Spyre Therapeutics Inc

Previous wording

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q for the quarterly period ended March 31, 2024 (this "Quarterly Report") as well as the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2023 filed with the SEC on February 29, 2024. This discussion and other parts of this Quarterly Report contain forward-looking statements that involve risks and uncertainties, such as statements regarding our expected results, outcomes, and the timing of these results and outcomes, plans, objectives, expectations and intentions. Our actual results and outcomes could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this Quarterly Report entitled “Risk Factors.” As used in this Quarterly Report, unless the context suggests otherwise, “we,” “us,” “our,” “the Company,” "Aeglea BioTherapeutics, Inc." or “Spyre” refers to Spyre Therapeutics, Inc. and its consolidated subsidiaries, including Spyre Therapeutics, LLC, taken as a whole.

Current wording

You should read the following discussion and analysis of our financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this Quarterly Report on Form 10-Q for the quarterly period ended June 30, 2024 (this "Quarterly Report") as well as the audited consolidated financial statements and notes and Management’s Discussion and Analysis of Financial Condition and Results of Operations, included in our Annual Report on Form 10-K for the year ended December 31, 2023 (the "Annual Report") filed with the Securities and Exchange Commission (the "SEC") on February 29, 2024 and amended on March 1, 2024. This discussion and other parts of this Quarterly Report contain forward-looking statements that involve risks and uncertainties, such as statements regarding our expected results, outcomes, and the timing of these results and outcomes, plans, objectives, expectations and intentions. Our actual results and outcomes could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those discussed in the section of this Quarterly Report entitled “Risk Factors.” As used in this Quarterly Report, unless the context suggests otherwise, “we,” “us,” “our,” “the Company,” "Aeglea BioTherapeutics, Inc." or “Spyre” refers to Spyre Therapeutics, Inc. and its consolidated subsidiaries, including Spyre Therapeutics, LLC, taken as a whole.

Previous wording

Through the Asset Acquisition, we received the option to license the in-process research and development ("IPR&D") rights related to four research programs (collectively, the "Option"). On July 12, 2023, we exercised the Option with respect to one of these research programs to exclusively license intellectual property rights related to such research program directed to antibodies that selectively bind to α4β7 integrin and methods of using these antibodies, including methods of treating inflammatory bowel disease ("IBD") using SPY001. If this research program is pursued non-provisionally and matures into issued patents, we would expect those patents to expire no earlier than 2044, subject to any disclaimers or extensions. On December 14, 2023, we exercised the Option under the Paragon Agreement to be granted an exclusive license to all of Paragon’s rights, title and interest in and to intellectual property rights, including inventions, patents, sequence information and results, under SPY002, our TL1A program, to develop and commercialize antibodies and products worldwide in all therapeutics disorders. The license agreements pertaining to such research programs are currently being finalized on previously agreed terms. Furthermore, as of the date of this Quarterly Report, the Option remains unexercised with respect to the IPR&D rights related to the two remaining research programs under the Paragon Agreement.

Current wording

Through the Asset Acquisition, we received the option to license certain intellectual property rights related to four research programs (collectively, the "Option"). On July 12, 2023, we exercised the Option with respect to one of these research programs to be granted an exclusive license to all of Paragon's rights, title and interest in and to intellectual property rights, including inventions, patents, sequence information and results, under SPY001, our α4β7 integrin program, to develop and commercialize antibodies and products worldwide in all therapeutics disorders. If this research program is pursued non-provisionally and matures into issued patents, we would expect those patents to expire no earlier than 2044, subject to any disclaimers or extensions. On December 14, 2023, we exercised the Option under the Paragon Agreement to be granted an exclusive license to all of Paragon’s rights, title and interest in and to intellectual property rights, including inventions, patents, sequence information and results, under SPY002, our TL1A program, to develop and commercialize antibodies and products worldwide in all therapeutics disorders. If this research program is pursued non-provisionally and matures into issued patents, we would expect those patents to expire no earlier than 2044, subject to any disclaimers or extensions. The License Agreements pertaining to SPY001 and SPY002 between the Company and Paragon were executed in the second quarter of 2024, based on previously agreed terms. On June 5, 2024, we exercised the Option under the Paragon Agreement to be granted an exclusive license to all of Paragon’s rights, title and interest in and to intellectual property rights, including inventions, patents, sequence information and results, under SPY003, our IL-23 program, to develop and commercialize antibodies and products worldwide solely in inflammatory bowel disease ("IBD") indications. If this research program is pursued non-provisionally and matures into issued patents, we would expect those patents to expire no earlier than 2045, subject to any disclaimers or extensions. Furthermore, as of the date of this Quarterly Report, the Option remains unexercised with respect to the intellectual property rights related to the last remaining research program under the Paragon Agreement, SPY004.

