Exhibit 99.1 Spyre Therapeutics Reports Second Quarter 2024 Financial Results and Provides Corporate Update Initiated dosing in Phase 1 trial of SPY001, an anti-α4β7 antibody engineered for infrequent, subcutaneous maintenance dosing, with interim proof-of-concept data on track for year-end 2024 SPY002, an anti-TL1A antibody program designed for enhanced potency to both TL1A monomers and trimers, and extended half-life compared to existing molecules, remains on track to begin first-in-human trials in the se ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ____________________________ FORM 10-Q ____________________________ (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended June 30, 2024 OR o 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: 001-37722 ____________________________ SPYRE THERAPEUTICS, INC. (Exact Name ...

Initiated dosing in Phase 1 trial of SPY001, an anti-α4β7 antibody engineered for infrequent, subcutaneous maintenance dosing, with interim proof-of-concept data on track for year-end 2024 SPY002, an anti-TL1A antibody program designed for enhanced potency to both TL1A monomers and trimers, and extended half-life compared to existing molecules, remains on track to begin first-in-human trials in the second half of 2024 Nominated a development candidate for SPY003, a highly potent anti-IL-23 antibody with an ...

Exhibit 99.1 SPY001, an anti-α4β7 antibody engineered for infrequent, subcutaneous dosing successfully completed a 28- day GLP toxicity study and remains on track to begin first-in-human studies in the second quarter of 2024, with interim proof-of-concept data expected year-end 2024 SPY002, an anti-TL1A antibody designed for enhanced potency to both TL1A monomers and trimers, and extended half-life compared to existing molecules, remains on track to begin first-in-human studies in the second half of 2024 Ra ...

UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, DC 20549 ____________________________ FORM 10-Q ____________________________ (Mark One) x QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 2024 OR For the transition period from to Commission File Number: 001-37722 SPYRE THERAPEUTICS, INC. (Exact Name of Registrant as Specified in its Charter) ____________________________ Delaware 46-4312787 (State or other jurisdictio ...

[Executive Summary & Corporate Update](index=1&type=section&id=Executive%20Summary%20%26%20Corporate%20Update) Spyre Therapeutics announced Q4 and FY2023 results, corporate updates including new CEO and Nasdaq listing, and pipeline progress for IBD drug candidates [Fourth Quarter and Full Year 2023 Highlights](index=1&type=section&id=Fourth%20Quarter%20and%20Full%20Year%202023%20Highlights) Spyre Therapeutics reported Q4 and FY2023 results, detailing corporate changes, positive preclinical data for SPY001 and SPY002, and a strong cash position with runway into H2 2026 - **Corporate name changed to Spyre Therapeutics**, **Cameron Turtle appointed CEO**, and **began trading on Nasdaq under 'SYRE'**[1](index=1&type=chunk) - SPY001 (anti-α4β7 antibody) demonstrated an updated half-life of **22 days** in non-human primates, a greater than **three-fold** increase relative to vedolizumab; remains on track to begin first-in-human (FIH) studies in **H1 2024**, with interim proof-of-concept data expected **year-end 2024**[1](index=1&type=chunk) - SPY002 (anti-TL1A antibody) remains on track to begin FIH studies in **H2 2024**, designed for enhanced potency to both TL1A monomers and trimers, and extended half-life[1](index=1&type=chunk) Key Financial and Funding Highlights | Metric | Value | | :----- | :---- | | Private Placement Equity Financing | **$180 million** | | Cash, Cash Equivalents, Marketable Securities, and Restricted Cash (as of Dec 31, 2023) | **$340 million** | | Expected Cash Runway | Into **H2 2026** | [CEO Statement](index=1&type=section&id=CEO%20Statement) CEO Cameron Turtle emphasized 2023's foundational work in building an IBD drug portfolio and securing significant capital, with 2024 focused on clinical studies and potential best-in-class properties - **2023 focused** on building the foundation for IBD therapies, including a portfolio of **three promising drug candidates** targeting α4β7, TL1A, and IL-23[2](index=2&type=chunk) - Company capitalized with **nearly $400 million** from top-tier investors[2](index=2&type=chunk) - **2024 ambitions** include entering clinical studies across multiple programs and demonstrating potential **best-in-class properties**. **Phase 2 evaluation** of rational therapeutic combinations in IBD patients is **anticipated in 2025**[2](index=2&type=chunk) [Development Pipeline Overview](index=1&type=section&id=Development%20Pipeline%20Overview) Spyre Therapeutics details its strategic approach to IBD treatment, focusing on best-in-class antibody engineering and a pipeline of four preclinical drug candidates [Company Approach and IBD Focus](index=1&type=section&id=Company%20Approach%20and%20IBD%20Focus) Spyre Therapeutics leverages advanced antibody engineering and precision immunology for IBD treatments, targeting approximately 2.4 million US individuals with four preclinical programs for infrequent subcutaneous dosing - Company's approach combines **best-in-class antibody engineering**, rational therapeutic combinations, and precision immunology with the goal of maximizing efficacy, safety, and convenience of its IBD treatments[3](index=3&type=chunk) - IBD, including ulcerative colitis (UC) and Crohn's disease (CD), is estimated to affect approximately **2.4 million individuals** in the United States[4](index=4&type=chunk) - Company has four programs in preclinical development, three targeting IBD (α4β7, TL1A, IL-23) and one novel target, with potential for infrequent subcutaneous dosing[5](index=5&type=chunk) [Key Pipeline Candidates](index=2&type=section&id=Key%20Pipeline%20Candidates) Spyre's pipeline includes SPY001 (anti-α4β7), SPY002 (anti-TL1A), and SPY003 (anti-IL-23), all engineered for high potency, selectivity, and extended half-life, aiming for infrequent subcutaneous dosing in IBD [SPY001 (anti-α4β7 antibody)](index=2&type=section&id=SPY001) SPY001 is an investigational anti-α4β7 monoclonal antibody engineered for high potency, selectivity, and extended half-life, enabling infrequent subcutaneous dosing - SPY001 is a highly potent and selective investigational anti-α4β7 monoclonal antibody engineered with half-life extension technology and formulated for high concentration and subcutaneous, infrequent dosing[6](index=6&type=chunk) [SPY002 (anti-TL1A antibody)](index=2&type=section&id=SPY002) SPY002 is a highly potent, selective, and half-life extended anti-TL1A investigational monoclonal antibody with potential best-in-class binding affinity - SPY002 is a highly potent, selective, half-life extended, anti-TL1A investigational monoclonal antibody with potential **best-in-class subnanomolar binding affinity** for both the monomer and trimer forms of the target[7](index=7&type=chunk) - TL1A has emerged as one of the most promising targets in IBD and broader immunology indications[7](index=7&type=chunk) [SPY003 (anti-IL-23 antibody)](index=2&type=section&id=SPY003) SPY003 is a highly potent and selective investigational monoclonal antibody targeting the p19 subunit of IL-23 with half-life extension technology - SPY003 is a highly potent and selective investigational monoclonal antibody targeting the p19 subunit of IL-23 engineered with half-life extension technology[8](index=8&type=chunk) [Recent Corporate and Program Updates](index=2&type=section&id=Recent%20Corporate%20and%20Program%20Updates) Spyre Therapeutics provides updates on the preclinical and clinical development progress of its SPY001, SPY002, and SPY003 programs, alongside corporate governance and financing activities [SPY001 Program Updates](index=2&type=section&id=SPY001%20Program%20Updates) SPY001 is advancing to FIH studies in H1 2024, with preclinical data showing a 22-day half-life and interim healthy volunteer data expected by year-end 2024 to support infrequent dosing - SPY001 development candidate selected in **Q3 2023**, progressing through IND-enabling studies, and expected to enter FIH studies in **H1 2024**[10](index=10&type=chunk) - Expanded preclinical data for SPY001 presented in **Feb 2024** showed an updated half-life of **22 days** in non-human primates, a greater than **three-fold** increase relative to vedolizumab, supporting a target human half-life of more than **35 days**[10](index=10&type=chunk) - Interim data from a healthy volunteer study are expected by the **end of 2024**, aiming to demonstrate proof of concept for SPY001 to potentially be dosed subcutaneously in an **every-eight-week or every-twelve-week dosing interval**[10](index=10&type=chunk) [SPY002 Program Updates](index=2&type=section&id=SPY002%20Program%20Updates) Two SPY002 candidates, licensed from Paragon, show subnanomolar potency and extended half-lives, with FIH studies expected in H2 2024 and interim data in H1 2025 - **Two lead** SPY002 development candidates nominated and option exercised to exclusively license related intellectual property rights under agreement with Paragon Therapeutics. Candidates bind both TL1A monomers and trimers with in vitro **subnanomolar potency** and pharmacokinetic half-lives that **potentially exceed all clinical-stage TL1A antibodies**[10](index=10&type=chunk) - Preclinical data for a lead SPY002 development candidate presented in **Feb 2024** demonstrated **subnanomolar binding affinity** and potency, as well as a pharmacokinetic half-life of **24 days** in non-human primates, representing a **two to three-fold** increase compared to clinical-stage anti-TL1As[10](index=10&type=chunk) - FIH studies of one or both SPY002 candidates expected in **H2 2024** with healthy volunteer interim data expected in **H1 2025**[10](index=10&type=chunk) [SPY003 Program Updates](index=2&type=section&id=SPY003%20Program%20Updates) Spyre continues preclinical development for a potential best-in-class IL-23 monoclonal antibody. Recent Phase 3 SEQUENCE study data for risankizumab validates targeting the p19 subunit over the p40 subunit. The company expects to nominate a development candidate in mid-2024 and move into IND-enabling studies in H2 2024 - Company continues preclinical development efforts on a **potential best-in-class IL-23 monoclonal antibody**[10](index=10&type=chunk) - Recent data from the Phase 3 SEQUENCE study of risankizumab versus ustekinumab in Crohn's disease **validates targeting the p19 subunit** as it demonstrated superiority to targeting the p40 subunit[10](index=10&type=chunk) - Company expects to nominate a development candidate in **mid-2024** and move into IND-enabling studies in **H2 2024**[10](index=10&type=chunk) [Corporate Governance and Financing](index=3&type=section&id=Corporate%20Governance%20and%20Financing) Spyre secured $180 million in private placement financing, extending its cash runway into H2 2026, and made key leadership and Board appointments in late 2023 and early 2024 Private Placement Equity Financing | Metric | Value | | :----- | :---- | | Gross Proceeds (Dec 2023) | **$180 million** | | Cash Runway Extension | Into **H2 2026** | - **Cameron Turtle appointed Chief Executive Officer** and **Board member** in **November 2023**. Jeffrey Albers and Laurie Stelzer also appointed to the **Board of Directors**[19](index=19&type=chunk) - Mark C. McKenna appointed to the **Board of Directors** in **February 2024**[19](index=19&type=chunk) - Stockholders approved conversion of **Series A Preferred Stock** to **common stock** and an increase to **authorized shares** in **November 2023**[19](index=19&type=chunk) [Fourth Quarter 2023 Financial Results](index=3&type=section&id=Fourth%20Quarter%202023%20Financial%20Results) Spyre Therapeutics reports its Q4 2023 financial performance, detailing cash position, R&D and G&A expenses, asset sale gains, other income/expense, and net loss [Cash Position](index=3&type=section&id=Cash%20Position) As of December 31, 2023, Spyre Therapeutics held $339.6 million in available cash, cash equivalents, marketable securities, and restricted cash. Net cash used in operating activities for Q4 2023 was $31.0 million. The company raised $180.0 million in gross proceeds from a private placement in December 2023 Cash Position (as of Dec 31, 2023) | Metric | Amount (Millions) | | :----- | :---------------- | | Available Cash, Cash Equivalents, Marketable Securities, and Restricted Cash | **$339.6** | | Net Cash Used in Operating Activities (Q4 2023) | **$31.0** | | Gross Proceeds from Private Placement (Dec 2023) | **$180.0** | [Research and Development (R&D) Expenses](index=3&type=section&id=Research%20and%20Development%20(R%26D)%20Expenses) R&D expenses significantly increased to $33.7 million in Q4 2023 from $14.3 million in Q4 2022, primarily due to increased preclinical development and manufacturing expenses for the IBD pipeline, including equity grants under the Paragon agreement, partially offset by decreased expenses for the legacy rare disease pipeline R&D Expenses (Q4 YoY) | Period | R&D Expenses (Millions) | YoY Change | | :----- | :---------------------- | :--------- | | **Q4 2023** | **$33.7** | **+135.7%** | | **Q4 2022** | **$14.3** | - | - The increase was primarily related to increases in preclinical development and manufacturing expenses for the Company's IBD pipeline, including expenses related to the annual equity grant under the agreement with Paragon, partially offset by a decrease in expenses associated with the Company's legacy rare disease pipeline[12](index=12&type=chunk) [General and Administrative (G&A) Expenses](index=3&type=section&id=General%20and%20Administrative%20(G%26A)%20Expenses) G&A expenses rose to $14.1 million in Q4 2023 from $5.1 million in Q4 2022, mainly driven by increased stock compensation expense and legal/professional service fees related to the Spyre acquisition G&A Expenses (Q4 YoY) | Period | G&A Expenses (Millions) | YoY Change | | :----- | :---------------------- | :--------- | | **Q4 2023** | **$14.1** | **+176.5%** | | **Q4 2022** | **$5.1** | - | - This increase was primarily due to an increase in stock compensation expense, as well as legal and other professional service fees related to the Spyre acquisition[13](index=13&type=chunk) [Gain on Sale of In-Process Research & Development Asset](index=3&type=section&id=Gain%20on%20Sale%20of%20In-Process%20Research%20%26%20Development%20Asset) In Q4 2023, Spyre recognized an additional $1.8 million gain from the sale of global rights for pegzilarginase, resulting from a cash reimbursement from Immedica for a prior expenditure Gain on Sale of In-Process R&D Asset (Q4 2023) | Metric | Amount (Millions) | | :----- | :---------------- | | Gain on Sale (Q4 2023) | **$1.8** | [Other (Expense) Income](index=3&type=section&id=Other%20(expense)%20income) Other expense totaled $17.3 million in Q4 2023, primarily driven by an increase in the CVR liability due to the increased likelihood of milestone payments related to pegzilarginase reimbursement in European markets, partially offset by interest earned on cash and marketable securities Other (Expense) Income (Q4 YoY) | Period | Other (Expense) Income (Millions) | | :----- | :-------------------------------- | | **Q4 2023** | **$(17.3)** | | **Q4 2022** | **$0.4** | - Other (expense) income for the fourth quarter totaled **$17.3 million** expense primarily driven by an increase in the Company's **CVR liability** related to the **increased likelihood of certain milestone payments** related to pegzilarginase reimbursement in European markets, partially offset by interest earned on the Company's cash and marketable securities[15](index=15&type=chunk) [Net Loss](index=3&type=section&id=Net%20Loss) Net loss for Q4 2023 significantly increased to $63.2 million, compared to $18.8 million in Q4 2022. This includes non-cash stock compensation expense of $17.3 million in Q4 2023, up from $1.4 million in Q4 2022 Net Loss (Q4 YoY) | Period | Net Loss (Millions) | YoY Change | | :----- | :------------------ | :--------- | | **Q4 2023** | **$(63.2)** | **+236.2%** | | **Q4 2022** | **$(18.8)** | - | Non-Cash Stock Compensation Expense (Q4 YoY) | Period | Non-Cash Stock Compensation Expense (Millions) | YoY Change | | :----- | :------------------------------------------- | :--------- | | **Q4 2023** | **$17.3** | **+1135.7%** | | **Q4 2022** | **$1.4** | - | [About Spyre Therapeutics](index=3&type=section&id=About%20Spyre%20Therapeutics) Spyre Therapeutics is a biotechnology company focused on developing next-generation inflammatory bowel disease products through advanced antibody engineering and precision medicine - **Spyre Therapeutics is a biotechnology company focused on creating next-generation inflammatory bowel disease (IBD) products**[17](index=17&type=chunk) - The company **combines best-in-class antibody engineering, rational therapeutic combinations, and precision medicine approaches**[17](index=17&type=chunk) - Spyre's pipeline includes **investigational extended half-life antibodies targeting α4β7, TL1A, and IL-23**[17](index=17&type=chunk) [Forward-Looking Statements](index=4&type=section&id=Safe%20Harbor%20%2F%20Forward%20Looking%20Statements) This section outlines forward-looking statements regarding future results, financial position, and development activities, subject to various risks and uncertainties - This press release contains forward-looking statements regarding future results, financial position, business strategy, funding sufficiency, market size, growth opportunities, preclinical and clinical development activities, efficacy and safety profiles, therapeutic benefits, timing of studies and data, and regulatory activities[21](index=21&type=chunk) - Forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including macroeconomic conditions, geopolitical instability, and risks described in the Company's SEC filings[22](index=22&type=chunk) - The Company cautions against relying on forward-looking statements as predictions of future events and undertakes no obligation to update them, except as required by law[23](index=23&type=chunk) [Contact Information](index=4&type=section&id=Contact%20Information) Provides contact details for media and investor inquiries regarding Spyre Therapeutics - Media Contact: Amanda Sellers, Verge Scientific Communications (amanda.sellers@vergescientific.com)[24](index=24&type=chunk)[25](index=25&type=chunk) - Investor Contact: Eric McIntyre (eric.mcintyre@spyre.com)[25](index=25&type=chunk) [Consolidated Financial Statements](index=6&type=section&id=Consolidated%20Financial%20Statements) Presents the company's consolidated balance sheets and statements of operations for the reported periods, detailing financial position and performance [Consolidated Balance Sheets](index=6&type=section&id=Consolidated%20Balance%20Sheets) The consolidated balance sheet shows a significant increase in total assets from $71.1 million in 2022 to $341.9 million in 2023, primarily driven by increases in cash and marketable securities. Total liabilities also increased from $20.8 million to $73.3 million, largely due to CVR liability and related party payables. Total stockholders' equity grew from $50.3 million to $184.0 million Consolidated Balance Sheet Highlights (Year-end) | Metric | Dec 31, 2023 (Thousands) | Dec 31, 2022 (Thousands) | YoY Change (Thousands) | | :-------------------------------- | :----------------------- | :----------------------- | :--------------------- | | Cash and cash equivalents | **$188,893** | **$34,863** | **+$154,030** | | Marketable securities | **$150,384** | **$20,848** | **+$129,536** | | Total current assets | **$341,528** | **$62,258** | **+$279,270** | | Total assets | **$341,859** | **$71,144** | **+$270,715** | | CVR liability (current & non-current) | **$42,700** | **$0** | **+$42,700** | | Related party accounts payable and other current liabilities | **$16,584** | **$0** | **+$16,584** | | Total liabilities | **$73,288** | **$20,839** | **+$52,449** | | Total stockholders' equity | **$184,016** | **$50,305** | **+$133,711** | [Consolidated Statements of Operations](index=7&type=section&id=Consolidated%20Statements%20of%20Operations) For the full year 2023, Spyre reported a net loss of $338.8 million, significantly higher than $83.8 million in 2022. This was driven by a substantial increase in R&D expenses ($89.5M vs $58.6M), G&A expenses ($39.9M vs $28.5M), and a large 'Acquired in-process research and development' expense of $130.2 million, along with a significant 'Change in fair value of forward contract liability' expense of $83.5 million. Revenue from development fees and royalties decreased Consolidated Statements of Operations Highlights (Full Year YoY) | Metric | FY 2023 (Thousands) | FY 2022 (Thousands) | YoY Change (Thousands) | | :-------------------------------------- | :------------------ | :------------------ | :--------------------- | | Total revenue | **$886** | **$2,329** | **$(1,443)** | | Research and development expenses | **$89,504** | **$58,579** | **+$30,925** | | General and administrative expenses | **$39,946** | **$28,531** | **+$11,415** | | Acquired in-process research and development | **$130,188** | **$0** | **+$130,188** | | Gain on sale of in-process R&D asset | **$(16,449)** | **$0** | **$(16,449)** | | Loss from operations | **$(242,303)** | **$(84,781)** | **$(157,522)** | | Change in fair value of forward contract liability | **$(83,530)** | **$0** | **+$(83,530)** | | Net loss | **$(338,790)** | **$(83,815)** | **$(254,975)** | | Net loss per share, basic and diluted | **$(49.12)** | **$(24.86)** | **$(24.26)** | Consolidated Statements of Operations Highlights (Q4 YoY) | Metric | Q4 2023 (Thousands) | Q4 2022 (Thousands) | YoY Change (Thousands) | | :-------------------------------------- | :------------------ | :------------------ | :--------------------- | | Total revenue | **$0** | **$168** | **$(168)** | | Research and development expenses | **$33,682** | **$14,251** | **+$19,431** | | General and administrative expenses | **$14,072** | **$5,079** | **+$8,993** | | Loss from operations | **$(45,914)** | **$(19,162)** | **$(26,752)** | | Other expense, net | **$(21,392)** | **$(32)** | **$(21,360)** | | Net loss | **$(63,180)** | **$(18,822)** | **$(44,358)** | | Net loss per share, basic and diluted | **$(4.05)** | **$(5.00)** | **+$0.95** |

Table of Contents UNITED STATES SECURITIES AND EXCHANGE COMMISSION Washington, DC 20549 _________________________________________________________ FORM 10-K x ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the fiscal year ended December 31, 2023 o 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 001-37722 _________________________________________________________ SPY ...

