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OFFON

PROTAGONIST THERAPEUTICS, INC.

(PTGX)
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PROTAGONIST THERAPEUTICS : Management's Discussion and Analysis of Financial Condition and Results of Operations (form 10-K)

03/10/2021 | 04:33pm EST
You should read the following discussion and analysis of our financial condition
and results of operations together with the consolidated financial statements
and related notes included elsewhere in this Annual Report. This discussion
contains forward-looking statements based upon current expectations that involve
risks and uncertainties. Our actual results may differ materially from those
anticipated in these forward-looking statements as a result of various factors,
including those discussed in "Item 1A. Risk Factors" and in other parts of
this
Annual Report.

Overview
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. We initiated
Phase 2 proof of concept ("POC") studies in the blood disorders polycythemia
vera ("PV") in the third quarter of 2019 and hereditary hemochromatosis ("HH")
in January 2020. In December 2020, we presented four posters and one oral
presentation relating to rusfertide at the American Society for Hematology's
virtual annual meeting, including updated interim Phase 2 results for rusfertide
in PV. We believe these interim results provide evidence regarding the potential
of rusfertide to eliminate the need for phlebotomy by controlling hematocrit
levels below 45% on an individual patient basis. Rusfertide has a unique
mechanism of action in the potential treatment of PV, which may enable it to
decrease and maintain hematocrit levels within the range of recommended clinical
guidelines without causing the iron deficiency that may occur with frequent
phlebotomy.



We selected PV as our first indication for potential pivotal study in rusfertide
and expect to complete patient enrollment in the ongoing Phase 2 clinical trial
by mid-2021. We are consulting with regulatory authorities in the first half of
2021 to discuss the registrational clinical development plan. In June 2020, the
U.S. Food and Drug Administration ("FDA") granted orphan drug designation for
rusfertide for the treatment of PV. In October 2020, the European Medicines
Agency granted orphan drug designation for rusfertide for the treatment of PV.
In December 2020, the FDA granted Fast Track designation for rusfertide for the
treatment of PV. In addition, we expect to disclose preliminary data from our
Phase 2 POC study in HH, our second indication, in the second half of 2021. We
discontinued development of rusfertide for anemia associated with
beta-thalassemia and myelodysplastic syndromes during the first half of 2020.



Our clinical assets PTG-943 and PTG-200 are orally delivered investigational
drugs currently in development for inflammatory bowel disease ("IBD"), a
gastrointestinal ("GI") disease consisting primarily of ulcerative colitis
("UC") and Crohn's disease ("CD"), that are designed to block biological
pathways currently targeted by marketed injectable antibody drugs. Our orally
stable peptide approach may offer targeted delivery to the GI tissue
compartment. 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. As a result,
if successfully developed and approved, we believe they may transform the
existing treatment paradigm for IBD.

PN-943 is an investigational, orally delivered, gut-restricted alpha-4-beta-7
("?4?7") specific integrin antagonist. We developed PN-943 as a potentially more
potent orally delivered, gut-restricted ?4?7 backup compound to PTG-100, our
first-generation orally delivered gut-restricted ?4?7 inhibitor that was being
developed for treatment of IBD. In 2019, we completed a Phase 1 single ascending
dose ("SAD") and multiple ascending dose ("MAD") clinical study of PN-943 in
healthy volunteers to evaluate safety, pharmacokinetics and pharmacodynamics.
The pharmacodynamic results indicated that the administration of PN-943 was well
tolerated and showed results of target engagement that were

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suggestive of higher potency for PN-943 as compared to PTG-100. We submitted a
U.S. Investigational New Drug application ("IND") with the FDA for PN-943 in
December 2019, which took effect in January 2020, and we initiated a Phase 2 POC
study in UC in the second quarter of 2020 which is expected to be completed in
2022, subject to delays related to the COVID-19 pandemic.

PTG-200 (also referenced as JNJ-67864238) is an investigational, orally
delivered, gut-restricted Interleukin-23 receptor ("IL-23R") antagonist for the
treatment of IBD. 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 PTG-200 and certain related
compounds for all indications, including IBD. The agreement with Janssen was
amended in May 2019 to expand the collaboration by supporting efforts towards
second-generation IL- 23R antagonists, triggering a $25.0 million milestone
payment to us. In January 2020, as part of the expanded research collaboration,
we announced the identification and nomination of an orally delivered IL-23R
antagonist peptide as a second-generation development candidate, triggering a
$5.0 million milestone payment to us. Janssen initiated a global Phase 2 POC
clinical study for PTG-200 in moderate-to-severe CD in the fourth quarter of
2019. Due to the uncertain effect on the timing of clinical trials caused by the
COVID-19 pandemic, we have suspended guidance on a timeline for completion of
the PTG-200 Phase 2 study. In October 2020, we announced the selection of two
second-generation IL-R antagonists for advancement into clinical development,
PN-235 (also referenced as JNJ-77242113) and PN-232 (also referenced as
JNJ-75105186). A Phase 1 study was initiated for PN-235 in December 2020 and is
expected to be completed in 2021. PN-232 is in the late preclinical stage and we
expect to initiate and complete a Phase 1 study for PN-232 in 2021. The
advancement of three different oral co-development candidates provides us with
several strategic options for development in multiple indications. We are also
continuing our joint research efforts to identify additional IL-23R antagonists.

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.

