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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
 FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2022
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from                      to                     
Commission File Number: 001-39620
PRAXIS PRECISION MEDICINES, INC.
(Exact Name of Registrant as Specified in its Charter)
Delaware 47-5195942
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
99 High Street, 30th Floor
Boston, MA
02110
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: 617-300-8460
Securities registered pursuant to Section 12(b) of the Act:
Title of each classTrading
Symbol(s)
Name of each exchange
on which registered
Common Stock, par value $0.0001 per sharePRAXThe Nasdaq Global Select Market
Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    Yes ☒   No  ☐
Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    Yes ☒   No ☐
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filerAccelerated filer
Non-accelerated filerSmaller reporting company
 Emerging growth company
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act.  ☐
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act).     Yes     No  ☒
As of August 5, 2022, the registrant had 45,576,128 shares of common stock, $0.0001 par value per share, outstanding.



SUMMARY OF THE MATERIAL AND OTHER RISKS ASSOCIATED WITH OUR BUSINESS

Our business is subject to numerous risks and uncertainties, including those described in Part II, Item 1A. "Risk Factors" in this Quarterly Report on Form 10-Q. You should carefully consider these risks and uncertainties when investing in our common stock. The principal risks and uncertainties affecting our business include the following:

We are a clinical-stage biopharmaceutical company and we have incurred significant losses since our inception. We anticipate that we will continue to incur significant losses for the foreseeable future.
         
We will need substantial additional funding, and if we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our product discovery and development programs or commercialization efforts.

The development and commercialization of drug products is subject to extensive regulation, and the regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time-consuming, and inherently unpredictable. If we are ultimately unable to obtain regulatory approval for our product candidates on a timely basis if at all, our business will be substantially harmed.

Preclinical and clinical drug development involves a lengthy, complex and expensive process, with an uncertain outcome. The outcome of preclinical testing and early clinical trials may not be predictive of the success of later clinical trials, and the results of our clinical trials may not satisfy the requirements of the FDA or comparable foreign regulatory authorities.

Our product candidates may cause undesirable side effects or have other properties that could delay or prevent their regulatory approval, limit their commercial potential or result in significant negative consequences following regulatory approval, if obtained.

We face significant competition in an environment of rapid technological and scientific change, and there is a possibility that our competitors may achieve regulatory approval before us or develop therapies that are safer, more advanced or more effective than ours, which may negatively impact our ability to successfully market or commercialize any product candidates we may develop and ultimately harm our financial condition.

Our success depends in part on our ability to protect our intellectual property. It is difficult and costly to protect our proprietary rights and technology, and we may not be able to ensure their protection.

We have entered into, and may enter into, license or other collaboration agreements that impose certain obligations on us. If we fail to comply with our obligations under such agreements with third parties, we could lose license rights that may be important to our business.

Third-party claims of intellectual property infringement may prevent or delay our product discovery and development efforts.

We depend on collaborations with third parties for the research, development and commercialization of certain of the product candidates we may develop. If any such collaborations are not successful, we may not be able to realize the market potential of those product candidates.

Business interruptions resulting from COVID-19 or a similar pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide may adversely affect our business.

The price of our stock has been and may in the future be volatile, and you could lose all or part of your investment.



SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS
This Quarterly Report on Form 10-Q contains express or implied forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:
the success, cost and timing of our product candidate development activities and clinical trials;
our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates;
the ability to license additional intellectual property relating to our product candidates from third parties and to comply with our existing license agreements and collaboration agreements;
the ability and willingness of our third-party research institution collaborators to continue research and development activities relating to our product candidates;
our ability to commercialize our product candidates, if approved, in light of the intellectual property rights of others;
our ability to obtain funding for our operations, including funding necessary to complete further development and, if approved, commercialization of our product candidates;
the commercialization of our product candidates, if approved;
our plans to research, develop and, if approved, commercialize our product candidates;
future agreements with third parties in connection with the commercialization of our product candidates, if approved, and any other approved product;
the size and growth potential of the markets for our product candidates, and our ability to serve those markets;
the rate and degree of market acceptance of our product candidates, if approved;
the pricing and reimbursement of our product candidates, if approved;
regulatory developments in the United States and foreign countries;
our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;
the success of competing therapies that are or may become available;
our ability to attract and retain key scientific or management personnel;
the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing; and
the effect of the COVID-19 pandemic, including mitigation efforts and economic effects, and the ongoing conflict in Ukraine on any of the foregoing or other aspects of our business operations, including but not limited to our ongoing and planned preclinical studies and clinical trials.
In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause



actual results to differ materially from current expectations include, among other things, those listed under the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 and under the section titled "Risk Factors" in this Quarterly Report on Form 10-Q. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the Securities and Exchange Commission as exhibits hereto completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.
The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.
This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from our own internal estimates and research as well as from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. While we are not aware of any misstatements regarding any third-party information presented in this Quarterly Report on Form 10-Q, their estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties and are subject to change based on various factors, including those discussed under the section titled “Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2021 and elsewhere in this Quarterly Report on Form 10-Q.



Table of Contents

  Page
PART I.
Item 1.
Item 2.
Item 3.
Item 4.
PART II.
Item 1.
Item 1A.
Item 2.
Item 3.
Item 4.
Item 5.
Item 6.
                   Signatures



PART I—FINANCIAL INFORMATION
Item 1. Financial Statements.
PRAXIS PRECISION MEDICINES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Amounts in thousands, except share and per share data)
June 30, 2022December 31, 2021
Assets
Current assets:
Cash and cash equivalents$56,039 $138,704 
Marketable securities109,365 137,207 
Prepaid expenses and other current assets10,176 11,498 
Total current assets175,580 287,409 
Property and equipment, net1,134 1,213 
Operating lease right-of-use assets3,287 3,653 
Other non-current assets416 472 
Total assets$180,417 $292,747 
Liabilities and stockholders’ equity
Current liabilities:
Accounts payable$11,821 $10,780 
Accrued expenses25,768 26,844 
Operating lease liabilities949 810 
Total current liabilities38,538 38,434 
Long-term liabilities:
Non-current portion of operating lease liabilities3,010 3,501 
Total liabilities41,548 41,935 
Commitments and contingencies (Note 6)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized and no shares issued or outstanding as of June 30, 2022 and December 31, 2021
  
