Praxis Precision Medicines Inc.

02/28/2025 | Press release | Distributed by Public on 02/28/2025 07:07

Annual Report for Fiscal Year Ending December 31, 2024 (Form 10-K)

MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
You should read the following discussion and analysis of our financial condition and results of operations together with our 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 financing needs, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the "Risk Factors" section of this Annual Report on Form 10-K, our actual results could differ materially from the results described in or implied by the forward-looking statements contained in the following discussion and analysis.
Overview
As noted in our Company Overview in Part I of this report, we are a clinical-stage biopharmaceutical company translating insights from genetic epilepsies into the development of therapies for central nervous system, or CNS, disorders characterized by neuronal excitation-inhibition imbalance. Normal brain function requires a delicate balance of excitation and inhibition in neuronal circuits, which, when dysregulated, can lead to abnormal function and both rare and more prevalent neurological disorders. We are applying genetic insights to the discovery and development of therapies for neurological disorders through two proprietary platforms, using our understanding of shared biological targets and circuits in the brain. Each platform currently has multiple programs, with significant potential for additional program and indication expansion:
•Cerebrum™, our small molecule platform, utilizes deep understanding of neuronal excitability and neuronal networks and applies a series of computational and experimental tools to develop orally available precision therapies
•Solidus™, our antisense oligonucleotide, or ASO, platform, is an efficient, targeted precision medicine discovery and development engine anchored on a proprietary, computational methodology
Our platforms utilize a deliberate, pragmatic and patient-guided approach, leveraging a suite of translational tools, including novel transgenic and predictive translational animal models and electrophysiology markers, to enable an efficient path to proof-of-concept in patients. Through this approach, we have established a diversified, multimodal CNS portfolio with four clinical-stage product candidates across movement disorders and epilepsy.
For our most advanced product candidate under the Cerebrum™ platform, ulixacaltamide, our Phase 3 Essential3 clinical trials in essential tremor, or ET, are ongoing. A pre-planned interim analysis of Study 1 was conducted in the first quarter of 2025. The Independent Data Monitoring Committee, or IDMC, overseeing the interim analysis of Study 1 of the Essential3 program has provided Praxis with the outcome of such analysis. Based on the predefined decision framework for Study 1, the IDMC has recommended that the study be stopped for futility, due to the results being unlikely to meet the primary efficacy endpoint under the parameters set by the statistical model. The committee also indicated that some underlying assumptions of the statistical model might have influenced this outcome and encouraged us to explore alternative analysis methods. Given the advanced state of enrollment for both Study 1 and Study 2 in the Essential3 program, and in the context of the advice received by the IDMC, we have decided to continue both studies to completion, with topline results expected in the third quarter of 2025. The decision about whether the data supports the submission of an NDA will be made after analyzing the final results for Study 1 and Study 2.
Within our vormatrigine program (formerly known as PRAX-628), we announced positive results from our Photo-Paroxysmal Response ("PPR") study in the first quarter of 2024, and have initiated or plan to initiate four studies to generate patient eligibility, efficacy, safety and pharmacokinetics (PK) data for the program. We initiated the EMPOWER study, an observational study of vormatrigine in patients with epilepsy, in the third quarter of 2024, and initiated or plan to initiate three efficacy studies. The first efficacy study, RADIANT, is an open label eight-week study in patients with focal onset seizures or generalized epilepsy that is currently enrolling, with topline results expected by mid-year 2025. We have also initiated the POWER1 study, a double-blind, placebo-controlled, 12-week study in focal onset seizures, with topline results expected in the second half of 2025, and plan to begin enrollment in the POWER2 study, a third efficacy study, in the second half of 2025. Within our relutrigine program (formerly known as PRAX-562), we announced positive topline results from the first cohort of our EMBOLD study in the third quarter of 2024 and have initiated enrollment of the second cohort, with topline results expected in the first half of 2026. We also plan to initiate the EMERALD study in a broader developmental and epileptic encephalopathies, or
DEE, patient population by mid-year 2025. For our most advanced product candidate under the Solidus™ platform, elsunersen (formerly known as PRAX-222), we shared results from Part 1 of the EMBRAVE study in the fourth quarter of 2023. We are currently enrolling the second cohort of the EMBRAVE study in Brazil, with topline results expected in the first half of 2026, and plan to initiate EMBRAVE3, a Phase 3 registrational study, by mid-year 2025. For further details on our business, refer to the Business section of Part I of this report.
