The following discussion and analysis of our financial condition and results of
operations should be read together with our consolidated financial statements
and related notes appearing elsewhere in this Annual Report on Form 10-K. Some
of the information contained in this discussion and analysis or set forth
elsewhere in this Annual Report on Form 10-K, including information with respect
to our plans and strategy for our business and related financing, includes
forward-looking statements that involve risks and uncertainties and should be
read together with the "Risk Factors" section of this Annual Report on Form 10-K
for a discussion of important factors that could cause actual results to differ
materially from the results described in or implied by the forward-looking
statements contained in the following discussion and analysis.



OVERVIEW



We are a commercial-stage biopharmaceutical company dedicated to intercepting
and preventing immune-mediated diseases. Since our inception, we have devoted
substantially all our efforts to business planning, research and development,
commercialization activities, recruiting management and technical staff,
acquiring operating assets, partnering and raising capital. We do not have any
positive cash flows from operations, and we will need to raise additional
capital to finance our operations.



On November 17, 2022, the FDA approved TZIELD to delay the onset of Stage 3 T1D
in adult and pediatric patients aged eight years and older with Stage 2 T1D. In
December 2022 we began shipping TZIELD to our distributors in the United States,
which include a specialty distributor and two specialty pharmacies. The full
commercial launch of TZIELD began in mid-January 2023.



As of December 31, 2022, we had an accumulated deficit of $405.6 million. Since
our inception in October 2016, we have financed our operations primarily through
equity and debt financings. Through equity offerings, we have raised aggregate
net proceeds of approximately $468.8 million as of December 31, 2022, net of
underwriting discounts, commissions and other offering expenses. This includes
completed underwritten public offerings in June 2020, which raised net proceeds
of $103.3 million and in January 2021, which when combined with the partial
exercise by the underwriters to purchase additional shares in February 2021,
raised net proceeds of $102.3 million, as well as a private placement of common
stock and warrants in July 2022 which raised net proceeds of $57.2 million. As
of December 31, 2022, we have also raised $57.3 million in net proceeds from the
sale of shares of common stock under our ATM stock sale programs. In addition,
we have received $23.7 million in net proceeds from the Hercules LSA, which
provides for up to $125.0 million of term loans in the aggregate.



94








We expect that over the next several years we will continue to incur losses from
operations as we increase our expenditures in research and development in
connection with our regulatory submissions, clinical trials and other
development activities, as well as costs to support the commercialization of
TZIELD. If adequate funds are not available to us on a timely basis, or at all,
we may be required to terminate or delay certain development activities and
certain commercial efforts.

Merger Agreement with Sanofi


On March 12, 2023, we entered into the Merger Agreement with Sanofi and its
indirect wholly owned acquisition subsidiary. Pursuant to the Merger Agreement,
and upon the terms and subject to the conditions thereof, Sanofi's acquisition
subsidiary will commence a tender offer to purchase all of the issued and
outstanding shares of our common stock at a price of $25.00 per share, to the
seller in cash, without interest, but subject to any applicable withholding of
taxes. If certain conditions are satisfied and the tender offer closes, Sanofi
would acquire any remaining shares of our common stock by a merger of Sanofi's
acquisition subsidiary with and into the Company.



The Merger Agreement contemplates that the merger will be effected pursuant to
Section 251(h) of the Delaware General Corporation Law, which permits completion
of the merger without a shareholder vote promptly following consummation of the
tender offer. The obligation of Sanofi and its acquisition subsidiary to
consummate the tender offer is subject to the condition that there be validly
tendered, and not properly withdrawn, prior to the expiration of the tender
offer, that number of shares of our common stock that, together with the number
of shares of our common stock, if any, then owned beneficially by Sanofi and its
acquisition subsidiary (together with their wholly-owned subsidiaries),
represents at least a majority of the shares of our common stock outstanding as
of the consummation of the tender offer. The obligation of Sanofi's acquisition
subsidiary to consummate the tender offer is also subject to the expiration of
the waiting period (and any extension thereof) under the Hart-Scott-Rodino
Antitrust Improvements Act of 1976 and other customary conditions. Consummation
of the tender offer is not subject to a financing condition.



Following the consummation of the tender offer and subject to the terms and
conditions of the Merger Agreement, Sanofi's acquisition subsidiary will merge
with and into the Company pursuant to the provisions of Section 251(h) of the
Delaware General Corporation Law as provided in the Merger Agreement, with the
Company being the surviving corporation. At the effective time of the merger,
each share of our common stock (other than shares of common stock (i) held in
our treasury or owned by us or any of our direct or indirect wholly owned
subsidiaries, (ii) owned by Sanofi, us or any of Sanofi's or our respective
direct or indirect wholly owned subsidiaries (other than Sanofi's acquisition
subsidiary), (iii) irrevocably accepted for purchase in the tender offer, and
(iv) held by stockholders who have properly demanded appraisal of their shares
of common stock in accordance with the Delaware General Corporation Law) will be
cancelled and converted into the right to receive an amount in cash equal to the
same $25.00 per share price payable in the tender offer, less applicable
withholding of taxes.



The Merger Agreement includes customary representations, warranties and
covenants. We have agreed to use commercially reasonable efforts to carry on our
business in the ordinary course until the effective time of the merger. We have
also agreed not to solicit or initiate discussions with third parties regarding
other proposals for a strategic transaction involving the Company. Sanofi and
its acquisition subsidiary have agreed to use reasonable best efforts to take
actions that may be required in order to obtain antitrust approval of the
proposed transaction, subject to certain limitations. The Merger Agreement also
includes customary termination provisions for each of us and Sanofi, subject, in
certain circumstances, to the payment by us of a termination fee of $100.0
million and the payment by Sanofi of a reverse termination fee of $158.0
million.