COVID-19 Business Impact



We are subject to risks and uncertainties as a result of the COVID-19 pandemic.
We are continuing to closely monitor the impact of the COVID-19 pandemic on our
business and have taken and continue to take proactive efforts to protect the
health and safety of our patients, study investigators, clinical research staff
and employees, and to maintain business continuity. The extent of the impact of
the COVID-19 pandemic on our activities is highly uncertain and difficult to
predict, as the pandemic and the response to the pandemic continue to evolve.
Capital markets and economies worldwide have been significantly impacted by
the COVID-19 pandemic, and the pandemic has contributed to a global economic
recession. Such economic disruption could have a material adverse effect on our
business. Policymakers around the globe have responded with fiscal policy
actions to support the healthcare industry and economy as a whole. The magnitude
and overall effectiveness of these actions remains uncertain.

The severity of the impact of the COVID-19 pandemic on our activities will
depend on a number of factors, including, but not limited to, the duration and
severity of the pandemic, including the severity of any additional periods of
increases or spikes in the number of cases in the areas we, our suppliers and
our manufacturers operate and areas where our clinical trial sites are located.
Accordingly, the extent and severity of the impact on our existing and planned
clinical trials, manufacturing, collaboration activities and operations is
uncertain and cannot be fully predicted. 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 and
collaboration activities, continued difficulty in recruiting patients for these
clinical trials, delays in manufacturing and collaboration activities, supply
chain disruptions, the ongoing impact on operating activities and employees, and
the ongoing impact of any initiatives or programs that we may undertake to
address financial and operational challenges. As

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of the date of issuance of this Annual Report on Form 10-K, the extent to which the COVID-19 pandemic may materially impact our future financial condition, liquidity or results of operations is uncertain.

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
losses were $66.2 million, $77.2 million and $38.9 million for the years ended
December 31, 2020, 2019 and 2018, respectively. As of December 31, 2020, we had
an accumulated deficit of $283.8 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,
including clinical development activities under our worldwide license and
collaboration agreement with Janssen, 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 May 26, 2017, we and Janssen, one of the Janssen Pharmaceutical Companies of
Johnson & Johnson, entered into an exclusive license and collaboration agreement
for the clinical development, manufacture and potential commercialization of
PTG-200 worldwide for the treatment of CD and UC (the "Janssen License and
Collaboration Agreement"), which was subsequently amended effective May 7, 2019
(the "First Amendment"). The First Amendment expanded the scope of the Janssen
License and Collaboration Agreement by supporting efforts towards identifying
and development second-generation compounds. 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. During the third quarter
of 2017, we received a non-refundable, upfront cash payment of $50.0 million
from Janssen. During the second quarter of 2019, we received a non-refundable
cash payment of $25.0 million upon execution of the First Amendment. During the
first quarter of 2020, we received a cash payment of $5.0 million upon the
successful nomination of a second-generation development candidate. See Note 3
to the Consolidated Financial Statements included elsewhere in this Annual
Report on Form 10-K 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 consolidated financial statements, which have been
prepared in accordance with United States generally accepted accounting
principles. 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 assets and liabilities at the
date of the 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. 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

Due to the COVID-19 pandemic, there has been uncertainty and disruption in the
global economy and financial markets. We have taken into consideration any known
COVD-19 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 issuance 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.



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Leases
We adopted Accounting Standards Codification Topic 842, Leases, ("ASC 842")
effective January 1, 2019. We determine if an arrangement is a lease at
inception. Pursuant to ASC 842, operating leases are included in operating lease
right-of-use ("ROU") assets, operating lease liabilities, and noncurrent
operating lease liabilities on the consolidated balance sheets. Operating lease
ROU assets and operating lease liabilities are recognized based on the present
value of the future minimum lease payments over the lease term at commencement
date. If our leases do not provide an implicit rate, we use our incremental
borrowing rate based on the information available at 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 we will exercise that option. Lease
expense for minimum lease payments is recognized on a straight-line basis over
the lease term.



We record 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 will be amortized over the shorter of their useful
life or the remaining term of the lease.



Revenue Recognition


We follow Accounting Standards Codification Topic 606, Revenue from Contracts
with Customers ("ASC 606"). Under ASC 606, we recognize revenue when our
customer obtains control of promised goods or services, in an amount that
reflects the consideration which we expect to receive in exchange for those
goods or services. To determine revenue recognition for arrangements that we
determine are within the scope of ASC 606, we perform 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) we satisfy a performance obligation. We
apply the five-step model to contracts when it is probable that we will collect
the consideration we are entitled to in exchange for the goods or services we
transfer to the customer. At contract inception, we assess the goods or services
promised within each contract, determine those that are performance obligations,
and assess whether each promised good or service is distinct. We then recognize
as revenue the amount of the transaction price that is allocated to the
respective performance obligations when (or as) the performance obligations are
satisfied. We constrain our 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 our intellectual property is
determined to be distinct from the other performance obligations identified in
an arrangement, we recognize 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, we utilize 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. We evaluate the measure of proportional
performance each reporting period and, if necessary, adjust 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, we evaluate
whether the milestones are considered probable of being reached and estimate the
amount to be included in the transaction price. ASC 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 is used, it should be consistently
applied throughout the life of the contract; however, it is not necessary for us
to use the same approach for all contracts. We expect 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 our control or the control of the licensee, such as regulatory
approvals, are not considered probable of being achieved until those approvals
are received. If there is more than one performance obligation, the transaction
price is then allocated to

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each performance obligation on a relative stand-alone selling price basis. We
recognize revenue as or when the performance obligations under the contract are
satisfied. At the end of each subsequent reporting period, we re-evaluate the
probability or achievement of each such milestone and any related constraint,
and if necessary, adjust our 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.