We were incorporated in 2015 and commenced operations in 2016. Since inception, we have devoted substantially all of our resources to developing our preclinical and clinical product candidates, building our intellectual property, or IP, portfolio, business planning, raising capital and providing general and administrative support for these operations. We employ a "virtual" research and development model, relying heavily upon external consultants, collaborators, contract development and manufacturing organizations and contract research organizations, or CROs, to conduct our preclinical and clinical activities. Since inception, we have financed our operations primarily with proceeds from the sale and issuance of equity securities.
We are a development stage company and we have not generated any revenue from product sales, and do not expect to do so for several years, if at all. All of our product candidates are still in preclinical and clinical development. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates, if approved. We have incurred recurring operating losses since inception, including net losses of $182.8 million and $123.3 million for the years ended December 31, 2024 and 2023, respectively. As of December 31, 2024, we had an accumulated deficit of $836.7 million. We expect to incur significant expenses and operating losses for the foreseeable future as we expand our research and development activities. In addition, our losses from operations may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and development activities. We anticipate that our expenses will be maintained or increased in connection with our ongoing activities, as we:
•advance our lead product candidate, ulixacaltamide, through completion of the Phase 3 Essential3 clinical trial program for ET;
•advance relutrigine (formally PRAX-562) in the EMBOLD and EMERALD clinical trials;
•advance vormatrigine (formerly PRAX-628) in efficacy clinical trials for focal onset seizures or generalized epilepsy;
•advance elsunersen (formerly PRAX-222) into the pivotal stage of the program;
•advance our preclinical candidates to clinical trials;
•further invest in our pipeline;
•further invest in our manufacturing capabilities;
•seek regulatory approval for our product candidates;
•maintain, expand, protect and defend our IP portfolio;
•acquire or in-license technology;
•establish a sales, marketing and distribution infrastructure to commercialize any products for which we may obtain marketing approval; and
•when needed, increase our headcount to support our development efforts and any future commercialization efforts.
As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as and when needed, we may have to significantly delay, scale back or discontinue the development and commercialization of one or more of our product candidates or delay our pursuit of potential in-licenses or acquisitions.
Because of the numerous risks and uncertainties associated with product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.
In November 2021, we entered into an Open Market Sale Agreement, or the 2021 Sales Agreement, with Jefferies LLC, or Jefferies, to provide for the offering, issuance and sale of up to an aggregate amount of $125.0 million of common stock from time to time in at-the-market offerings for which Jefferies acted as sales agent. We terminated the 2021 Sales Agreement in June 2023. During the year ended December 31, 2023, we issued and sold an aggregate of 952,794 shares under the 2021 Sales Agreement for aggregate net proceeds of $24.1 million, after deducting commissions and offering expenses payable by us.
In June 2023, we completed a public offering of: (i) an aggregate of 4,296,646 shares of common stock at a public offering price of $14.25 per share, including the underwriters' full exercise of their option to purchase 619,979 additional shares of common stock, and (ii) pre-funded warrants to purchase 470,000 shares of common stock at a public offering price of $14.2485 per share. The purchase price per share for each pre-funded warrant represents the per share offering price for the common stock, less the $0.0015 per share exercise price for each underlying share. Total net proceeds generated from the offering were approximately $63.4 million, after deducting underwriting discounts, commissions and other offering expenses payable by us. As of December 31, 2024, all warrants associated with this offering were exercised on a cashless basis with no proceeds received by us.
In December 2023, we entered into an Open Market Sale Agreement, or the 2023 Sales Agreement, with Jefferies, to provide for the offering, issuance and sale of up to an aggregate amount of $75.0 million of common stock from time to time in at-the-market offerings. The 2023 Sales Agreement was terminated in January 2024. During the year ended December 31, 2024, we issued and sold an aggregate of 192,190 shares under the 2023 Sales Agreement for aggregate net proceeds of $5.3 million, after deducting commissions and offering expenses payable by us. During the year ended December 31, 2023, we issued and sold an aggregate of 212,453 shares under the 2023 Sales Agreement for aggregate net proceeds of $4.0 million, after deducting commissions and offering expenses payable by us.
In January 2024, we completed a public offering of: (i) an aggregate of 3,802,025 shares of our common stock at a public offering price of $35.50 per share, including the underwriters' full exercise of their option to purchase 633,750 additional shares of common stock, and (ii) pre-funded warrants to purchase 1,056,725 shares of common stock at a public offering price of $35.4999 per share of common stock underlying the warrants. The purchase price per share for each pre-funded warrant represents the per share offering price for the common stock, less the $0.0001 per share exercise price of each underlying share. Total net proceeds generated from the offering were approximately $161.6 million, after deducting underwriting discounts, commissions and other offering expenses payable by us. As of December 31, 2024, 152,145 warrants associated with this offering were exercised on a cashless basis with no cash proceeds received by us.