Common stock, $0.0001 par value; 150,000,000 shares authorized; 45,575,406 shares issued and outstanding as of June 30, 2022, and 45,300,514 shares issued and outstanding as of December 31, 2021
5 5 
Additional paid-in capital585,070 567,598 
Accumulated other comprehensive loss(680)(176)
Accumulated deficit(445,526)(316,615)
Total stockholders’ equity138,869 250,812 
Total liabilities and stockholders’ equity$180,417 $292,747 
The accompanying notes are an integral part of these condensed consolidated financial statements.
1


PRAXIS PRECISION MEDICINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Amounts in thousands, except share and per share data)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Operating expenses:
Research and development$43,620 $25,678 $96,272 $43,607 
General and administrative16,774 10,805 32,971 20,295 
Total operating expenses60,394 36,483 129,243 63,902 
Loss from operations(60,394)(36,483)(129,243)(63,902)
Other income:
Other income, net200 82 332 128 
Total other income200 82 332 128 
Net loss$(60,194)$(36,401)$(128,911)$(63,774)
Net loss per share attributable to common stockholders, basic and diluted$(1.32)$(0.88)$(2.83)$(1.59)
Weighted average common shares outstanding, basic and diluted45,542,600 41,569,782 45,499,131 40,028,807 
The accompanying notes are an integral part of these condensed consolidated financial statements.
2


PRAXIS PRECISION MEDICINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS
(Unaudited)
(Amounts in thousands)
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Net loss$(60,194)$(36,401)$(128,911)$(63,774)
Net unrealized (losses) gains on marketable securities, net of tax(74)36 (504)(50)
Comprehensive loss$(60,268)$(36,365)$(129,415)$(63,824)
The accompanying notes are an integral part of these condensed consolidated financial statements.
3



PRAXIS PRECISION MEDICINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY
(Unaudited)
(Amounts in thousands, except share data)
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated Other
Comprehensive Loss
Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 202145,300,514 $5 $567,598 $(316,615)$(176)$250,812 
Stock-based compensation expense— — 7,886 — — 7,886 
Issuance of common stock from at-the-market public offerings, net of issuance costs70,410 — 1,368 — — 1,368 
Vesting of restricted stock units81,130 — — — — — 
Shares withheld for taxes for vesting of restricted stock units(17,850)— (230)— — (230)
Issuance of common stock upon exercise of stock options72,278 — 333 — — 333 
Change in unrealized loss on marketable securities, net of tax— — — — (430)(430)
Net loss— — — (68,717)— (68,717)
Balance at March 31, 202245,506,482 $5 $576,955 $(385,332)$(606)$191,022 
Stock-based compensation expense— — 7,611 — — 7,611 
Issuance of common stock under employee stock purchase plan51,645 — 454 — — 454 
Vesting of restricted stock units6,361 — — — — — 
Shares withheld for taxes for vesting of restricted stock units(2,225)— (17)— — (17)
Issuance of common stock upon exercise of stock options13,143 — 67 — — 67 
Change in unrealized loss on marketable securities, net of tax— — — — (74)(74)
Net loss— — — (60,194)— (60,194)
Balance at June 30, 202245,575,406 $5 $585,070 $(445,526)$(680)$138,869 
The accompanying notes are an integral part of these condensed consolidated financial statements.
4


PRAXIS PRECISION MEDICINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (continued)
(Unaudited)
(Amounts in thousands, except share data)
Common StockAdditional
Paid-In
Capital
Accumulated
Deficit
Accumulated Other
Comprehensive Loss
Total
Stockholders’
Equity
SharesAmount
Balance at December 31, 202038,268,543 $4 $437,007 $(149,554)$ $287,457 
Stock-based compensation expense— — 4,666 — — 4,666 
Issuance of common stock upon exercise of stock options352,506 — 851 — — 851 
Change in unrealized loss on marketable securities, net of tax— — — — (86)(86)
Net loss— — — (27,373)— (27,373)
Balance at March 31, 202138,621,049 $4 $442,524 $(176,927)$(86)$265,515 
Stock-based compensation expense— — 5,400 — — 5,400 
Issuance of common stock from follow-on public offering, net of offering costs of $229
5,750,000 1 98,412 — — 98,413 
Issuance of common stock upon exercise of stock options322,113 — 809 — — 809 
Change in unrealized loss on marketable securities, net of tax— — — — 36 36 
Net loss— — — (36,401)— (36,401)
Balance at June 30, 202144,693,162 $5 $547,145 $(213,328)$(50)$333,772 
The accompanying notes are an integral part of these condensed consolidated financial statements.
5


PRAXIS PRECISION MEDICINES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Amounts in thousands)
Six Months Ended
June 30,
20222021
Cash flows from operating activities:
Net loss$(128,911)$(63,774)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense212 50 
Stock-based compensation expense15,497 10,066 
Non-cash operating lease expense366 475 
Amortization of premiums and discounts on marketable securities, net598 815 
Changes in operating assets and liabilities:
Prepaid expenses and other current assets722 (3,531)
Accounts payable1,041 3,708 
Accrued expenses(547)(3,106)
Operating lease liabilities(352)(373)
Other56 (65)
Net cash used in operating activities(111,318)(55,735)
Cash flows from investing activities:
Purchases of property and equipment(399)(69)
Purchases of marketable securities(83,022)(164,170)
Maturities of marketable securities109,761  
Net cash provided (used) in investing activities26,340 (164,239)
Cash flows from financing activities:
Proceeds from follow-on public offering, net of issuance costs 98,576 
Proceeds from at-the-market offerings, net of issuance costs1,368  
Payment of issuance costs for at-the-market offerings and initial public offering(262)(575)
Payments of tax withholdings related to vesting of restricted stock units(246) 
Proceeds from exercise of options and employee stock purchase plan contributions853 1,660 
Net cash provided by financing activities1,713 99,661 
Decrease in cash, cash equivalents and restricted cash(83,265)(120,313)
Cash, cash equivalents and restricted cash, beginning of period139,720 297,208 
Cash, cash equivalents and restricted cash, end of period$56,455 $176,895 
Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents56,039 175,879 
Restricted cash416 1,016 
Total cash, cash equivalents and restricted cash$56,455 $176,895 
Supplemental disclosures of non-cash activities:
Operating lease right-of-use assets obtained in exchange for operating lease liabilities$ $4,086 
Offering costs included in accounts payable and accrued expenses$ $163 
Purchases of property and equipment included in accounts payable$ $83 
The accompanying notes are an integral part of these condensed consolidated financial statements.
6