Royalties: For arrangements that include sales-based royalties, including
milestone payments based on the level of sales, and the license is deemed to be
the predominant item to which the royalties relate, we recognize 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 we
perform our obligations under these arrangements. Amounts payable to us are
recorded as accounts receivable when our right to consideration is
unconditional. Amounts payable to us and not yet billed to the collaboration
partner are recorded as contract assets. We do 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 and revenue is recognized prospectively. If a contract modification is
not accounted for as a separate contract, we account 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. We account 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).

The period between when we transfer control of promised goods or services and
when we receive payment is expected to be one year or less, which is consistent
with our historical experience. Upfront payment contract liabilities resulting
from our license and collaboration agreements do not represent a financing
component as the payment is not financing the transfer of goods and services,
and the technology underlying the licenses granted reflects research and
development expenses already incurred by us. As such, we do not adjust our
revenues for the effects of a significant financing component.

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 both clinical and pre-clinical materials, research costs,
development milestone payments under license and collaboration agreements,
and
other consulting services.

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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 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. We accrue for these costs based on 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, 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 number and location of sites activated may vary from our
estimates, resulting in adjustments to expense in future periods. Changes in
these estimates that result in material changes to our accruals could materially
affect our results of operations.

We have received orphan drug designation from the U.S. Food and Drug Administration ("FDA") for our clinical asset rusfertide (generic name for PTG-300) for the treatment of PV and beta-thalassemia and may qualify for a related 25% U.S. Federal income tax credit on qualifying clinical study expenditures.

Stock-Based Compensation


We recognize compensation costs related to stock options accounted for under
Accounting Standards Codification Topic 718 - "Stock Compensation" based on the
estimated fair value of the awards on the date of grant. We estimate the fair
value, and the resulting stock-based compensation expense, using the
Black-Scholes option-pricing model. The estimated fair value of the stock-based
awards is generally recognized on a straight-line basis over the requisite
service period, which is generally the vesting period of the respective awards.

The Black-Scholes option-pricing model requires the use of subjective
assumptions which determine the fair value of stock-based awards. Expected
volatility generally requires significant judgement to determine. Prior to
January 1, 2020, our expected volatility was estimated based on the average
volatility for comparable publicly traded biopharmaceutical companies over a
period equal to the expected term of the stock option grants. Beginning January
1, 2020, our expected volatility was estimated based upon a mix of 75% of the
average volatility for comparable publicly traded biopharmaceutical companies
over a period equal to the expected term of the stock option grants and 25% of
the volatility of our own stock price since our initial public offering in
August 2016. These comparable companies are chosen based on their similar size,
stage in the life cycle, or area of specialty. We will continue to apply this
process until a longer period of historical information regarding the volatility
of our own stock price becomes available.

Income Taxes

We use the asset and liability method of accounting for income taxes. Under this
method, deferred tax assets and liabilities are determined based on the
differences between the financial reporting and the tax bases of assets and
liabilities and are measured using the enacted tax rates and laws that will be
in effect when the differences are expected to reverse. We assess the likelihood
that the resulting deferred tax assets will be realized. A valuation allowance
is provided when it is more likely than not that all or some portion of a
deferred tax asset will not be realized.

At December 31, 2020, our total gross deferred tax assets were $72.9 million and
our gross deferred tax liabilities were $1.0 million. Due to our lack of
earnings history and uncertainties surrounding our ability to generate future
taxable income, our net deferred tax assets have been offset by a valuation
allowance of $71.9 million. The deferred tax assets were primarily comprised of
federal and state tax net operating loss and tax credit carryforwards. At
December 31, 2020, we had $222.8 million of federal net operating loss
carryforwards and $214.3 million of state net operating loss carryforwards.
$78.7 million of the federal net operating loss carryforwards will begin to
expire in 2033, if not utilized, and the remaining $144.1 million have no
expiration date. The state net operating loss carryforwards will begin to expire
in 2035, if not utilized. As of December 31, 2020, we also had accumulated
Australian tax losses of AUD 3.7 million ($2.8 million) available for carry
forward against future earnings, which under relevant tax laws do not expire but
may not be available under certain circumstances.

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Utilization of the net operating loss carryforwards may be subject to a
substantial annual limitation due to ownership changes that may have occurred or
that could occur in the future, as required by Section 382 of the Internal
Revenue Code (the "Code"), and similar state provisions. These ownership change
limitations may limit the amount of net operating loss carryforwards and other
tax attributes that can be utilized annually to offset future taxable income and
tax, respectively. In general, an "ownership change" as defined by Section 382
of the Code results from a transaction or series of transactions over a
three-year period resulting in an ownership change of more than 50 percentage
points (by value) of the outstanding stock of a company by certain stockholders.

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 Janssen 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 study 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

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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.

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


                                                          Year Ended December 31,
                                                       2020          2019         2018

                                                            (Dollars in thousands)
Clinical and development expense - rusfertide
(PTG-300)                                           $   32,395    $   30,325    $  14,304
Clinical and development expense - PN-943               23,354        20,924          523
Clinical and development expense - PTG-200                 925         9,414       16,120
Clinical and development expense - PN-235                  317             -            -
Clinical and development expense - PTG-100                 540           288       20,443
Milestone payment obligation to former
collaboration partner                                        -             -          500
Pre-clinical and drug discovery research expense        18,453         4,162        9,837
Grants and tax incentives expense reimbursement,
net                                                    (1,478)         (110)      (2,230)
Total research and development expenses             $   74,506    $   65,003    $  59,497




We expect our research and development expenses will increase as we progress our
product candidates into later stage clinical trials, expand the number of
ongoing clinical trials, advance development activities under the Janssen
License and Collaboration Agreement, advance our discovery research projects
into the pre-clinical stage and continue our early-stage research. The process
of conducting research, identifying potential product candidates and conducting
pre-clinical and clinical trials necessary to obtain regulatory approval 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 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-commercial
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

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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, 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.