KEY COMPONENTS OF OUR RESULTS OF OPERATIONS





Product Revenues, Net




Product revenues, net, consists of net sales of TZIELD. In December 2022 we
began shipping TZIELD to our distributors in the United States, which include a
specialty distributor and two specialty pharmacies. The full commercial launch
of TZIELD began in mid-January 2023. Revenues from product sales are recorded at
the net sales price, or transaction price, which includes estimates of variable
consideration that result from (a) invoice discounts for prompt payment and
distribution fees, (b) government rebates, such as Medicaid and Tricare, (c)
estimated chargebacks, including the Public Health Service 340B drug pricing
program chargebacks, and (d) costs of co-pay assistance programs for patients.
Where appropriate, these estimates take into consideration a range of possible
outcomes which are probability-weighted for relevant factors such as the
Company's historical experience, current contractual and statutory requirements,
specific known market events and trends, industry data and forecasted customer
buying and payment patterns. If actual results in the future vary from
estimates, we may adjust these estimates, which would affect net product revenue
and earnings in the period such variances become known.



Collaboration Revenues



Collaboration revenues consists of revenue recognized under our License
Agreement with Huadong and Co-Promotion Agreement with Sanofi. We recognize
revenue for the Sanofi Co-Promotion Agreement using a time elapsed output method
and are recognizing the upfront, non-refundable ROFN payment on a straight-line
basis over the Initial ROFN period from October 4, 2022 through June 30, 2023.
We recognize revenue under the Huadong License Agreement, which relates to
payments received or to be received from Huadong for the granting of licenses
and the performance of research, development and manufacturing activities, using
a cost-based input method according to costs incurred to date compared to
estimated total costs of the clinical research activities over the period which
the activities are performed under the agreement, which began in mid-2021 and
are currently expected to occur through the second half of 2024. We expect that
revenue will fluctuate from period to period as a result of the timing of
expenses incurred in conjunction with the related research and development
activities.

Cost of Product Revenues (Excluding Amortization of Intangible Assets)





Cost of product revenues (excluding amortization of intangible assets) consists
primarily of direct and indirect costs related to the manufacturing of TZEILD
sold, including third-party manufacturing costs, packaging services, freight,
inventory reserves, allocation of overhead costs, as well as royalty expenses.
We began capitalizing inventory costs for TZEILD following FDA approval in
November 2022. Prior to regulatory approval, we recorded all costs related to
manufacturing and material costs of TZIELD as research and development expenses
when incurred, and therefore are not included in cost of product revenues.

Research and Development Expenses





Research and development expenses consist primarily of clinical studies, the
cost of manufacturing our drug candidates for clinical study, regulatory costs,
other internal operating expenses, and the cost of conducting preclinical
activities. Expenses also include the cost of salaries, benefits and other
related costs, including stock-based compensation, for personnel serving in our
research and development functions. In addition, our research and development
expenses include payments to third parties, as well as the fair value of equity
issuances to third parties for the license rights to products in development
(prior to marketing approval). Our expenses related to clinical trials are
primarily related to activities at CROs and other consultants that design,
obtain regulatory and ethics committee approval, and conduct clinical trials on
our behalf. Our expenses related to the production of drug substance or drug
product for our clinical trials and development programs are primarily related
to activities performed by licensors, strategic partners or CMOs and other
consultants on our behalf. Our development efforts from inception have been
principally related to the acquisition and development of our clinical programs,
as well as the build out of our medical affairs infrastructure, medical
education programs and grants to support the screening of potential T1D
patients.



95







All research and development expenses are charged to operations as incurred in
accordance with ASC 730, Research and Development. We account for non-refundable
advance payments for goods and services that will be used in future research and
development activities as expenses when the service has been performed or when
the goods have been received, rather than when the payment is made.

Selling, General and Administrative Expenses


Selling, general and administrative expenses consist primarily of salaries,
benefits and other related costs, including stock-based compensation, for our
personnel serving in our executive, business development, commercial, legal,
finance and accounting and other administrative functions. Selling, general and
administrative expenses also include professional fees for marketing and other
commercial activities, legal, including patent-related expenses, consulting,
insurance, board of director fees, tax and accounting services. We expect that
our selling, general and administrative expenses will increase significantly in
the future as we continue the commercial launch of TZIELD, including due to
expenses to be incurred under the Sanofi Co-Promotion Agreement.

Amortization of Intangible Assets


Upon FDA approval of TZIELD in November 2022, our definite-lived intangible
assets began to be amortized over their estimated useful lives. Our
definite-lived intangibles assets consist solely of milestone payments,
primarily relating to our agreement with MacroGenics, for in-licensed product
rights which have an alternative future use. We are amortizing the TZIELD
milestone intangible assets over TZIELD's initial regulatory exclusivity period
of 12 years. Certain events or circumstances may occur that require us to review
the assets for impairment.

Interest Income, net

Interest income, net, consists of interest income earned on our cash, cash equivalents and marketable securities offset by amortization of premiums and accretion of discounts to maturity on our marketable securities.

Interest Expense



Interest expense consists of the accretion of debt discount, contractual
interest costs and the amortization of debt issuance costs related to our debt.
Debt discount is accreted, and debt issuance costs are amortized, to interest
expense using the effective interest rate method over the term of the debt. Our
consolidated balance sheets reflect debt, net of the debt discount, debt
issuance costs paid to the lender and other third-party costs.

96






RESULTS OF OPERATIONS

Comparison of years ended December 31, 2022 and 2021



                                                   Years Ended December 31,               Increase
                                                 2022                    2021            (Decrease)
                                             (in thousands, except per share data)
Statement of Comprehensive Loss Data:
Product revenues, net                       $        1,183         $              -     $       1,183
Collaboration revenues                              11,712                    1,395            10,317
Total revenues                                      12,895                    1,395            11,500

Operating expenses:
Cost of product revenues (excluding
amortization of intangible assets)                     512                        -               512
Research and development                            75,804                   69,627             6,177
Selling, general and administrative                 64,113                   47,346            16,767
Amortization of intangible assets                      627                 

      -               627
Total operating expenses                           141,056                  116,973            24,083
Loss from operations                              (128,161 )               (115,578 )          12,583
Interest income, net                                 2,241                      146             2,095
Interest expense                                    (1,037 )                      -            (1,037 )

Loss before income tax benefit                    (126,957 )              

(115,432 )          11,525
Income tax benefit                                  13,392                    1,000            12,392
Net loss                                    $     (113,565 )       $       (114,432 )   $        (867 )

Net loss per common share, basic and
diluted                                     $        (1.52 )       $          (1.81 )
Weighted average common shares
outstanding, basic and diluted                      74,723                 

 63,101



Product Revenues, Net

Product revenues, net, were $1.2 million for the year ended December 31, 2022.
Following receipt of FDA approval for TZIELD in November 2022, we began shipping
TZIELD to our distributors in the United States in December 2022. We did not
recognize any product revenues during the year ended December 31, 2021.