PRAXIS PRECISION MEDICINES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. Nature of the Business
Praxis Precision Medicines, Inc. (“Praxis” or the “Company”) is a clinical-stage biopharmaceutical company translating genetic insights into the development of therapies for central nervous system ("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 disease. The Company is applying insights from genetic epilepsies to both rare and more prevalent neurological disorders, using its understanding of shared biological targets and circuits in the brain. The Company applies a deliberate and pragmatic precision 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, the Company has established a broad CNS portfolio with multiple programs, including product candidates across movement disorders, epilepsy and psychiatric disorders, with three clinical-stage product candidates. The Company expects to announce topline results from the Phase 2b clinical trial in essential tremor, or ET, for its lead clinical-stage movement disorders program, the initiation of two first-in-patient studies for its lead small molecule epilepsy program and its lead antisense oligonucleotide, or ASO, epilepsy program and the launch of an additional clinical development program this year. In addition, the Company has established a robust pipeline of preclinical stage programs through internal research and in-licensing, including one of the largest portfolios of targeted epilepsy programs in the industry.
Praxis was incorporated in 2015 and commenced operations in 2016. The Company has funded its operations primarily with proceeds from the issuance of redeemable convertible preferred stock and from the sale of common stock through an initial public offering, a follow-on public offering and at-the-market offerings under its shelf registration statement. From inception through June 30, 2022, the Company raised $517.8 million in aggregate cash proceeds from these transactions, net of issuance costs.
The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including but not limited to, risks associated with completing preclinical studies and clinical trials, receiving regulatory approvals for product candidates, development by competitors of new biopharmaceutical products, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Programs currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.
Liquidity
In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these condensed consolidated financial statements are issued.
The Company has incurred recurring losses since its inception, including a net loss of $128.9 million for the six months ended June 30, 2022. In addition, as of June 30, 2022, the Company had an accumulated deficit of $445.5 million. The Company expects to continue to generate operating losses for the foreseeable future.
The Company expects that its cash, cash equivalents and marketable securities as of June 30, 2022 of $165.4 million will be sufficient to fund the operating expenditures and capital expenditure requirements necessary to advance its research efforts and clinical trials for at least one year from the date of issuance of these condensed consolidated financial statements. The future viability of the Company is dependent on its ability to raise additional capital to finance its operations. The Company’s inability to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies. There can be no assurance that the
7


current operating plan will be achieved or that additional funding will be available on terms acceptable to the Company, or at all.
2. Summary of Significant Accounting Policies
Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and ASUs of the FASB.
The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and six months ended June 30, 2022 are consistent with those discussed in Note 2 to the consolidated financial statements included in the Company's 2021 Annual Report on Form 10-K, other than as noted below.
Unaudited Interim Condensed Consolidated Financial Information
The accompanying condensed consolidated balance sheet as of June 30, 2022, the condensed consolidated statements of operations for the three and six months ended June 30, 2022 and 2021, the condensed consolidated statements of comprehensive loss for the three and six months ended June 30, 2022 and 2021, the condensed consolidated statements of cash flows for the six months ended June 30, 2022 and 2021 and the condensed consolidated statements of stockholders’ equity for the three and six months ended June 30, 2022 and 2021 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited annual consolidated financial statements, and in the opinion of management reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of June 30, 2022, the results of its operations for the three and six months ended June 30, 2022 and 2021 and its cash flows for the six months ended June 30, 2022 and 2021. Financial statement disclosures for the three and six months ended June 30, 2022 and 2021 are condensed and do not include all disclosures required for an annual set of financial statements in accordance with GAAP.
The results for the three and six months ended June 30, 2022 are not necessarily indicative of results to be expected for the year ended December 31, 2022, any other interim periods, or any future year or period.
Use of Estimates
The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, accrued and prepaid research and development expenses, stock-based compensation expense and the recoverability of the Company’s net deferred tax assets and related valuation allowance. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ materially from those estimates.
Recently Issued Accounting Pronouncements
The Company does not expect any recently issued accounting pronouncements to have a material impact on its financial statements.

8


3. Marketable Securities
The following is a summary of the Company's investment portfolio as of June 30, 2022 and December 31, 2021 (in thousands).
As of June 30, 2022
Gross UnrealizedEstimated
CostGainsLossesFair Value
Available-for-sale securities:
Corporate debt securities$45,039 $ $(609)$44,430 
Commercial paper32,958   32,958 
Debt securities issued by U.S. government agencies32,048  (71)31,977 
Total securities with a maturity of one year or less$110,045 $ $(680)$109,365 
Total available-for-sale securities$110,045 $ $(680)$109,365 
As of December 31, 2021
Gross UnrealizedEstimated
CostGainsLossesFair Value
Available-for-sale securities:
Corporate debt securities$52,214 $ $(31)$52,183 
Commercial paper34,993   34,993 
Debt securities issued by U.S. government agencies12,111  (8)12,103 
Other debt securities6,398 1  6,399 
Total securities with a maturity of one year or less$105,716 $1 $(39)$105,678 
Corporate debt securities31,667  (138)31,529 
Total securities with a maturity of one to two years$31,667 $ $(138)$31,529 
Total available-for-sale securities$137,383 $1 $(177)$137,207 
As of June 30, 2022, the Company had 13 securities with a total fair market value of $76.4 million in an unrealized loss position. As of December 31, 2021, the Company had 14 securities with a total fair market value of $95.8 million in an unrealized loss position. The Company believes that any unrealized losses associated with the decline in value of its securities is temporary and primarily related to the change in market interest rates since purchase, and believes that it is more likely than not that it will be able to hold its debt securities to maturity. Therefore, the Company anticipates a full recovery of the amortized cost basis of its debt securities at maturity and an allowance was not recognized.
Securities are evaluated for impairment at the end of each reporting period. The Company did not record any impairment related to its available-for-sale securities during the three and six months ended June 30, 2022 and 2021.
4. Fair Value Measurements
Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. The Company categorizes financial assets measured at fair value based on a fair value hierarchy. The following fair value hierarchy is used to classify financial assets based on observable inputs and unobservable inputs used to value the financial assets:
Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets;
Level 2: Quoted prices for similar assets in active markets, quoted prices in markets that are not active, or inputs which are unobservable, either directly or indirectly, for substantially the full term of the asset; or
9