Interest Expense


Interest expense consists of interest recognized on our long-term debt, which is
comprised of contractual interest, amortization of origination fees and other
issuance costs, and accretion of final payment fees.

Loss on Early Repayment of Debt

Loss on early repayment of debt consists of prepayment and final payment fees paid upon the early repayment of our long-term debt.

Other Expense, Net

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

Results of Operations

Comparison of the Year ended December 31, 2020 and 2019


                                                       Year Ended December 31,        Dollar        %
                                                         2020             2019        Change      Change

                                                              (Dollars in thousands)

License and collaboration revenue - related party $ 28,628 $

   231    $  28,397         *
Operating expenses:
Research and development (1)                                74,506         65,003        9,503        15
General and administrative (2)                              18,638         15,749        2,889        18
Total operating expenses                                    93,144         80,752       12,392        15
Loss from operations                                      (64,516)       (80,521)       16,005      (20)
Interest income                                                900          2,813      (1,913)      (68)
Interest expense                                             (598)          (169)        (429)       254
Loss on early repayment of debt                              (585)              -        (585)       100
Other expense, net                                            (46)            (1)         (45)         *
Loss before income tax (expense) benefit                  (64,845)       (77,878)       13,033      (17)
Income tax (expense) benefit                               (1,305)         
  691      (1,996)     (289)
Net loss                                             $    (66,150)     $ (77,187)    $  11,037      (14)

(1) Includes $4.1 million and $4.4 million of non-cash stock-based compensation expense for the year ended December 31, 2020 and 2019, respectively.

(2) Includes $3.8 million and $4.0 million of non-cash stock-based compensation expense for the year ended December 31, 2020 and 2019, respectively.

*Percentage not meaningful

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License and Collaboration Revenue

License and collaboration revenue increased $28.4 million from $0.2 million for
the year ended December 31, 2019 to $28.6 million for the year ended December
31, 2020. The increase in license and collaboration revenue was primarily due to
an update in the amounts forecast for future services remaining to be performed
under the Janssen License and Collaboration Agreement, correspondingly
increasing our overall cumulative percentage of completion of our performance
obligation during year ended December 31, 2020, coupled with continued
performance and delivery of services under the ongoing Janssen License and
Collaboration Agreement. The increase in license and collaboration revenue for
the year ended December 31, 2020 also included the impact of a one-time
cumulative adjustment related to the application of revenue recognition
principles following the May 2019 amendment of the Janssen License and
Collaboration Agreement that reduced 2019 revenue by $9.4 million. The contract
modification resulted in an increase in the transaction price and additional
deliverables under the initial performance obligation, leading to an overall
corresponding decrease in the cumulative percentage of completion of our
performance obligation for the Janssen License and Collaboration Agreement
during the second quarter of 2019.

We determined that the transaction price of the Janssen License and
Collaboration Agreement was $98.6 million as of December 31, 2020, a decrease of
$14.3 million from the transaction price of $112.9 million at December 31, 2019.
In order to determine the transaction price, we evaluated all payments expected
to be received during the duration of the contract, net of development costs
reimbursement expected to be payable to Janssen. We determined that the
transaction price includes the $50.0 million upfront payment, the $25.0 million
payment received upon the effectiveness of the First Amendment, the $5.0 million
payment triggered by the successful nomination of a second-generation compound,
$17.9 million of reimbursement from Janssen for services performed for PTG-200
Phase 2 and for second-generation compound research costs and other services,
and estimated variable consideration consisting of a $7.5 million milestone
payment subject to the completion of a Phase 1 study for a second-generation
compound, offset by $6.8 million of net cost reimbursement to Janssen for
services performed. The decrease in transaction price from December 31, 2019 to
December 31, 2020 was due primarily to a decrease in the forecast of remaining
services to be provided under the initial performance obligation. We re-evaluate
the transaction price each reporting period and as uncertain events are resolved
or other changes in circumstances occur.

Research and Development Expenses


                                                 Year Ended December 31,         Dollar         %
                                                  2020              2019         Change      Change

                                                        (Dollars in thousands)
Clinical and development expense -
rusfertide (PTG-300)                          $      32,395     $     30,325    $   2,070          7
Clinical and development expense - PN-943            23,354           20,924        2,430         12
Clinical and development expense - PTG-200              925            9,414      (8,489)       (90)
Clinical and development expense - PN-235               317                -          317        100
Clinical and development expense - PTG-100              540              288          252         88
Preclinical and drug discovery research
expense                                              18,453            4,162       14,291        344
Grants and tax incentive expense
reimbursement, net                                  (1,478)            

(110) (1,368) * Total research and development expenses $ 74,506 $ 65,003 $ 9,503 15


*Percentage not meaningful



Research and development expenses increased $9.5 million, or 15%, from $65.0
million for the year ended December 31, 2019 to $74.5 million for the year ended
December 31, 2020. The increase included a $14.3 million increase in
pre-clinical and discovery research expenses, including pre-clinical costs
related to our second-generation research collaboration efforts with Janssen, a
$2.4 million increase in PN-943 clinical trial and development expenses
following the initiation of the Phase 2 trial in UC in 2020, a $2.1 million
increase in rusfertide clinical trial and development expenses, including the
ongoing Phase 2 trials in PV and HH, and $0.3 million of Phase 1 clinical trial
and development expenses for PN-235. These increases were partially offset by a
decrease of $8.5 million for PTG-200 clinical trial and development expenses
under the Janssen License and Collaboration Agreement due to timing of

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deliverables and related cost sharing arrangements, and the impact of a $1.3
million reversal of previously recorded reductions to research and development
expenses in connection with the tax incentive from Australia in 2019. Research
and development expenses for the year ended December 31, 2020 included increased
personnel costs due to an increase in research and development headcount from 54
full-time equivalent employees at December 31, 2019 to 59 full-time equivalent
employees at December 31, 2020.