Previous wording

Following the Asset Acquisition, we have significantly reshaped the business into a preclinical stage biotechnology company focused on developing next generation therapeutics for patients living with IBD, including ulcerative colitis ("UC") and Crohn's disease ("CD"). Through the Paragon Agreement, our portfolio of novel and proprietary monoclonal antibody product candidates has the potential to address unmet needs in IBD care by improving efficacy, safety, and/or dosing convenience relative to products currently available or product candidates in development. We have engineered our product candidates with the aim to bind potently and selectively to their target epitopes and to exhibit extended pharmacokinetic half-lives through modifications in the Fc domain, which modifications are designed to increase affinity to human FcRn and increase antibody recycling. We anticipate that half-life extension will enable less frequent administration as compared to marketed or development-stage mAbs that do not incorporate half-life extension modifications. In addition to the development of our product candidates as potential monotherapies, we plan to investigate combinations of our proprietary antibodies in preclinical and clinical studies in order to evaluate whether combination therapy (co-administration or co-formulation of multiple monoclonal antibodies) can lead to greater efficacy, as compared to monotherapies in IBD. We also intend to examine patient selection strategies via complementary diagnostics utilized in our clinical studies to evaluate whether patients may be matched to the optimal therapy based on genetic background and/or other biomarker signatures. We intend to deliver our product candidates through convenient, infrequently self-administered, subcutaneous injections, although the specific delivery mechanism or technology has not been selected given our early stage.

Current wording

Following the Asset Acquisition, we have significantly reshaped the business into a clinical stage biotechnology company focused on developing next generation therapeutics for patients living with IBD, including ulcerative colitis ("UC") and Crohn's disease ("CD"). Through the Paragon Agreement, our portfolio of novel and proprietary monoclonal antibody product candidates has the potential to address unmet needs in IBD care by improving efficacy, safety, and/or dosing convenience relative to products currently available or product candidates in development. We have engineered our product candidates with the aim to bind potently and selectively to their target epitopes and to exhibit extended pharmacokinetic half-lives through modifications in the Fc domain, which modifications are designed to increase affinity to human FcRn and increase antibody recycling. We anticipate that half-life extension will enable less frequent administration as compared to marketed or development-stage mAbs that do not incorporate half-life extension modifications. In addition to the development of our product candidates as potential monotherapies, we plan to investigate combinations of our proprietary antibodies in nonclinical studies and clinical trials in order to evaluate whether combination therapy (co-administration or co-formulation of multiple monoclonal antibodies) can lead to greater efficacy, as compared to monotherapies in IBD. We also intend to examine patient selection strategies via complementary diagnostics utilized in our clinical trials to evaluate whether patients may be matched to the optimal therapy based on genetic background and/or other biomarker signatures. We intend to deliver our product candidates through convenient, infrequently self-administered, subcutaneous maintenance injections, although the specific delivery mechanism or technology has not been selected given our early stage.

Previous wording

We are advancing a pipeline of monoclonal antibodies (“mAbs”) for the treatment of IBD (UC and CD) in connection with the research programs with respect to which we have exercised the Option to exclusively license all of Paragon’s right, title, and interest in, including all intellectual property license rights to, or have the Option to acquire such intellectual property and other rights to pursuant to the Paragon Agreement and plan to develop patient selection approaches for each program. The following table summarizes the programs that have been exercised to date pursuant to the Paragon Agreement:

Current wording

We are advancing a pipeline of monoclonal antibodies (“mAbs”) for the treatment of IBD (UC and CD) and plan to develop patient selection approaches for each of our programs. The following table summarizes the programs that have been exercised to date pursuant to the Paragon Agreement:

Previous wording

We have nominated development candidates for SPY001 and SPY002. We have exercised our Option to license worldwide rights from Paragon for the SPY001 and SPY002 programs and a SPY001 license agreement (the "SPY001 License Agreement") and a SPY002 license agreement (the "SPY002 License Agreement") are currently being finalized with execution expected to occur in the second quarter of 2024. We continue to hold the Option to license similar rights from Paragon for certain other programs. We expect the SPY003 license to be restricted to IBD, and we expect other potential program licenses related to the Option to be indication agnostic. We additionally have an exclusive option under the agreement for a discovery stage program targeting a novel MOA that also incorporates half-life extension (SPY004). See the section titled “Paragon Agreement” for more information on the Paragon Agreement, including the Option.