Level 3: Prices or valuation techniques that require inputs that are both significant to the valuation of the asset and unobservable.
The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and indicate the level of the fair value hierarchy utilized to determine such fair values as of June 30, 2022 and December 31, 2021 (in thousands):
As of June 30, 2022
Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market funds$35,552 $ $ $35,552 
Marketable securities:
Corporate debt securities 44,430  44,430 
Commercial paper 32,958  32,958 
Debt securities issued by U.S. government agencies31,977   31,977 
$67,529 $77,388 $ $144,917 

As of December 31, 2021
Level 1Level 2Level 3Total
Assets:
Cash equivalents:
Money market funds$131,372 $ $ $131,372 
Marketable securities:
Corporate debt securities 83,712  83,712 
Commercial paper 34,993  34,993 
Debt securities issued by U.S. government agencies12,103   12,103 
Other debt securities 6,399  6,399 
$143,475 $125,104 $ $268,579 
5. Accrued Expenses
Accrued expenses consisted of the following (in thousands):
June 30, 2022December 31, 2021
Accrued external research and development expenses$20,067 $17,763 
Accrued personnel-related expenses2,420 7,180 
Accrued other3,281 1,901 
Total accrued expenses$25,768 $26,844 
6. Commitments and Contingencies
In May 2021, the Company entered into a sublease agreement for office space located in Boston, Massachusetts that expires on January 31, 2026, with no option to renew or terminate early. The base rent increases by approximately 2% annually. The Company issued a letter of credit to the landlord related to the security deposit, secured by restricted cash, which is reflected within other non-current assets on the accompanying condensed consolidated balance sheets as of June 30, 2022 and December 31, 2021. This lease qualifies as an operating lease.

10


7. Common Stock and Preferred Stock
Common Stock
As of June 30, 2022 and December 31, 2021, the authorized capital stock of the Company included 150,000,000 shares of common stock, $0.0001 par value.
As of June 30, 2022 and December 31, 2021, the Company did not hold any treasury shares.
Shares Reserved for Future Issuance
The Company has reserved the following shares of common stock for future issuance:
June 30,
2022
December 31,
2021
Shares reserved for exercise of outstanding stock options9,826,672 6,468,501 
Shares reserved for future awards under the 2020 Stock Option and Incentive Plan957,739 2,667,780 
Shares reserved for future awards under the 2020 Employee Stock Purchase Plan929,661 654,204 
Shares reserved for vesting of restricted stock units856,287 440,079 
Total shares of authorized common stock reserved for future issuance12,570,359 10,230,564 

Preferred Stock
As of June 30, 2022 and December 31, 2021, the authorized capital stock of the Company included 10,000,000 shares of undesignated preferred stock, $0.0001 par value.
8. Stock-Based Compensation
2020 Stock Option and Incentive Plan
The total number of shares of common stock authorized for issuance under the 2020 Stock Option and Incentive Plan (the "2020 Plan”) as of June 30, 2022 and December 31, 2021 was 7,449,480 shares and 5,184,455 shares, respectively.

2017 Stock Incentive Plan
The total number of shares of common stock authorized for issuance under the 2017 Stock Incentive Plan (the "2017 Plan”) as of June 30, 2022 and December 31, 2021 was 5,937,763 shares. Any authorization to issue new options under the 2017 Plan was cancelled upon the effectiveness of the 2020 Plan and no further awards will be granted under the 2017 Plan.

2020 Employee Stock Purchase Plan
The total number of shares of common stock authorized for issuance under the 2020 Employee Stock Purchase Plan (the "2020 ESPP”) as of June 30, 2022 and December 31, 2021 was 981,306 shares and 654,204 shares, respectively.