Collaboration Revenues



Collaboration revenues were $11.7 million for the year ended December 31, 2022,
an increase of $10.3 million, compared to $1.4 million for the year ended
December 31, 2021. The increase in collaboration revenues is driven by $6.6
million recognized under the Sanofi Co-Promotion Agreement, which was executed
in October 2022, as well as an increase of $3.7 million of revenue recognized
under the Huadong License Agreement due to an increase in the related clinical
research and manufacturing activities performed as a result of the initiation of
the PREVAIL-2 Phase 2a study in January 2022.

Cost of Product Revenues (Excluding Amortization of Intangible Assets)


Cost of product revenues (excluding amortization of intangible assets) was $0.5
million for the year ended December 31, 2022. Cost of product revenues related
primarily to the manufacturing costs of units of TZIELD sold during the year
ended December 31, 2022, as well as royalty expenses, overhead costs, initial
product validation charges and the establishment of inventory reserves recorded
for excess inventory. We did not record any cost of product revenues for the
year ended December 31, 2021.

Research and Development Expenses



Research and development expenses were $75.8 million for the year ended December
31, 2022, an increase of $6.2 million, compared to $69.6 million for the year
ended December 31, 2021. This increase related primarily to manufacturing costs
for additional clinical drug supply of PRV-3279, costs for the PREVAIL-2 Phase
2a study (PRV-3279), which was initiated in January 2022, as well as increased
costs for the PROACTIVE Phase 2b study (ordesekimab). These increases in
research and development expenses were partially offset by lower costs for our
TZIELD program, including the PROTECT study, as we completed target enrollment
in August 2021, and lower costs for regulatory activities, compared to the prior
year period, which included costs related to the initial TZIELD BLA submission.
Also contributing to the decrease were costs related to the PROVENT Phase 1
study (PRV-101), for which we announced interim results from in October 2021,
including $0.5 million in expense related to a milestone payment to Vactech for
the first subject dosed in the PROVENT study during the first quarter of 2021.
We also incurred $1.1 million in expenses related to the Company's grant of
certain rights of PRV-3279 to Huadong under the Huadong License Agreement during
the first quarter of 2021.

97







Research and development expenses for the years ended December 31, 2022 and 2021
also included personnel costs of $26.1 million and $16.3 million, respectively,
including stock-based compensation of $7.8 million and $4.4 million in each
respective year. The increase in personnel costs relates to an increase in
headcount as well as an increase in stock-based compensation due to the vesting
of certain performance-based metrics related primarily to the receipt of FDA
approval for, and commercial launch of, TZIELD.

Selling, General and Administrative Expenses



Selling, general and administrative expenses were $64.1 million for the year
ended December 31, 2022, an increase of $16.8 million, compared to $47.3 million
for the year ended December 31, 2021. Selling, general and administrative
expenses for the years ended December 31, 2022 and 2021 were comprised of the
following:

                                               Years Ended December 31,           Increase
                                                2022               2021          (Decrease)
                                                    (in thousands)

Selling and other commercial expenses       $     35,799       $     23,250     $      12,549
General and administrative expenses               28,314             24,096             4,218
Total selling, general and administrative
expenses                                    $     64,113       $     47,346     $      16,767
Selling and other commercial expenses were $35.8 million for the year ended
December 31, 2022 and primarily consisted of $15.8 million in external costs for
our pre-commercial and commercial activities for TZIELD, such as marketing,
market access and commercial launch related costs, $18.4 million in personnel
costs, including stock-based compensation of $4.8 million and $1.4 million of
other commercial expenses. Selling and other commercial expenses were $23.3
million for the year ended December 31, 2021 and primarily consisted of $12.2
million in external costs for our pre-commercial activities, such as marketing
and market access costs, and $11.1 million in personnel costs, including
stock-based compensation of $2.0 million. The increase in selling and other
commercial expenses related primarily to an increase in headcount for the
buildout of our commercial infrastructure and other activities to support the
commercial launch of TZIELD.

General and administrative expenses were $28.3 million for the year ended
December 31, 2022 and primarily consisted of $14.3 million in personnel costs,
including stock-based compensation of $6.4 million, $7.9 million in professional
fees and legal expenses, $2.7 million in insurance and other public company
costs, as well as $3.1 million in other internal expenses. Other general and
administrative expenses were $24.1 million for the year ended December 31, 2021
and primarily consisted of $10.7 million in personnel costs, including
stock-based compensation of $5.5 million, $8.4 million in professional fees and
legal expenses, and approximately $2.6 million in insurance and other public
company costs.

The increase selling, general and administrative stock-based compensation expense in 2022 relates to the increase in headcount as well as the vesting of certain performance-based metrics related primarily to the receipt of FDA approval for, and commercial launch of, TZIELD.

Amortization of Intangible Assets



Amortization of intangible assets was $0.6 million for the year ended December
31, 2022. Amortization of intangible assets is comprised of amortization of
milestone payments, primarily related to our agreement with MacroGenics, for
in-licensed product rights which have an alternative future use. We did not
record any amortization expense for the year ended December 31, 2021.

98






Interest Income, net

Interest income, net, was $2.2 million for the year ended December 31, 2022,
compared to $0.1 million during the year ended December 31, 2021. The increase
in interest income, net, primarily related higher yields from our investment
portfolio during the year ended December 31, 2022.