[Company Information](index=1&type=section&id=Company%20Information) The company filed a Form 10-Q as a Non-accelerated and Smaller reporting company, with **4,048,927** common shares outstanding - AEGLEA BIOTHERAPEUTICS, INC. filed a Quarterly Report on Form 10-Q for the period ended September 30, 2023[1](index=1&type=chunk)[2](index=2&type=chunk) - The company is a **Non-accelerated filer** and a **Smaller reporting company**[6](index=6&type=chunk) - As of November 3, 2023, **4,048,927** shares of common stock, $0.0001 par value per share, were outstanding[6](index=6&type=chunk) [NOTE ABOUT FORWARD-LOOKING STATEMENTS](index=4&type=section&id=NOTE%20ABOUT%20FORWARD-LOOKING%20STATEMENTS) This section clarifies that the report contains forward-looking statements subject to risks, and the company is not obligated to update them unless legally required - This Quarterly Report contains forward-looking statements regarding future operations, financial position, business strategy, and product development, subject to risks and uncertainties detailed in the 'Risk Factors' section[10](index=10&type=chunk)[11](index=11&type=chunk) - Readers should not rely on forward-looking statements as predictions of future events, and the company undertakes no obligation to update them, except as required by law[12](index=12&type=chunk) [PART I. FINANCIAL INFORMATION](index=5&type=section&id=PART%20I.%20FINANCIAL%20INFORMATION) This part presents the company's unaudited condensed consolidated financial statements and accompanying notes for the reporting period [Item 1. Financial Statements (Unaudited)](index=5&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section contains the company's unaudited condensed consolidated financial statements and notes, detailing accounting policies and the financial impact of recent transactions [Condensed Consolidated Balance Sheets](index=5&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) This table presents the company's financial position, highlighting significant changes in cash, marketable securities, total assets, liabilities, and stockholders' equity | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change | | :----------------------------- | :-------------------------- | :-------------------------- | :----- | | Cash and cash equivalents | $90,592 | $34,863 | +159.8% | | Marketable securities | $113,007 | $20,848 | +442.1% | | Total current assets | $205,949 | $62,258 | +230.8% | | Total assets | $207,265 | $71,144 | +191.3% | | Total current liabilities | $44,872 | $14,656 | +206.2% | | Total liabilities | $65,562 | $20,839 | +214.6% | | Series A Preferred Stock | $387,105 | $0 | N/A | | Total Stockholders' (Deficit) Equity | $(245,402) | $50,305 | -587.9% | | Accumulated deficit | $(701,234) | $(425,624) | +64.7% | [Condensed Consolidated Statements of Operations](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) This table details the company's operational performance, showing revenue, expenses, and net loss for the three and nine months ended September 30, 2023 and 2022 | Metric | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (YoY) | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------- | :--------------------------------------- | :--------------------------------------- | :------------- | | Total revenue | $0 | $174 | -100% | $886 | $2,161 | -59% | | Research and development | $24,660 | $11,977 | +106% | $55,822 | $44,328 | +26% | | Acquired in-process research and development | $(298) | $0 | N/A | $130,188 | $0 | N/A | | Gain on sale of in-process research and development asset | $(14,609) | $0 | N/A | $(14,609) | $0 | N/A | | Total operating expenses | $18,337 | $18,929 | -3% | $197,275 | $67,780 | +191% | | Loss from operations | $(18,337) | $(18,755) | +2% | $(196,389) | $(65,619) | +199% | | Change in fair value of forward contract liability | $(25,360) | $0 | N/A | $(83,530) | $0 | N/A | | Net loss | $(40,107) | $(18,234) | +120% | $(275,610) | $(64,993) | +324% | | Net loss per share, basic and diluted | $(9.34) | $(4.84) | +93% | $(69.57) | $(20.17) | +245% | [Condensed Consolidated Statements of Comprehensive Loss](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) This table presents the company's net loss and total comprehensive loss for the three and nine months ended September 30, 2023 and 2022 | Metric | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | Change (YoY) | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (YoY) | | :-------------------------- | :--------------------------------------- | :--------------------------------------- | :------------- | :--------------------------------------- | :--------------------------------------- | :------------- | | Net loss | $(40,107) | $(18,234) | +120% | $(275,610) | $(64,993) | +324% | | Total comprehensive loss | $(40,250) | $(18,198) | +121% | $(275,694) | $(65,157) | +323% | [Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' (Deficit) Equity](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20(Deficit)%20Equity) This section details changes in the company's convertible preferred stock and stockholders' (deficit) equity, including the impact of net loss and Series A preferred stock issuance - As of December 31, 2022, total stockholders' equity was **$50,305 thousand**, with an accumulated deficit of **$(425,624) thousand**[26](index=26&type=chunk) - The company issued Series A non-voting convertible preferred stock valued at **$387,105 thousand** as of September 30, 2023[26](index=26&type=chunk) - For the nine months ended September 30, 2023, the net loss was **$(275,610) thousand**, contributing to an accumulated deficit of **$(701,234) thousand** and total stockholders' (deficit) equity of **$(245,402) thousand**[26](index=26&type=chunk) [Condensed Consolidated Statements of Cash Flows](index=10&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) This table summarizes the company's cash flows from operating, investing, and financing activities for the nine months ended September 30, 2023 and 2022 | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (YoY) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | :------------- | | Net cash used in operating activities | $(68,874) | $(62,004) | +11.1% | | Net cash (used in) and provided by investing activities | $(73,121) | $43,008 | -270.0% | | Net cash provided by financing activities | $197,471 | $42,686 | +362.6% | | Net increase in cash, cash equivalents, and restricted cash | $55,483 | $23,538 | +135.7% | | Cash, cash equivalents, and restricted cash, End of period | $91,899 | $40,518 | +126.8% | [Notes to Unaudited Condensed Consolidated Financial Statements](index=12&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) This section provides detailed notes to the unaudited condensed consolidated financial statements, explaining accounting policies and the impact of recent transactions [1. The Company and Basis of Presentation](index=12&type=section&id=1.%20The%20Company%20and%20Basis%20of%20Presentation) Aeglea BioTherapeutics, Inc. transformed into a preclinical IBD biotechnology company in 2023 through restructuring, the Spyre acquisition, and Series A preferred stock issuance, facing going concern uncertainty - Aeglea BioTherapeutics, Inc. is now a preclinical stage biotechnology company focused on developing next generation therapeutics for patients living with **inflammatory bowel disease (IBD)**[34](index=34&type=chunk)[152](index=152&type=chunk) - In April 2023, the company implemented a restructuring plan resulting in an approximate **83% reduction** of its existing headcount[35](index=35&type=chunk)[42](index=42&type=chunk) - On June 22, 2023, Aeglea acquired assets from Spyre Therapeutics, Inc., a privately held biotechnology company advancing antibody therapeutics for IBD, in a stock-for-stock transaction[36](index=36&type=chunk)[43](index=43&type=chunk) - As of September 30, 2023, the Company had an accumulated deficit of **$701.2 million** and cash, cash equivalents, and marketable securities of **$203.6 million**[39](index=39&type=chunk) - Substantial doubt exists about the Company's ability to continue as a **going concern**, contingent on stockholder approval for the conversion of Series A Preferred Stock to common stock[44](index=44&type=chunk) [2. Summary of Significant Accounting Policies](index=13&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines the company's significant accounting policies for its unaudited interim financial statements, including convertible preferred stock, acquisitions, CVRs, and the early adoption of ASU 2020-06 - Series A Preferred Stock is classified outside of stockholders' (deficit) equity because it is redeemable at the option of the holders for cash if conversion to common stock is not approved by stockholders[48](index=48&type=chunk) - Acquisitions are evaluated as either business combinations or asset acquisitions; the Spyre transaction was accounted for as an **asset acquisition**, with acquired in-process research and development (IPR&D) expensed if it has no alternative future use[49](index=49&type=chunk)[51](index=51&type=chunk) - Contingent Value Rights (CVR) are classified as **derivative liabilities**, initially recorded at fair value and re-valued at each reporting date, with changes recognized in other income or expense[52](index=52&type=chunk) - The Company early adopted **ASU 2020-06**, 'Accounting for Convertible Instruments and Contracts in an Entity's Own Equity,' effective January 1, 2023, eliminating certain accounting models for convertible instruments[55](index=55&type=chunk) [3. Fair Value Measurements](index=15&type=section&id=3.%20Fair%20Value%20Measurements) This section details the company's fair value measurements for financial instruments using a three-level hierarchy, including assets like money market funds and liabilities such as the CVR liability | Category | Level 1 (in thousands) | Level 2 (in thousands) | Level 3 (in thousands) | Total (in thousands) | | :------- | :--------------------- | :--------------------- | :--------------------- | :------------------- | | **Financial Assets:** | | | | | | Money market funds | $55,451 | — | — | $55,451 | | Commercial paper | — | $107,093 | — | $107,093 | | Corporate bonds | — | $22,828 | — | $22,828 | | **Liabilities:** | | | | | | Parapyre Option Obligation | — | $2,952 | — | $2,952 | | CVR liability | — | — | $28,200 | $28,200 | - The forward contract liability, initially **$106.2 million** on June 22, 2023, increased to **$164.3 million** by June 30, 2023, and was settled for **$189.7 million** on July 7, 2023, with the issuance of Series A Preferred Stock[61](index=61&type=chunk)[62](index=62&type=chunk) - The CVR liability decreased by **$1.3 million** between June 30, 2023, and September 30, 2023, primarily due to changes in the likelihood of pegtarviliase disposition and milestone timing[66](index=66&type=chunk)[67](index=67&type=chunk) [4. Cash Equivalents and Marketable Securities](index=18&type=section&id=4.%20Cash%20Equivalents%20and%20Marketable%20Securities) This section details the company's cash equivalents and marketable securities, which significantly increased, with a portfolio shift towards commercial paper and corporate bonds, and notes uninsured cash deposits | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change | | :---------------------- | :-------------------------- | :-------------------------- | :----- | | Total cash equivalents | $72,365 | $26,005 | +178.3% | | Total marketable securities | $113,007 | $20,848 | +442.1% | - As of September 30, 2023, marketable securities had total unrealized losses of **$115 thousand**, primarily from commercial paper and corporate bonds, but no allowance for credit losses was recognized[69](index=69&type=chunk) - The Company had **$16.9 million** of U.S. cash deposits in excess of the FDIC insured limit as of September 30, 2023[70](index=70&type=chunk) - Contractual maturities of marketable securities due in one year or less increased from **$20,848 thousand** at December 31, 2022, to **$102,518 thousand** at September 30, 2023[71](index=71&type=chunk) [5. Accrued and Other Current Liabilities](index=20&type=section&id=5.%20Accrued%20and%20Other%20Current%20Liabilities) As of September 30, 2023, the company's accrued and other current liabilities increased to $15.9 million, primarily driven by higher accrued professional and consulting fees and accrued compensation | Metric | Sep 30, 2023 (in thousands) | Dec 31, 2022 (in thousands) | Change | | :-------------------------------- | :-------------------------- | :-------------------------- | :----- | | Accrued compensation | $5,368 | $4,589 | +17.0% | | Accrued contracted R&D costs | $6,669 | $6,972 | -4.3% | | Accrued professional & consulting fees | $3,484 | $946 | +268.3% | | Total accrued & other current liabilities | $15,861 | $12,837 | +23.6% | [6. Related Party Transactions](index=20&type=section&id=6.%20Related%20Party%20Transactions) Aeglea assumed Spyre's obligations under the Paragon Agreement, incurring significant R&D expenses and related payables to Paragon, and also recognized stock compensation expense for the Parapyre Option Obligation - Aeglea assumed Spyre's obligations under the Paragon Agreement, including **$19.0 million** in unpaid expenses at the acquisition date[74](index=74&type=chunk) - The Company recognized **$19.4 million** and **$20.8 million** in Research and development expenses for services provided by Paragon for the three and nine months ended September 30, 2023, respectively[75](index=75&type=chunk) - As of September 30, 2023, related party accounts payable totaled **$19.8 million**, including **$16.8 million** for reimbursable costs under the Paragon Agreement and **$3.0 million** for the Parapyre Option Obligation liability[82](index=82&type=chunk) - The Company exercised its option for the SPY001 program in July 2023, with potential future milestone payments up to **$22.0 million** to Paragon[77](index=77&type=chunk) - Stock compensation expense related to the Parapyre Option Obligation was **$2.7 million** and **$2.9 million** for the three and nine months ended September 30, 2023, respectively[81](index=81&type=chunk) [7. Asset Acquisition](index=22&type=section&id=7.%20Asset%20Acquisition) On June 22, 2023, Aeglea acquired Spyre for **$113.2 million** as an asset acquisition, primarily for IBD-related IPR&D assets, recognizing **$130.2 million** in IPR&D - On June 22, 2023, Aeglea acquired Spyre, a preclinical stage biotechnology company, in an **asset acquisition**[83](index=83&type=chunk) - The transaction involved issuing **517,809** shares of common stock and **364,887** shares of Series A Preferred Stock to former Spyre security holders[84](index=84&type=chunk) - The acquisition was classified as an asset acquisition because substantially all of the fair value of the gross assets acquired was concentrated in Spyre's option to exclusively license IPR&D[86](index=86&type=chunk) - The total cost to acquire the asset was **$113.2 million**, which included **$110.0 million** in consideration transferred and **$3.2 million** in transaction costs[88](index=88&type=chunk) - Acquired in-process research and development (IPR&D) was recorded at **$130.2 million**[88](index=88&type=chunk) [8. Paragon Agreement](index=23&type=section&id=8.%20Paragon%20Agreement) Aeglea assumed Spyre's rights and obligations under the Paragon Agreement, including R&D service payments and annual equity option grants, and has exercised the SPY001 program option with potential milestone payments up to $22.0 million - Aeglea assumed Spyre's rights and obligations under the Paragon Agreement, including **$19.0 million** in unpaid expenses at the acquisition date[89](index=89&type=chunk) - The Company incurred **$19.4 million** and **$20.8 million** in costs reimbursable to Paragon for the three and nine months ended September 30, 2023, respectively, recorded as Research and development expenses[90](index=90&type=chunk) - On July 12, 2023, Aeglea exercised its option for the SPY001 research program, obligating the Company to pay Paragon up to **$22.0 million** upon achievement of specific development and clinical milestones[91](index=91&type=chunk)[92](index=92&type=chunk) [9. Series A Non-Voting Convertible Preferred Stock](index=24&type=section&id=9.%20Series%20A%20Non-Voting%20Convertible%20Preferred%20Stock) Aeglea issued Series A preferred stock as part of the Spyre acquisition and private placement, with cash redemption rights if stockholders don't approve conversion, raising going concern doubts, and a special meeting is set for November 21, 2023 - On June 26, 2023, the Company completed a private placement of **721,452** shares of Series A Preferred Stock for gross proceeds of **$210.0 million** (net **$197.3 million**)[97](index=97&type=chunk) - An additional **364,887** shares of Series A Preferred Stock were issued on July 7, 2023, as part of the consideration for the Asset Acquisition[98](index=98&type=chunk) - If stockholder approval for conversion to common stock is not obtained, holders can require cash settlement at fair value, which was **$532.3 million** as of September 30, 2023[95](index=95&type=chunk) - A special meeting of stockholders is scheduled for **November 21, 2023**, to submit the Conversion Proposal for approval[95](index=95&type=chunk)[99](index=99&type=chunk) - Each share of Series A Preferred Stock will automatically convert into **40** shares of common stock upon stockholder approval, subject to certain limitations[96](index=96&type=chunk) [10. Liabilities, Convertible Preferred Stock and Stockholders' (Deficit) Equity](index=25&type=section&id=10.%20Liabilities,%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20(Deficit)%20Equity) This section details equity changes, including proceeds from the 2022 registered direct offering, outstanding pre-funded warrants, and equity incentives, with significant stock compensation expense recognized - The Company received net proceeds of approximately **$42.9 million** from a registered direct offering of common stock and pre-funded warrants in May 2022[100](index=100&type=chunk) - As of September 30, 2023, **250,000** pre-funded warrants for common stock were outstanding, with a **$0.0025** exercise price and no expiration date[102](index=102&type=chunk) - The 2016 Equity Incentive Plan had **293,497** shares available for future issuance as of September 30, 2023[107](index=107&type=chunk) - During the nine months ended September 30, 2023, **3,583,880** inducement awards were granted under the 2018 Equity Inducement Plan[108](index=108&type=chunk) Stock-based compensation expense (in thousands) | Metric | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | | :-------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | | Research and development | $2,965 | $639 | $4,136 | $2,031 | | General and administrative | $1,820 | $926 | $4,269 | $3,653 | | **Total stock-based compensation expense** | **$4,785** | **$1,565** | **$8,405** | **$5,684** | [11. Strategic License Agreements](index=27&type=section&id=11.