Restricted Stock Units
The following table summarizes the Company’s restricted stock unit activity:
SharesWeighted
Average
Grant Date
Fair Value
Unvested as of December 31, 2021440,079 $41.86 
Issued625,578 16.06 
Vested(87,491)49.86 
Forfeited(121,879)23.85 
Unvested as of June 30, 2022856,287 $24.76 
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As of June 30, 2022, total unrecognized compensation cost related to unvested restricted stock units was $18.6 million, which is expected to be recognized over a weighted-average period of 3.11 years.
Stock Options
The following table summarizes the Company’s stock option activity:
Number of
Shares
Weighted
Average
Exercise Price
per Share
Weighted
Average
Remaining
Contractual
Term
Aggregate
Intrinsic Value
(In years)(In thousands)
Outstanding as of December 31, 20216,468,501 $16.92 
Granted3,881,427 9.38 
Exercised(85,421)4.64 $785 
Cancelled or Forfeited(437,835)22.94 
Outstanding as of June 30, 20229,826,672 $13.79 8.70$753 
Exercisable as of June 30, 20222,904,632 $13.88 7.63$141 
Vested and expected to vest as of June 30, 20229,826,672 $13.79 8.70$753 
The aggregate intrinsic value of stock options outstanding, exercisable, and vested and expected to vest is calculated as the difference between the exercise price of the underlying stock options and the estimated fair value of the Company’s common stock for those stock options that had exercise prices lower than the estimated fair value of the Company’s common stock at June 30, 2022. The aggregate intrinsic value of stock options exercised is calculated as the difference between the exercise price of the underlying stock options and the estimated fair value of the Company’s common stock on the date of exercise for those stock options that had exercise prices lower than the estimated fair value of the Company’s common stock on the exercise date.
Stock Option Valuation
The weighted-average assumptions that the Company used in the Black-Scholes option pricing model to determine the grant-date fair value of stock options granted to employees and non-employees on the date of grant were as follows for the three and six months ended June 30, 2022:
Three Months Ended
June 30,
Six Months Ended
June 30,
20222022
Risk-free interest rate3.15 %2.50 %
Expected term (in years)6.016.07
Expected volatility88.42 %89.23 %
Expected dividend yield % %
Weighted average grant-date fair value per share$2.53 $7.02 
As of June 30, 2022, total unrecognized compensation cost related to unvested stock options was $65.3 million, which is expected to be recognized over a weighted-average period of 2.59 years.
Stock-Based Compensation
Stock-based compensation expense was allocated as follows (in thousands):
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Research and development$2,987 $2,031 $6,201 $4,349 
General and administrative4,624 3,369 9,296 5,717 
Total stock-based compensation expense$7,611 $5,400 $15,497 $10,066 
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9. Net Loss per Share
The following potential shares of common stock, presented based on amounts outstanding at each period end, were excluded from the calculation of diluted net loss per share for the periods indicated because including them would have been anti-dilutive:
Three Months Ended
June 30,
Six Months Ended
June 30,
2022202120222021
Outstanding stock options9,826,672 6,608,072 9,826,672 6,608,072 
Unvested restricted stock units856,287 340,563 856,287 340,563 
Potential shares issuable under the 2020 ESPP55,244  55,244  
10,738,203 6,948,635 10,738,203 6,948,635 
10. Related Party Transactions
On September 11, 2019, the Company entered into a Cooperation and License Agreement (the “License Agreement”) with RogCon Inc. (“RogCon”). Under the License Agreement, RogCon granted to the Company an exclusive, worldwide license under RogCon’s intellectual property to research, develop and commercialize products for the treatment of all forms of epilepsy and/or neurodevelopmental disorders in each case caused by any mutation of the SCN2A gene. Pursuant to the terms of the License Agreement, the Company will conduct, at its own cost and expense, the research and development activities assigned to it under the associated research plan. In addition, the Company is responsible for reimbursing RogCon for any costs associated with research and development activities RogCon performs at the request of the Company. One of the founders of RogCon became the Company’s General Counsel in June 2020. The Company continues to reimburse RogCon for its out-of-pocket costs incurred for activities performed under the License Agreement. Expenses incurred during all periods presented were not material. As of June 30, 2022, the Company had accrued expenses of $0.3 million due to RogCon under the License Agreement.
11. Restructuring
In June 2022, the Company began a strategic realignment to focus resources on its Movement Disorders and Epilepsy franchises, which resulted in a reduction of the Company’s workforce.
The Company incurred $1.0 million of costs related to the realignment, of which $0.6 million has been recognized in research and development expenses and $0.4 million has been recognized in general and administrative expenses in the condensed consolidated statement of operations during the three and six months ended June 30, 2022. These costs relate to employee severance, benefits and related costs. The Company does not expect to incur any additional significant costs related to the strategic realignment.
As of June 30, 2022, $0.5 million of the $1.0 million costs were paid. The remaining $0.5 million of costs are included within accrued expenses on the condensed consolidated balance sheet as of June 30, 2022 and are expected to be disbursed during the period from July 1, 2022 through December 31, 2022.
12. Subsequent Events
The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the condensed consolidated financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure. The Company has concluded that no subsequent events have occurred that require disclosure.
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Item 2. 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 condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission (the "SEC") on February 28, 2022. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, including information with respect to our plans and strategy for our business and related financing, 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 our Annual Report on Form 10-K for the year ended December 31, 2021 and set forth in the "Risk Factors" section of this Quarterly Report on Form 10-Q, 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
We are a clinical-stage biopharmaceutical company translating genetic insights 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 disease. We are applying insights from genetic epilepsies to both rare and more prevalent neurological disorders, using our understanding of shared biological targets and circuits in the brain. We apply a deliberate and pragmatic precision 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 broad CNS portfolio with multiple programs, including product candidates across movement disorders, epilepsy and psychiatric disorders, with three clinical-stage product candidates. We expect to announce topline results from the Phase 2b clinical trial in essential tremor, or ET, for our lead clinical-stage movement disorder program, the initiation of two first-in-patient studies for our lead small molecule epilepsy program and our lead antisense oligonucleotide, or ASO, epilepsy program and the launch of an additional clinical development program this year. In addition, we have established a robust pipeline of preclinical-stage programs through internal research and in-licensing, including one of the largest portfolios of targeted epilepsy programs in the industry.
Within our Movement Disorders franchise, our lead clinical candidate, PRAX-944, is being developed for the treatment of ET and Parkinson's Disease, or PD. In May 2022, we reported positive topline results from the second cohort of our Phase 2a trial evaluating PRAX-944 for the treatment of ET. We expect to report topline results from the Phase 2b placebo-controlled Essential1 Study for daytime treatment of ET in the fourth quarter of 2022. Following the positive Phase 2a topline results announced in May 2022, the primary endpoint of the Essential1 Study was revised to change from baseline to Day 56 on modified Activities of Daily Living and we plan to randomize approximately 130 participants. We intend to initiate a Phase 2, placebo-controlled trial to evaluate the safety, pharmacokinetics, or PK, and efficacy of PRAX-944 as a non-dopaminergic treatment for the motor symptoms of PD in the second half of 2022, and expect to report topline results in 2023.