Interest Expense


Interest expense was $1.0 million for the year ended December 31, 2022, and
consisted of contractual interest, accretion of debt discount and amortization
of debt issuance costs for our debt. We did not have any outstanding debt during
the year ended December 31, 2021.

Income Tax Benefit



We recorded an income tax benefit of $13.4 million for the year ended December
31, 2022, compared to $1.0 million for the year ended December 31, 2021. Both
benefits recognized related to proceeds from the sale of certain of our prior
years New Jersey net operating losses. The increase in income tax benefit
related to an overall increase in the amount of net operating losses ("NOLs")
sold year over year.

Comparison of years ended December 31, 2021 and 2020



                                                  Years Ended December 31,              Increase
                                                 2021                   2020           (Decrease)
                                            (in thousands, except per share data)
Statement of Comprehensive Loss Data:
Collaboration revenues                      $        1,395         $            -     $       1,395
Operating expenses:
Research and development                            69,627                 66,360             3,267
General and administrative                          47,346                 33,327            14,019
Total operating expenses                           116,973                 99,687            17,286
Loss from operations                              (115,578 )              (99,687 )          15,891
Interest income, net                                   146                    583              (437 )
Loss before income tax benefit                    (115,432 )              (99,104 )          16,328
Income tax benefit                                   1,000                    523               477
Net loss                                    $     (114,432 )       $      (98,581 )   $      15,851

Net loss per common share, basic and
diluted                                     $        (1.81 )       $        (1.88 )
Weighted average common shares
outstanding, basic and diluted                      63,101                

52,457



Collaboration Revenues

Collaboration revenue was $1.4 million for the year ended December 31, 2021, recognized from the Huadong License Agreement. We did not recognize any collaboration revenue during the year ended December 31, 2020.

Research and Development Expenses



Research and development expenses were $69.6 million for the year ended December
31, 2021, an increase of $3.2 million, compared to $66.4 million for the year
ended December 31, 2020. The increase related primarily to increased costs for
our TZIELD program, including the PROTECT study and the PROTECT Extension study,
as well as the build out of our medical affairs infrastructure, medical
education programs and grants to support the screening of potential T1D
patients. Also contributing to the increase were costs for the PROACTIVE study
(ordesekimab), which was initiated in August 2020, and the PREVAIL Phase 2a
study (PRV-3279), for start-up costs incurred in the second half of 2021. We
also incurred $1.1 million in expense, which was paid to MacroGenics in May
2021, in connection with the Company's grant of certain rights of PRV-3279 to
Huadong under the Huadong License Agreement and $0.5 million in expense related
to a milestone payment to Vactech for the first subject dosed in the PROVENT
study during the first quarter of 2021. These increases were offset by a
decrease in TZIELD manufacturing costs, including costs for GMP and process
performance qualification ("PPQ") batches of drug supply and drug product, which
were produced in 2020, drug supply manufacturing costs for PRV-101 and
regulatory activities for the initial teplizumab BLA submission incurred in

the
prior year period.

99







Research and development expenses for the years ended December 31, 2021 and 2020
also included personnel costs of $16.3 million and $11.7 million, respectively,
including stock-based compensation of $4.4 million and $5.6 million in each
respective year. The increase in personnel costs relates to an increase in
headcount and was partially offset by a decrease in stock-based compensation due
to the vesting of certain performance-based metrics related primarily to the
completion of CMC activities and submission of the BLA for TZIELD that occurred
in the prior year period.

General and Administrative Expenses



General and administrative expenses were $47.3 million for the year ended
December 31, 2021, an increase of $14.0 million, compared to $33.3 million for
the year ended December 31, 2020. General and administrative expenses for the
years ended December 31, 2021 and 2020 were comprised of the following:

                                               Years Ended December 31,           Increase
                                                2021               2020          (Decrease)
                                                    (in thousands)
Pre-commercial expenses                     $     23,250       $     16,298     $       6,952

Other general and administrative expenses         24,096             17,029             7,067

Total general and administrative expenses $ 47,346 $ 33,327

$ 14,019


Pre-commercial expenses were $23.3 million for the year ended December 31, 2021
and primarily consisted of $12.2 million in external costs for our
pre-commercial activities, such as marketing and market access costs, and $11.1
million in personnel costs, including stock-based compensation of $2.0 million.
Pre-commercial expenses were $16.3 million for the year ended December 31, 2020
and primarily consisted of $11.7 million in external costs of pre-commercial
activities for TZIELD and $4.6 million in personnel costs, including stock-based
compensation of $1.7 million. The increase in pre-commercial expenses related
primarily to an increase in headcount, as we continued to buildout out our
infrastructure to support the commercial launch of TZIELD.

General and administrative expenses were $24.1 million for the year ended
December 31, 2021 and primarily consisted of $10.7 million in personnel costs,
including stock-based compensation of $5.5 million, $8.4 million in professional
fees and legal expenses, and approximately $2.6 million in insurance and other
public company costs. Other general and administrative expenses were $17.0
million for the year ended December 31, 2020 and were primarily comprised of
$9.0 million in personnel costs, including stock-based compensation of $5.9
million, $5.0 million in professional fees and legal expenses, and approximately
$2.0 million in insurance and other public company costs.

Interest Income, net


Interest income, net was $0.1 million for the year ended December 31, 2021,
compared to $0.6 million for the year ended December 31, 2020. The decrease in
interest income, net during the year ended December 31, 2021 primarily related
to a reduction in interest rates since the COVID-19 pandemic began in early
2020.

Income Tax Benefit



We recorded an income tax benefit of $1.0 million during the year ended December
31, 2021, compared to $0.5 million during the year ended December 31, 2020. Both
benefits recognized related to proceeds from the sale of certain of our prior
years New Jersey net operating losses. The increase in income tax benefit
related to an overall increase in the amount of NOLs sold year over year.

