as of
June 30, 2022 includes the $112.5 million of nonrefundable payments received to
date, $17.9 million of reimbursement from Janssen for services performed for
IL-23 receptor antagonist compound research costs and other services, and
variable consideration consisting of $8.2 million of development cost
reimbursement from Janssen, partially offset by $6.9 million of net cost
reimbursement due to Janssen for services performed. The increase in transaction
price from December 31, 2021 to June 30, 2022 was due primarily to the $25.0
million milestone payment we received in April 2022 upon the dosing of the third
patient in the Janssen Phase 2b FRONTIER 1 trial of PN-235 for
moderate-to-severe plaque psoriasis in March 2022.

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Research and Development Expenses

                                                             Six Months Ended
                                                                June 30,          Dollar      %
                                                             2022       2021      Change    Change

                                                               (Dollars in thousands)

Clinical and development expense - rusfertide (PTG-300) $ 27,550 $ 22,247 $ 5,303 24 Clinical and development expense - PN-943

                     29,360     15,475     13,885      90
Clinical and development expense - PN-235                        235      3,232    (2,997)    (93)
Clinical and development expense - PN-232                        445         39        406       *
Clinical and development expense - PTG-200                       (6)          2        (8)   (400)
Clinical and development expense - PTG-100                       386        250        136      54
Preclinical and discovery research expense                    12,959     11,245      1,714      15
Grants and tax incentives expense reimbursement, net               -    (1,813)      1,813   (100)
Total research and development expenses                    $  70,929  $  50,677  $  20,252      40


*Percentage not meaningful

Research and development expenses increased $20.3 million, or 40%, from $50.7
million for the six months ended June 30, 2021 to $70.9 million for the
six months ended June 30, 2022. The increase was primarily due to an increase of
$13.9 million in PN-943 contract manufacturing costs and clinical expenses
related to the Phase 2 IDEAL trial in UC initiated in 2020 and an increase of
$5.3 million in rusfertide clinical and contract manufacturing expenses
primarily for VERIFY.

We had 101 and 81 full-time equivalent research and development employees as of
June 30, 2022 and 2021, respectively. Research and development expenses for the
six months ended June 30, 2022 included increases of $3.8 million in stock-based
compensation expense and $4.2 million in other personnel-related expenses
compared to the three months ended June 30, 2021.

General and Administrative Expenses


General and administrative expenses increased $5.5 million, or 44%, from $12.7
million for the six months ended June 30, 2021 to $18.2 million for the
six months ended June 30, 2022 due primarily to an increase of $3.3 million in
personnel expenses and $2.2 million in expenses to support the growth of our
business and other costs. The increase in personnel expenses was primarily due
to increases of $2.3 million in stock-based compensation expense and $0.9
million in wages and benefits.

We had 26 and 20 full-time equivalent general and administrative employees as of June 30, 2022 and 2021, respectively.

Interest Income

Interest income increased $0.5 million from $0.2 million for the six months
ended June 30, 2021 to $0.7 million for the six months ended June 30, 2022. This
increase was due primarily to higher yields on invested balances during a period
of increasing interest rates compared to the prior year period.

Liquidity and Capital Resources

Sources of Liquidity

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

In October 2019, we filed a registration statement on Form S-3 (File no. 333-234414) that was declared effective as of November 22, 2019 and permits the offering, issuance, and sale by us of up to a maximum aggregate


                                       33

Table of Contents

offering price of $250.0 million of our common stock, preferred stock, debt
securities and warrants (the "2019 Form S-3"). Up to a maximum of $75.0 million
of the maximum aggregate offering price of $250.0 million may be issued and sold
pursuant to an at-the-market ("ATM") financing facility under a sales agreement
we entered into on November 27, 2019. In January 2022, we issued 422,367 shares
of our common stock under our ATM financing facility for net proceeds of $14.6
million, after deducting issuance costs. As of June 30, 2022, a total of $79.3
million of common stock remained available for sale under the 2019 Form S-3,
$17.0 million of which remained available for sale under the ATM financing
facility. The 2019 Form S-3 expires in October 2022.

In December 2020, we filed an automatic registration statement on Form S-3ASR
and an accompanying prospectus (File No. 333-251254). In June 2021, pursuant
this S-3ASR, we completed an underwritten public offering of 3,046,358 shares of
common stock at a public offering price of $37.75 per share and issued an
additional 456,953 shares of common stock at a public offering price of $37.75
per share following the underwriters' exercise of their option to purchase
additional shares. Net proceeds, after deducting underwriting commission and
offering costs paid by us, were $123.8 million. The Form S-3ASR expires in
December 2023.

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

? Upon effectiveness of the agreement, we received a non-refundable, upfront cash

payment of $50.0 million from Janssen;

Upon effectiveness of the First Amendment, we became eligible to receive a

? $25.0 million payment from Janssen, which was received during the second

quarter of 2019;

In December 2019, we became eligible to receive a $5.0 million payment

? triggered by the successful nomination of a second-generation development

compound, which was received during the first quarter of 2020;

In October 2021, we became eligible to receive a $7.5 million milestone payment

? triggered by completion of the data collection for PN-235 Phase 1 activities,

which was received during the fourth quarter of 2021; and

In March 2022, we became eligible to receive a $25.0 million milestone payment

? in connection with the dosing of the third patient in the Phase 2b clinical

trial of PN-235 in moderate-to-severe plaque psoriasis during the first quarter

of 2022, which was received during the second quarter of 2022.