Within our Epilepsy franchise, we completed a Phase 1, two-part, placebo controlled study evaluating the safety, tolerability, PK and pharmacodynamics of our lead small molecule epilepsy candidate, PRAX-562. We are expecting to initiate a Phase 2, placebo-controlled study with PRAX-562 in the second half of 2022 for the treatment of rare pediatric Developmental and Epileptic Encephalopathies, or DEEs, and expect to report topline results in mid-2023. Our most advanced preclinical stage product candidate within our Epilepsy franchise, PRAX-222, is an ASO designed to decrease the expression levels of the protein encoded by the gene SCN2A in patients with gain-of-function SCN2A mutations. In April 2022, we announced that we received an email communication from the U.S. Food and Drug Administration, or FDA, that our Investigational New Drug, or IND, application for the first-in-patient study of PRAX-222 was place on clinical hold. In June 2022, we announced that additional communication from the FDA indicated that the IND could be cleared upon submission of additional documentation related to the completed 13-week non-human primate toxicology study supporting the starting dose proposed by us. We have submitted the requested documentation for the 13-week non-human primate toxicology study and will engage with the FDA on the study design as needed, upon completion of their review of these data. We expect to start a first-in-patient study with PRAX-222 in the second half of 2022. In addition, we expect to initiate a Phase 1 study with our preclinical candidate, PRAX-628, in the fourth quarter of 2022 and subsequently initiate a Phase 2 study in focal epilepsy in 2023. Our disclosed preclinical pipeline also consists of discovery programs in development for KCNT1 related epilepsy, three ASOs targeting SCN2A in patients with loss-of-function mutations, PCDH19 and SYNGAP1,
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respectively, and two additional discovery programs for undisclosed targets in movement disorders and epilepsy. We plan to advance ASO candidates, PRAX-080 for PCDH19 and PRAX-090 for SYNGAP1 into preclinical development in 2023.
Within Psychiatry, in June 2022, we announced that the Phase 2/3 Aria Study, evaluating the efficacy and safety of PRAX-114 for monotherapy treatment of major depressive disorder, or MDD, did not achieve statistical significance on the primary endpoint of change from baseline in the 17-item Hamilton Depression Rating Scale total score at Day 15, or on any secondary endpoints. As a result, we closed screening and enrollment in the Phase 2 Acapella Study which is evaluating the presence of a dose response signal for PRAX-114 in MDD at doses up to 60 mg, and we intend to read out results from approximately 100 patients in the third quarter of 2022. We also stopped enrollment in the Phase 2 study evaluating PRAX-114 for the treatment of post-traumatic stress disorder and discontinued the Phase 2 crossover study to evaluate the safety, pharmacokinetics and efficacy of daytime dosing of PRAX-114 for the treatment of ET.
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 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 a net loss of $128.9 million for the six months ended June 30, 2022. As of June 30, 2022, we had an accumulated deficit of $445.5 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, PRAX-944, to a late stage clinical trial;
advance our PRAX-562 product candidate to Phase 2 clinical trial;
advance our PRAX-222 product candidate to clinical trials;
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;
take precautionary measures to help minimize the risk of COVID-19 to our employees; and
when needed, increase our headcount to support our development efforts and any future commercialization efforts.
In addition, as we progress toward potential marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution.
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
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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.
As of June 30, 2022, we had cash, cash equivalents and marketable securities of $165.4 million. We believe that our cash, cash equivalents and marketable securities as of June 30, 2022 will enable us to fund our operating expenses and capital expenditures into the first quarter of 2024. We have based this estimate on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. See “—Liquidity and Capital Resources.”
Restructuring
In June 2022, we began a strategic realignment to focus resources on our Movement Disorders and Epilepsy franchises, which resulted in a reduction of our workforce.
We incurred $1.0 million of costs related to the realignment, of which $0.6 million has been recognized in research and development expenses and $0.4 million has been recognized in general and administrative expenses in the condensed consolidated statement of operations during the three and six months ended June 30, 2022. These costs relate to employee severance, benefits and related costs. We do not expect to incur any additional significant costs related to the strategic realignment.
As of June 30, 2022, $0.5 million of the $1.0 million costs were paid. The remaining $0.5 million of costs are included within accrued expenses on the condensed consolidated balance sheet as of June 30, 2022 and are expected to be disbursed during the period from July 1, 2022 through December 31, 2022.
COVID-19 Business Update
In light of the ongoing COVID-19 pandemic, we continue to experience some disruptions and increased risk in our operations and those third parties upon whom we rely. These include disruptions and risks related to the conduct of our clinical trials and preclinical studies as policies at various clinical sites and federal, state, local and foreign laws, rules and regulations continue to evolve, including quarantines, travel restrictions and redirection of healthcare resources toward pandemic response efforts. The COVID-19 pandemic has impacted the enrollment of some of our ongoing clinical trials, including slower patient enrollment and treatment in some of our clinical studies, the impact of which has varied by clinical study and program, but none of which have significantly impacted our overall clinical trial timelines. While we have experienced limited financial impacts to date, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic such as increased inflation, our business, financial condition and results of operations could be materially adversely affected. We continue to closely monitor the COVID-19 pandemic as we evolve our business continuity plans, clinical development plans and response strategy.
Financial Operations Overview
Revenue
We have not generated any revenue since inception and do not expect to generate any revenue from the sale of products for several years, if at all. If our development efforts for our current or future product candidates are successful and result in marketing approval or collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from such collaboration or license agreements.
Operating Expenses
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Research and Development Expense
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, 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. We track direct external research and development expenses to specific franchises and product candidates upon commencement. Due to the number of ongoing studies and our ability to use resources across several projects, indirect or shared operating costs incurred for our research and development franchises, such as personnel, facility costs and certain consulting costs, are not recorded or maintained on a franchise-specific basis.
The following table reflects our research and development expenses, including direct expenses summarized by major franchise and other exploratory CNS indications and indirect or shared operating costs recognized as research and development expenses during each period presented (in thousands):
Three Months Ended June 30,Six Months Ended June 30,
2022202120222021
Psychiatry
$11,314 $6,640 $25,752 $9,841 
Epilepsy
10,685 5,839 24,949 10,765 
Movement disorders
8,411 3,795 17,515 5,372 
Other exploratory CNS indications248 819 2,439 1,482 
Personnel-related (including stock-based compensation)10,735 6,745 21,876 13,250 
Other indirect research and development expenses2,227 1,840 3,741 2,897 
Total research and development expenses$43,620 $25,678 $96,272 $43,607 
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,
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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 the product candidates following approval.