In March 2024, we entered into an Open Market Sale Agreement, or the March 2024 Sales Agreement, with Jefferies, to provide for the offering, issuance, and sale of up to an aggregate amount of $150.0 million of common stock from time to time in at-the-market offerings. During the year ended December 31, 2024, we issued and sold an aggregate of 1,614,975 shares under the March 2024 Sales Agreement for aggregate net proceeds of $113.1 million, after deducting commissions and offering expenses payable by us.
In April 2024, we completed a public offering of: (i) an aggregate of 3,849,558 shares of our common stock at a public offering price of $56.50 per share, including the underwriters' full exercise of their option to purchase 530,973 additional shares of common stock, and (ii) pre-funded warrants to purchase 221,238 shares of common stock at a public offering price of $56.4999 per share of common stock underlying the warrants. The purchase price per share for each pre-funded warrant represents the per share offering price for the common stock, less the $0.0001 per share exercise price of each underlying share. Total net proceeds generated from the offering were approximately $216.0 million, after deducting underwriting discounts, commissions and other offering expenses payable by us.
In December 2024, we entered into an amendment to the March 2024 Sales Agreement with Jefferies, to provide for the offering, issuance, and sale of up to an aggregate amount of $250.0 million of common stock from time to time in at-the-market offerings. During the year ended December 31, 2024, we issued and sold an aggregate
of 16,487 shares under the amended March 2024 Sales Agreement for aggregate net proceeds of $1.0 million, after deducting commissions and offering expenses payable by us.
As of December 31, 2024, we had cash, cash equivalents and marketable securities of $469.5 million. We expect that our cash, cash equivalents, and marketable securities as of December 31, 2024 will be sufficient to fund our operating expenditures and capital expenditure requirements necessary to advance our research efforts and clinical trials into 2028.The analysis included consideration of our current financial needs and ongoing research and development plans. We have based this estimate on assumptions that may provide to be wrong, and we could exhaust our available capital resources sooner than we expect. See "-Liquidity and Capital Resources."
Reverse Stock Split
On November 28, 2023, we filed a Certificate of Amendment to our Amended and Restated Certificate of Incorporation with the Secretary of State of the State of Delaware to effect a 1-for-15 reverse stock split of our common stock, or the Reverse Stock Split. The Reverse Stock Split became effective at 5:00 p.m., Eastern Time, on November 28, 2023, or the Effective Time.
As a result of the Reverse Stock Split, every 15 shares of our issued and outstanding common stock were automatically reclassified into one validly issued, fully-paid and non-assessable share of common stock, subject to the treatment of fractional shares as described below, without any action on the part of the holders thereof. The Reverse Stock Split did not affect the number of authorized shares of common stock or the par value of the common stock.
No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who would otherwise be entitled to receive fractional shares as a result of the Reverse Stock Split were entitled to a cash payment in lieu thereof at a price equal to the fraction to which the stockholder would otherwise be entitled multiplied by the closing price per share of the common stock (as adjusted for the Reverse Stock Split) on the Nasdaq Global Select Market on November 28, 2023, the last trading day immediately preceding the Effective Time.
Financial Operations Overview
Revenue
We have not generated any revenue from the sale of products since inception and do not expect to generate any revenue from the sale of products for several years, if at all. As discussed in Note 9 to our audited consolidated financial statements, we entered into an Option and License Agreement, or the Collaboration Agreement, with UCB Biopharma SRL, or UCB, in December 2022. We recognized $8.6 million and $2.4 million, respectively, of collaboration revenue from the Collaboration Agreement during the years ended December 31, 2024 and 2023. In December 2024, UCB exercised its option to in-license global development and commercialization rights under the terms of the Collaboration Agreement.
Operating Expenses
Research and Development Expenses
The nature of our business and primary focus of our activities generate a significant amount of research and development costs. Research and development expenses represent costs incurred by us for the following:
•costs to develop our portfolio;
•discovery efforts leading to development candidates;
•clinical development costs for our product candidates; and
•costs to develop our manufacturing technology and infrastructure.
The costs above comprise the following categories:
•personnel-related expenses, including salaries, benefits and stock-based compensation expense;
•expenses incurred under agreements with third parties, such as consultants, investigative sites and CROs, that conduct our preclinical and clinical studies and in-licensing arrangements;
•costs incurred to maintain compliance with regulatory requirements;
•costs incurred with third-party contract development and manufacturing organizations to acquire, develop and manufacture materials for preclinical and clinical studies; and
•depreciation, amortization and other direct and allocated expenses, including rent and other operating costs, such as information technology, incurred as a result of our research and development activities.