We also receive payments for services provided under the collaboration agreement
and we make in-kind payment reimbursements to Janssen for certain costs they
have incurred based on the cost sharing terms of the agreement.

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

$10.0 million for dosing of the third patient in the first Phase 2 clinical

? trial for any second-generation product for a second indication (i.e., an

indication different than the indication which triggered the $25.0 million

milestone described above); and

? $50.0 million for dosing of the third patient in a Phase 3 clinical trial for a

second-generation compound for any indication.

? $15.0 million for dosing of the third patient in a Phase 3 clinical trial for a

second-generation compound for a second indication; and


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  Table of Contents

? $115.0 million for a Phase 3 clinical trial for a second-generation compound

for any indication meeting its primary clinical endpoint.

Capital Requirements


As of June 30, 2022, we had $291.9 million of cash, cash equivalents and
marketable securities and an accumulated deficit of $471.3 million. Our capital
expenditures for the six months ended June 30, 2022 were $0.7 million. Our
capital expenditures for the years ended December 31, 2021 and 2020 were $1.1
million and $0.5 million, respectively. Our primary uses of cash are to fund
operating expenses, primarily our research and development expenditures, general
and administrative costs and pre-commercialization costs. Cash used to fund
operating expenses is impacted by the timing of when we pay these expenses. We
believe, based on our current operating plan and assumptions, that our existing
cash, cash equivalents and marketable securities will be sufficient to meet our
anticipated operating and capital expenditure requirements for at least the next
12 months from the date of this filing. We have based this estimate on
assumptions that may prove to be wrong. We could utilize our available capital
resources sooner than we currently expect if our planned pre-clinical and
clinical trials are successful or expanded, our product candidates enter new and
more advanced stages of clinical development, or our newer product clinical
trials advance beyond the discovery stage. We expect that our cash burn will
approximate current levels for the remainder of the year but will reduce in
2023.We expect to require additional financing to advance our product candidates
through clinical development and toward potential regulatory approval and to
develop, acquire or in-license other potential product candidates. Such
additional funding may come from raising additional capital, seeking access to
debt, and additional collaborative or other arrangements with corporate sources,
but such funding may not be available at terms acceptable to us, if at all. As
has been widely reported, we are currently operating in a period of economic
uncertainty and capital markets disruption, which has been significantly
impacted by domestic and global monetary and fiscal policy, and geopolitical
instability. There can be no assurance that further deterioration in credit and
financial markets and confidence in economic conditions will not occur.

We anticipate that we will need to raise substantial additional funding, the requirements of which 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 ability to obtain clinical and commercial supplies and any

other product candidates we may identify and develop;

? our ability to successfully commercialize the product candidates we may

identify and develop;

the selling and marketing costs associated with our current product candidates

? and any other product candidates we may identify and develop, including the

cost and timing of expanding our sales and marketing capabilities;

the achievement of development, regulatory and sales milestones resulting in

? payments to us from Janssen under the Restated Agreement, as amended, or other

such arrangements that we may enter into, and the timing of receipt of such

payments, if any;

the timing, receipt and amount of royalties under the Restated Agreement on

? worldwide net sales of IL-23 receptor antagonist compounds, upon regulatory

approval or clearance, if any;

the amount and timing of sales and other revenues from our current product

? candidates and any other product candidates we may identify and develop,

including the sales price and the availability of adequate third-party

reimbursement;

? the cash requirements of any future acquisitions or discovery of product

   candidates;


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  Table of Contents

? the time and cost necessary to respond to technological and market

developments;

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

technologies;

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

? the costs of maintaining, expanding and protecting our intellectual property

portfolio; and

? the costs of ongoing general and administrative activities to support the

growth of our business.

Adequate additional funding may not be available to us on acceptable terms, or
at all. 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 will be diluted, and the terms of these securities may include
liquidation or other preferences that adversely affect our stockholders' rights.
If we raise additional capital through debt financing, we may be subject to
covenants limiting or restricting our ability to take specific actions, such as
incurring additional debt, making capital expenditures or declaring dividends.
Because of the numerous risks and uncertainties associated with the development
and commercialization of our product candidates, we are unable to fully estimate
the amounts of increased capital outlays and operating expenditures associated
with our current and anticipated product development programs. For additional
information, see Part II - Item 1A - Risks Related to our Financial Position and
Capital Requirements.

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

© Edgar Online, source Glimpses

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Sales 2022 32,8 M - -
Net income 2022 -142 M - -
Net cash 2022 206 M - -
P/E ratio 2022 -2,97x
Yield 2022 -
Capitalization 416 M 416 M -
EV / Sales 2022 6,41x
EV / Sales 2023 27,8x
Nbr of Employees 127
Free-Float 98,6%
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Dinesh V. Patel President, Chief Executive Officer & Director
Asif Ali Chief Financial Officer & Executive Vice President
Harold E. Selick Chairman
Mark L. Smythe Vice President-Technology
David Y. Liu Chief Research & Development Strategy Officer
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