%20Strategic%20License%20Agreements) The company's exclusive license and supply agreement with Immedica for pegzilarginase was terminated on July 27, 2023, following the sale of global rights to Immedica, resulting in zero deferred revenue as of September 30, 2023 - The exclusive license and supply agreement with Immedica for pegzilarginase was terminated on **July 27, 2023**, following the sale of global rights to Immedica[125](index=125&type=chunk) - For the nine months ended September 30, 2023, the Company recognized **$0.9 million** in revenue under the Immedica Agreement, primarily from PEACE Phase 3 and PIP trials, drug supply, and royalties[124](index=124&type=chunk) - As of September 30, 2023, there was **no deferred revenue** associated with the Immedica Agreement, compared to **$3.6 million** as of December 31, 2022[124](index=124&type=chunk)[127](index=127&type=chunk) [12. Sale of Pegzilarginase to Immedica](index=29&type=section&id=12.%20Sale%20of%20Pegzilarginase%20to%20Immedica) On July 27, 2023, Aeglea sold global rights to pegzilarginase to Immedica for **$15.0 million** upfront and up to **$100.0 million** in contingent milestones, recognizing a **$14.6 million** gain, with proceeds allocated to CVR holders - On July 27, 2023, the Company sold the global rights to pegzilarginase to Immedica for **$15.0 million** in upfront cash proceeds and up to **$100.0 million** in contingent milestone payments[128](index=128&type=chunk) - A **$14.6 million** gain on the sale of the in-process research and development asset was recognized[129](index=129&type=chunk) - The upfront payment and contingent milestone payments, if paid, will be distributed to holders of Aeglea's CVR[130](index=130&type=chunk) [13. Net Loss Per Share](index=30&type=section&id=13.%20Net%20Loss%20Per%20Share) The company computes net loss per common share using the two-class method, excluding convertible preferred stock from basic EPS due to no loss obligation, and diluted EPS equals basic EPS due to anti-dilutive potential securities - Net loss attributable per common stockholder is computed using the **two-class method**, considering convertible preferred stock as participating securities[131](index=131&type=chunk) - Series A Preferred Stock was excluded from the calculation of basic net loss per share because holders do not have an obligation to fund losses[132](index=132&type=chunk) - Diluted net loss per share is the same as basic net loss per share for all periods presented, as the inclusion of potentially dilutive securities (options, unvested RSUs, Series A Preferred Stock) would be **anti-dilutive**[133](index=133&type=chunk)[134](index=134&type=chunk) [14. Restructuring Charges](index=30&type=section&id=14.%20Restructuring%20Charges) In April 2023, Aeglea implemented a restructuring plan, reducing its workforce by **83%** and abandoning its Austin office, incurring **$10.9 million** in total charges recognized in Q2 2023 - The Company implemented a restructuring plan in April 2023, resulting in an approximate **83% reduction** of its workforce by June 30, 2023[136](index=136&type=chunk) - Restructuring expenses included **$6.4 million** in cash severance payments and other employee-related costs, and **$1.0 million** in non-cash stock-based compensation expense related to accelerated vesting[136](index=136&type=chunk) - The Company recognized an impairment loss of **$0.9 million** related to the operating lease right-of-use asset and **$1.7 million** related to leasehold improvements due to abandoning its Austin, Texas office space[139](index=139&type=chunk)[140](index=140&type=chunk) - Total restructuring costs amounted to **$10.9 million**, all recognized during the second quarter of 2023, with no further charges expected[140](index=140&type=chunk) [15. Novation of Manufacturing Agreements](index=31&type=section&id=15.%20Novation%20of%20Manufacturing%20Agreements) On September 19, 2023, Aeglea novated two manufacturing agreements from Paragon to WuXi Biologics: a Biologics Master Services Agreement for SPY001 development and GMP manufacturing, and a Cell Line License Agreement for non-exclusive global cell line technology - On September 19, 2023, Aeglea novated a Biologics Master Services Agreement (MSA) and a Cell Line License Agreement from Paragon to WuXi Biologics (Hong Kong) Limited[141](index=141&type=chunk) - The WuXi Biologics MSA governs development activities and GMP manufacturing and testing for the SPY001 program[142](index=142&type=chunk) - The Cell Line License Agreement provides Aeglea with a non-exclusive, worldwide, sublicensable license to WuXi Biologics' know-how, cell line, and biological materials for manufacturing therapeutic products, specifically for the SPY001 program[145](index=145&type=chunk) - A non-refundable license fee of **$0.2 million** was paid to WuXi Biologics, with potential royalty payments of less than one percent of global net sales if third-party manufacturers are used for commercial supplies[146](index=146&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=33&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses the company's financial condition and operating results, focusing on business transformation, product pipeline, related party relationships, corporate developments, and restructuring, highlighting increased net loss and future funding needs [Acquisition of Spyre](index=33&type=section&id=Acquisition%20of%20Spyre) Aeglea acquired Spyre, gaining an option to license IPR&D for four research programs, and subsequently exercised the option for the SPY001 program - Aeglea acquired Spyre on June 22, 2023, gaining an option to license in-process research and development (IPR&D) related to four research programs[150](index=150&type=chunk)[151](index=151&type=chunk) - On July 12, 2023, Aeglea exercised the option for the **SPY001 program**, focused on antibodies for inflammatory bowel disease (IBD), with expected patent expiration no earlier than 2044[151](index=151&type=chunk) [Overview](index=33&type=section&id=Overview) Following the Spyre acquisition, Aeglea transformed into a preclinical IBD biotechnology company with a portfolio of novel monoclonal antibody candidates, facing substantial going concern doubt - Following the Spyre acquisition, Aeglea has reshaped its business into a preclinical stage biotechnology company focused on developing next generation therapeutics for **inflammatory bowel disease (IBD)**[152](index=152&type=chunk) - The company's portfolio of novel monoclonal antibody product candidates aims to improve efficacy, safety, and dosing convenience in IBD care[152](index=152&type=chunk) - Substantial doubt exists about the company's ability to continue as a **going concern** if stockholders do not timely approve the conversion of Series A Preferred Stock, which could trigger a cash redemption[153](index=153&type=chunk)[154](index=154&type=chunk) [Our Portfolio](index=34&type=section&id=Our%20Portfolio) This section outlines the company's product portfolio, including SPY001 and SPY002 entering first-in-human studies in 2024, and the discovery-stage SPY003 program - **SPY001** (anti-α4β7 mAb), the most advanced product candidate, is expected to enter first-in-human (FIH) studies in the **first half of 2024**, with interim healthy volunteer data by the end of 2024[157](index=157&type=chunk) - **SPY002** (anti-TL1A mAb), a co-lead product candidate, is expected to begin FIH studies in the **second half of 2024**, with healthy volunteer interim data in the first half of 2025[158](index=158&type=chunk) - **SPY003** (anti-IL-23 mAb) is a discovery stage program with an IND/CTN expected in 2025[159](index=159&type=chunk) - The company plans to advance combination programs (**SPY120, SPY130, SPY230**) and precision immunology approaches for IBD treatment[161](index=161&type=chunk)[162](index=162&type=chunk) [Our Relationship with Paragon and Parapyre](index=35&type=section&id=Our%20Relationship%20with%20Paragon%20and%20Parapyre) Aeglea assumed Spyre's obligations under the Paragon Agreement, incurring significant R&D expenses and related party payables, and recognized stock compensation for the Parapyre Option Obligation - Aeglea assumed Spyre's obligations under the Paragon Agreement, including **$19.0 million** in unpaid expenses at the acquisition date[164](index=164&type=chunk)[165](index=165&type=chunk) - The Company recognized **$19.4 million** and **$20.8 million** in research and development expenses due to Paragon for the three and nine months ended September 30, 2023, respectively[166](index=166&type=chunk) - As of September 30, 2023, **$16.8 million** was unpaid and owed to Paragon under the Paragon Agreement[166](index=166&type=chunk) - Stock compensation expense related to the Parapyre Option Obligation was **$2.7 million** and **$2.9 million** for the three and nine months ended September 30, 2023, respectively[167](index=167&type=chunk) [Corporate Developments](index=36&type=section&id=Corporate%20Developments) This section highlights corporate developments, including the sale of pegzilarginase global rights and key executive appointments in Q3 and Q4 2023 - In July 2023, Aeglea sold the global rights to pegzilarginase to Immedica for **$15 million** upfront and up to **$100 million** in contingent milestone payments, terminating the previous license agreement[168](index=168&type=chunk) - **Scott Burrows** was appointed Chief Financial Officer effective September 1, 2023[169](index=169&type=chunk) - **Heidy Abreu King-Jones** was appointed Chief Legal Officer and Corporate Secretary on September 1, 2023[170](index=170&type=chunk) - **Dr. Cameron Turtle** was appointed principal executive officer effective October 6, 2023[170](index=170&type=chunk) [Restructuring](index=36&type=section&id=Restructuring) During Q2 2023, Aeglea implemented a restructuring plan, reducing its workforce by **83%**, selling lab equipment, and abandoning its Austin headquarters lease, with all related charges recognized - During the second quarter of 2023, Aeglea implemented a restructuring plan, reducing its workforce by **83%**, selling lab equipment, and abandoning its corporate headquarters lease in Austin, TX[171](index=171&type=chunk) - All charges related to the restructuring activities were recognized during the second quarter of 2023, with no further charges expected under the plan[171](index=171&type=chunk) [Critical Accounting Policies and Estimates](index=36&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) This section highlights critical accounting policies and estimates requiring significant judgment, including accrued R&D costs, IPR&D valuation, CVR liability, and stock-based compensation - The preparation of financial statements requires significant judgments and estimates, particularly for accrued research and development costs, valuation of acquired IPR&D, CVR liability, stock-based compensation, lease asset impairment, and revenue recognition[174](index=174&type=chunk) - The fair value of equity transferred in the Spyre acquisition was determined by considering the per share value of the PIPE financing[174](index=174&type=chunk) [Results of Operations](index=37&type=section&id=Results%20of%20Operations) This section provides a comparative analysis of the company's operating results for the three and nine months ended September 30, 2023 and 2022 [Comparison of the Three Months Ended September 30, 2023 and 2022](index=37&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20September%2030,%202023%20and%202022) In Q3 2023, net loss increased to **$40.1 million**, up **120%**, driven by a **$25.4 million** non-cash charge and higher IBD R&D expenses, partially offset by a **$14.6 million** gain from pegzilarginase sale | Metric | 3 Months Ended Sep 30, 2023 (in thousands) | 3 Months Ended Sep 30, 2022 (in thousands) | Dollar Change | % Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------ | :--------- | | Total revenue | $0 | $174 | $(174) | (100)% | | Research and development | $24,660 | $11,977 | $12,683 | 106% | | General and administrative | $8,584 | $6,952 | $1,632 | 23% | | Gain on sale of in-process research and development asset | $(14,609) | $0 | $(14,609) | * | | Change in fair value of forward contract liability | $(25,360) | $0 | $(25,360) | * | | Net loss | $(40,107) | $(18,234) | $(21,873) | * | - The increase in research and development expenses was primarily due to a **$22.4 million** increase in preclinical development and manufacturing expenses for the IBD pipeline, partially offset by a **$10.0 million** decrease in legacy rare disease pipeline expenses[179](index=179&type=chunk) - General and administrative expenses increased primarily due to a **$1.1 million** increase in legal costs and a **$0.6 million** increase in employee separation costs[180](index=180&type=chunk) [Comparison of the Nine Months Ended September 30, 2023 and 2022](index=38&type=section&id=Comparison%20of%20the%20Nine%20Months%20Ended%20September%2030,%202023%20and%202022) For the nine months ended September 30, 2023, net loss increased to **$275.6 million**, up **324%**, driven by **$130.2 million** in acquired IPR&D and **$83.5 million** non-cash charges | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Dollar Change | % Change | | :--------------------------------------- | :--------------------------------------- | :--------------------------------------- | :------------ | :--------- | | Total revenue | $886 | $2,161 | $(1,275) | (59)% | | Research and development | $55,822 | $44,328 | $11,494 | 26% | | General and administrative | $25,874 | $23,452 | $2,422 | 10% | | Acquired in-process research and development | $130,188 | $0 | $130,188 | * | | Gain on sale of in-process research and development asset | $(14,609) | $0 | $(14,609) | * | | Change in fair value of forward contract liability | $(83,530) | $0 | $(83,530) | * | | Net loss | $(275,610) | $(64,993) | $(210,617) | * | - The increase in research and development expenses was primarily due to a **$23.6 million** increase in preclinical development and manufacturing expenses for the IBD pipeline and a **$2.4 million** increase in restructuring costs, partially offset by a **$14.5 million** decrease in legacy rare disease pipeline activities[190](index=190&type=chunk) - General and administrative expenses increased due to a **$2.6 million** increase in restructuring costs, a **$1.1 million** increase in legal fees, and a **$0.5 million** increase in employee separation costs, partially offset by a **$1.8 million** decrease in legacy commercial readiness activities[185](index=185&type=chunk) [Liquidity and Capital Resources](index=39&type=section&id=Liquidity%20and%20Capital%20Resources) This section discusses the company's liquidity and capital resources, including funding sources, future requirements, cash flow analysis, and contractual obligations [Sources of Liquidity](index=39&type=section&id=Sources%20of%20Liquidity) Since inception, Aeglea has raised approximately **$716.2 million** from financing and licensing, with recent liquidity from a **$42.9 million** 2022 offering, a **$197.3 million** 2023 private placement, and a **$15.0 million** asset sale - Since inception through September 30, 2023, the Company has raised approximately **$716.2 million** of gross proceeds primarily from equity/debt financings and licensing[189](index=189&type=chunk) - Net proceeds from the 2022 registered direct offering were **$42.9 million**[193](index=193&type=chunk) - Net proceeds from the June 2023 PIPE transaction (Series A Preferred Stock) were approximately **$197.3 million**[195](index=195&type=chunk) - The sale of global rights to pegzilarginase to Immedica in July 2023 generated **$15.0 million** in upfront cash proceeds[192](index=192&type=chunk) - Primary use of cash is to fund the development of product candidates, including research and development and general and administrative expenses[196](index=196&type=chunk) [Future Funding Requirements and Operational Plan](index=40&type=section&id=Future%20Funding%20Requirements%20and%20Operational%20Plan) The company had an accumulated deficit of **$701.2 million** and anticipates continued losses, with substantial going concern doubt contingent on stockholder approval for Series A preferred stock conversion - The Company had an accumulated deficit of **$701.2 million** as of September 30, 2023, and anticipates continued operating losses[197](index=197&type=chunk) - Substantial doubt exists about the Company's ability to continue as a **going concern** within one year, contingent on stockholder approval for the conversion of Series A Preferred Stock[198](index=198&type=chunk)[199](index=199&type=chunk) - Future funding will be required through equity or debt financings, research grants, collaborations, or licensing agreements[197](index=197&type=chunk) - Failure to raise additional capital could lead to delays, scaling back, or discontinuation of product development, or relinquishing rights to product candidates[229](index=229&type=chunk) [Cash Flows](index=41&type=section&id=Cash%20Flows) For the nine months ended September 30, 2023, the company experienced **$68.9 million** cash outflow from operations and **$73.1 million** from investing, offset by **$197.5 million** from financing, resulting in a **$55.5 million** net cash increase | Metric | 9 Months Ended Sep 30, 2023 (in thousands) | 9 Months Ended Sep 30, 2022 (in thousands) | Change (YoY) | | :------------------------------------------ | :--------------------------------------- | :--------------------------------------- | :------------- | | Net cash used in operating activities | $(68,874) | $(62,004) | +11.1% | | Net cash (used in) and provided by investing activities | $(73,121) | $43,008 | -270.0% | | Net cash provided by financing activities | $197,471 | $42,686 | +362.6% | | Net increase in cash, cash equivalents, and restricted cash | $55,483 | $23,538 | +135.7% | - Cash used in operating activities for the nine months ended September 30, 2023, was **$68.9 million**, offset by non-cash expenses such as acquired IPR&D (**$130.2 million**) and change in fair value of forward contract liability (**$83.5 million**)[201](index=201&type=chunk) - Cash used in investing activities for the nine months ended September 