LIQUIDITY AND CAPITAL RESOURCES

Sources and Uses of Cash


There is considerable time and cost associated with developing a potential drug
or pharmaceutical product to the point of regulatory approval and
commercialization. We commenced commercial shipments of TZIELD in December 2022.
We expect to continue to incur operating losses as we conduct our commercial
launch of TZIELD and fund related development and regulatory activities for
TZIELD and our product candidates.

100






As of December 31, 2022, we had cash, cash equivalents and marketable securities
of $165.0 million. We currently have invested our cash, cash equivalents and
marketable securities primarily in money market funds, U.S. Treasury securities,
U.S Government agency securities and investment-grade corporate debt securities.
Since our inception in October 2016, we have financed our operations primarily
through equity and debt financings. Through equity offerings, we have raised
aggregate net proceeds of approximately $468.8 million as of December 31, 2022,
net of underwriting discounts, commissions and other offering expenses.

On February 10, 2023, Sanofi, in accordance with the Sanofi Securities Purchase
Agreement (defined below), purchased 2,712,497 shares of our common stock at a
purchase price of approximately $12.90 per share, which was equal to 140% of the
daily volume-weighted average price per share of our common stock for the five
consecutive trading days prior to the closing date, for a total investment of
$35.0 million.

In July 2022, we entered into a Securities Purchase Agreement with certain
institutional purchasers, pursuant to which we sold, in a private placement,
13,318,535 shares of common stock and 13,318,535 warrants to acquire additional
shares of common stock for aggregate gross proceeds of approximately $60.0
million, based on an offering price of $4.505 for each share plus one warrant.
The warrants will expire five years from the closing date of the transaction,
have an exercise price of $6.00 per share and are immediately exercisable upon
issuance, subject to other limitations on exercise as described in the warrants.
Net proceeds from the transaction were $57.2 million after deducting fees for
the placement agent of $2.4 million and other offering expenses of $0.4 million.

We established the 2021 ATM Program through which the Company may sell, from
time to time at its sole discretion, up to $150.0 million of shares of its
common stock. During the year ended December 31, 2022, the Company sold
10,306,780 shares of its common stock for aggregate net proceeds of $47.4
million, net of $1.7 million in sales commissions and other offering expenses,
under the 2021 ATM Program all of which occurred during the quarters ended June
30, 2022 and September 30, 2022. We have approximately $100.9 million of
available capacity under the 2021 ATM Program.

In January 2021, we completed an underwritten public offering in which we sold
6,250,000 shares of common stock at a public offering price of $16.00 per share.
In February 2021, the underwriters partially exercised their option to purchase
an additional 587,500 shares at a price of $16.00 per share. In the aggregate,
total net proceeds from the underwritten public offering were $102.3 million,
after deducting underwriting discounts and commissions of $6.6 million and other
offering expenses of $0.5 million.

In June 2020, we completed an underwritten public offering in which we sold
7,590,000 shares of common stock at a public offering price of $14.50 per share.
The 7,590,000 shares sold included the full exercise of the underwriters' option
to purchase 990,000 shares at a price of $14.50 per share. We received net
proceeds from the underwritten public offering of $103.3 million, after
deducting underwriting discounts and commissions of approximately $6.6 million
and other offering expenses of $0.2 million.

In August 2019, we established an at-the-market program ("2019 ATM Program")
through which we may sell, from time to time at our sole discretion, up to $50.0
million of shares of our common stock. In February 2021, we established the
"2021 ATM Program". In connection with the establishment of the 2021 ATM
Program, we terminated the 2019 ATM Program, and no additional stock may be
issued thereunder. Prior to its termination, we sold 725,495 shares of its
common stock for aggregate net proceeds of approximately $9.9 million, net of
$0.3 million in sales commissions, under the 2019 ATM Program, all of which
occurred during the quarter ended June 30, 2020.

In addition, in August 2022, we entered into the Hercules LSA with Hercules
Capital, Inc. The Hercules LSA provides for up to $125.0 million of term loans
in the aggregate, available to be funded in up to five tranches. The first
tranche in an amount equal to $25.0 million was drawn on August 31, 2022, the
Closing Date, for net proceeds of $23.7 million. On February 2, 2023, an
additional $40.0 million was drawn from the second tranche following FDA
approval of TZIELD, for net proceeds of approximately $38.9 million. The third
and fourth tranches will be available to us in an aggregate amount of up to
$35.0 million, subject to satisfaction of certain conditions, including
achievement of certain milestones. The availability of the fifth tranche of up
to $25.0 million is subject to the approval of Hercules Capital, Inc.


If the Merger Agreement is terminated under certain circumstances, including
termination by us in order to accept and enter into a definitive agreement with
respect to a Superior Proposal (as defined in the Merger Agreement) or
termination due to a change in recommendation by our Board, we will be required
to pay Sanofi a termination fee of $100.0 million by wire transfer of
immediately available funds. The Merger Agreement also provides that Sanofi must
pay us a $158.0 million termination fee if the merger is not consummated due to
the failure of certain conditions to be satisfied as a result of failure to

obtain antitrust clearance.


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We will need to raise additional capital to fund our operations, execute our
strategy and continue as a going concern. We currently plan to raise additional
capital, subject to any applicable restrictions in the Merger Agreement, through
public or private equity or debt financings, or potential out-licensing
transactions. Such additional funding will be necessary to continue to develop
our product candidates, to pursue the license or purchase of other technologies,
to commercialize TZIELD or our product candidates, or to purchase other
products. We may seek to sell common or preferred equity or convertible debt
securities, enter into other credit facilities or another form of third-party
funding, or seek other debt financing. In addition, we may consider raising
additional capital to fund operating activities, expand our business, pursue
strategic investments, take advantage of financing opportunities, or for other
reasons. The sale of equity and convertible debt securities may result in
dilution to our stockholders and those securities may have rights senior to
those of our common stock. If we raise additional funds through the issuance of
preferred stock, convertible debt securities or other debt financing, these
securities or other debt could contain covenants that would restrict our
operations. Any other third-party funding arrangement could require us to
relinquish valuable rights. We may require additional capital beyond its
currently anticipated needs. Additional capital may not be available on
reasonable terms, or at all. If we are unable to obtain sufficient additional
funds when required, we may be forced to delay, restrict or eliminate all or a
portion of our development programs, halt commercial sales activities for
TZIELD, dispose of assets or technology or cease operations.