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. Costs to secure and defend our IP are expensed as incurred and are classified as general and administrative expenses.
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These costs relate to the operation of the business and are unrelated to the research and development function or any individual franchise 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. 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. The income tax benefit (provision) for the three and six months ended June 30, 2022 and 2021 was not material.
Results of Operations
Comparison of the Three Months Ended June 30, 2022 and 2021
The following table summarizes our consolidated statements of operations for each period presented (in thousands):
Three Months Ended June 30,Change
20222021
Operating expenses:
Research and development$43,620 $25,678 $17,942 
General and administrative16,774 10,805 5,969 
Total operating expenses60,394 36,483 23,911 
Loss from operations(60,394)(36,483)(23,911)
Other income:
Other income, net200 82 118 
Total other income200 82 118 
Net loss$(60,194)$(36,401)$(23,793)
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):
Three Months Ended June 30,Change
20222021
Psychiatry
$11,314 $6,640 $4,674 
Epilepsy
10,685 5,839 4,846 
Movement disorders
8,411 3,795 4,616 
Other exploratory CNS indications248 819 (571)
Personnel-related (including stock-based compensation)10,735 6,745 3,990 
Other indirect research and development expenses2,227 1,840 387 
Total research and development expenses$43,620 $25,678 $17,942 
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The $17.9 million increase in research and development expenses was primarily attributable to the following:
$4.8 million increase in expense related to our epilepsy franchise, driven primarily by an increase in clinical-related spend for our PRAX-562 Phase 1 clinical trial, an increase in preclinical activities for our earlier stage assets and an increase in clinical-related spend to support the initiation of our anticipated PRAX-222 seamless clinical trial and our PRAX-562 Phase 2 DEEs clinical trial;
$4.7 million increase in expense related to our psychiatry franchise, driven primarily by an increase in clinical-related spend for our PRAX-114 Phase 2 Acapella clinical trial which was initiated in the second quarter of 2021 and our Phase 2 placebo-controlled study evaluating PRAX-114 for the treatment of PTSD which was initiated in the fourth quarter of 2021;
$4.6 million increase in expense related to our movement disorders franchise, driven primarily by an increase in clinical-related spend for our PRAX-944 Phase 2 Essential1 clinical trial; and
$4.0 million increase in personnel-related costs due to increased headcount.
General and Administrative Expense
The $6.0 million increase in general and administrative expenses was primarily attributable to the following:
$3.4 million increase in personnel-related costs due to increased headcount; and
$2.6 million increase in other general and administrative expenses, none of which were individually significant.
Other Income
Other income for the three months ended June 30, 2022 and 2021 was comprised of interest income on our cash, cash equivalents and marketable securities and investment premium and discount amortization.
Comparison of the Six Months Ended June 30, 2022 and 2021
The following table summarizes our consolidated statements of operations for each period presented (in thousands):
Six Months Ended June 30,Change
20222021
Operating expenses:
Research and development$96,272 $43,607 $52,665 
General and administrative32,971 20,295 12,676 
Total operating expenses129,243 63,902 65,341 
Loss from operations(129,243)(63,902)(65,341)
Other income:
Other income, net332 128 204 
Total other income332 128 204 
Net loss$(128,911)$(63,774)$(65,137)
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):
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Six Months Ended June 30,Change
20222021
Psychiatry$25,752 $9,841 $15,911 
Epilepsy24,949 10,765 14,184 
Movement disorders17,515 5,372 12,143 
Other exploratory CNS indications2,439 1,482 957 
Personnel-related (including stock-based compensation)21,876 13,250 8,626 
Other indirect research and development expenses3,741 2,897 844 
Total research and development expenses$96,272 $43,607 $52,665 
The $52.7 million increase in research and development expenses was primarily attributable to the following:
$15.9 million increase in expense related to our psychiatry franchise, driven primarily by an increase in clinical-related spend for our PRAX-114 Phase 2/3 Aria and Phase 2 Acapella clinical trials which were initiated in the first quarter and second quarter of 2021, respectively;
$14.2 million increase in expense related to our epilepsy franchise, driven primarily by an increase in clinical-related spend to support the initiation of our anticipated PRAX-222 seamless clinical trial and our PRAX-562 Phase 2 developmental epileptic encephalopathies clinical trial, an increase in clinical-related spend for our PRAX-562 Phase 1 clinical trial, an increase in preclinical activities for our earlier stage assets, and the payment of a $2.0 million license fee to Ionis Pharmaceuticals, Inc. in January of 2022 upon exercise of our exclusive option to obtain the rights and license to further develop and commercialize PRAX-222;
$12.1 million increase in expense related to our movement disorders franchise, driven primarily by an increase in clinical-related spend for our PRAX-944 Phase 2 Essential1 clinical trial; and
$8.6 million increase in personnel-related costs due to increased headcount.
General and Administrative Expense
The $12.7 million increase in general and administrative expenses was primarily attributable to the following:
$8.4 million increase in personnel-related costs due to increased headcount; and
$3.6 million increase in professional fees, including a $1.4 million increase in legal fees due to increased corporate activity and patent-related work.
Other Income
Other income for the six months ended June 30, 2022 and 2021, was comprised of interest income on our cash, cash equivalents and marketable securities and investment premium and discount amortization.
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 do not expect to 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, a follow-on public offering and at-the-market offerings under our shelf registration statement. From inception through June 30, 2022, we have raised $517.8 million in aggregate cash proceeds from such transactions, net of issuance costs. As of June 30, 2022, we had cash, cash equivalents and marketable securities of $165.4 million.
On November 3, 2021, we entered into an Open Market Sale Agreement, or the 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 acts as sales agent. During the three months ended June 30, 2022, we did not sell any shares under the sales agreement. During the six
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months ended June 30, 2022, we issued and sold 70,410 shares under the sales agreement for aggregate net proceeds of $1.4 million. We have issued and sold a total of 462,407 shares under the sales agreement for aggregate net proceeds of $8.4 million after deducting commissions and offering expenses payable by us.
Historical Cash Flows
The following table provides information regarding our cash flows for each period presented (in thousands):
Six Months Ended June 30,
20222021
Net cash (used in) provided by:
Operating activities$(111,318)$(55,735)
Investing activities26,340 (164,239)
Financing activities1,713 99,661 
Net decrease in cash, cash equivalents and restricted cash$(83,265)$(120,313)
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 our 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, which are primarily the result of increased expenses and timing of vendor payments.
During the six months ended June 30, 2022, net cash used in operating activities of $111.3 million was primarily due to our $128.9 million net loss, partially offset by $16.7 million of non-cash charges primarily related to stock-based compensation and $0.9 million in changes in operating assets and liabilities primarily related to an increase in accounts payable and a decrease in prepaid expenses and other current assets.
During the six months ended June 30, 2021, net cash used in operating activities of $55.7 million was primarily due to our $63.8 million net loss and $3.4 million in changes in operating assets and liabilities primarily related to a decrease in accrued expenses and an increase in prepaid expenses and other current assets, partially offset by $11.4 million of non-cash charges primarily related to stock-based compensation.