30, 2023, was **$73.1 million**, primarily due to **$112.6 million** in marketable securities purchases, partially offset by **$21.0 million** from maturities/sales and **$15.0 million** from the sale of IPR&D assets[203](index=203&type=chunk) - Cash provided by financing activities for the nine months ended September 30, 2023, was **$197.5 million**, primarily from the net proceeds of the Series A Preferred Stock issuance in the PIPE[205](index=205&type=chunk) [Contractual Obligations and Other Commitments](index=42&type=section&id=Contractual%20Obligations%20and%20Other%20Commitments) The company has potential future milestone payment obligations to Paragon of up to **$22.0 million** for the SPY001 program, with similar amounts for other programs if options are exercised, while most vendor agreements are cancelable within 30-60 days - The Company has potential future obligations of up to **$22.0 million** in milestone payments to Paragon for the SPY001 program[207](index=207&type=chunk) - If options for the remaining three research programs (**SPY002, SPY003, SPY004**) are exercised, similar milestone payments of up to **$22.0 million** per program would be obligated[207](index=207&type=chunk) - Agreements with contract research organizations, contract manufacturing organizations, and other vendors are generally cancelable upon **30 to 60 days'** prior written notice[208](index=208&type=chunk) [Recently Adopted Accounting Pronouncements](index=42&type=section&id=Recently%20Adopted%20Accounting%20Pronouncements) The company early adopted ASU 2020-06 on January 1, 2023, which eliminated certain accounting models for convertible instruments and changed diluted EPS calculation, applied to all Series A preferred stock - The Company early adopted **ASU 2020-06**, 'Accounting for Convertible Instruments and Contracts in an Entity's Own Equity,' effective January 1, 2023, using the modified retrospective method[209](index=209&type=chunk) - ASU 2020-06 eliminated cash conversion and beneficial conversion feature models for certain convertible debt and preferred stock and changed the accounting for diluted earnings-per-share for convertible instruments[209](index=209&type=chunk) [Item 3. Quantitative and Qualitative Disclosures About Market Risk](index=42&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) The company's primary market risk is interest rate sensitivity, but a hypothetical **10%** change is not expected to materially affect its short-term, low-risk investment portfolio, and foreign currency exchange rate risk is also deemed immaterial - The Company's primary exposure to market risk is **interest rate sensitivity**, but it is not significant as most investments are short-term and low-risk marketable securities[210](index=210&type=chunk) - A hypothetical **10% change** in interest rates is not expected to have a material effect on the total market value of the investment portfolio[210](index=210&type=chunk) - As of September 30, 2023, the Company held **$203.6 million** in cash, cash equivalents, and marketable securities, predominantly denominated in U.S. dollars[211](index=211&type=chunk) - Foreign currency exchange rate risk is not material; a hypothetical **10% change** would not have a material impact on consolidated financial statements[212](index=212&type=chunk) [Item 4. Controls and Procedures](index=43&type=section&id=Item%204.%20Controls%20and%20Procedures) As of September 30, 2023, management, including the CEO and CFO, concluded that the company's disclosure controls and procedures were effective at a reasonable assurance level, with no material changes to internal control over financial reporting during the quarter - As of September 30, 2023, the Company's disclosure controls and procedures were evaluated and concluded to be **effective** at the reasonable assurance level[213](index=213&type=chunk) - There were no changes in internal control over financial reporting during the quarter ended September 30, 2023, that materially affected, or are reasonably likely to materially affect, internal control over financial reporting[214](index=214&type=chunk) [PART II. OTHER INFORMATION](index=44&type=section&id=PART%20II.%20OTHER%20INFORMATION) This part covers other information, including legal proceedings, risk factors, equity sales, defaults, mine safety, and a list of exhibits [Item 1. Legal Proceedings](index=44&type=section&id=Item%201.%20Legal%20Proceedings) Management believes there are no pending legal claims or actions against the company that could materially adversely affect its results of operations, financial condition, or cash flows - Management believes there are currently **no claims or actions pending** against the Company that could have a material adverse effect on its results of operations, financial condition, or cash flows[216](index=216&type=chunk) [Item 1A. Risk Factors](index=44&type=section&id=Item%201A.%20Risk%20Factors) Investing in the company's common stock involves high risks, including uncertainties related to the Spyre acquisition, going concern ability, preclinical development, third-party reliance, and intellectual property [Risk Factor Summary](index=44&type=section&id=Risk%20Factor%20Summary) Investing in the company's common stock involves a high degree of risk, categorized across financial, development, regulatory, intellectual property, and operational areas - Investing in the Company's common stock involves a **high degree of risk**[217](index=217&type=chunk) - Key risk categories include financial condition and capital requirements, discovery/development/commercialization, government regulation, intellectual property, reliance on third parties, employee matters/managing growth, and common stock[218](index=218&type=chunk)[219](index=219&type=chunk)[221](index=221&type=chunk)[222](index=222&type=chunk)[223](index=223&type=chunk) [Risks Related to Our Financial Condition and Capital Requirements](index=45&type=section&id=Risks%20Related%20to%20Our%20Financial%20Condition%20and%20Capital%20Requirements) The company faces risks of insufficient capital, impacting its going concern ability if Series A preferred stock conversion is not approved, and anticipates continued losses requiring substantial funding that may dilute stockholders - The Company will need to raise additional capital to fund operations and service debt obligations; inability to do so will prevent continuation as a **going concern**[226](index=226&type=chunk) - If stockholders do not timely approve the conversion of Series A Preferred Stock, holders may require cash settlement, raising substantial doubt about the Company's ability to continue as a **going concern**[226](index=226&type=chunk) - The Company has never generated revenue from product sales and anticipates incurring significant losses for the foreseeable future, with an accumulated deficit of **$701.2 million** as of September 30, 2023[231](index=231&type=chunk)[235](index=235&type=chunk) - Raising additional capital through equity or convertible debt securities will **dilute** the ownership interest of existing stockholders[241](index=241&type=chunk)[243](index=243&type=chunk) [Risks Related to Discovery, Development and Commercialization](index=50&type=section&id=Risks%20Related%20to%20Discovery,%20Development%20and%20Commercialization) All company programs are in preclinical development, facing intense competition and potential failure or delays, with SPY001 and SPY002 success being critical despite clinical trial risks - The Company's programs are in preclinical stages of development and may fail or suffer delays, as all programs are unproven in humans[249](index=249&type=chunk) - The Company faces significant competition from multinational biopharmaceutical companies with greater financial resources and expertise[246](index=246&type=chunk) - Success is substantially dependent on **SPY001** and **SPY002**, but their anticipated clinical trials may not be successful, and preliminary data may change[254](index=254&type=chunk)[265](index=265&type=chunk) - Difficulties in patient enrollment, significant adverse events, or undesirable side effects in future clinical trials could halt development or limit commercial potential[264](index=264&type=chunk)[267](index=267&type=chunk) - Any approved products may not achieve adequate market acceptance among clinicians, patients, and payors, hindering commercial success[271](index=271&type=chunk) [Risks Related to Government Regulation](index=57&type=section&id=Risks%20Related%20to%20Government%20Regulation) Regulatory approval processes are lengthy and unpredictable, potentially delaying or failing product commercialization, requiring strict CMC compliance, and posing risks from biosimilar competition and ongoing regulatory obligations - The regulatory approval processes of the FDA and comparable foreign authorities are lengthy, time-consuming, and inherently unpredictable, potentially delaying or preventing commercialization[276](index=276&type=chunk) - Failure to meet chemistry, manufacturing, and control requirements could prevent product approval[280](index=280&type=chunk) - Programs approved as biologics may face competition sooner than anticipated due to biosimilar pathways[281](index=281&type=chunk)[282](index=282&type=chunk) - Even with regulatory approval, the Company will be subject to extensive ongoing regulatory obligations and review, with potential penalties for non-compliance[283](index=283&type=chunk)[284](index=284&type=chunk) - The Company is exposed to risks from healthcare legislative reform, fraud and abuse laws, and strict price controls in foreign governments, which could adversely affect revenue and business[286](index=286&type=chunk)[287](index=287&type=chunk)[288](index=288&type=chunk)[290](index=290&type=chunk) [Risks Related to Our Intellectual Property](index=61&type=section&id=Risks%20Related%20to%20Our%20Intellectual%20Property) The company's ability to protect its patents and proprietary rights is uncertain, risking loss of competitive advantage, potential patent infringement claims, and weakened IP protection due to changes in patent law or non-compliance - The Company's ability to protect its patents and other proprietary rights is uncertain, potentially leading to a **loss of competitive advantage**[293](index=293&type=chunk) - Pending and future patent applications may not result in issued patents, and existing patents may be challenged, narrowed, or found invalid/unenforceable[294](index=294&type=chunk) - The Company may be subject to patent infringement claims or need to file claims to protect its intellectual property, incurring substantial costs and liability[304](index=304&type=chunk) - Changes to patent laws (e.g., Leahy-Smith Act) and geopolitical instability could diminish the value of patents and impair protection[312](index=312&type=chunk)[315](index=315&type=chunk) - Failure to identify relevant third-party patents or correctly interpret their scope/expiration could adversely affect the ability to develop and market products[317](index=317&type=chunk) [Risks Related to Our Reliance on Third Parties](index=67&type=section&id=Risks%20Related%20to%20Our%20Reliance%20on%20Third%20Parties) The company heavily relies on third-party collaborations, licensing, preclinical research, clinical trials, and manufacturing, and their failure to perform could adversely affect business, regulatory approval, or product commercialization - The Company relies on collaborations and licensing arrangements with third parties, including Paragon, for discovery capabilities and in-licenses; failure to maintain these could negatively impact the business[325](index=325&type=chunk)[326](index=326&type=chunk) - The Company relies on third parties (investigators, CROs, CMOs) to conduct and support preclinical studies and clinical trials; their failure to perform could delay or prevent regulatory approval[329](index=329&type=chunk)[331](index=331&type=chunk) - Reliance on third-party manufacturing facilities or CMOs for product manufacturing poses risks, including supply disruptions, non-compliance with cGMP, and manufacturing difficulties[332](index=332&type=chunk)[333](index=333&type=chunk) [Risks Related to Employee Matters, Managing Growth and Other Risks Related to Our Business](index=69&type=section&id=Risks%20Related%20to%20Employee%20Matters,%20Managing%20Growth%20and%20Other%20Risks%20Related%20to%20Our%20Business) The company anticipates significant growth, posing management challenges and reliance on talent, alongside risks of employee misconduct, cybersecurity breaches, NOL carryforward limitations, and compliance with evolving regulations - The Company expects significant growth in employees and operations, requiring effective management and recruitment/training of qualified personnel[335](index=335&type=chunk) - High dependence on key personnel and the ability to attract and retain highly qualified individuals is critical for business strategy implementation[336](index=336&type=chunk)[337](index=337&type=chunk) - Risks include employee misconduct, security/data privacy breaches, limitations on net operating loss carryforwards, and compliance with stringent privacy, data protection, and environmental regulations[340](index=340&type=chunk)[341](index=341&type=chunk)[348](index=348&type=chunk)[349](index=349&type=chunk)[351](index=351&type=chunk) - Adverse legislative or regulatory tax changes, such as those from the Inflation Reduction Act of 2022, could negatively impact financial condition[352](index=352&type=chunk) [Risks Related to Our Common Stock](index=73&type=section&id=Risks%20Related%20to%20Our%20Common%20Stock) Investment in common stock carries risks including cash settlement if Series A preferred stock conversion is not approved, potential Nasdaq delisting, anti-takeover provisions, future dilution from equity issuances, and high market price volatility - Failure to obtain stockholder approval for the conversion of Series A Preferred Stock could require cash settlement, materially harming operations and raising **going concern doubts**[356](index=356&type=chunk) - Failure to meet Nasdaq Capital Market listing requirements, such as the Minimum Bid Price Requirement, could result in **delisting**[357](index=357&type=chunk)[358](index=358&type=chunk) - Anti-takeover provisions in charter documents, Delaware law, and Series A Preferred Stock terms could make acquisitions more difficult[362](index=362&type=chunk)[363](index=363&type=chunk) - Future sales of shares by existing stockholders and future issuances of equity and debt could result in additional **dilution** to stockholders[369](index=369&type=chunk)[371](index=371&type=chunk) - The market price of the Company's Common Stock has historically been **volatile** and may decline in the future due to various factors, including regulatory approvals, competition, and macroeconomic conditions[374](index=374&type=chunk)[375](index=375&type=chunk) [General Risk Factors](index=76&type=section&id=General%20Risk%20Factors) As a public company, the company incurs compliance costs and management burdens, with potential stock price impact from insufficient analyst coverage or internal control failures, and faces risks from financial institution failures affecting operational payments - The Company incurs significant legal, accounting, and other expenses associated with public company reporting requirements, which can be time-consuming and costly[378](index=378&type=chunk) - Failure to maintain proper and effective internal controls could impair the ability to produce accurate financial statements, leading to investor loss of confidence and stock price decline[380](index=380&type=chunk)[383](index=383&type=chunk) - The failure of financial institutions where the Company holds cash deposits (often exceeding federally-insured limits) could adversely affect its ability to pay operational expenses[354](index=354&type=chunk)[355](index=355&type=chunk) [Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.](index=78&type=section&id=Item%202.%20Unregistered%20Sales%20of%20Equity%20Securities%20and%20Use%20of%20Proceeds.) No unregistered sales of equity securities or use of proceeds were reported this quarter [Item 3. Defaults Upon Senior Securities.](index=78&type=section&id=Item%203.%20Defaults%20Upon%20Senior%20Securities.) No defaults upon senior securities were reported this quarter [Item 4. Mine Safety Disclosures.](index=78&type=section&id=Item%204.%20Mine%20Safety%20Disclosures.) Not applicable [Item 5. Other Information.](index=78&type=section&id=Item%205.%20Other%20Information.) No other information was reported this quarter [Item 6. Exhibits.](index=79&type=section&id=Item%206.%20Exhibits.) This section lists exhibits filed or furnished as part of the 10-Q quarterly report, including key documents such as merger agreements, certificates of designation, and manufacturing agreements - Key exhibits include the Agreement and Plan of Merger (Spyre acquisition), Certificate of Designation of Series A Non-Voting Convertible Preferred Stock, Asset Purchase Agreement (pegzilarginase sale), Biologics Master Services Agreement, Cell Line License Agreement, and Novation Agreement (WuXi Biologics)[390](index=390&type=chunk) [Signatures](index=81&type=section&id=Signatures) This section confirms the report was signed by Scott Burrows, Chief Financial Officer, on November 9, 2023 - The report was signed by **Scott Burrows**, Chief Financial Officer (Principal Financial Officer, Principal Accounting Officer, and Duly Authorized Signatory), on **November 9, 2023**[394](index=394&type=chunk)[395](index=395&type=chunk)