We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated balance sheets as prepaid expenses or accrued expenses. Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized, even when there is no alternative future use for the research and development. The capitalized amounts are expensed as the related goods are delivered or the services are performed.
As a company operating in a virtual environment, a significant portion of our research and development costs have been external costs incurred by third-parties. We track direct external research and development expenses to specific platforms and product candidates upon commencement. Due to the number of ongoing studies and our ability to use resources across platforms, indirect or shared operating costs incurred for our research and development platforms, such as personnel, facility costs and certain consulting costs, are not recorded or maintained on a platform-specific basis.
The following table reflects our research and development expenses, including direct expenses summarized by platform and indirect or shared operating costs recognized as research and development expenses during each period presented (in thousands):
Year Ended December 31,
2024 2023
Cerebrum™
$ 93,591 $ 31,680
Solidus™
5,738 19,009
Personnel-related (including stock-based compensation) 43,407 28,904
Other indirect research and development expenses 9,677 7,173
Total research and development expenses $ 152,413 $ 86,766
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will be maintained or increase in the foreseeable future as we advance our product candidates through the development phase, and as we continue to discover and develop additional product candidates, build manufacturing capabilities and expand into additional therapeutic areas.
At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales or licensing of our product candidates. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of:
•our ability to add and retain key research and development personnel;
•the timing and progress of preclinical and clinical development activities;
•the number and scope of preclinical and clinical programs we decide to pursue;
•our ability to successfully complete clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the FDA or any comparable foreign regulatory authority;
•our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize, our product candidates;
•our successful enrollment in and completion of clinical trials;
•the costs associated with the development of any additional product candidates we identify in-house or acquire through collaborations;
•our ability to discover, develop and utilize biomarkers to demonstrate target engagement, pathway engagement and the impact on disease progression of our product candidates;
•our ability to establish and maintain agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if our product candidates are approved;
•the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder;
•our ability to obtain and maintain patent, trade secret and other IP protection and regulatory exclusivity for our product candidates, if approved;
•our receipt of marketing approvals from applicable regulatory authorities;
•our ability to commercialize products, if approved, whether alone or in collaboration with others; and
•the continued acceptable safety profiles of our product candidates.
A change in any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect, or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time to complete our clinical development activities. We may never obtain regulatory approval for any of our product candidates. Drug commercialization will take several years and require significant development costs.
General and Administrative Expense
General and administrative expenses consist primarily of personnel-related costs, including salaries, benefits and stock-based compensation, for personnel in our executive, finance, legal, commercial and administrative functions. General and administrative expenses also include legal fees relating to corporate matters; professional fees for accounting, auditing, tax and administrative consulting services; commercial-related costs to support market assessments and scenario planning; insurance costs; administrative travel expenses; and facility-related expenses, which include direct depreciation costs and allocated expenses for office rent and other operating costs, such as information technology. Costs to secure and defend our IP are expensed as incurred and are classified as general and administrative expenses. These costs relate to the operation of the business and are unrelated to the research and development functionor any individual platform or product candidate.
We anticipate that our general and administrative expenses may increase in the future as we increase our headcount, when needed, to support the expected growth in our research and development activities and the potential commercialization of our product candidates. We also expect to incur additional IP-related expenses as we file patent applications to protect innovations arising from our research and development activities.
Other Income
Other Income, Net
Other income, net consists of interest income from our cash, cash equivalents and marketable securities and amortization of investment premiums and discounts.
Income Taxes
Since our inception, we have not recorded any U.S. federal or state income tax benefits for the net losses we have incurred in each year or for our earned research and development tax credits due to our uncertainty of realizing a benefit from those items. As of December 31, 2024 and 2023, we had U.S. federal and state net operating loss carryforwards which may be available to offset future taxable income and which begin to expire in 2035. As of December 31, 2024 and 2023, we also had federal and state research and development tax credit carryforwards which may be available to offset future income tax liabilities and which begin to expire in 2032.
Income taxes are determined at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits and other permanent differences. Our income tax provision may be significantly affected by changes to our estimates. There was no income tax provision recognized for the years ended December 31, 2024 and 2023.