General and Administrative Expenses


General and administrative expenses increased $2.9 million, or 18%, from $15.7
million for the year ended December 31, 2019 to $18.6 million for the year ended
December 31, 2020 primarily due to increases of $1.4 million in
compensation-related expenses to support the growth of our operations, $1.3
million in legal expenses and $0.8 million in insurance expense, partially
offset by a $0.6 decrease in other expenses, including accounting fees, market
research, recruiting fees and travel expense.

Interest Income


Interest income decreased $1.9 million, or 68%, from $2.8 million for the year
ended December 31, 2019 to $0.9 million for the year ended December 31, 2020.
This decrease was primarily due to the declining interest rate environment and a
change in the mix of marketable securities compared to the prior year period,
despite higher interest-earning asset balances.

Interest Expense

Interest expense increased $0.4 million, or 254%, from $0.2 million for the year
ended December 31, 2019 to $0.6 million for the year ended December 31, 2020.
Interest expense reflects contractual interest, amortization of origination fees
and other issuance costs, and accretion of final payment fees on our term loan
that funded in October 2019 and was repaid in full in June 2020.

Income Tax Expense


Income tax expense increased by $2.0 million, or 289%, from an income tax
benefit of $0.7 million for the year ended December 31, 2019 to income tax
expense of $1.3 million for the year ended December 31, 2020. Our effective
income tax rate was (2.0)% for the year ended December 31, 2020 as compared to
0.9% for the year ended December 31, 2019. Our effective income tax rate differs
from our federal statutory rate of 21% primarily because our losses cannot be
benefited due to our full valuation allowance position. During the second
quarter of 2020, our Australia subsidiary sold beneficial rights to discovery
intellectual property to our U.S. entity, and the U.S. entity reimbursed the
Australia subsidiary for certain direct development costs. Upon completion of
the sale, we analyzed tax planning strategies and future income and concluded
that a valuation allowance is necessary for our Australia subsidiary. Income tax
expense for year ended December 31, 2020 reflects this sale of intellectual
property rights, cost reimbursements and related adjustments to the deferred tax
asset, establishing a valuation allowance and certain uncertain tax position
liabilities. Income tax benefit for the year ended December 31, 2019 included a
discrete tax benefit of approximately $1.1 million for the 2017 Australia
refundable R&D tax offset.





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Comparison of the Years ended December 31, 2019 and 2018


                                                       Year Ended December 31,         Dollar        %
                                                         2019             2018         Change      Change

                                                               (Dollars in thousands)
License and collaboration revenue - related party    $         231     $   30,925    $ (30,694)      (99)
Operating expenses:
Research and development (1)                                65,003         59,497         5,506         9
General and administrative (2)                              15,749         13,697         2,052        15
Total operating expenses                                    80,752         73,194         7,558        10
Loss from operations                                      (80,521)       (42,269)      (38,252)        90
Interest income                                              2,813          2,566           247        10
Interest expense                                             (169)              -         (169)       100
Other expense, net                                             (1)           (20)            19      (95)
Loss before income tax benefit                            (77,878)       (39,723)      (38,155)        96
Income tax benefit                                             691            799         (108)      (14)
Net loss                                             $    (77,187)     $ (38,924)    $ (38,263)        98

(1) Includes $4.4 million and $3.4 million of non-cash stock-based compensation expense for the year ended December 31, 2019 and 2018, respectively.

(2) Includes $4.0 million and $3.5 million of non-cash stock-based compensation expense for the year ended December 31, 2019 and 2018, respectively.

License and Collaboration Revenue


License and collaboration revenue decreased $30.7 million, or 99%, from $30.9
million for the year ended December 31, 2018 to $0.2 million for the year ended
December 31, 2019. The decrease in license and collaboration revenue was
primarily due to a contract modification for the First Amendment to the Janssen
License and Collaboration Agreement and the related cumulative catchup
adjustment during the second quarter of 2019. The contract modification resulted
in an increase in the transaction price and additional deliverables under the
performance obligation, leading to an overall corresponding decrease in the
cumulative percentage of completion of our performance obligation for the
Janssen License and Collaboration Agreement.

We determined that the transaction price of the Janssen License and
Collaboration Agreement was $112.9 million as of December 31, 2019, an increase
of $52.2 million from the transaction price of $60.7 million at December 31,
2018. In order to determine the transaction price, we evaluated all payments to
be received during the duration of the contract, net of Phase 2 development
costs reimbursement expected to be payable to Janssen. We determined that the
transaction price includes the $50.0 million upfront payment, the $25.0 million
payment received upon the effectiveness of the First Amendment, the $5.0 million
payment triggered by the successful nomination of a second-generation compound,
$18.3 million of reimbursement from Janssen for services performed for PTG-200
Phase 2 and for second-generation compound research costs and other services,
and $14.6 million of estimated variable consideration, which includes a $7.5
million milestone payment subject to the completion of a Phase 1 study for a
second-generation compound. The increase in transaction price from December 31,
2018 to December 31, 2019 was due to an increase in fixed and variable
consideration related to the contract modification for First Amendment to the
Janssen License and Collaboration Agreement effective May 7, 2019.