Report Information [Filing Details](index=1&type=section&id=Filing%20Details) This 10-Q quarterly report for AEGLEA BIOTHERAPEUTICS, INC. covers the period ended June 30, 2023, with the company listed on Nasdaq as AGLE and classified as a non-accelerated filer and smaller reporting company - The company is AEGLEA BIOTHERAPEUTICS, INC., submitting its 10-Q quarterly report for the period ended June 30, 2023[2](index=2&type=chunk) Filing Details | Metric | Details | | :--- | :--- | | Jurisdiction of Incorporation | Delaware | | Stock Symbol | AGLE | | Exchange | Nasdaq Capital Market | | Filing Status | Non-accelerated filer, Smaller reporting company | | Common Stock Outstanding (as of August 4, 2023) | 101,192,921 shares | [Note About Forward-Looking Statements](index=3&type=section&id=Note%20About%20Forward-Looking%20Statements) This report contains forward-looking statements on future operations, finances, and product development, subject to risks and uncertainties, with no commitment for public updates - This report contains numerous forward-looking statements covering shareholder approval, CVR payments, Spyre asset acquisition benefits, future operating results, financial condition, business strategy, cash resources, market size, growth opportunities, preclinical and clinical development, product candidate efficacy and safety, regulatory approvals, and commercialization[10](index=10&type=chunk) - Forward-looking statements are subject to various risks, uncertainties, and assumptions, including those in the 'Risk Factors' section, where actual results may differ materially from expectations[11](index=11&type=chunk) - The company undertakes no obligation to publicly update any forward-looking statements, except as required by law[12](index=12&type=chunk) PART I. FINANCIAL INFORMATION [Item 1. Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements%20(Unaudited)) This section provides the company's unaudited condensed consolidated financial statements, including balance sheets, statements of operations, comprehensive loss, equity changes, and cash flows, with detailed notes [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Condensed Consolidated Balance Sheets (as of June 30, 2023, and December 31, 2022, in thousands of USD) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $235,358 | $34,863 | | Marketable securities | — | $20,848 | | Total assets | $243,529 | $71,144 | | **Liabilities and stockholders' (deficit) equity** | | | | Forward contract liability | $164,382 | — | | CVR liability | $10,500 | — | | Total liabilities | $253,575 | $20,839 | | Series A non-voting convertible preferred stock | $197,323 | — | | Total stockholders' (deficit) equity | $(207,369) | $50,305 | | Accumulated deficit | $(661,127) | $(425,624) | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Condensed Consolidated Statements of Operations (for the periods ended June 30, 2023, in thousands of USD) | Item | Three Months Ended 2023 | Three Months Ended 2022 | Six Months Ended 2023 | Six Months Ended 2022 | | :--- | :--- | :--- | :--- | :--- | | Revenue | $688 | $625 | $886 | $1,987 | | Research and development expenses | $17,386 | $15,373 | $31,162 | $32,351 | | General and administrative expenses | $12,062 | $7,675 | $17,290 | $16,500 | | Acquired in-process research and development expenses | $130,486 | — | $130,486 | — | | Operating loss | $(159,246) | $(22,423) | $(178,052) | $(46,864) | | Change in fair value of forward contract liability | $(58,170) | — | $(58,170) | — | | Net loss | $(217,081) | $(22,323) | $(235,503) | $(46,759) | | Net loss per share (basic and diluted) | $(2.27) | $(0.27) | $(2.48) | $(0.63) | | Weighted-average common shares outstanding (basic and diluted) | 95,565,118 | 82,209,032 | 94,917,487 | 73,650,146 | [Condensed Consolidated Statements of Comprehensive Loss](index=6&type=section&id=Condensed%20Consolidated%20Statements%20of%20Comprehensive%20Loss) Condensed Consolidated Statements of Comprehensive Loss (for the periods ended June 30, 2023, in thousands of USD) | Item | Three Months Ended 2023 | Three Months Ended 2022 | Six Months Ended 2023 | Six Months Ended 2022 | | :--- | :--- | :--- | :--- | :--- | | Net loss | $(217,081) | $(22,323) | $(235,503) | $(46,759) | | Foreign currency translation adjustment | $18 | $(36) | $28 | $(49) | | Unrealized (loss) gain on marketable securities | $(1) | $(31) | $31 | $(151) | | Total comprehensive loss | $(217,064) | $(22,390) | $(235,444) | $(46,959) | [Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' (Deficit) Equity](index=7&type=section&id=Condensed%20Consolidated%20Statements%20of%20Changes%20in%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20(Deficit)%20Equity) Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' (Deficit) Equity (as of June 30, 2023, in thousands of USD) | Item | Series A Non-Voting Convertible Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders' (Deficit) Equity | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance as of December 31, 2022 | — | $6 | $475,971 | $(48) | $(425,624) | $50,305 | | Issuance of Series A preferred stock | $197,323 | — | — | — | — | — | | Issuance of common stock (Spyre acquisition) | — | — | $3,768 | — | — | $3,768 | | CVR distribution to common stockholders | — | — | $(29,500) | — | — | $(29,500) | | Net loss | — | — | — | — | $(217,081) | $(217,081) | | Balance as of June 30, 2023 | $197,323 | $6 | $453,741 | $11 | $(661,127) | $(207,369) | Condensed Consolidated Statements of Changes in Convertible Preferred Stock and Stockholders' (Deficit) Equity (as of June 30, 2022, in thousands of USD) | Item | Series A Non-Voting Convertible Preferred Stock | Common Stock | Additional Paid-in Capital | Accumulated Other Comprehensive Income (Loss) | Accumulated Deficit | Total Stockholders' (Deficit) Equity | | :--- | :--- | :--- | :--- | :--- | :--- | :--- | | Balance as of December 31, 2021 | — | $5 | $425,765 | $(20) | $(341,809) | $83,941 | | Issuance of common stock and pre-funded warrants | — | $1 | $42,872 | — | — | $42,873 | | Net loss | — | — | — | — | $(22,323) | $(22,323) | | Balance as of June 30, 2022 | — | $6 | $472,939 | $(220) | $(388,568) | $84,157 | [Condensed Consolidated Statements of Cash Flows](index=9&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Condensed Consolidated Statements of Cash Flows (for the periods ended June 30, 2023, in thousands of USD) | Item | Six Months Ended 2023 | Six Months Ended 2022 | | :--- | :--- | :--- | | Net cash used in operating activities | $(34,277) | $(46,936) | | Net cash provided by investing activities | $24,510 | $26,509 | | Net cash provided by financing activities | $210,002 | $42,816 | | Net increase in cash, cash equivalents, and restricted cash | $200,259 | $22,294 | | Cash, cash equivalents, and restricted cash at end of period | $236,675 | $39,274 | [Notes to Unaudited Condensed Consolidated Financial Statements](index=10&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) [1. The Company and Basis of Presentation](index=10&type=section&id=1.%20The%20Company%20and%20Basis%20of%20Presentation) The company, a preclinical IBD biotechnology firm, restructured and acquired Spyre assets in June 2023, raising $210 million, but faces going concern uncertainty from accumulated deficit and potential Series A preferred stock redemption - The company is a preclinical-stage biotechnology company focused on developing next-generation therapies for inflammatory bowel disease (IBD)[31](index=31&type=chunk) - In April 2023, following an evaluation of pegtarviliase clinical trial results, the company initiated a strategic alternatives exploration and implemented a restructuring plan involving an approximate **83% reduction in workforce**[32](index=32&type=chunk)[38](index=38&type=chunk) - On June 22, 2023, the company acquired assets of Spyre Therapeutics, Inc. through a stock transaction, completed a private placement of approximately **$210 million** in Series A preferred stock on June 26, and distributed contingent value rights (CVRs) to existing stockholders[33](index=33&type=chunk)[34](index=34&type=chunk)[35](index=35&type=chunk) Liquidity Position (as of June 30, 2023, in millions of USD) | Metric | Amount | | :--- | :--- | | Accumulated deficit | $661.1 | | Cash and cash equivalents | $235.4 | - If stockholders do not timely approve the conversion of Series A preferred stock, the company may be required to redeem it for cash, posing significant uncertainty about its ability to continue as a going concern[40](index=40&type=chunk) [2. Summary of Significant Accounting Policies](index=11&type=section&id=2.%20Summary%20of%20Significant%20Accounting%20Policies) This section outlines key accounting policies for financial statements, covering convertible preferred stock, asset acquisition, CVR derivatives, and estimates, with early adoption of ASU 2020-06 - The company prepares its financial statements in accordance with U.S. Generally Accepted Accounting Principles (GAAP) and SEC interim financial information instructions[42](index=42&type=chunk) - Series A convertible preferred stock is classified outside of stockholders' (deficit) equity because it is redeemable for cash at the holder's option if stockholders do not approve conversion into common stock, and conversion and redemption are not solely within the company's control[43](index=43&type=chunk) - The company accounted for the Spyre acquisition as an asset acquisition rather than a business combination, as the fair value of the acquired assets was concentrated in a single identifiable asset (IPR&D option), and this IPR&D asset had no alternative future use, thus expensed on the acquisition date[44](index=44&type=chunk)[47](index=47&type=chunk) - Certain contingent payments under the contingent value rights (CVR) agreement are identified as derivatives, measured at fair value, recorded as a liability, with changes in fair value recognized in other income or expense[48](index=48&type=chunk) - The company early adopted ASU 2020-06, which eliminates separate accounting for embedded conversion features in certain convertible debt and preferred stock, and changes the accounting for diluted earnings per share for convertible instruments[51](index=51&type=chunk)[52](index=52&type=chunk) [3. Fair Value Measurements](index=13&type=section&id=3.%20Fair%20Value%20Measurements) The company measures financial assets and liabilities using a three-level fair value hierarchy, with Level 1 for money market funds, Level 2 for forward contract and Parapyre option liabilities, and Level 3 for CVR liabilities based on unobservable inputs Fair Value of Financial Assets and Liabilities (as of June 30, 2023, in thousands of USD) | Item | Level 1 | Level 2 | Level 3 | Total | | :--- | :--- | :--- | :--- | :--- | | **Financial Assets** | | | | | | Money market funds | $18,861 | — | — | $18,861 | | **Liabilities** | | | | | | Forward contract liability | — | $164,382 | — | $164,382 | | Parapyre option obligation | — | $279 | — | $279 | | CVR liability | — | — | $29,500 | $29,500 | | Total Liabilities | — | $164,661 | $29,500 | $194,161 | - The forward contract liability and Parapyre option obligation are considered Level 2 liabilities, with changes in fair value recognized in other income (expense)[54](index=54&type=chunk) - The CVR liability is considered a Level 3 liability, with its value based on unobservable market inputs such as estimated cash flows, probability of success, and risk-adjusted discount rates[55](index=55&type=chunk)[60](index=60&type=chunk) - The forward contract liability's fair value was **$106.2 million** at the acquisition date (June 22, 2023), increasing to **$164.4 million** as of June 30, 2023, resulting in a **$58.2 million** fair value change expense[57](index=57&type=chunk) CVR Liability Changes (as of June 30, 2023, in thousands of USD) | Item | Amount | | :--- | :--- | | Initial balance as of December 31, 2022 | $— | | Fair value at CVR issuance | $29,500 | | Ending balance as of June 30, 2023 | $29,500 | [4. Cash Equivalents and Marketable Securities](index=15&type=section&id=4.%20Cash%20Equivalents%20and%20Marketable%20Securities) As of June 30, 2023, the company held money market funds as cash equivalents but no marketable securities, classifying all as current assets and assessing credit losses due to market conditions Cash Equivalents and Marketable Securities (as of June 30, 2023, in thousands of USD) | Item | Amortized Cost | Fair Value | | :--- | :--- | :--- | | **June 30, 2023** | | | | Money market funds | $18,861 | $18,861 | | **December 31, 2022** | | | | Money market funds | $15,250 | $15,250 | | Commercial paper | $7,021 | $7,020 | | U.S. government securities | $3,736 | $3,735 | | **Total cash equivalents** | $26,007 | $26,005 | | **Marketable securities** | | | | Commercial paper | $16,644 | $16,621 | | Corporate bonds | $3,738 | $3,732 | | U.S. government securities | $495 | $495 | | **Total marketable securities** | $20,877 | $20,848 | - As of June 30, 2023, the company held no available-for-sale securities and assessed credit losses, concluding that market value declines were primarily due to economic and market conditions, not credit losses[62](index=62&type=chunk) - As of June 30, 2023, **$215.6 million** of the company's cash deposits at U.S. banking institutions exceeded FDIC insurance limits[63](index=63&type=chunk) Marketable Securities Contractual Maturities (in thousands of USD) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Due within one year | $— | $20,848 | | Due after one year | $— | $— | | **Total marketable securities** | $— | $20,848 | [5. Accrued and Other Current Liabilities](index=16&type=section&id=5.%20Accrued%20and%20Other%20Current%20Liabilities) As of June 30, 2023, accrued and other current liabilities totaled **$28.427 million**, a significant increase from **$12.837 million** on December 31, 2022, primarily due to higher PIPE-related accrued financing fees and accrued compensation Accrued and Other Current Liabilities (in thousands of USD) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | PIPE accrued financing fees | $12,677 | $— | | Accrued compensation | $7,240 | $4,589 | | Accrued contractual research and development costs | $4,450 | $6,972 | | Accrued professional and consulting fees | $3,674 | $946 | | Other accrued expenses | $386 | $330 | | **Total accrued and other current liabilities** | $28,427 | $12,837 | [6. Related Party Transactions](index=16&type=section&id=6.%20Related%20Party%20Transactions) Paragon and Parapyre, affiliates, collectively hold over 5% of the company's equity, and the company assumed Spyre's Paragon Agreement obligations, including R&D service fees and Parapyre option obligations, with **$20.8 million** owed to Paragon as of June 30, 2023 - Paragon and Parapyre (affiliates of Paragon) collectively hold over **5%** of the company's capital stock, and Fairmount Funds Management LLC also holds over **5%** of the company's capital stock and has a board seat[67](index=67&type=chunk) - Following the Spyre asset acquisition, the company assumed Spyre's rights and obligations under the Paragon Agreement, including payments to Paragon for R&D services, with **$19.3 million** in unpaid fees incurred by Spyre as of the acquisition date, now assumed by the company[68](index=68&type=chunk) - In July 2023, the company exercised its option for the SPY001 program, requiring payments of up to **$22.0 million** to Paragon upon achieving specific development and clinical milestones[69](index=69&type=chunk) Reimbursable Costs Under Paragon Agreement (in millions of USD) | Item | Three Months Ended 2023 | Three Months Ended 2022 | Six Months Ended 2023 | Six Months Ended 2022 | | :--- | :--- | :--- | :--- | :--- | | Reimbursable costs under Paragon Agreement | $1.2 | — | $1.2 | — | Summary of Related Party Payables (in millions of USD) | Item | June 30, 2023 | December 31, 2022 | | :--- | :--- | :--- | | Reimbursable costs under Paragon Agreement | $20.5 | $— | | Parapyre option obligation liability | $0.3 | $— | | **Total related party payables** | $20.8 | $— | [7. Asset Acquisition](index=17&type=section&id=7.%20Asset%20Acquisition) On June 22, 2023, the company acquired Spyre's assets via a stock transaction, issuing common and Series A preferred shares and assuming options; this **$113.3 million** asset acquisition, focused on Spyre's IPR&D license option, was expensed as acquired IPR&D - On June 22, 2023, the company acquired Spyre's assets, issuing **12,945,385** shares of common stock and **364,887** shares of Series A preferred stock to its former stockholders, and assumed unexercised stock options for **68,365** shares of common stock[75](index=75&type=chunk) - The company accounted for this acquisition as an asset acquisition, not a business combination, because the fair value of the acquired assets was concentrated in Spyre's IPR&D exclusive license option, and no substantive processes, employees, or output capabilities were acquired[77](index=77&type=chunk) Asset Acquisition Costs (as of June 22, 2023, in millions of USD) | Item | Amount | | :--- | :--- | | Series A preferred stock and common stock consideration transferred | $110.0 | | Transaction costs assumed by the company | $3.2 | | Fair value of Parapyre option obligation assumed | $0.1 | | **Total asset acquisition costs** | $113.3 | Allocation of Purchase Price to Net Assets (as of June 22, 2023, in millions of USD) | Item | Amount | | :--- | :--- | | Acquired in-process research and development (IPR&D) | $130.5 | | Cash acquired | $3.0 | | Liabilities assumed | $(20.2) | | **Total asset acquisition costs** | $113.3 | [8. Paragon Agreement](index=18&type=section&id=8.%20Paragon%20Agreement) After acquiring Spyre assets, the company assumed Spyre's Paragon Agreement obligations, including R&D service compensation and **$19.3 million** in unpaid fees; the SPY001 option was exercised in July 2023, with potential **$22.0 million** milestone payments - The company assumed Spyre's rights and obligations under the Paragon Agreement with Paragon, including quarterly compensation for Paragon's R&D service costs[80](index=80&type=chunk) - As of the acquisition date, Spyre had incurred **$19.3 million** in unpaid fees (including **$3.0 million** in research initiation fees and **$16.3 million** in reimbursable costs), which were assumed by the company[80](index=80&type=chunk)[83](index=83&type=chunk) - On July 12, 2023, the company exercised its option for the SPY001 research program and expects to pay Paragon up to **$22.0 million** in milestone payments under the SPY001 license agreement upon achieving specific development and clinical milestones[81](index=81&type=chunk)[82](index=82&type=chunk) [9. Series A Non-Voting Convertible Preferred Stock](index=18&type=section&id=9.%20Series%20A%20Non-Voting%20Convertible%20Preferred%20Stock) Established June 22, 2023, Series A preferred stock, with 1,086,341 authorized shares, lacks voting rights but holds veto power; if conversion is unapproved, holders can demand **$325 million** cash redemption, with **$197.3 million** net proceeds from a June 26 private placement - On June 22, 2023, the company established Series A preferred stock, authorizing **1,086,341** shares with a par value of **$0.0001** per share[84](index=84&type=chunk) - Series A preferred stock has no voting rights but possesses veto power over certain corporate actions, such as amending the certificate of incorporation, issuing more preferred stock, or engaging in significant transactions[85](index=85&type=chunk) - If stockholders do not approve conversion into common stock, Series A preferred stock will be redeemable for cash at the holder's option, with a redemption price equal to the common stock's closing price, valued at **$325 million** as of June 30, 2023[86](index=86&type=chunk) - On June 26, 2023, the company issued **721,452** shares of Series A preferred stock through a private placement, generating gross proceeds of **$210 million** and net proceeds of **$197.3 million**[88](index=88&type=chunk) - On July 7, 2023, the company issued **364,887** shares of Series A preferred stock as consideration for the asset acquisition[88](index=88&type=chunk) [10. Liabilities, Convertible Preferred Stock and Stockholders' (Deficit) Equity](index=20&type=section&id=10.