Current wording

We have nominated development candidates for SPY001, SPY002, and SPY003. We executed the License Agreements with Paragon for SPY001 and SPY002 in the second quarter of 2024. We have exercised our Option to license worldwide rights from Paragon for SPY003 and the license agreement remains under negotiation as of this Quarterly Report. The SPY001 and SPY002 licenses are indication agnostic, and we expect the SPY003 license to be restricted to IBD. We additionally have an exclusive option under the agreement for a discovery stage program targeting a novel MOA that also incorporates half-life extension (SPY004). See the section titled “Paragon Agreement” for more information on the Paragon Agreement, including the Option.

Previous wording

The drug and/or device development process is inherently uncertain, our development approach is unproven, the preclinical evidence that supports our proposed development program is preliminary and limited, and we have not yet tested any product candidate in humans. Notwithstanding our efforts to develop safe and effective monotherapies and combination therapies, there can be no guarantee that we will be able to develop product candidates that will be found to be safe and effective so as to obtain the necessary regulatory approvals to market our product candidates.

Current wording

The drug and/or device development process is inherently uncertain, our development approach is unproven, the preclinical evidence that supports our proposed development program is preliminary and limited, and we have not yet completed testing of any product candidate in humans. Notwithstanding our efforts to develop safe and effective monotherapies and combination therapies, there can be no guarantee that we will be able to develop product candidates that will be found to be safe and effective so as to obtain the necessary regulatory approvals to market our product candidates.

Previous wording

For a discussion of the risks associated with our portfolio, see Item 1A, “Risk Factors” included in our Annual Report.

Current wording

For a discussion of the risks associated with our portfolio, see Item 1A, “Risk Factors” included in this Quarterly Report.

Previous wording

Our most advanced product candidate, SPY001, is a highly potent, highly selective, and humanized monoclonal immunoglobulin G1 antibody designed to bind selectively to the α4β7 integrin being developed for the treatment of IBD (UC and CD). The α4β7 integrin is a protein found on the surface of immune cells known as lymphocytes. This integrin regulates the migration of lymphocytes to the gut where they contribute to the inflammatory process in IBD. By selectively binding to the α4β7 integrin, SPY001 is designed to prevent the interaction of these lymphocytes with MAdCAM-1, a molecule expressed on endothelial cells lining the blood vessels in the gut. This interaction is responsible for guiding lymphocytes from the bloodstream into the gut tissue, where they cause inflammation. By blocking the interaction between α4β7 integrin and MAdCAM-1, SPY001 aims to reduce the recruitment of lymphocytes to the gut, leading to a decrease in inflammation. Since it specifically targets the gut immune system, SPY001 is designed to minimize systemic immunosuppressive effects unrelated to IBD pathology.

Current wording

Our most advanced product candidate, SPY001, is a highly potent, highly selective, and humanized monoclonal immunoglobulin G1 antibody designed to bind selectively to the α4β7 integrin being developed for the treatment of IBD (UC and CD). The α4β7 integrin is a protein found on the surface of immune cells. This integrin regulates the migration of immune cells to the gut where they contribute to the inflammatory process in IBD. By selectively binding to the α4β7 integrin, SPY001 is designed to prevent the interaction of these immune cells with MAdCAM-1, a molecule expressed on endothelial cells lining the blood vessels in the gut. This interaction is responsible for guiding lymphocytes from the bloodstream into the gut tissue, where they cause inflammation. By blocking the interaction between α4β7 integrin and MAdCAM-1, SPY001 aims to reduce the recruitment of lymphocytes to the gut, leading to a decrease in inflammation. Since it specifically targets the gut immune system, SPY001 is designed to minimize systemic immunosuppressive effects unrelated to IBD pathology.

Previous wording

SPY001 is being developed by us and our research partners at Paragon. Prior to the closing of the Asset Acquisition, Paragon had sole leadership in conductingin vitro andin vivo studies for SPY001 clones, including the potency, selectivity, and non-human primate ("NHP") PK data supporting development candidate nomination for the SPY001 program. Following the closing of the Asset Acquisition and the exercise of the Option with respect to the SPY001 program, Spyre and Paragon established a Joint Development Committee (“JDC”) comprised of two employees from Spyre and two employees from Paragon and jointly directed research and development work, with Spyre having final decision rights on the budget for any research program. The JDC is the decision-making body for SPY001 and our other pipeline programs prior to the execution of the SPY001 License Agreement and, in addition to SPY001, we will also control and lead the development process for each of SPY002, non-optioned programs SPY003 and SPY004, and each of the combination programs once the respective license agreements are executed.