Results of Operations
Comparison of the Years Ended December 31, 2024 and 2023
The following table summarizes our consolidated statements of operations for each period presented (in thousands):
Year Ended December 31, Change
2024 2023
Collaboration revenue $ 8,553 $ 2,447 $ 6,106
Operating expenses:
Research and development 152,413 86,766 65,647
General and administrative 56,305 42,054 14,251
Total operating expenses 208,718 128,820 79,898
Loss from operations (200,165) (126,373) (73,792)
Other income:
Other income, net 17,346 3,096 14,250
Total other income 17,346 3,096 14,250
Net loss $ (182,819) $ (123,277) $ (59,542)
Collaboration Revenue
The $6.1 million increase in collaboration revenue is associated with an increase in revenue recorded under the Collaboration Agreement with UCB that was executed in December 2022. In December 2024, UCB exercised its option to in-license global development and commercialization rights for a development candidate as part of the Collaboration Agreement. Upon notice of the exercise, we recognized a $6.0 million option exercise fee, and also recognized the remaining $2.6 million of collaboration revenue associated with the $5.0 million up front payment earned upon execution of the Collaboration Agreement. We have no further research service obligations under the terms of the Collaboration Agreement.
Research and Development Expense
The following table summarizes our research and development expenses for each period presented, along with the changes in those items (in thousands):
Year Ended December 31, Change
2024 2023
Cerebrum™
$ 93,591 $ 31,680 $ 61,911
Solidus™
5,738 19,009 (13,271)
Personnel-related (including stock-based compensation) 43,407 28,904 14,503
Other indirect research and development expenses 9,677 7,173 2,504
Total research and development expenses $ 152,413 $ 86,766 $ 65,647
The $65.6 million increase in research and development expenses was primarily attributable to the following:
•$61.9 million increase in expense related to our Cerebrum™ platform, driven primarily by:
◦$49.8 million increase in spend for our ulixacaltamide program, primarily due to Essential3 study spend and Phase 1 trial spend, partially offset by completion of the Essential1 study in the prior year;
◦$11.4 million increase in spend for our vormatrigine program, primarily driven by spend for our ENERGY program and manufacturing-related spend;
◦$2.3 million increase in spend for our relutrigine program, primarily related to EMBOLD Phase 2 clinical trial spend; partially offset by
◦$1.6 million decrease in activities for our earlier stage assets;
•$14.5 million increase in personnel-related costs mainly due to increased headcount and stock-based compensation expense;
•$2.5 million increase in indirect expenses, primarily driven by increased consulting spend to support operations; partially offset by
•$13.3 million decrease in expense related to our Solidus™ platform, primarily related to our elsunersen program, driven by a $6.9 million milestone payment to Ionis Pharmaceuticals Inc. upon initiation of our EMBRAVE study in the prior year, as well as prior year study activity.
General and Administrative Expense
The $14.3 million increase in general and administrative expenses was primarily attributable to the following:
•$11.7 million increase in personnel-related costs mainly due to increased stock-based compensation expense;
•$1.7 million increase in professional fees; and
•$0.9 million increase in other general and administrative expenses, none of which were individually significant.
Liquidity and Capital Resources
Sources of Liquidity
Since our inception, we have incurred significant losses in each period. We have not yet commercialized any of our product candidates, which are in various phases of preclinical and clinical development, and we may not generate revenue from sales of any products for several years, if at all.
To date, we have financed our operations primarily with proceeds from the issuance of redeemable convertible preferred stock and from the sale of common stock through an initial public offering, common stock and pre-funded warrants through follow-on public offerings and common stock from at-the-market offerings under our shelf registration statement. From inception through December 31, 2024, we have raised $1.1 billion in aggregate cash proceeds from such transactions, net of issuance costs. As of December 31, 2024, we had cash, cash equivalents, and marketable securities of $469.5 million.
In November 2021, we entered into the 2021 Sales Agreement with Jefferies to provide for the offering, issuance and sale of up to an aggregate amount of $125.0 million of common stock from time to time in at-the-market offerings for which Jefferies acted as sales agent. We terminated the 2021 Sales Agreement in June 2023. During the year ended December 31, 2023, we issued and sold an aggregate of 952,794 shares under the 2021 Sales Agreement for aggregate net proceeds of $24.1 million, after deducting commissions and offering expenses payable by us.
In June 2023, we completed a public offering of: (i) an aggregate of 4,296,646 shares of common stock at a public offering price of $14.25 per share, including the underwriters' full exercise of their option to purchase 619,979 additional shares of common stock, and (ii) pre-funded warrants to purchase 470,000 shares of common stock at a public offering price of $14.2485 per share. The purchase price per share for each pre-funded warrant represents the per share offering price for the common stock, less the $0.0015 per share exercise price for each underlying share. Total net proceeds generated from the offering were approximately $63.4 million, after deducting underwriting discounts, commissions and other offering expenses payable by us. As of December 31, 2024, all warrants associated with this offering were exercised on a cashless basis with no proceeds received by us.