%20Liabilities%2C%20Convertible%20Preferred%20Stock%20and%20Stockholders'%20(Deficit)%20Equity) This section details liabilities, convertible preferred stock, and equity, including **$42.9 million** net proceeds from a May 2022 offering, **13,281,250** outstanding pre-funded warrants, and disclosures on stock options, restricted stock units, and related compensation expenses - In May 2022, the company completed a registered direct offering of common stock and pre-funded warrants, generating approximately **$42.9 million** in net proceeds[91](index=91&type=chunk) Pre-Funded Warrants (as of June 30, 2023) | Issuance Date | Expiration Date | Exercise Price | Number of Unexercised Warrants | | :--- | :--- | :--- | :--- | | February 8, 2019 | None | $0.0001 | — | | April 30, 2020 | None | $0.0001 | — | | May 20, 2022 | None | $0.0001 | 13,281,250 | | **Total Pre-Funded Warrants** | | | 13,281,250 | - On June 22, 2023, the company's board of directors approved an increase of **70,000,000** shares under the 2018 Equity Incentive Plan and granted **63,417,415** incentive options to new employees[98](index=98&type=chunk) - The company assumed unexercised stock options under the Spyre 2023 Equity Incentive Plan, which converted into options to purchase **68,365** shares of the company's common stock[100](index=100&type=chunk) Stock-Based Compensation Expense (in thousands of USD) | Item | Three Months Ended 2023 | Three Months Ended 2022 | Six Months Ended 2023 | Six Months Ended 2022 | | :--- | :--- | :--- | :--- | :--- | | Research and development | $394 | $691 | $1,171 | $1,392 | | General and administrative | $1,517 | $1,327 | $2,449 | $2,726 | | **Total stock-based compensation expense** | $1,911 | $2,018 | $3,620 | $4,118 | [11. Strategic License Agreements](index=22&type=section&id=11.%20Strategic%20License%20Agreements) In March 2021, the company licensed pegzilarginase commercialization rights to Immedica, receiving a **$21.5 million** upfront payment and potential milestones/royalties, recognizing **$0.7 million** (three months) and **$0.9 million** (six months) in revenue as of June 30, 2023; the agreement was terminated in July 2023 with global rights sold to Immedica - In March 2021, the company entered into an exclusive license and supply agreement with Immedica Pharma AB, granting rights to develop and commercialize pegzilarginase in the European Economic Area, UK, Switzerland, and the Middle East[106](index=106&type=chunk) - The agreement included a **$21.5 million** non-refundable upfront payment and reimbursement for **50%** of PIP trial costs (up to **$1.8 million**); the company is also eligible for regulatory and commercial milestone payments and mid-**20%** range net sales royalties[108](index=108&type=chunk) - The company identified the agreement as a customer contract with three performance obligations: the license, the PEACE trial and BLA package, and the PIP trial[109](index=109&type=chunk) Immedica Agreement Revenue Recognition (in millions of USD) | Period | Revenue | | :--- | :--- | | Three Months Ended 2023 | $0.7 | | Six Months Ended 2023 | $0.9 | | Three Months Ended 2022 | $0.6 | | Six Months Ended 2022 | $2.0 | - On July 27, 2023, the company announced an agreement to sell the global rights to pegzilarginase to Immedica, simultaneously terminating the existing agreement[116](index=116&type=chunk) [12. Net Loss Per Share](index=24&type=section&id=12.%20Net%20Loss%20Per%20Share) Net loss per share is calculated using the two-class method, treating convertible preferred stock as participating securities; diluted and basic net loss per share are equal due to anti-dilutive effects - The company calculates net loss per share using the two-class method, treating convertible preferred stock as participating securities[119](index=119&type=chunk) - As the company incurred net losses in all periods presented, diluted net loss per share is the same as basic net loss per share because the effect of potentially dilutive securities (such as stock options, restricted stock units, and Series A preferred stock) is anti-dilutive[121](index=121&type=chunk)[122](index=122&type=chunk) [13. Restructuring Charges](index=24&type=section&id=13.%20Restructuring%20Charges) In April 2023, the company restructured, cutting **83%** of its workforce, recognizing **$6.4 million** in severance and **$1.0 million** in stock-based compensation, plus **$2.6 million** in lease asset impairment from abandoning its Austin office, and selling lab equipment - In April 2023, due to uncertainties in pegtarviliase clinical trial results and other business considerations, the company implemented a restructuring plan, reducing its workforce by approximately **83%**[123](index=123&type=chunk)[125](index=125&type=chunk) Restructuring Charges (as of June 30, 2023, in thousands of USD) | Item | Severance and Related Costs | Stock-Based Compensation Expense | Loss on Disposal of Long-Lived Assets | Lease Asset Impairment | Total Restructuring Costs | | :--- | :--- | :--- | :--- | :--- | :--- | | Research and development | $3,182 | $123 | $749 | $1,405 | $5,459 | | General and administrative | $3,266 | $870 | $182 | $1,175 | $5,493 | | **Total** | $6,448 | $993 | $931 | $2,580 | $10,952 | - The company sold various laboratory equipment, supplies, and furniture for a total consideration of **$0.5 million**, recognizing **$0.7 million** in R&D long-lived asset disposal losses and **$0.2 million** in G&A long-lived asset disposal losses[127](index=127&type=chunk) - The company recognized **$2.6 million** in impairment losses for lease right-of-use assets and leasehold improvements due to abandoning its Austin leased office space[128](index=128&type=chunk) [14. Subsequent Events](index=25&type=section&id=14.%20Subsequent%20Events) Post-period, the company settled its forward contract liability via Series A preferred stock on July 7, 2023, and sold global pegzilarginase rights to Immedica for **$15 million** upfront and up to **$100 million** in milestones, with proceeds for CVR holders; the Austin office lease was terminated for a **$2 million** fee on August 7 - On July 7, 2023, the company settled its forward contract liability by issuing Series A preferred stock[130](index=130&type=chunk) - On July 27, 2023, the company announced the sale of global rights to pegzilarginase to Immedica for a **$15 million** upfront payment and up to **$100 million** in contingent milestone payments, terminating the original license agreement[131](index=131&type=chunk) - The upfront and contingent milestone payments from the pegzilarginase sale (net of expenses and adjustments) will be distributed to CVR holders[132](index=132&type=chunk) - On August 7, 2023, the company terminated its Austin office lease, incurring a **$2.0 million** termination fee[133](index=133&type=chunk) [Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations](index=26&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) This section discusses the company's financial condition and operating results as of June 30, 2023, focusing on its business transformation post-Spyre asset acquisition, new IBD treatment strategy, product pipeline, related party relationships, regulatory environment, restructuring activities, and critical accounting policies and liquidity [Acquisition of Spyre](index=26&type=section&id=Acquisition%20of%20Spyre) On June 22, 2023, the company acquired Spyre Therapeutics, Inc.'s assets, making Spyre a wholly-owned subsidiary, gaining IPR&D license options for four programs, and exercising the SPY001 option on July 12, 2023, to develop IBD-targeting antibodies - On June 22, 2023, the company acquired the assets of Spyre Therapeutics, Inc. through a merger agreement, making Spyre a wholly-owned subsidiary[135](index=135&type=chunk) - Through this asset acquisition, the company obtained IPR&D license options for four research programs; on July 12, 2023, the company exercised its option for the SPY001 program, focusing on developing antibodies targeting α4β7 integrin for IBD treatment[136](index=136&type=chunk) [Overview](index=26&type=section&id=Overview) Post-Spyre asset acquisition, the company transformed into a preclinical IBD biotechnology firm, acquiring novel monoclonal antibody candidates via the Paragon Agreement, but faces significant going concern uncertainty if Series A preferred stock conversion is not approved - Following the Spyre asset acquisition, the company has transformed into a preclinical-stage biotechnology company focused on developing next-generation therapies for inflammatory bowel disease (IBD)[137](index=137&type=chunk) - The company acquired a portfolio of novel monoclonal antibody product candidates through the Paragon Agreement, aiming to address unmet needs in IBD treatment by improving efficacy, safety, and convenience of administration[137](index=137&type=chunk) - If stockholders do not timely approve the conversion of Series A preferred stock, the company may face the risk of cash redemption, posing significant uncertainty about its ability to continue as a going concern[138](index=138&type=chunk) [Our Strategy](index=27&type=section&id=Our%20Strategy) The company is committed to developing next-generation IBD therapies through three strategic pillars: advancing long-acting antibodies, evaluating optimal combination therapies, and developing gene or biomarker-based companion diagnostics, addressing growing market needs and unmet demands - The company is committed to developing next-generation IBD therapies, with strategic pillars including: advancing novel long-acting antibodies, evaluating rational therapeutic combinations, and developing gene or biomarker-based companion diagnostics[144](index=144&type=chunk) - IBD, including ulcerative colitis and Crohn's disease, affects millions globally, with approximately **1.7 million** patients in the U.S., and the market demand for IBD therapies continues to grow[141](index=141&type=chunk) - Unmet needs in existing IBD treatments include inadequate response to current therapies, side effects from long-term use, limited options for refractory or severe patients, and adherence issues with frequent dosing regimens[145](index=145&type=chunk) [Inflammatory Bowel Disease (IBD) Overview](index=27&type=section&id=Inflammatory%20Bowel%20Disease%20(IBD)%20Overview) - IBD is a chronic inflammatory disease, encompassing ulcerative colitis (UC) and Crohn's disease (CD), affecting millions worldwide, with approximately **1.7 million** patients in the U.S[140](index=140&type=chunk)[141](index=141&type=chunk) - Existing treatment options include anti-inflammatory drugs, immunosuppressants, and biologics, but unmet needs persist, such as inadequate response to current therapies, side effects, limited choices, and inconvenient administration[142](index=142&type=chunk)[145](index=145&type=chunk) [Our Portfolio of Product Candidates](index=27&type=section&id=Our%20Portfolio%20of%20Product%20Candidates) - The company is advancing a portfolio of potentially best-in-class monoclonal antibody (mAb) product candidates and plans to develop companion diagnostics for each program[143](index=143&type=chunk) - SPY001, the company's most advanced candidate, is a potent, highly selective, fully human monoclonal antibody designed to selectively bind α4β7 integrin, reducing inflammation by blocking lymphocyte migration to the gut, with First-in-Human (FIH) studies anticipated in the first half of **2024**[146](index=146&type=chunk)[151](index=151&type=chunk) - SPY002, the company's co-lead candidate, is a potent, highly selective, fully human monoclonal antibody designed to bind TL1A, blocking TL1A-DR3 interaction to inhibit inflammatory responses, with FIH studies anticipated in the second half of **2024**[152](index=152&type=chunk)[154](index=154&type=chunk) - SPY003 is an IL-23 antibody program in discovery, and SPY004 is an undisclosed novel mechanism of action (MOA) antibody, both incorporating half-life extension technology[155](index=155&type=chunk)[158](index=158&type=chunk) - The company plans to advance combination therapies such as SPY120 (α4β7 + TL1A), SPY130 (α4β7 + IL-23), and SPY230 (TL1A + IL-23) to achieve higher remission rates in IBD[159](index=159&type=chunk) - The company aims to develop gene or biomarker-based companion diagnostics to help patients and physicians select optimal treatment regimens and is discussing establishing an IBD biobank with potential partners[161](index=161&type=chunk) [Our Team and Investors](index=30&type=section&id=Our%20Team%20and%20Investors) The company's antibody portfolio, discovered by Paragon and licensed by Spyre, is supported by a **$210 million** private placement and an experienced management team with extensive biopharmaceutical expertise - The company's antibody portfolio was discovered and developed by Paragon, with rights acquired by Spyre from Paragon[162](index=162&type=chunk) - The company has completed a **$210 million** private placement of Series A preferred stock[163](index=163&type=chunk) - The company possesses an experienced management team and workforce with extensive discovery, development, and commercialization experience in the biopharmaceutical sector[164](index=164&type=chunk) [Our Relationship with Paragon and Parapyre](index=30&type=section&id=Our%20Relationship%20with%20Paragon%20and%20Parapyre) Paragon and Parapyre are related parties holding over 5% of the company's equity; the company assumed Spyre's Paragon Agreement obligations, with **$20.5 million** owed to Paragon as of June 30, 2023, and the SPY001 option exercised in July - Paragon and Parapyre (affiliates of Paragon) collectively hold over **5%** of the company's capital stock[165](index=165&type=chunk) - The company assumed Spyre's rights and obligations under the Paragon Agreement, including quarterly compensation for Paragon's R&D service costs; as of the acquisition date, Spyre had incurred **$19.3 million** in unpaid fees, which were assumed by the company[166](index=166&type=chunk) - As of June 30, 2023, the company owed Paragon **$20.5 million**[166](index=166&type=chunk) - The company exercised its option for the SPY001 program in July 2023, while options for SPY002, SPY003, and SPY004 programs remain unexercised[167](index=167&type=chunk) [Commercial Strategy](index=31&type=section&id=Commercial%20Strategy) The company plans to commercialize its product candidates in the U.S. and other key markets via internal infrastructure or external collaborations, but currently lacks a commercial organization or distribution capabilities - The company plans to commercialize its product candidates in the U.S. and other major markets through internal infrastructure and/or external collaborations[169](index=169&type=chunk) - The company is currently in the development stage and has not yet established a commercial organization or distribution capabilities[169](index=169&type=chunk) [Manufacturing Strategy](index=31&type=section&id=Manufacturing%20Strategy) The company relies on third-party contract manufacturers for product manufacturing, testing, storage, and distribution, and is transferring and revising future clinical manufacturing and toxicology agreements from Paragon as development progresses - The company currently does not own or operate facilities for product manufacturing, testing, storage, and distribution, relying instead on third-party contract manufacturers[170](index=170&type=chunk) - The company is transferring agreements for future clinical manufacturing and toxicology activities with third parties from Paragon, which will be revised to specify deliverables and costs once clinical development activities commence[170](index=170&type=chunk) [Competition](index=31&type=section&id=Competition) The company anticipates intense competition from other biopharmaceutical firms developing inflammatory disease treatments; approved IBD candidates will compete with various marketed and late-stage TNF, IL-12/23, IL-23, α4β7 antibodies, JAK inhibitors, S1P1 receptor modulating therapies, and other pipeline candidates - The company anticipates intense competition from other biopharmaceutical companies developing treatments for inflammatory diseases[171](index=171&type=chunk) - If the company's IBD product candidates are approved, they will compete with various marketed and late-stage therapies, including TNF antibodies (e.g., Humira, Remicade), IL-12/23 and IL-23 antibodies (e.g., Stelara, Skyrizi), α4β7 antibodies (e.g., Entyvio), JAK inhibitors (e.g., Xeljanz, Rinvoq), and S1P1 receptor modulating therapies (e.g., Zeposia)[171](index=171&type=chunk) - The company also faces competition from other pipeline TL1A antibodies, IL-23s, S1P1 modulators, and oral anti-integrin drugs[172](index=172&type=chunk) [Government Regulation](index=31&type=section&id=Government%20Regulation) The company's product development, approval, and commercialization are subject to stringent regulation by the U.S. FDA and other domestic and international bodies, covering preclinical and clinical development, BLA submission, expedited programs, post-market requirements, biosimilars, healthcare laws, data privacy, coverage, reimbursement, and healthcare reform - The company's products are subject to extensive regulation by the U.S. FDA and other domestic and international regulatory bodies, covering research and development, testing, manufacturing, quality control, import/export, safety, efficacy, labeling, packaging, storage, distribution, record-keeping, approval, advertising, promotion, marketing, post-market surveillance, and reporting[173](index=173&type=chunk) - Non-compliance with applicable requirements may result in administrative or judicial sanctions, including FDA refusal to approve, withdrawal of approval, clinical holds, product recalls, fines, and denial of government contracts[174](index=174&type=chunk) [United States Biologics Regulation](index=32&type=section&id=United%20States%20Biologics%20Regulation) - In the U.S., biological products are regulated under the Federal Food, Drug, and Cosmetic Act (FDCA) and the Public