Current wording

SPY001 is being developed by us following exclusively licensing the program from our research partners at Paragon. Prior to the closing of the Asset Acquisition, Paragon had sole leadership in conductingin vitro andin vivo studies for SPY001 clones, including the potency, selectivity, and non-human primate ("NHP") PK data supporting development candidate nomination for the SPY001 program. Following the closing of the Asset Acquisition and the exercise of the Option with respect to the SPY001 program, Spyre and Paragon established a Joint Development Committee (“JDC”) comprised of two employees from Spyre and two employees from Paragon and jointly directed research and development work, for SPY001 and SPY002, with Spyre having final decision rights on the budget for any research program. Since the time that we executed exclusive licenses with Paragon for each of the SPY001 and SPY002 programs, Spyre has taken on sole development responsibility. Additionally, the JDC continues to be the decision-making body for SPY003 and SPY004 prior to the execution of license agreements for each of these programs.

Previous wording

The 28-day GLP toxicity study in NHPs (n=42) for SPY001 has been completed with the highest dose level tested determined as the no-observed-adverse-effect-level ("NOAEL"). Chemistry, manufacturing, and control ("CMC") activities to enable the SPY001 first-in-human (“FIH”) study are also complete. Initiation of the FIH study in the second quarter of 2024 remains on track, pending health agency approval. Interim data from the Phase 1 healthy volunteer study are expected by the end of 2024. If successful, SPY001 would then advance to Phase 2 clinical studies and, pending further success, Phase 3 clinical studies to support global regulatory submissions and commercial approval.

Current wording

The 28-day GLP toxicity study in NHPs (n=42) for SPY001 was completed with the highest dose level tested determined as the no-observed-adverse-effect-level. The Company initiated a first-in-human ("FIH") Phase 1 trial for SPY001 in June 2024. The SPY001 Phase 1 trial is a double blind, placebo-controlled trial in healthy volunteers and consists of a single-ascending dose (SAD) component and a multi-ascending dose (MAD) component. The trial is expected to enroll approximately 48 healthy adult participants into four SAD cohorts and two MAD cohorts. The primary endpoint is safety, with pharmacokinetics (PK) and Anti-drug Antibodies (ADA) serving as secondary endpoints. We expect interim safety and PK data from this trial by year-end 2024. If successful, SPY001 would then advance to Phase 2 clinical trials and, pending further success, Phase 3 clinical trials to support global regulatory submissions and commercial approval.

Previous wording

For our co-lead program, SPY002, we have nominated two highly potent, highly selective, and fully human mAb candidates designed to bind to tumor necrosis factor-like ligand 1A (“TL1A”), both of which are in preclinical development for the treatment of IBD (UC and CD). TL1A is a protein that plays a role in regulating the immune system and is elevated in the gut tissue of individuals with IBD. TL1A interacts with its receptor, death receptor 3 (“DR3”), which is expressed in various immune cells, including T cells. This interaction triggers signaling pathways that contribute to inflammation and immune system activation, leading to IBD symptomology. The SPY002 candidates have been designed to block the interaction between TL1A and DR3, and thereby inhibit the downstream signaling events and dampen the inflammatory response. By neutralizing

Current wording

For our co-lead program, SPY002, we have nominated two highly potent, highly selective, and fully human mAb candidates designed to bind to tumor necrosis factor-like ligand 1A (“TL1A”), both of which are in preclinical development for the treatment of IBD (UC and CD). TL1A is a protein that plays a role in regulating the immune system and is elevated in the gut tissue of individuals with IBD. TL1A interacts with its receptor, death receptor 3 (“DR3”), which is expressed in various immune cells, including T cells. This interaction triggers signaling pathways that contribute to inflammation and immune system activation, leading to IBD symptomology. The SPY002 candidates have been designed to block the interaction between TL1A and DR3, and thereby inhibit the downstream signaling events and dampen the inflammatory response. By neutralizing TL1A, we believe SPY002 candidates have the potential to modulate the immune response in IBD patients, potentially reducing disease activity and promoting mucosal healing.