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Research and Development Expenses


                                                 Year Ended December 31,          Dollar         %
                                                  2019             2018           Change      Change

                                                         (Dollars in thousands)
Clinical and development expense -
rusfertide (PTG-300)                          $     30,325     $      14,304        16,021        112
Clinical and development expense - PN-943           20,924               523        20,401          *
Clinical and development expense - PTG-200           9,414            16,120       (6,706)       (42)
Clinical and development expense - PTG-100             288            20,443      (20,155)       (99)
Milestone payment obligation to former
collaboration partner                                    -               500         (500)      (100)
Preclinical and drug discovery research                                9,837       (5,675)       (58)
expense                                              4,162
Grants and tax incentive expense
reimbursement, net                                   (110)           

(2,230) 2,120 (95) Total research and development expenses $ 65,003 $ 59,497 $ 5,506 9



*Percentage not meaningful

Research and development expenses increased $5.5 million, or 9%, from $59.5
million for the year ended December 31, 2018 to $65.0 million for the year ended
December 31, 2019. The increase included $20.4 million of PN-943 clinical trial
and development expenses, an increase of $16.0 million in rusfertide clinical
trial and development expenses and a $1.3 million reversal of previously
recorded reductions to research and development expenses in connection with the
tax incentive from Australia, partially offset by a decrease of $20.1 million in
PTG-100 clinical trial and development expenses due to the halting of further
development during 2018 and related credit adjustments, a decrease of $6.7
million for PTG-200 clinical trial and development expenses under the Janssen
License and Collaboration Agreement due to timing of deliverables and a decrease
of $5.7 million in pre-clinical and discovery research expenses. Research and
development expenses for the year ended December 31, 2019 included increased
personnel costs due to an increase in research and development headcount from 49
employees at December 31, 2018 to 54 employees at December 31, 2019.

General and Administrative Expenses


General and administrative expenses increased $2.0 million, or 15%, from $13.7
million for the year ended December 31, 2018 to $15.7 million for the year ended
December 31, 2019 primarily due to increases of $1.0 million in personnel costs
to support the growth of our operations, $0.7 million in professional fees and
$0.3 million in insurance expense. The increase in personnel costs for the year
ended December 31, 2019 reflected an increase in general and administrative
headcount from 15 employees at December 31, 2018 to 19 employees at December 31,
2019.

Interest Income

Interest income increased $0.2 million, or 10%, from $2.6 million for the year
ended December 31, 2018 to $2.8 million for the year ended December 31, 2019
primarily due to higher interest income related to an increase in marketable
securities balances.

Income Tax Benefit

Income tax benefit decreased $0.1 million, or 14%, from $0.8 million for the
year ended December 31, 2018, representing an effective income tax rate of 2.0%,
to $0.7 million for the year ended December 31, 2019, representing an effective
income tax rate of 0.9%. Our effective income tax rate differs from our federal
statutory rate of 21%, primarily because our U.S. loss cannot be benefited due
to the full valuation allowance position and reduced by foreign taxes.

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Liquidity and Capital Resources

Liquidity and Capital Expenditures


As of December 31, 2020, we had $307.8 million of cash, cash equivalents and
marketable securities and an accumulated deficit of $283.8 million. Our
operations have been financed primarily by net proceeds from the sale of shares
of our capital stock and payments under the Janssen License and Collaboration
Agreement. During the third quarter of 2017 we received a non-refundable,
upfront payment of $50.0 million from Janssen. During the second quarter of
2019, we received a nonrefundable $25.0 million payment from Janssen upon
execution of the First Amendment. During the first quarter of 2020, we received
a nonrefundable $5.0 million payment from Janssen.



In September 2017, we filed a registration statement on Form S-3 with the
Securities and Exchange Commission (File No. 333-220314) that was declared
effective as of October 5, 2017 and permits the offering, issuance, and sale by
us of up to a maximum aggregate offering price of $200.0 million of our common
stock, preferred stock and certain debt securities (the "2017 Form S-3"). Up to
a maximum of $50.0 million of the maximum aggregate offering price of $200.0
million could be issued and sold pursuant to an at-the-market ("ATM") financing
facility under a sales agreement (the "2017 Sales Agreement"). The 2017 Sales
Agreement was terminated in 2019. During the year ended December 31, 2019, prior
to the termination of the 2017 Sales Agreement, we sold 2,846,641 shares of our
common stock for net proceeds of $34.5 million, after deducting issuance costs.
We sold 151,273 shares of our common stock pursuant to the 2017 Sales Agreement
during the year ended December 31, 2018 for net proceeds of $1.5 million, after
deducting issuance costs. The 2017 Form S-3 expired in October 2020.

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 is exercisable from August 8, 2018 through August 8,
2023. Warrants to purchase 1,375,000 shares of our common stock have an exercise
price of $10.00 per share and Warrants to purchase 1,375,000 shares of our
common stock have an exercise price of $15.00 per share. The exercise price and
number of shares of common stock issuable upon the exercise of the Warrants (the
"Warrant Shares") are subject to adjustment in the event of any stock dividends
and splits, reverse stock split, recapitalization, reorganization or similar
transaction, as described in the Warrants. Under certain circumstances, the
Warrants may be exercisable on a "cashless" basis. In connection with the
issuance and sale of the common stock and Warrants, we granted the Investors
certain registration rights with respect to the Warrants and the Warrant Shares.
The common stock and Warrants are classified as equity in accordance with
Accounting Standards Codification Topic 480, Distinguishing Liabilities from
Equity ("ASC 480"), and the net proceeds from the transaction were recorded as a
credit to additional paid-in capital. As of December 31, 2020, none of the
Warrants have been exercised.