Health Service Act (PHSA) and their implementing regulations[175](index=175&type=chunk) - FDA approval for biological products requires a series of steps, including preclinical testing, IND submission, IRB approval, cGMP manufacturing, clinical trials, BLA submission, FDA advisory committee review, facility inspection, and user fee payment[175](index=175&type=chunk) [Preclinical and Clinical Development](index=32&type=section&id=Preclinical%20and%20Clinical%20Development) - Before conducting First-in-Human clinical trials, an Investigational New Drug (IND) application must be submitted to the FDA, which automatically becomes effective after **30 days** unless the FDA raises safety concerns[175](index=175&type=chunk) - Clinical trials must be conducted under the supervision of qualified investigators, in accordance with cGCPs, and with independent IRB approval, progressing through three phases: Phase 1 (safety, dose tolerance), Phase 2 (preliminary efficacy, optimal dose), and Phase 3 (statistically significant efficacy, safety)[176](index=176&type=chunk)[180](index=180&type=chunk)[182](index=182&type=chunk) - Regulatory authorities, IRBs, or sponsors may suspend clinical trials at any time due to reasons such as subject health risks or failure to achieve trial objectives[178](index=178&type=chunk) [BLA Submission and Review](index=34&type=section&id=BLA%20Submission%20and%20Review) - Upon successful completion of all testing, a Biologics License Application (BLA) must be submitted to the FDA to request product marketing approval, including preclinical and clinical trial data, manufacturing information, and proposed labeling[183](index=183&type=chunk) - The FDA reviews BLA completeness within **60 days** of receipt and, if accepted, aims to complete its review within **10 months** (or **6 months** for priority review)[185](index=185&type=chunk) - Before approving a BLA, the FDA typically inspects manufacturing facilities for cGMP compliance and may request additional testing or information[186](index=186&type=chunk) - The FDA may issue an approval letter or a complete response letter, which lists all deficiencies and may require additional data or studies[187](index=187&type=chunk) [Expedited Development and Review Programs](index=35&type=section&id=Expedited%20Development%20and%20Review%20Programs) - The FDA offers expedited development and review programs, such as Fast Track and Breakthrough Therapy designations, to accelerate the market entry of products meeting specific criteria[189](index=189&type=chunk)[190](index=190&type=chunk) - Fast Track designation applies to products treating serious or life-threatening conditions that address unmet medical needs, offering more frequent interactions and rolling review[189](index=189&type=chunk) - Breakthrough Therapy designation is for products with preliminary clinical evidence showing substantial improvement over existing therapies, providing more intensive FDA interaction and guidance[190](index=190&type=chunk) - Accelerated approval may be granted based on surrogate or early clinical endpoints, but typically requires post-marketing studies to verify clinical benefit[192](index=192&type=chunk) [Post-Approval Requirements](index=36&type=section&id=Post-Approval%20Requirements) - Even after product approval, ongoing FDA regulation requires compliance with record-keeping, adverse event reporting, periodic reporting, product sampling and distribution, and advertising and promotion requirements[194](index=194&type=chunk) - Manufacturers must register their establishments and undergo regular FDA inspections to ensure compliance with cGMP requirements[194](index=194&type=chunk) - The FDA may withdraw approval due to non-compliance or post-market issues, potentially leading to revised labeling, mandatory post-marketing studies, distribution restrictions, fines, product recalls, or criminal prosecution[195](index=195&type=chunk) - The FDA strictly regulates the marketing, labeling, advertising, and promotion of biological products, prohibiting the promotion of unapproved indications (off-label uses)[196](index=196&type=chunk) [Biosimilars and Reference Product Exclusivity](index=36&type=section&id=Biosimilars%20and%20Reference%20Product%20Exclusivity) - The Biologics Price Competition and Innovation Act (BPCIA) established an abbreviated approval pathway for biosimilars, requiring them to demonstrate no clinically meaningful differences in safety, purity, and potency from a reference product[197](index=197&type=chunk)[199](index=199&type=chunk) - The BPCIA stipulates that biosimilar applications can be submitted four years after the reference product's initial approval, but approval cannot be effective until **12 years** later[200](index=200&type=chunk) - Pediatric market exclusivity can add **six months** to existing exclusivity and patent periods[201](index=201&type=chunk) - The Inflation Reduction Act of **2022** (IRA) aims to promote generic and biosimilar competition and reduce drug and biological product costs[203](index=203&type=chunk) [Other Healthcare Laws and Compliance Requirements](index=37&type=section&id=Other%20Healthcare%20Laws%20and%20Compliance%20Requirements) - Pharmaceutical companies are subject to additional federal and state healthcare regulations and enforcement, including the Anti-Kickback Statute (AKS), the False Claims Act (FCA), and the Health Insurance Portability and Accountability Act (HIPAA)[204](index=204&type=chunk) - The AKS prohibits offering remuneration to induce referrals or purchases of items or services payable by federal healthcare programs[205](index=205&type=chunk) - The FCA prohibits knowingly presenting false or fraudulent claims for payment to the federal government[207](index=207&type=chunk) - HIPAA establishes federal criminal statutes for healthcare benefit program fraud[208](index=208&type=chunk) - The Physician Payments Sunshine Act requires manufacturers to report payments made to healthcare professionals to CMS[210](index=210&type=chunk) [Data Privacy and Security](index=38&type=section&id=Data%20Privacy%20and%20Security) - The company is subject to numerous state, federal, and foreign laws and regulations governing the collection, dissemination, use, access, confidentiality, and security of personal information, including health-related information[212](index=212&type=chunk) - HIPAA imposes privacy, security, and breach notification obligations on covered entities and their business associates[212](index=212&type=chunk) - Violations of consumer privacy rights or failure to protect personal information may constitute unfair acts under Section 5(a) of the Federal Trade Commission Act[214](index=214&type=chunk) - The California Consumer Privacy Act (CCPA) imposes new data privacy obligations on covered companies and grants new privacy rights to California residents[215](index=215&type=chunk) [Coverage and Reimbursement](index=39&type=section&id=Coverage%20and%20Reimbursement) - In the U.S. and other markets, patients typically rely on third-party payers for treatment reimbursement; obtaining adequate coverage and reimbursement from government healthcare programs and commercial payers is crucial for new product market acceptance[216](index=216&type=chunk) - Payers consider whether a product is a covered benefit, safe, effective, medically necessary, appropriate for specific patients, cost-effective, and not experimental or investigational when making reimbursement decisions[218](index=218&type=chunk) - Third-party payers increasingly challenge the price of medical products and services, scrutinizing their medical necessity and cost-effectiveness[217](index=217&type=chunk) - In some foreign countries, drug pricing must be approved before legal marketing, and pricing requirements vary by country[221](index=221&type=chunk) [Healthcare Reform](index=40&type=section&id=Healthcare%20Reform) - The U.S. and some foreign jurisdictions are considering or have enacted various healthcare reform proposals aimed at controlling healthcare costs, improving quality, or expanding access[222](index=222&type=chunk) - The Affordable Care Act (ACA) has significantly impacted healthcare financing and the pharmaceutical industry[223](index=223&type=chunk) - The Inflation Reduction Act of **2022** (IRA) includes provisions that may affect the company's business, such as lowering the Medicare Part D out-of-pocket cap, imposing new manufacturer financial responsibility for certain drugs, allowing government negotiation of Medicare price caps for high-cost drugs and biologics, and requiring rebates for drugs with price increases exceeding inflation[228](index=228&type=chunk) - President Biden has issued several executive orders aimed at lowering prescription drug costs, and HHS has proposed new prescription drug pricing models[229](index=229&type=chunk) [Other Government and Regulation Outside of the United States](index=41&type=section&id=Other%20Government%20and%20Regulation%20Outside%20of%20the%20United%20States) - Beyond U.S. regulations, the company is subject to various regulations in other jurisdictions governing research and development, clinical trials, testing, manufacturing, safety, efficacy, quality control, labeling, packaging, storage, record-keeping, distribution, reporting, import/export, advertising, marketing, and other promotional activities for biological products[232](index=232&type=chunk) - Before conducting clinical trials or marketing products in foreign countries, approval from relevant regulatory authorities is required, with requirements and processes varying by country[233](index=233&type=chunk)[234](index=234&type=chunk) - Non-compliance with applicable foreign regulatory requirements may result in fines, clinical trial suspension, suspension or withdrawal of regulatory approval, product recalls, product seizures, operating restrictions, and criminal prosecution[277](index=277&type=chunk) [Regulation in the European Union](index=42&type=section&id=Regulation%20in%20the%20European%20Union) - The processing of personal health data in the EU is strictly governed by the General Data Protection Regulation (GDPR) and related national data protection laws, including additional requirements for health, genetic, and biometric data[236](index=236&type=chunk) - The EU Clinical Trials Regulation (CTR), effective January 31, 2022, fundamentally reformed existing EU drug clinical trial regulation by introducing a unified application procedure[242](index=242&type=chunk)[244](index=244&type=chunk) - In the EU, medicinal products require marketing authorization (MA) through either a centralized or national procedure; the centralized procedure, applicable to certain drug types, involves scientific assessment by the EMA and MA issuance by the European Commission[247](index=247&type=chunk)[248](index=248&type=chunk) - All new MAAs must include a Risk Management Plan (RMP) describing the risk management system and measures to prevent or minimize product risks[252](index=252&type=chunk) - Innovative medicinal products in the EU typically benefit from **eight years** of data exclusivity and **ten years** of market exclusivity[256](index=256&type=chunk) - Pharmaceutical advertising and promotion in the EU are governed by EU law and national legislation of member states, prohibiting direct-to-consumer advertising for prescription-only medicines and promotions inconsistent with the Summary of Product Characteristics (SmPC)[269](index=269&type=chunk) - EU anti-corruption laws prohibit offering benefits or advantages to physicians to induce prescription or recommendation of medicinal products[270](index=270&type=chunk) [Other Markets (UK & International)](index=47&type=section&id=Other%20Markets%20(UK%20%26%20International)) - Post-Brexit, the UK's regulatory regime largely aligns with EU pharmaceutical regulations but may diverge in the future; the MHRA will consider approval decisions from the EMA and other regulatory bodies starting January 1, 2024[273](index=273&type=chunk)[274](index=274&type=chunk) - The Windsor Framework will alter pharmaceutical regulation under the Northern Ireland Protocol, with the MHRA responsible for approving all medicines sold in the UK market, including Great Britain and Northern Ireland[275](index=275&type=chunk) - Clinical trial, product licensing, pricing, and reimbursement requirements vary in other countries outside the EU, such as Eastern Europe, Latin America, or Asia[276](index=276&type=chunk) [Employees and Human Capital Resources](index=48&type=section&id=Employees%20and%20Human%20Capital%20Resources) As of June 30, 2023, the company had **14** non-unionized full-time employees, relying on key personnel expertise and planning to recruit high-quality talent for business growth - As of June 30, 2023, the company had **14** full-time employees, none of whom were unionized[278](index=278&type=chunk) [Corporate Developments](index=48&type=section&id=Corporate%20Developments) In Q2 2023, the company explored strategic alternatives, implemented layoffs, saw executive departures, appointed Jonathan Alspaugh as President and CFO, acquired Spyre's net assets on June 22, 2023, appointed Cameron Turtle as COO, and increased total employees to **14** - In the second quarter of **2023**, the company began exploring strategic alternatives and engaged Wedbush Securities Inc. as its exclusive financial advisor[279](index=279&type=chunk) - The company reduced its workforce, retaining approximately **10** employees to support strategic evaluation and ongoing business; several executives departed, and Jonathan Alspaugh was appointed President and Chief Financial Officer[279](index=279&type=chunk) - On June 22, 2023, the company acquired Spyre's net assets, appointed Cameron Turtle as Chief Operating Officer, and increased its total employee count to **14**[279](index=279&type=chunk) [Restructuring Activities](index=48&type=section&id=Restructuring%20Activities) In Q2 2023, the company restructured, cutting **83%** of its workforce, recognizing **$6.4 million** in severance and **$1.0 million** in stock-based compensation, plus **$2.6 million** in lease asset impairment from abandoning its Austin office, and selling lab equipment - The company implemented a restructuring plan in the second quarter of **2023**, resulting in an approximate **83%** reduction in workforce[280](index=280&type=chunk) Summary of Restructuring Charges (as of June 30, 2023, in thousands of USD) | Item | Severance and Related Costs | Stock-Based Compensation Expense | Loss on Disposal of Long-Lived Assets | Lease Asset Impairment | Total Restructuring Costs | | :--- | :--- | :--- | :--- | :--- | :--- | | Research and development | $3,182 | $123 | $749 | $1,405 | $5,459 | | General and administrative | $3,266 | $870 | $182 | $1,175 | $5,493 | | **Total** | $6,448 | $993 | $931 | $2,580 | $10,952 | - The company sold various laboratory equipment, supplies, and furniture for a total consideration of **$0.5 million**, recognizing **$0.7 million** in R&D long-lived asset disposal losses and **$0.2 million** in G&A long-lived asset disposal losses[281](index=281&type=chunk) - The company recognized **$2.6 million** in impairment losses for lease right-of-use assets and leasehold improvements due to abandoning its Austin leased office space[282](index=282&type=chunk) [Licensing of Pegzilarginase](index=49&type=section&id=Licensing%20of%20Pegzilarginase) In March 2021, the company licensed pegzilarginase commercialization rights to Immedica, receiving a **$21.5 million** upfront payment and potential milestones/royalties; in July 2023, global rights were sold to Immedica, terminating the original agreement, with **$0.7 million** (three months) and **$0.9 million** (six months) in revenue recognized as of June 30, 2023 - In March 2021, the company licensed the commercialization rights for pegzilarginase to Immedica, receiving a **$21.5 million** upfront payment and potential milestone and sales royalties[283](index=283&type=chunk) - In July 2023, the company announced the sale of global rights to pegzilarginase to Immedica and the termination of the original license agreement[284](index=284&type=chunk) Immedica Agreement Revenue Recognition (in millions of USD) | Period | Revenue | | :--- | :--- | | Three Months Ended 2023 | $0.7 | | Six Months Ended 2023 | $0.9 | | Three Months Ended 2022 | $0.6 | | Six Months Ended 2022 | $2.0 | [Critical Accounting Policies and Estimates](index=49&type=section&id=Critical%20Accounting%20Policies%20and%20Estimates) The company's financial statements rely on critical accounting policies and estimates, including accrued R&D costs, IPR&D valuation, CVR liability discount rates, stock-based compensation inputs, lease ROU asset impairment, and revenue recognition, where actual results may differ significantly from estimates - The company relies on critical accounting policies and estimates in preparing its financial statements, including accrued research and development costs, valuation of acquired in-process research and development (IPR&D), CVR liability discount rates and probability of success, Black-Scholes model inputs for stock-based compensation expense, impairment of lease right-of-use assets, and cost to complete performance obligations for revenue recognition[287](index=287&type=chunk) - These estimates significantly impact financial statement amounts, and actual results may differ materially from estimates[286](index=286&type=chunk) [Impairment of ROU Assets and Leasehold Improvements](index=50&type=section&id=Impairment%20of%20ROU%20Assets%20and%20Leasehold%20Improvements) - The company's abandonment of its Austin leased office space triggered an impairment test for long-lived assets, which was evaluated using a discounted future cash flow model[289](index=289&type=chunk) [Convertible Preferred Stock Issued through PIPE](index=50&type=section&id=Convertible%20Preferred%20Stock%20Issued%20through%20PIPE) - The company classifies convertible preferred stock outside of stockholders' (deficit) equity because it is redeemable for cash at the holder's option if stockholders do not approve conversion into common stock, and conversion and redemption are not solely within the company's control[290](index=290&type=chunk) [Contingent Value Rights Liability](index=50&type=section&id=Contingent%20Value%20Rights%20Liability) - The contingent value rights (CVR) liability is considered a Level 3 instrument, initially measured at estimated fair value, and subsequently remeasured at each reporting period end, with changes recognized in the statements of operations[291](index=291&type=chunk) - Determining the fair value of the CVR liability requires significant