Previous wording

SPY002 preclinical characterization studies were conducted in-house with support from third party vendors. Our extensive discovery campaign has identified two lead candidates which bind TL1A monomers and trimers and have subnanomolar potency in cellular assays (see Figure 3, n=4 replicates per group per study, studies completed in Q42023 and Q12024). The candidates also exhibited extended pharmacokinetic half-lives of greater than two to three-fold relative to competitor molecules in clinical development that do not incorporate half-life extending modifications, based on head-to-head preclinical studies in NHPs (see Figure 4, n=5 per group, studies completed in Q42023 and Q12024). SPY002 candidates are currently progressing through IND-enabling studies (CMC scale-up ongoing) and we expect to submit an IND or equivalent foreign regulatory submission and enter a Phase 1 FIH study in healthy volunteers in the second half of 2024, with one or both of our SPY002 candidates pending additional preclinical data and pending health agency approval. Interim data from the Phase 1 healthy volunteer study are expected in the first half of 2025. If successful, one SPY002 candidate would then advance to Phase 2 clinical studies and, pending further success, Phase 3 clinical studies to support global regulatory submissions and commercial approval.

Current wording

SPY002 preclinical characterization studies were conducted in-house with support from third party vendors. Our extensive discovery campaign has identified two lead candidates which bind TL1A monomers and trimers and have subnanomolar potency in cellular assays (see Figure 3, n=4 replicates per group per study, studies completed in fourth quarter of 2023 and first quarter of 2024). The candidates also exhibited extended pharmacokinetic half-lives of greater than two to three-fold relative to competitor molecules in clinical development that do not incorporate half-life extending modifications, based on head-to-head preclinical studies in NHPs (see Figure 4, n=5 per group, studies completed in fourth quarter of 2023 and first quarter of 2024). SPY002 candidates are currently progressing through IND-enabling studies (CMC scale-up ongoing) and we expect to submit an IND or equivalent foreign regulatory submission and enter a Phase 1 FIH trial in healthy volunteers in the second half of 2024, with one or both of our SPY002 candidates pending additional preclinical data and pending health agency approval. Interim data from the Phase 1 healthy volunteer trial are expected in the first half of 2025. If successful, one SPY002 candidate would then advance to Phase 2 clinical trials and, pending further success, Phase 3 clinical trials to support global regulatory submissions and commercial approval.

Previous wording

SPY003 is a discovery-stage program focused on designing antibodies to bind to Interleukin 23 (“IL-23”) and incorporates half-life extending modifications. IL-23 is a cytokine that is produced by immune cells and is involved in immune response regulation. IL-23 promotes the survival, expansion, and activity of Th17 cells. Th17 cells produce inflammatory cytokines, such as IL-17, which contribute to the inflammation seen in IBD. IL-23 also helps in the recruitment and activation of other immune cells, such as neutrophils, which further contribute to tissue damage in the gut. To date, we have identified several promising clones that meet our target product profile, and we are in the process of narrowing down the potential clones to select a development candidate based on pharmacokinetic performance and CMC developability. We are continuing our preclinical development efforts with the SPY003 program and expect to nominate a development candidate in mid-2024, move into IND-enabling studies in the second half of 2024 and initiate FIH studies in the first half of 2025. Upon development candidate nomination, we intend to exercise our Option to acquire intellectual property rights for the SPY003 program pursuant to the Paragon Agreement. We expect the license to be restricted to IBD.

Current wording

SPY003 is a discovery-stage program focused on designing antibodies to bind to Interleukin 23 (“IL-23”) and incorporates half-life extending modifications. IL-23 is a cytokine that is produced by immune cells and is involved in immune response regulation. IL-23 promotes the survival, expansion, and activity of Th17 cells. Th17 cells produce inflammatory cytokines, such as IL-17, which contribute to the inflammation seen in IBD. IL-23 also helps in the recruitment and activation of other immune cells, such as neutrophils, which further contribute to tissue damage in the gut. We exercised our Option to acquire intellectual property rights for the SPY003 program pursuant to the Paragon Agreement and completed our SPY003 candidate selection process in June 2024. We expect to move into IND-enabling studies in the second half of 2024 and initiate FIH trials in the first half of 2025. We expect the license agreement, which is still being negotiated with Paragon, to be restricted to IBD.

Previous wording

SPY004 is an undisclosed novel mechanism of action ("MOA") and incorporates half-life extension modifications. Upon development candidate nomination, we intend to exercise our Option to acquire intellectual property rights for the SPY004 program pursuant to the Paragon Agreement.

Current wording

SPY004 has an undisclosed novel MOA and incorporates half-life extension modifications. Upon development candidate nomination, we intend to exercise our Option to acquire intellectual property rights for the SPY004 program pursuant to the Paragon Agreement.