In December 2023, we entered into the 2023 Sales Agreement with Jefferies to provide for the offering, issuance and sale of up to an aggregate amount of $75.0 million of common stock from time to time in at-the-market offerings. The 2023 Sales Agreement was terminated in January 2024. During the year ended December 31, 2024, we issued and sold an aggregate of 192,190 shares under the 2023 Sales Agreement for aggregate net proceeds of $5.3 million, after deducting commissions and offering expenses payable by us. During the year ended December 31, 2023, we issued and sold an aggregate of 212,453 shares under the 2023 Sales Agreement for aggregate net proceeds of $4.0 million, after deducting commissions and offering expenses payable by us.
In January 2024, we completed a public offering of: (i) an aggregate of 3,802,025 shares of our common stock at a public offering price of $35.50 per share, including the underwriters' full exercise of their option to purchase 633,750 additional shares of common stock, and (ii) pre-funded warrants to purchase 1,056,725 shares of common stock at a public offering price of $35.4999 per share of common stock underlying the warrants. The purchase price per share for each pre-funded warrant represents the per share offering price for the common stock, less the $0.0001 per share exercise price of each underlying share. Total net proceeds generated from the offering were approximately $161.6 million, after deducting underwriting discounts, commissions and other offering expenses payable by us. As of December 31, 2024, 152,145 warrants associated with this offering were exercised on a cashless basis with no cash proceeds received by us.
In March 2024, we entered into the March 2024 Sales Agreement with Jefferies to provide for the offering, issuance and sale of up to an aggregate amount of $150.0 million of common stock from time to time in at-the-market offerings. During the year ended December 31, 2024, we issued and sold an aggregate of 1,614,975 shares under the March 2024 Sales Agreement for aggregate net proceeds of $113.1 million, after deducting commissions and offering expenses payable by us.
In April 2024, we completed a public offering of: (i) an aggregate of 3,849,558 shares of our common stock at a public offering price of $56.50 per share, including the underwriters' full exercise of their option to purchase 530,973 additional shares of common stock, and (ii) pre-funded warrants to purchase 221,238 shares of common stock at a public offering price of $56.4999 per share of common stock underlying the warrants. The purchase price per share for each pre-funded warrant represents the per share offering price for the common stock, less the $0.0001 per share exercise price of each underlying share. Total net proceeds generated from the offering were approximately $216.0 million, after deducting underwriting discounts, commissions and other offering expenses payable by us.
In December 2024, we entered into an amendment to the March 2024 Sales Agreement with Jefferies to provide for the offering, issuance and sale of up to an aggregate amount of $250.0 million of common stock from time to time in at-the-market offerings. During the year ended December 31, 2024, we issued and sold an aggregate of 16,487 shares under the amended March 2024 Sales Agreement for aggregate net proceeds of $1.0 million, after deducting commissions and offering expenses payable by us.
Cash Flows
The following table provides information regarding our cash flows for each period presented (in thousands):
Year Ended December 31,
2024 2023
Net cash (used in) provided by:
Operating activities $ (131,757) $ (111,136)
Investing activities (248,494) 38,950
Financing activities 514,323 91,871
Net increase in cash, cash equivalents and restricted cash $ 134,072 $ 19,685
Operating Activities
Our cash flows from operating activities are greatly influenced by our use of cash for operating expenses and working capital requirements to support the business. We have historically experienced negative cash flows from operating activities as we have invested in developing our portfolio, drug discovery efforts and related infrastructure. The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in operating assets and liabilities.
During the year ended December 31, 2024, net cash used in operating activities of $131.8 million was primarily due to our $182.8 million net loss and $10.9 million in changes in operating assets and liabilities primarily related to an increase in accrued expenses and accounts payable, partially offset by $40.1 million of non-cash charges primarily related to stock-based compensation.
During the year ended December 31, 2023, net cash used in operating activities of $111.1 million was primarily due to our $123.3 million net loss and $14.0 million in changes in operating assets and liabilities primarily related to a decrease in accrued expenses and accounts payable, partially offset by $26.2 million of non-cash charges primarily related to stock-based compensation.
Investing Activities
During the year ended December 31, 2024, net cash used in investing activities of $248.5 million primarily related to purchases of marketable securities, partially offset by maturities of marketable securities.
During the year ended December 31, 2023, net cash provided by investing activities of $39.0 million primarily related to maturities of marketable securities.