management judgment, and any changes in input parameters could lead to material fair value adjustments, impacting current operating results[291](index=291&type=chunk) [Results of Operations](index=51&type=section&id=Results%20of%20Operations) The company experienced significant operating changes in Q2 and H1 2023, with acquired IPR&D expenses from the Spyre asset acquisition leading to a wider net loss; R&D and G&A expenses increased due to restructuring and Paragon Agreement fees, while fair value changes in forward contract liability also contributed to non-cash expenses [Comparison of the Three Months Ended June 30, 2023 and 2022](index=51&type=section&id=Comparison%20of%20the%20Three%20Months%20Ended%20June%2030%2C%202023%20and%202022) Summary of Results of Operations (for the three months ended June 30, 2023, in thousands of USD) | Item | Three Months Ended 2023 | Three Months Ended 2022 | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Revenue | $688 | $625 | $63 | 10% | | Research and development expenses | $17,386 | $15,373 | $2,013 | 13% | | General and administrative expenses | $12,062 | $7,675 | $4,387 | 57% | | Acquired in-process research and development expenses | $130,486 | — | $130,486 | * | | Operating loss | $(159,246) | $(22,423) | $(136,823) | * | | Change in fair value of forward contract liability | $(58,170) | — | $(58,170) | * | | Net loss | $(217,081) | $(22,323) | $(194,758) | * | | * Percentage not meaningful | | | | | - Revenue increased by **10%** to **$0.7 million**, primarily from drug supply under the Immedica agreement and royalties from the French early access program[292](index=292&type=chunk) - Research and development expenses increased by **$2.0 million** (**13%**) to **$17.4 million**, primarily due to a **$2.4 million** increase in restructuring costs and a **$1.2 million** increase in Paragon Agreement fees, partially offset by a **$1.6 million** decrease in pegtarviliase toxicology costs[293](index=293&type=chunk) - General and administrative expenses increased by **$4.4 million** (**57%**) to **$12.1 million**, primarily due to a **$5.3 million** increase in restructuring costs, partially offset by a **$0.9 million** decrease in commercial activities[293](index=293&type=chunk) - Acquired in-process research and development expenses totaled **$130.5 million**, primarily resulting from the Spyre asset acquisition being accounted for as an asset acquisition[294](index=294&type=chunk) - A **$58.2 million** non-cash expense resulted from the change in fair value of the forward contract liability[295](index=295&type=chunk) [Comparison of the Six Months Ended June 30, 2023 and 2022](index=52&type=section&id=Comparison%20of%20the%20Six%20Months%20Ended%20June%2030%2C%202023%20and%202022) Summary of Results of Operations (for the six months ended June 30, 2023, in thousands of USD) | Item | Six Months Ended 2023 | Six Months Ended 2022 | Change Amount | Change Percentage | | :--- | :--- | :--- | :--- | :--- | | Revenue | $886 | $1,987 | $(1,101) | (55)% | | Research and development expenses | $31,162 | $32,351 | $(1,189) | (4)% | | General and administrative expenses | $17,290 | $16,500 | $790 | 5% | | Acquired in-process research and development expenses | $130,486 | — | $130,486 | * | | Operating loss | $(178,052) | $(46,864) | $(131,188) | * | | Change in fair value of forward contract liability | $(58,170) | — | $(58,170) | * | | Net loss | $(235,503) | $(46,759) | $(188,744) | * | | * Percentage not meaningful | | | | | - Revenue decreased by **55%** to **$0.9 million**, primarily due to reduced revenue related to the PEACE Phase 3 trial and BLA package under the Immedica agreement[296](index=296&type=chunk) - Research and development expenses decreased by **$1.2 million** (**4%**) to **$31.9 million**, primarily due to a **$3.2 million** reduction in pegtarviliase activities and a **$1.6 million** decrease in toxicology costs, partially offset by a **$2.4 million** increase in restructuring costs and a **$1.2 million** increase in Paragon Agreement fees[297](index=297&type=chunk)[298](index=298&type=chunk) - General and administrative expenses increased by **$0.8 million** (**5%**) to **$17.3 million**, primarily due to a **$2.6 million** increase in restructuring costs, partially offset by a **$1.8 million** decrease in pegtarviliase commercialization preparedness activities[299](index=299&type=chunk) - Acquired in-process research and development expenses totaled **$130.5 million**, primarily resulting from the Spyre asset acquisition being accounted for as an asset acquisition[300](index=300&type=chunk) - A **$58.2 million** non-cash expense resulted from the change in fair value of the forward contract liability[301](index=301&type=chunk) [Liquidity and Capital Resources](index=53&type=section&id=Liquidity%20and%20Capital%20Resources) The company has incurred operating losses since inception, with an accumulated deficit of **$661.1 million** as of June 30, 2023, funding operations through equity, debt, grants, and licensing, holding **$235.4 million** in cash, but faces going concern uncertainty if Series A preferred stock conversion is not approved, and anticipates continued losses requiring additional financing - The company has incurred operating losses since its inception, with an accumulated deficit of **$661.1 million** as of June 30, 2023[302](index=302&type=chunk)[310](index=310&type=chunk) - The company has primarily funded operations through equity and debt financing, research grants, and collaboration and license agreements, totaling approximately **$716.2 million**[302](index=302&type=chunk) - As of June 30, 2023, the company had **$235.4 million** in cash and cash equivalents[306](index=306&type=chunk)[311](index=311&type=chunk) - If stockholders do not timely approve the conversion of Series A preferred stock, the company may face the risk of cash redemption, posing significant uncertainty about its ability to continue as a going concern[311](index=311&type=chunk) - The company anticipates continued losses and will require additional financing to support product candidate development and commercialization[309](index=309&type=chunk)[310](index=310&type=chunk) [Sources of liquidity](index=53&type=section&id=Sources%20of%20liquidity) - Since inception, the company has primarily raised funds through the sale and issuance of convertible preferred stock and common stock, pre-funded warrants, receipt of grants, and licensing product rights, totaling approximately **$716.2 million**[302](inde

PART I. FINANCIAL INFORMATION [Financial Statements (Unaudited)](index=4&type=section&id=Item%201.%20Financial%20Statements) Aeglea BioTherapeutics reported a **$18.4 million** net loss for Q1 2023, total assets at **$52.5 million**, and a 'going concern' warning [Condensed Consolidated Balance Sheets](index=4&type=section&id=Condensed%20Consolidated%20Balance%20Sheets) Total assets decreased to **$52.5 million** from **$71.1 million** at year-end 2022, driven by reduced marketable securities and cash used in operations Condensed Consolidated Balance Sheet Highlights | Balance Sheet Item | March 31, 2023 (in thousands) | December 31, 2022 (in thousands) | | :--- | :--- | :--- | | **Assets** | | | | Cash and cash equivalents | $35,243 | $34,863 | | Marketable securities | $3,235 | $20,848 | | Total current assets | $44,375 | $62,258 | | **Total Assets** | **$52,453** | **$71,144** | | **Liabilities & Equity** | | | | Total current liabilities | $12,637 | $14,656 | | **Total Liabilities** | **$18,801** | **$20,839** | | **Total Stockholders' Equity** | **$33,652** | **$50,305** | [Condensed Consolidated Statements of Operations](index=5&type=section&id=Condensed%20Consolidated%20Statements%20of%20Operations) Q1 2023 revenue decreased to **$0.2 million**, operating expenses fell to **$19.0 million**, narrowing the net loss to **$18.4 million** from **$24.4 million** year-over-year Condensed Consolidated Statements of Operations | Line Item | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total revenue | $198 | $1,362 | | Research and development | $13,776 | $16,978 | | General and administrative | $5,228 | $8,825 | | Total operating expenses | $19,004 | $25,803 | | Loss from operations | ($18,806) | ($24,441) | | **Net loss** | **($18,422)** | **($24,436)** | | Net loss per share, basic and diluted | ($0.20) | ($0.37) | [Condensed Consolidated Statements of Cash Flows](index=8&type=section&id=Condensed%20Consolidated%20Statements%20of%20Cash%20Flows) Net cash used in operations decreased to **$17.6 million**, with **$17.8 million** provided by investing activities, ending the quarter with **$36.6 million** in cash and equivalents Cash Flow Summary | Cash Flow Activity | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Net cash used in operating activities | ($17,634) | ($26,263) | | Net cash provided by investing activities | $17,750 | $25,759 | | Net cash provided by financing activities | $10 | $12 | | **Net increase (decrease) in cash** | **$137** | **($515)** | [Notes to Unaudited Condensed Consolidated Financial Statements](index=9&type=section&id=Notes%20to%20Unaudited%20Condensed%20Consolidated%20Financial%20Statements) Notes detail the company's strategic alternatives, **83%** workforce reduction, 'going concern' doubt, Immedica agreement, and pre-funded warrants - The company has substantial doubt about its ability to continue as a going concern within one year, citing its accumulated deficit of **$444.0 million** and the need for additional financing[30](index=30&type=chunk)[33](index=33&type=chunk) - In April 2023, the company initiated a process to explore strategic alternatives and approved a restructuring plan to reduce its workforce by approximately **83%**[29](index=29&type=chunk)[32](index=32&type=chunk) - As of March 31, 2023, the company had **28,891,578** pre-funded warrants outstanding, each with an exercise price of **$0.0001**[47](index=47&type=chunk) - Subsequent to the quarter end, the company announced a restructuring plan estimated to incur **$6.2 million** in charges, primarily related to employee severance, with the majority expected in Q2 2023[67](index=67&type=chunk) [Management's Discussion and Analysis of Financial Condition and Results of Operations](index=17&type=section&id=Item%202.%20Management's%20Discussion%20and%20Analysis%20of%20Financial%20Condition%20and%20Results%20of%20Operations) Management discusses the shift to strategic alternatives, **83%** workforce reduction, paused clinical programs, reduced operating expenses, and reiterates 'going concern' doubt [Overview and Recent Developments](index=17&type=section&id=Overview%20and%20Recent%20Developments) Aeglea is exploring strategic alternatives and implemented an **83%** workforce reduction and clinical trial pause after inconclusive pegtarviliase results - The company's current focus is to explore strategic alternatives, including possible business combinations or divestiture of its clinical programs, to maximize stockholder value[71](index=71&type=chunk)[74](index=74&type=chunk) - In April 2023, the company initiated a restructuring plan, reducing its workforce by approximately **83%** to about **10** employees to support the evaluation of strategic alternatives[74](index=74&type=chunk)[84](index=84&type=chunk) [Pipeline of Product Candidates](index=19&type=section&id=Pipeline%20of%20Product%20Candidates) Clinical development is paused; pegtarviliase showed inconclusive results, while pegzilarginase faces an FDA Refusal to File despite EMA review - Interim results from the Phase 1/2 trial of pegtarviliase showed that participants in the third cohort (**1.35 mg/kg**) developed anti-drug antibodies, which may have reduced the drug's effect. Clinical development for this program is paused[86](index=86&type=chunk) - The FDA has placed the pegtarviliase trial on a partial clinical hold for the enrollment of patients under **18** years of age in the U.S., citing a lack of evidence for direct clinical benefit in pediatric patients[89](index=89&type=chunk) - The EMA validated the MAA for pegzilarginase, with a potential decision in late 2023. However, the FDA issued a Refusal to File (RTF) letter for the BLA, requesting additional data to support effectiveness[94](index=94&type=chunk)[95](index=95&type=chunk) [Results of Operations](index=23&type=section&id=Results%20of%20Operations) Q1 2023 revenue decreased to **$0.2 million**, while R&D and G&A expenses fell by **19%** and **41%** respectively, leading to a net loss of **$18.4 million** Comparison of Results of Operations | Line Item | Three Months Ended March 31, 2023 (in thousands) | Three Months Ended March 31, 2022 (in thousands) | | :--- | :--- | :--- | | Total revenue | $198 | $1,362 | | Research and development | $13,776 | $16,978 | | General and administrative | $5,228 | $8,825 | | **Net loss** | **($18,422)** | **($24,436)** | - R&D expenses decreased by **$3.2 million (19%)** primarily due to reduced costs for the pegzilarginase PEACE Phase 3 trial and BLA submission activities[106](index=106&type=chunk) - G&A expenses decreased by **$3.6 million (41%)** due to lower headcount, reduced commercial expenses for Arginase 1 Deficiency, and decreased general support activities[106](index=106&type=chunk) [Liquidity and Capital Resources](index=23&type=section&id=Liquidity%20and%20Capital%20Resources) The company faces substantial doubt about its 'going concern' ability, with an accumulated deficit of **$444.0 million**, and is focused on a strategic transaction while minimizing expenditures - The company has determined there is substantial doubt about its ability to continue as a going concern within twelve months of the financial statement issuance date[82](index=82&type=chunk)[116](index=116&type=chunk) - The company's operational plan is to identify, assess, and execute a strategic transaction while reducing R&D and G&A expenditures[114](index=114&type=chunk) - As of March 31, 2023, the company had an accumulated deficit of **$444.0 million**[81](index=81&type=chunk)[114](index=114&type=chunk) [Quantitative and Qualitative Disclosures About Market Risk](index=26&type=section&id=Item%203.%20Quantitative%20and%20Qualitative%20Disclosures%20About%20Market%20Risk) Primary market risk is interest rate sensitivity on short-term marketable securities, deemed immaterial, with minimal foreign currency exchange rate risk - The company's primary market risk is interest rate sensitivity on its marketable securities, but this exposure is not considered significant due to the short-term duration and low-risk profile of the investments[127](index=127&type=chunk) - Foreign currency exchange rate risk is minimal as most transactions are denominated in U.S. dollars[129](index=129&type=chunk) [Controls and Procedures](index=26&type=section&id=Item%204.%20Controls%20and%20Procedures) Disclosure controls and procedures were effective as of March 31, 2023, with no material changes to internal control over financial reporting - As of March 31, 2023, the company's principal executive officer and principal financial officer concluded that disclosure controls and procedures were effective[130](index=130&type=chunk) - No material changes were made to the company's internal control over financial reporting during the quarter ended March 31, 2023[131](index=131&type=chunk) PART II. OTHER INFORMATION [Legal Proceedings](index=27&type=section&id=Item%201.%20Legal%20Proceedings) The company is not currently involved in any legal proceedings expected to have a material adverse effect on its financial condition or operations - Management believes there are currently no pending claims or actions that would have a material adverse effect on the company's results of operations, financial condition, or cash flows[133](index=133&type=chunk) [Risk Factors](index=27&type=section&id=Item%201A.%20Risk%20Factors) New risks relate to strategic alternatives, including transaction failure, low asset valuation, 'going concern' doubt, restructuring impacts, and dependence on paused clinical programs [Risks Related to Strategic Alternative Process](index=27&type=section&id=Risks%20Related%20to%20Strategic%20Alternative%20Process) Risks include failure to complete a strategic transaction, potential dissolution and liquidation, and low valuation of assets by counterparties - There is no assurance that the exploration of strategic alternatives will result in a transaction. If one is not consummated, the board may decide to pursue dissolution and liquidation, likely resulting in a total loss for investors[135](index=135&type=chunk)[138](index=138&type=chunk) - The restructuring plan, which reduced the workforce by **83%**, may lead to unintended consequences such as loss of institutional knowledge and attrition beyond intended reductions, potentially harming operations[143](index=143&type=chunk) [Risks Related to Financial Position and Need for Capital](index=28&type=section&id=Risks%20Related%20to%20Financial%20Position%20and%20Need%20for%20Capital) Substantial doubt exists about the company's 'going concern' ability due to **$444.0 million** accumulated deficit and the need for significant additional funding - The company has determined there is substantial doubt about its ability to continue as a going concern within the next twelve months[146](index=146&type=chunk) - The company has incurred significant losses since inception, with a net loss of **$18.4 million** for Q1 2023 and an accumulated deficit of **$444.0 million** as of March 31, 2023[149](index=149&type=chunk) - Substantial additional funding is needed, and if the company is unable to raise capital, its business will be adversely affected[153](index=153&type=chunk) [Risks Related to Product Development and Regulatory Approval](index=30&type=section&id=Risks%20Related%20to%20Product%20Development%20and%20Regulatory%20Approval) Success depends on two product candidates, both facing setbacks; clinical programs are paused, with inconclusive pegtarviliase results and an FDA Refusal to File for pegzilarginase - The company has voluntarily paused its clinical programs since announcing its plan to explore strategic alternatives in April 2023[157](index=157&type=chunk) - The FDA issued a Refuse to File (RTF) letter for the pegzilarginase BLA, and interim results for the pegtarviliase Phase 1/2 trial were inconclusive due to the development of anti-drug antibodies in the third cohort[151](index=151&type=chunk)[152](index=152&type=chunk)[156](index=156&type=chunk) [Exhibits](index=37&type=section&id=Item%206.%20Exhibits) This section lists exhibits filed with the Form 10-Q, including CEO/CFO certifications and Inline XBRL documents