In December 2018, we entered into an exchange agreement (the "Exchange
Agreement") with an Investor and its affiliates (the "Exchanging Stockholders"),
pursuant to which we exchanged an aggregate of 1,000,000 shares of our 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 will expire
ten years from the date of issuance. The Exchange Warrants are exercisable at
any time prior to expiration except that the Exchange Warrants cannot be
exercised by the Exchanging Stockholders if, after giving effect thereto, the
Exchanging Stockholders would beneficially own more than 9.99% of our common
stock, subject to certain exceptions. In accordance with Accounting Standards
Codification Topic 505, Equity, we 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 are classified as equity in
accordance with ASC 480, and fair value of the Exchange Warrants was recorded as
a credit to additional paid-in capital and is not subject to remeasurement. We
determined that the fair value of the Exchange Warrants is substantially similar
to the fair value of the retired shares on the issuance date due to the
negligible exercise price for the Exchange Warrants.

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During the year ended December 31, 2019, Exchange Warrants to purchase 600,000
shares were net exercised, resulting in the issuance of 599,997 shares of common
stock. As of December 31, 2020, 400,000 of the Exchange Warrants remain
unexercised.

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 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
ATM financing facility under a sales agreement we entered into on November 27,
2019 (the "2019 Sales Agreement"). In May 2020, we completed an underwritten
public offering of 7,000,000 shares of common stock at a public offering price
of $14.00 per share and issued an additional 1,050,000 shares of our common
stock at a price of $14.00 per share following the underwriters' exercise of
their option to purchase additional shares. Net proceeds, after deducting
underwriting commissions and offering costs paid us, were $105.3 million. We
sold 2,483,719 shares of our common stock pursuant to the 2019 Sales Agreement
during the year ended December 31, 2020 for net proceeds of $41.9 million, after
deducting issuance costs. As of December 31, 2020, a total of $94.2 million of
common stock remained available for sale under the 2019 Form S-3, $31.9 million
of which remained available for sale under the ATM financing facility.

In October 2019, we entered into a credit and security agreement pursuant to
which the lenders party thereto agreed to make term loans available to us for
working capital and general business purposes, in a principal amount of up to
$50.0 million, including a $10.0 million term loan which was funded at closing
(October 30, 2019), with the ability to access the remaining $40.0 million in
two additional tranches of $20.0 million, subject to specified availability
periods, the achievement of certain clinical development milestones, minimum
cash requirements and other customary conditions. In June 2020, we prepaid the
outstanding $10.0 million balance on the term loan as well as $0.6 million for
related prepayment and exit fees. We did not exercise our option to borrow the
$20.0 million second tranche of Term Loans, which expired on December 31, 2020,
and therefore have one remaining $20.0 million tranche available under the Term
Loan Credit Agreement and no related outstanding balance as of December 31,
2020. Additional information about this credit facility and our long-term debt
is presented in Note 9 to the consolidated financial statements included
elsewhere in this Annual Report on Form 10-K.



In December 2020, we filed an automatic registration statement on Form S-3ASR
and an accompanying prospectus (Registration Statement No. 333-251254), pursuant
to which we completed an underwritten public offering of 4,761,904 shares of
common stock at a public offering price of $21.00 per share and issued an
additional 714,285 shares of our common stock at a price of $21.00 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 $107.6 million. This Form S-3ASR expires in December
2023.



Our primary uses of cash are to fund operating expenses, primarily research and
development expenditures and pre-commercialization costs. Cash used to fund
operating expenses is impacted by the timing of when we pay these expenses, as
reflected in the change in our outstanding accounts payable and accrued
expenses.

We believe, based on our current operating plan and expected expenditures, that
our existing cash, cash equivalents and marketable securities and access to our
term loan facility 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, and we could utilize our available capital resources sooner than we
currently expect. If our planned pre-clinical and clinical trials are
successful, or our other product candidates enter clinical trials or advance
beyond the discovery stage, we will need to raise additional funding, which may
come from raising additional capital, seeking access to additional debt, and
additional collaborative or other arrangements with corporate sources in order
to further advance our product candidates towards potential regulatory approval,
but such funding may not be available at terms acceptable to us, if at all. We
will continue to require additional financing to advance our current product
candidates through clinical development, to develop, acquire or in-license
other
potential

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product candidates and to fund operations for the foreseeable future. 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 our pre-clinical studies and

? 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 Janssen License and Collaboration

Agreement or other such arrangements we may enter into, and the timing of

receipt of such payments, if any;

the timing, receipt and amount of royalties under the Janssen License and

? Collaboration Agreement on worldwide net sales of PTG-200, including any

second-generation 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;

? 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 estimate the
amounts of increased capital outlays and operating expenditures associated with
our current and anticipated product development programs.



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




                                                             Year Ended December 31,
                                                         2020          2019          2018

                                                                  (In thousands)
Cash used in operating activities                     $ (72,484)    $ (41,527)    $ (49,947)
Cash (used in) provided by investing activities         (90,965)      (53,710)         2,213
Cash provided by financing activities                    247,626        46,036        24,115



Cash Flows from Operating Activities

Cash used in operating activities for the year ended December 31, 2020 was $72.5
million, consisting or our net loss of $66.2 million and a net change of $19.0
million in net operating assets and liabilities, partially offset by non-cash
charges of $12.7 million. Non-cash charges were primarily comprised of $7.9
million of stock-based compensation, $1.8 million of operating lease ROU asset
amortization, a $1.4 million change in net deferred tax asset, $0.8 million of
depreciation and amortization, a $0.6 million loss on early prepayment of
long-term debt and $0.2 million of amortization of debt issuance costs and
accretion of debt discount. The change in net operating assets and liabilities
was primarily due to a decrease of $27.0 million in deferred revenue related to
the Janssen License and Collaboration Agreement, a $1.9 million decrease in
operating lease liability, a $1.1 million increase in prepaid expenses and other
assets and a $1.0 million increase in Australia research and development
refundable cash tax incentive receivable, partially offset by an increase of
$5.8 million in accrued expenses and other liabilities, a decrease of $4.3
million in receivable from collaboration partner, an increase of $1.5 million in
payable to collaboration partner, an increase of $0.3 million in accounts
payable, and an increase of $0.1 million in other liability.