Investing Activities
During the six months ended June 30, 2022, net cash provided by investing activities of $26.3 million was primarily related to maturities of marketable securities, partially offset by purchases of marketable securities.
During the six months ended June 30, 2021, net cash used in investing activities of $164.2 million was primarily related to the purchase of marketable securities.
Financing Activities
During the six months ended June 30, 2022, net cash provided by financing activities of $1.7 million consisted of net proceeds from at-the-market offerings of $1.4 million and proceeds from purchases of common stock under our employee stock purchase plan and from the exercise of stock options, partially offset by the payment of issuance costs for our at-the-market offerings and the payment of taxes related to the vesting of restricted stock units.
During the six months ended June 30, 2021, net cash provided by financing activities of $99.7 million consisted of net proceeds from our follow-on public offering of $98.6 million and net proceeds from the exercise of stock options, partially offset by the payment of issuance costs for our initial public offering..
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:
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advance the clinical development of our clinical-stage product candidates within our movement disorders and epilepsy franchises;
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;
potentially establish a sales, marketing 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.
In June 2022, following the Aria Study topline results, we announced a strategic realignment to focus resources on our Movement Disorders and Epilepsy franchises, which resulted in a reduction of our workforce and future operating expenses and extended our cash runway.
We are unable to estimate the exact amount of our working capital requirements, but based on our current operating plan, we believe that our cash, cash equivalents and marketable securities as of June 30, 2022 will enable us to fund our operating expenses and capital expenditure requirements into the first quarter of 2024. 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 franchises 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;
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the impact of any business interruptions to our operations or to those of our manufacturers, suppliers or other vendors resulting from the COVID-19 pandemic or similar public health crisis; 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 resulting from the COVID-19 pandemic or other factors 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.
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 condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed 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.
There have been no changes to our critical accounting policies from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgments and Estimates” included in our Annual Report on Form 10-K filed with the SEC on February 28, 2022.
Recently Issued Accounting Pronouncements
We have reviewed all recently issued standards and have determined that, other than as disclosed in Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, such standards will not have a material impact on our condensed consolidated financial statements or do not otherwise apply to our current operations.
Item 3. Quantitative and Qualitative Disclosures About Market Risk.
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We are exposed to market risk related to changes in interest rates. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our cash, cash equivalents and marketable securities are or may be in the form of money market funds or marketable debt securities and are or may be invested in U.S. Treasury and U.S. government agency obligations. However, because of the short-term nature and low risk profile of the instruments in our portfolio, an immediate change in market interest rates of 100 basis points would not have a material impact on the fair market value of our investment portfolio or on our financial position or results of operations.
Item 4. Controls and Procedures.
Management’s Evaluation of Our Disclosure Controls and Procedures
We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended (the "Exchange Act") as controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the issuer in the reports that it files or submits under the Exchange Act is accumulated and communicated to the issuer's management, including its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.
Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of June 30, 2022. Based on the evaluation of our disclosure controls and procedures as of June 30, 2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.
Changes in Internal Control Over Financial Reporting
There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
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PART II—OTHER INFORMATION
Item 1. Legal Proceedings.
As of the date of this Quarterly Report on Form 10-Q, we are not party to any material legal matters or claims. We may become party to legal matters and claims arising in the ordinary course of business. We cannot predict the outcome of any such legal matters or claims, and despite the potential outcomes, the existence thereof may have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Item 1A. Risk Factors.
Investing in our common stock involves a high degree of risk. You should carefully consider the risks and uncertainties described below together with all of the other information contained in this Quarterly Report on Form 10-Q, including our consolidated financial statements and the related notes appearing elsewhere in this Quarterly Report on Form 10-Q and in our other filings with the Securities and Exchange Commission, or SEC, before deciding to invest in our common stock. The risks described below are not the only risks facing our company. The occurrence of any of the following risks, or of additional risks and uncertainties not presently known to us or that we currently believe to be immaterial, could cause our business, prospects, operating results and financial condition to suffer materially. In such event, the trading price of our common stock could decline, and you might lose all or part of your investment.
Risks Related to Our Financial Position and Need for Additional Capital
Risks Related to Past Financial Condition
We are a clinical-stage biopharmaceutical company and we have incurred significant losses since our inception. We anticipate that we will continue to incur significant losses for the foreseeable future.
Investment in biopharmaceutical product development is highly speculative because it entails substantial upfront capital expenditures and significant risk that any potential product candidate will fail to demonstrate adequate effect or an acceptable safety profile, gain regulatory approval and become commercially viable. We have no products approved for commercial sale and have not generated any revenue to date, and we will continue to incur significant research and development and other expenses related to our clinical development and ongoing operations. As a result, we are not profitable and have incurred losses in each period since our inception. Since our inception, we have devoted substantially all of our financial resources and efforts to research and development, including preclinical studies and our clinical trials. Our financial condition and operating results, including net losses, may fluctuate significantly from quarter to quarter and year to year. Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance. Additionally, net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders’ equity and working capital. Our net losses were $128.9 million and $167.1 million for the six months ended June 30, 2022 and the year ended December 31, 2021, respectively. As of June 30, 2022, we had an accumulated deficit of $445.5 million. We expect to continue to incur significant losses for the foreseeable future, and we expect these losses to increase as we continue our research and development of and seek regulatory approvals for our product candidates in our initial and potential additional indications as well as for other product candidates.
We anticipate that our expenses will increase substantially if and as we:
continue to develop and conduct clinical trials, including in expanded geographies such as Europe, for our product candidates;
initiate and continue research and development, including preclinical, clinical and discovery efforts for any future product candidates;
seek to identify additional product candidate