Our cash requirements for 2023 and into 2024 will be impacted by a number of
factors, the most significant of which are the success of our commercial launch
of TZIELD and expenses related to the continued commercialization of TZIELD,
including costs to continue the build out the Company's commercial
infrastructure and commercial sales activities (including the Sanofi
Co-Promotion Agreement), the milestone payments due to MacroGenics, the PROTECT
clinical trial and manufacturing activities for TZIELD. Other factors include
costs related to the Company's other ongoing clinical trials, such as the Phase
2b PROACTIVE clinical study of ordesekimab in celiac disease and the Phase 2a
PREVAIL-2 clinical study of PRV-3279 in lupus, which was initiated in January
2022.

Based on our current business plans, management believes that our cash, cash
equivalents and marketable securities on hand at December 31, 2022 are
sufficient to meet our operating requirements for at least the next 12 months
from the issuance of the financial statements included in this report.

Cash Flows

The following table shows a summary of our cash flows for the years ended December 31, 2022, 2021 and 2020:



                                                Years Ended December 31,
                                            2022          2021

2020


                                                     (in thousands)
Net cash (used in) provided by:
Operating activities                      $ (75,408 )   $ (95,385 )   $ (76,336 )
Investing activities                        (88,127 )     (31,096 )      25,174
Financing activities                        129,384       102,377       114,291

Net change in cash and cash equivalents $ (34,151 ) $ (24,104 ) $ 63,129

Cash Flows from Operating Activities


Net cash used in operating activities was $75.4 million for the year ended
December 31, 2022, and primarily related to cash used to fund manufacturing,
pre-commercial and commercial activities for TZIELD, clinical development
activities for ordesekimab, clinical development and manufacturing expenses for
PRV-3279, as well as increased personnel costs to support our clinical programs
and our corporate and commercial infrastructures. Cash expenses were offset by
$11.6 million received from the sale of certain of our New Jersey net operating
losses, as well as the $20.0 million upfront ROFN payment received in connection
with the Sanofi Co-Promotion Agreement and $3.0 million received from Huadong in
connection with the Huadong License Agreement. Under these two agreements, there
was $18.4 million currently recorded as deferred revenue as of December 31,
2022. Our working capital was $84.3 million as of December 31, 2022.

Net cash used in operating activities was $95.4 million for the year ended
December 31, 2021, and primarily related to cash used to fund clinical
development, manufacturing, regulatory activities and pre-commercial activities
for TZIELD, clinical development activities for ordesekimab, PRV-3279 and
PRV-101, and increased personnel costs to support our clinical programs and the
build out of our corporate and commercial infrastructure. Cash expenses were
offset by $8.5 million received from Huadong in connection with the Huadong
License Agreement, of which $7.1 million was recorded as deferred revenue as of
December 31, 2021.
102







Net cash used in operating activities was $76.3 million for the year ended
December 31, 2020 and primarily related to cash used to fund clinical
development, manufacturing, and pre-commercial activities for TZIELD, clinical
development activities for ordesekimab, development activities for PRV-101, and
increased personnel costs to support our clinical programs and the build out of
our corporate and commercial infrastructure.

Cash Flows from Investing Activities


Net cash used in investing activities was $88.1 million for the year ended
December 31, 2022, and primarily related to the purchase of marketable
securities totaling $103.1 million, $15.0 million paid to MacroGenics for the
first product milestone tranche payable upon FDA approval of TZIELD and capital
expenditures associated with data information systems of $0.1 million, partially
offset by proceeds received from the maturity of marketable securities totaling
$30.8 million.

Net cash used in investing activities was $31.1 million for the year ended
December 31, 2021, and primarily related to the purchase of marketable
securities totaling $55.3 million and capital expenditures associated with data
information systems of $1.0 million, partially offset by proceeds received from
the maturity of marketable securities totaling $25.2 million.

Net cash provided by investing activities was $25.2 million for the year ended
December 31, 2020 and primarily related to the proceeds received from the
maturity of marketable securities totaling $55.0 million, partially offset by
purchases of marketable securities totaling $28.7 million and net capital
expenditures associated with the build out of our new corporate headquarters and
information systems infrastructure of $1.1 million.

Cash Flows from Financing Activities



Net cash provided by financing activities was $129.4 million for the year ended
December 31, 2022, and primarily related to aggregate net proceeds received from
the July 2022 Private Placement of $57.2 million, $47.4 million from the sale of
common stock under our 2021 ATM program, $23.7 million from the issuance of debt
under the Hercules LSA as well as $1.0 million in proceeds received from stock
option exercises during the period.

Net cash provided by financing activities was $102.4 million for the year ended
December 31, 2021, and primarily related to aggregate net proceeds of $102.3
million received from our underwritten public offering in January 2021,
including the subsequent partial exercise of the underwriters' option to
purchase additional shares in February 2021, as well as approximately $0.1
million in proceeds from stock option exercises during the period.

Net cash provided by financing activities was $114.3 million for the year ended
December 31, 2020 and primarily related to net proceeds received from our
underwritten public offering in June 2020 of $103.3 million, net proceeds
received from the sale of our common stock under our ATM program of $9.9 million
and $1.1 million received from stock option exercises during the period.

Commitments and Contractual Obligations



We have entered into a number of license, collaboration, acquisition and other
agreements with third parties. For further details regarding our significant
contracts, and the commitments and contractual obligations contained within each
contract, please refer to Note 6 - Commitments and Contingencies, and Note 12 -
Debt, to our consolidated financial statements included in this report, which is
incorporated herein by reference.

In July 2020, we entered into an agreement to lease approximately 7,000 square
feet of office space in Red Bank, NJ, for which the initial lease term expires
approximately 64 months from the lease commencement date, which occurred in
October 2020, with base annual lease payments of approximately $0.2 million.