Financing Activities
During the year ended December 31, 2024, net cash provided by financing activities of $514.3 million consisted primarily of net proceeds from our January 2024 and April 2024 follow-on public offerings, our at-the-market offerings and our collaboration and license agreement with Tenacia.
During the year ended December 31, 2023, net cash provided by financing activities of $91.9 million consisted primarily of net proceeds from our June 2023 follow-on public offering of $63.4 million and from at-the-market offerings of $28.2 million.
Plan of Operation and Future Funding Requirements
We expect our expenses to increase substantially in connection with our ongoing research and development activities, particularly as we advance the preclinical activities and clinical trials of our product candidates. As a result, we expect to incur substantial operating losses and negative operating cash flows for the foreseeable future. We anticipate that our expenses will increase substantially if and as we:
•advance the clinical development of our clinical-stage product candidates within our Cerebrum™ and Solidus™ platforms;
•advance the development of any additional product candidates;
•conduct research and continue preclinical development of potential product candidates;
•make strategic investments in manufacturing capabilities;
•maintain our IP portfolio and opportunistically acquire complementary IP;
•seek to obtain regulatory approvals for our product candidates;
•establish a sales, marketing, technology and distribution infrastructure and scale-up manufacturing capabilities to commercialize any products for which we may obtain regulatory approval;
•when needed, add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support our product development and potential future commercialization efforts and to support our operations as a public company; and
•experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges.
We are unable to estimate the exact amount of our working capital requirements, but based on our current operating plan, we believe that our current cash, cash equivalents and marketable securities will be sufficient to fund our operating expenditures and capital expenditure requirements into 2028. However, we have based this estimate on assumptions that may prove to be wrong and we could exhaust our capital resources sooner than we expect.
Because of the numerous risks and uncertainties associated with product development and potential collaborations with third parties for the development of our product candidates, we may incorrectly estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our funding requirements and timing and amount of our operating expenditures will depend on many factors, including, but not limited to:
•the scope, progress, results and costs of preclinical studies and clinical trials for our platforms and product candidates;
•the number and characteristics of product candidates and technologies that we develop or may in-license;
•the costs and timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;
•the costs necessary to obtain regulatory approvals, if any, for products in the United States and other jurisdictions, and the costs of post-marketing studies that could be required by regulatory authorities in jurisdictions where approval is obtained;
•the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our IP rights and defending any IP-related claims;
•the continuation of our existing licensing arrangements and entry into new collaborations and licensing arrangements;
•the costs we incur in maintaining business operations;
•the costs associated with being a public company;
•the revenue, if any, received from commercial sales of any product candidates for which we receive marketing approval;
•the effect of competing technological and market developments; and
•the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements for product candidates, although we currently have no commitments or agreements to complete any such acquisitions or investments in businesses.
Identifying potential product candidates and conducting preclinical testing and clinical trials is a time consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived
from sales of products that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.
Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds. Market volatility could also adversely impact our ability to access capital as and when needed. To the extent that we raise additional capital through the sale of equity 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 the rights of holders of our common stock. Additional debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially result in dilution to the holders of our common stock.
If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates to third parties that we would otherwise prefer to develop and market ourselves.
Contractual Obligations and Commitments
We have entered into certain agreements under which we have incurred or may in the future incur obligations and commitments that could have a material impact on our capital resources.
We sublease building space in Boston, Massachusetts. Our sublease will expire on January 31, 2026. As of December 31, 2024, our operating lease commitments for the remainder of the lease term were $1.4 million.
In addition, we have entered into collaboration and license agreements with RogCon Inc., or RogCon, and Ionis Pharmaceuticals, Inc., or Ionis, under which we could be obligated to pay certain fees, milestone payments and cost reimbursements.
Under our license agreement with RogCon, we are obligated to reimburse RogCon for its out-of-pocket costs incurred for activities performed under the license agreement. Additionally, we may be obligated to pay RogCon a milestone payment of $3.0 million and profit share payments. The $3.0 million milestone payment is due when the first profit share payment has become due and payable and certain contingent payments have become due and payable to Ionis under our collaboration agreement with Ionis. The profit share payments are based on a low-double-digit percentage of net profits, depending on sales volume. Either party may terminate the license agreement for material breach or insolvency of the other party. Additionally, we may terminate for convenience with prior notice to RogCon. See "Business-License Agreements-License Agreement with RogCon."