Cash used in operating activities for the year ended December 31, 2019 was $41.5
million, consisting of our net loss of $77.2 million, partially offset by a net
change of $26.1 million in net operating assets and liabilities and non-cash
charges of $9.5 million. The change in net operating assets and liabilities was
primarily due to a net increase of $33.5 million in deferred revenue related to
the Janssen License and Collaboration Agreement, a decrease of $1.4 million in
research and development refundable cash tax incentive receivable and an
increase of $1.1 million in accrued expenses and other payables, partially
offset by an decrease of $3.0 million in accounts payable, an increase of $2.8
million in prepaid expenses and other assets, an increase of $2.2 million in
receivable from collaboration partner and a decrease of $1.9 million in
operating lease liability. Non-cash charges were primarily comprised of $8.4
million of stock-based compensation, $1.8 million of operating lease
right-of-use asset amortization and $0.7 million of depreciation and
amortization, partially offset by a $0.8 million increase in deferred tax assets
and $0.6 million of net accretion of discount on marketable securities.

Cash used in operating activities for the year ended December 31, 2018 was $49.9
million, consisting of our net loss of $38.9 million and a net change of $18.0
million in net operating assets and liabilities, partially offset by non-cash
charges of $7.0 million. The change in net operating assets and liabilities was
primarily due to a net decrease of $23.5 million in deferred revenue related to
the Janssen License and Collaboration Agreement and an increase of $2.8 million
in receivable from collaboration partner, partially offset by an increase of
$4.4 million in accounts payable, an increase of $1.9 million in accrued
expenses and other payables, an increase of $1.1 million in payable to
collaboration partner and a decrease of $1.1 million in prepaid expenses and
other assets. Non-cash charges were primarily comprised of $6.9 million of
stock-based compensation, $0.5 million of depreciation and amortization and $0.2
million of net amortization of premium on marketable securities, partially
offset by a $0.7 million increase in deferred tax assets.

Cash Flows from Investing Activities

Cash used in investing activities for the year ended December 31, 2020 was $91.0
million, consisting of purchases of marketable securities of $280.0 million and
purchases of property and equipment of $0.5 million, partially offset by
proceeds from maturities of marketable securities of $189.5 million. Purchases
of property and equipment were primarily related to purchases of laboratory
equipment, furniture and computer equipment.

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Cash used in investing activities for the year ended December 31, 2019 was $53.7
million, consisting of purchases of marketable securities of $166.9 million and
purchases of property and equipment of $1.0 million, partially offset by
proceeds from maturities of marketable securities of $114.2 million. Purchases
of property and equipment were primarily related to purchases of scientific
equipment and leasehold improvements.

Cash provided by investing activities for the year ended December 31, 2018 was
$2.2 million, consisting of proceeds from marketable securities of $73.8
million, partially offset by purchases of marketable securities of $71.1 million
and purchases of property and equipment of $0.5 million. Purchases of property
and equipment were primarily related to purchases of scientific equipment.

Cash Flows from Financing Activities

Cash provided by financing activities for the year ended December 31, 2020 was
$247.6 million, consisting primarily of cash proceeds from our public offerings
of common stock of $213.3 million, cash proceeds from ATM sales of $42.1
million, and proceeds from the issuance of common stock upon exercise of stock
options and purchases of common stock under our employee stock purchase plan of
$2.8 million, partially offset by early repayment of long-term debt of $10.5
million.

Cash provided by financing activities for the year ended December 31, 2019 was
$46.0 million, consisting of $34.5 million of net proceeds from sales of common
stock through our ATM financing facility, $9.8 million of net proceeds from
long-term debt and $1.8 million from the issuance of common stock upon exercise
of stock options and purchases of common stock under our employee stock purchase
plan.

Cash provided by financing activities for the year ended December 31, 2018 was
$24.1 million, consisting of $21.7 million of net proceeds from issuance of our
common stock and warrants in a private placement, $1.5 million of net proceeds
from sales through our ATM financing facility and $0.9 million from the issuance
of common stock upon exercise of stock options and purchases of common stock
under our employee stock purchase plan.

Contractual Obligations and Other Commitments

Our contractual obligations include minimum lease payments under our operating lease obligations. See Note 10 to the consolidated financial statements elsewhere in this Annual Report on Form 10-K for additional information.




We enter into agreements in the normal course of business with contract research
organizations for clinical trials and with vendors for pre-clinical studies and
other services and products for operating purposes, which are cancelable at any
time by us, generally upon 30 to 60 days prior written notice.

Under the Janssen License and Collaboration Agreement, we share with Janssen
certain development, regulatory and compound supply costs. The actual amounts
that we pay Janssen or that Janssen pays us will depend on numerous factors,
some of which are outside of our control and some of which are contingent upon
the success of certain development and regulatory activities.

In June 2012, we entered into a Research Collaboration and License Agreement
with Zealand Pharma A/S 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 Protagonist assumed responsibility for the development
program. See "Item 3. Legal Proceedings", "Item 7. Management's Discussion and
Analysis - Contractual Obligations and Other Commitments" and Note 7 and Note 11
to the Consolidated Financial Statements included elsewhere in this Annual
Report on Form 10-K for additional information.





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