103






In addition, in the course of normal business operations, we have agreements
with contract service providers to assist in the performance of our research and
development and manufacturing activities. Expenditures to CROs, CMOs and other
clinical development related vendors represent significant costs in clinical
development. Subject to required notice periods and our obligations under
binding purchase orders, we can elect to discontinue the work under these
agreements at any time. We could also enter into additional collaborative
research, contract research, manufacturing, and supplier agreements in the
future, which may require upfront payments and even long-term commitments of
cash. As of December 31, 2022, we had $0.3 million of contracted purchase
obligations which represents our commitments under binding forecasts, and
purchase orders (inclusive of cancellation fees), including those provided under
our agreements with our CMOs. The actual amounts incurred will be determined
based on the amount of goods purchased and the pricing then in effect under the
applicable arrangement. These committed purchase obligations are expected to be
incurred within one year from the issuance of these financial statements.

We also have employment agreements with certain employees which require the funding of a specific level of payments, if certain events, such as a change in control or termination without cause, occur.



We do not have any off-balance sheet arrangements that have or are reasonably
likely to have a current or future material effect on our financial condition,
revenues or expenses, results of operations, liquidity, capital expenditures or
capital resources. We do not have any interest in special purpose entities,
structured finance entities or other variable interest entities.

TRENDS AFFECTING OUR BUSINESS

COVID-19



The COVID-19 pandemic continues to adversely affect global economies, financial
markets and the overall environment. We have experienced some level of
disruption to each of our current trials. We completed target enrollment in the
PROTECT study in August 2021 and expect to report top-line results in the second
half of 2023, subject to change for any potential interruptions related to
COVID-19, regulatory decisions or issues or other interruptions. We initiated
the ordesekimab Phase 2b trial in gluten free diet NRCD in August 2020 and the
pandemic has caused difficulties and delays in recruitment. As a result of these
delays, we now expect to report top-line results from the PROACTIVE study by the
end of 2023. The ongoing effects of the COVID-19 pandemic have affected the
PREVAIL-2 study enrollment, primarily due to resource constraints at the
clinical site level and subdued patient interest in participating in clinical
trials of immune modulatory agents. We now expect top-line results of the
PREVAIL-2 study in the second half of 2024.

Inflation and Interest Rates


Inflation and interest rates have both increased during the periods covered by
this report, and these increases are expected to continue to impact the economy
for the near future. Inflation and higher interest rates have had a negative
impact on the broader equity markets, leading to declines in equity valuations,
especially in the biopharmaceutical sector, and may continue to result in higher
borrowing costs, reduced liquidity and ability to raise capital, and could
potentially increase the interest payments on our variable rate debt. Other
factors that may be impacted by inflation include manufacturing, research and
development, selling, general and administrative, and personnel related
expenses. We have not been affected materially by inflation during the periods
covered by this report, however, inflationary increases in the future may
adversely impact our business and corresponding financial position.

CRITICAL ACCOUNTING POLICIES AND ESTIMATES



The following disclosure supplements the descriptions of our accounting policies
contained in Note 3 to our consolidated financial statements regarding
significant areas of judgement. Management made certain estimates and
assumptions during the preparation of the consolidated financial statements in
accordance with generally accepted accounting principles in the United States
("GAAP"). These estimates and assumptions affect the reported amount of assets
and liabilities and disclosures of contingent assets and liabilities in the
consolidated financial statements. These estimates involve a significant level
of estimation uncertainty and have had a material impact on our results of
operations. Actual results could differ from our estimates.

104

Management has discussed the development and selection of these critical accounting policies and estimates with the audit committee of our board of directors. A discussion of some of our more significant accounting policies and estimates follows.



Revenue Recognition

Product Revenues, Net

Product revenues, net consists of net sales of TZIELD. In accordance with ASC
606, Revenue from Contracts with Customers ("ASC 606"), we recognize revenue
when a customer obtains control of promised goods or services, in an amount that
reflects the consideration we expect to receive in exchange for the goods or
services provided. The only performance obligation in our contracts with
customers is to timely deliver TZIELD to the customer's designated location. We
have not incurred or capitalized any incremental costs associated with obtaining
contracts with customers.

Revenues from product sales are recorded at the net sales price, or transaction
price, which includes estimates of variable consideration that result from (a)
invoice discounts for prompt payment and distribution fees, (b) government
rebates, such as Medicaid and Tricare, (c) estimated chargebacks, including the
Public Health Service 340B drug pricing program chargebacks, and (d) costs of
co-pay assistance programs for patients. These reserves are based on the amounts
earned or to be claimed on the related sales. Where appropriate, these estimates
take into consideration a range of possible outcomes which are
probability-weighted for relevant factors such as our historical experience,
current contractual and statutory requirements, specific known market events and
trends, industry data and forecasted customer buying and payment patterns.
Overall, these reserves reflect our best estimates of the amount of
consideration to which we are entitled based on the terms of the applicable
contract. The amount of variable consideration included in the transaction price
may be constrained and is included in the net sales price only to the extent
that it is probable that a significant reversal in the amount of the cumulative
revenue recognized will not occur in a future period. Actual amounts of
consideration ultimately received may differ from our estimates. If actual
results in the future vary from estimates, we adjust these estimates, which
would affect net product revenue and earnings in the period such variances
become known. The critical estimates that affect the net sales price recorded
for sales of TZIELD are as follows:

Rebates: We contract with government agencies (our "Third-party Payers") so that
TZIELD will be eligible for purchase by, or partial reimbursement from, such
Third-party Payers. We estimate the rebates we will provide to Third-Party
Payers and deducts these estimated amounts from total gross product revenues at
the time the revenues are recognized. We estimate the rebates that we will
provide to Third-Party Payers based upon (i) our contracts with these
Third-Party Payers, (ii) the government mandated discounts applicable to
government-funded programs, (iii) a range of possible outcomes that are
probability-weighted for the estimated payor mix, and (iv) historical
experience.