Under our collaboration agreement with Ionis, we reimbursed Ionis for identifying a development candidate and conducting an investigational new drug application, or IND, enabling toxicology study, as well as out of pocket costs incurred by Ionis related to research activities. Ionis granted us an exclusive option to obtain the rights and license to further develop and commercialize the development candidate in the field of epilepsy and neurodevelopmental disorders, other than Dravet Syndrome, following the results of the IND-enabling toxicology study. We exercised this exclusive option in January 2022 and paid a $2.0 million license fee. In July 2023, upon initiation of the elsunersen EMBRAVE study in the second quarter of 2023, we paid a milestone payment of $6.9 million to Ionis. Ionis may be entitled to additional development milestone payments, additional milestone payments, and sales royalties or sublicense fees. We may be required to make additional payments to Ionis including development milestone payments, additional milestone payments and sales royalties or sublicense fees. Either party may terminate the collaboration agreement upon material breach or insolvency of the other party. Ionis may terminate if we fail to achieve a performance milestone. See "Business-License Agreements-Ionis Collaboration Agreement."
We have also entered into multiple agreements with third parties under which we may be obligated to make future development, regulatory and commercial milestone payments and royalty payments on future sales of specified product candidates. Payments under these agreements generally become due and payable upon achievement of such milestones and sales. When the achievement of these milestones or sales have not occurred, such contingencies are not recorded in our financial statements.
We have agreements with certain vendors for various services, including services related to clinical operations and support, for which we are not contractually able to terminate for convenience and avoid any and all future obligations to the vendors. Under such agreements, we are contractually obligated to make certain payments to vendors to reimburse them for their unrecoverable outlays incurred prior to cancellation. The exact amounts of such obligations are dependent on the timing of termination and the exact terms of the relevant agreement and cannot be reasonably estimated.
In addition, we enter into indemnification agreements and agreements containing indemnification provisions in the ordinary course of business. Pursuant to these agreements, we agree to indemnify, hold harmless and reimburse the indemnified party for losses suffered or incurred by the indemnified party, generally our business collaborators, in connection with any U.S. patent or any copyright or other IP infringement claim by any third party with respect to our product candidates. The term of these indemnification agreements is generally perpetual upon execution of the agreement. The maximum potential amount of future payments we could be required to make under these indemnification agreements cannot be reasonably estimated.
Critical Accounting Policies and Significant Judgments 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 generally accepted accounting principles in the United States. 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 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.
While our significant accounting policies are described in more detail in the notes to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, we believe the following accounting policies used in the preparation of our consolidated financial statements require the most significant judgments and estimates.
Research and Development Expenses and Related Accruals and Prepaids
Research and development expenses include costs directly attributable to the conduct of research and development activities, including personnel-related expenses such as salaries, benefits and stock-based compensation expense; materials; supplies; manufacturing and external costs related to outside vendors engaged to conduct both preclinical studies and clinical trials; and the allocable portions of facility costs, such as rent, utilities, depreciation and general support services. All costs associated with research and development activities are expensed as incurred.
As part of the process of preparing our consolidated financial statements, we are required to estimate our accrued and prepaid research and development expenses. This process involves reviewing open contracts and purchase orders, communicating with our personnel to identify services that have been performed on our behalf, and estimating the level of service performed and the associated costs incurred for the services when we have not yet been invoiced or otherwise notified of the actual costs. The majority of our service providers invoice us in arrears for services performed, on a pre-determined schedule or when contractual milestones are met; however, some require advance payments. We make estimates in determining our accrued and prepaid research and development expenses as of each balance sheet date in our financial statements based on facts and circumstances known to us at that time. When evaluating the adequacy of the accrued liabilities and prepaid expenses, we analyze progress of the studies or trials related to these services, including the phase or completion of events, invoices received and contracted costs. Examples of estimated accrued and prepaid research and development expenses include fees paid to:
•CROs in connection with performing research services and preclinical and clinical studies;
•investigative sites or other providers in connection with preclinical and clinical studies;
•vendors in connection with preclinical and clinical development activities; and
•vendors related to product manufacturing, development and distribution of preclinical and clinical supplies.
The financial terms of our agreements with CROs 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 clinical expense. Payments under some of these contracts depend on factors such as the successful enrollment of patients and the completion of milestones. In expensing service fees, we estimate the time period over which services will be performed, enrollment of patients, number of sites activated and the level of effort 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 expense accordingly. Significant judgments and estimates are made in determining the accrued and prepaid research and development expenses at the end of any reporting period. 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 may result in us reporting amounts that are too high or too low in any particular period.
Recently Issued Accounting Pronouncements
We have reviewed all recently issued standards and have determined that, other than as disclosed in Note 2 to our consolidated financial statements appearing elsewhere in this Annual Report on Form 10-K, such standards will not have a material impact on our consolidated financial statements or do not otherwise apply to our current operations.