Collaboration Revenues



From time to time, we enter into licensing agreements that are within the scope
of ASC 606 and ASC 808, Collaborative Arrangements("ASC 808"), under which we
may license rights to research, develop and commercialize our product candidates
to third parties. The terms of these collaborative research and development
agreements typically include non-refundable, upfront license fees; reimbursement
for research and development activities; development, regulatory and commercial
milestone payments; and royalties on net sales of commercialized products. We
may also enter into development and manufacturing service agreements with our
collaborators.

Generally, as part of the accounting for these agreements under ASC 606, we must
develop estimates and assumptions that require judgment to determine the
underlying stand-alone selling price for each performance obligation which
determines how the transaction price is allocated among each identified
performance obligation within the agreement. If observable standalone selling
prices are not available, we estimate the applicable standalone selling price,
which may include the use of forecasted revenues or costs, development
timelines, discount rates and probabilities of technical and regulatory
success.However, we currently do not have any agreements that contain more than
one performance obligation, and as such we allocate the entire transaction price
to the single performance obligation.

Revenue is then recognized over time using an appropriate method of measuring
progress towards fulfilling our performance obligation for the respective
out-licensing agreement. Determining the measure of progress that consistently
depicts our satisfaction of the performance obligations requires judgement as
well as estimates, and the effect of any changes made to an estimated input,
therefore impacting revenue or expenses recognized, would be recorded as a

change in estimate.

105






For certain milestone payments included in these agreements, at the inception of
each agreement, we evaluate whether the milestones are considered probable of
occurring and estimate the amount to be included in the transaction price using
either the expected value or most likely amount method, depending on the facts
and circumstances relative to the agreement. 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,
or our collaborative partner's control, such as non-operational developmental
and regulatory approvals, are generally not considered probable of being
achieved until those approvals are received, and as such are constrained. At the
end of each reporting period, we re-evaluate the probability of achievement of
milestones that are within our, or our collaborative partner's control, and if
necessary, adjust our estimate of the overall transaction price.

There have been no material changes in estimates used in accounting for any of
our collaborative agreements accounted for under ASC 606 and ASC 808, since the
inception of each agreement.

Accrued Research and Development Expenses


As part of the process of preparing our consolidated financial statements, we
are required to estimate our accrued expenses. This process involves reviewing
quotations and contracts, identifying services that have been performed on our
behalf and estimating the level of service performed and the associated cost
incurred for the service when we have not yet been invoiced or otherwise
notified of the actual cost. The majority of our service providers invoice us
monthly in arrears for services performed or when contractual milestones are
met. We make estimates of our accrued expenses as of each balance sheet date in
our consolidated financial statements based on facts and circumstances known to
us at that time. We periodically confirm the accuracy of our estimates with the
service providers and make adjustments if necessary. The significant estimates
in our accrued research and development expenses are related to expenses
incurred with respect to CROs, CMOs and other vendors in connection with
research and development and manufacturing activities.

We base our expenses related to CROs and CMOs on our estimates of the services
received and efforts expended pursuant to quotations and contracts with such
vendors that conduct research and development and manufacturing activities on
our behalf. The financial terms of these agreements are subject to negotiation,
vary from contract to contract and may result in uneven payment flows. There may
be instances in which payments made to our vendors will exceed the level of
services provided and result in a prepayment of the applicable research and
development or manufacturing expense. In accruing service fees, we estimate the
time period over which services will be performed and the level of effort to be
expended in each period. If the actual timing of the performance of services or
the level of effort varies from our estimate, we adjust the accrual or prepaid
expense accordingly. Although we do not expect our estimates to be materially
different from amounts actually incurred, our understanding of the status and
timing of services performed relative to the actual status and timing of
services performed may vary and could result in us reporting amounts that are
too high or too low in any particular period. There have been no material
changes in estimates for the periods presented within this Annual Report on

Form
10-K.

Stock-Based Compensation

We recognize stock-based compensation expense for awards of equity instruments
based on the grant-date fair value of those awards. The grant-date fair value of
the award is recognized as compensation expense ratably over the requisite
service period, which generally equals the vesting period of the award. We also
grant performance-based stock options. The grant-date fair value of the
performance-based stock options is recognized as compensation expense once it is
probable that the performance condition will be achieved. We record actual
forfeitures in the period the forfeiture occurs.

We used the Black-Scholes option-pricing model to estimate the fair value of
option awards with the following weighted-average assumptions for the period
indicated:

                               Years Ended December 31,
                             2022          2021       2020

Exercise price             $   4.83       $ 7.37     $ 12.87
Expected volatility              80 %         81 %        74 %
Expected dividends                -            -           -
Expected term (in years)        6.1          6.1         6.2
Risk-free interest rate        2.16 %       1.13 %      0.59 %

The weighted-average valuation assumptions were determined as follows:

? Risk-free interest rate: we base the risk-free interest rate on the interest

rate payable on United States Treasury securities in effect at the time of

grant for a period that is commensurate with the assumed expected option term.

? Expected annual dividends: the estimate for annual dividends is 0%, because we

have not historically paid, and do not expect for the foreseeable future to

pay, a dividend.

? Expected stock price volatility: the expected volatility used is based on

historical volatilities of similar entities within our industry which were

commensurate with our expected term assumption. We also utilize our limited

available historical volatility, to a lesser weight, in our expected

volatility calculation.

? Expected term of options: the expected term of options represents the period

of time options are expected to be outstanding. The expected term of the

options granted to employees is derived from the "simplified" method as

described in Staff Accounting Bulletin 107 relating to stock-based

compensation, whereby the expected term is an average between the vesting

period and contractual period due to our limited operating history. For

non-employee stock option grants, we have the option to utilize either the

expected term or the contractual term, determined on an award-by-award basis.





Stock-based compensation expense is included in both research and development
expenses and selling, general and administrative expenses in the consolidated
statements of comprehensive loss. There have been no material changes in
estimates, or our estimation methods, for the periods presented within this
Annual Report on Form 10-K.

Recent Accounting Pronouncements

See Note 3 - Significant Accounting Policies, in the accompanying notes to consolidated financial statements, which is incorporated herein by reference.

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