Previous wording

SPY120 combines SPY001 (anti-α4β7) and SPY002 (anti-TL1A) antibodies, pairing two mechanisms studied in third-party clinical trials targeting non-overlapping sites of action. We are currently evaluating SPY120 in preclinical studies, and plan to initiate combination toxicology studies in 2024. We expect to initiate clinical studies for SPY120 in 2025, pending approval of an IND or equivalent foreign regulatory submission anticipated in 2025.

Current wording

SPY120 combines SPY001 (anti-α4β7) and SPY002 (anti-TL1A) antibodies, pairing two mechanisms studied in third-party clinical trials targeting non-overlapping sites of action. We are currently evaluating SPY120 in nonclinical studies, and plan to initiate combination toxicology studies in 2024. Subject to regulatory feedback, we intend to initiate clinical trials in 2025 that will include SPY120.

Previous wording

SPY130 combines SPY001 (anti-α4ß7) and SPY003 (anti-IL-23) antibodies, pairing two commercially validated mechanisms targeting non-overlapping sites of action. We are currently evaluating SPY130 in preclinical studies and potentially initiate combination toxicology studies in 2025.

Current wording

SPY130 combines SPY001 (anti-α4ß7) and SPY003 (anti-IL-23) antibodies, pairing two commercially validated mechanisms targeting non-overlapping sites of action. We are currently evaluating SPY130 in nonclinical studies and plan to initiate combination toxicology studies in 2025. Subject to regulatory feedback, we intend to initiate clinical trials in 2025 that will include SPY130.

Previous wording

SPY230 combines SPY002 (anti-TL1A) and SPY003 (anti-IL-23) antibodies, pairing two complementary mechanisms of action with potential to address overlapping and non-overlapping triggers of inflammation. We are currently evaluating SPY230 in preclinical studies and potentially initiate combination toxicology studies in 2025.

Current wording

SPY230 combines SPY002 (anti-TL1A) and SPY003 (anti-IL-23) antibodies, pairing two complementary mechanisms of action with potential to address overlapping and non-overlapping triggers of inflammation. We are currently evaluating SPY230 in nonclinical studies and plan to initiate combination toxicology studies in 2025. Subject to regulatory feedback, we intend to initiate clinical trials in 2025 that will include SPY230.

Previous wording

Paragon and Parapyre each beneficially own less than 5% of the Company's capital stock through their respective holdings of the Company's Common Stock. Fairmount Funds Management LLC ("Fairmount") beneficially owns more than 5% of the Company's capital stock on an as-converted basis, has two seats on our board of directors (the "Board") and beneficially owns more than 5% of Paragon, which is a joint venture between Fairmount and Fair Journey Biologics. Fairmount appointed Paragon's board of directors and has the contractual right to approve the appointment of any executive officers. Parapyre is an entity formed by Paragon as a vehicle to hold equity in Spyre in order to share profits with certain employees of Paragon.

Current wording

Paragon and Parapyre each beneficially own less than 5% of the Company's capital stock through their respective holdings of the Company's Common Stock. Fairmount Funds Management LLC ("Fairmount") beneficially owns more than 5% of the Company's capital stock on an as-converted basis, has two seats on our board of directors (the "Board") and beneficially owns more than 5% of Paragon, which is a joint venture between Fairmount and FairJourney Biologics. Fairmount appointed Paragon's board of directors and has the contractual right to approve the appointment of any executive officers. Parapyre is an entity formed by Paragon as a vehicle to hold equity in Spyre in order to share profits with certain employees of Paragon.

Previous wording

For the three months ended March 31, 2024, we recognized $17.1 million, in Research and development expenses that are due to Paragon under the Paragon Agreement. As of March 31, 2024, $15.5 million was unpaid and owed to Paragon under the Paragon Agreement.

Current wording

For the three and six months ended June 30, 2024, we recognized $9.4 million, in Research and development expenses that are due to Paragon under the Paragon Agreement. As of June 30, 2024, $10.6 million was unpaid and owed to Paragon under the Paragon Agreement.

Previous wording

On July 12, 2023 and December 14, 2023, we exercised our Option available under the Paragon Agreement with respect to the SPY001 and SPY002 research programs, respectively, and expect to enter into the SPY001 License Agreement and the SPY002 License Agreement. Our Option available under the Paragon Agreement with respect to the SPY003 and SPY004 programs remains unexercised.

Current wording

On July 12, 2023, December 14, 2023, and June 5, 2024, we exercised our Option available under the Paragon Agreement with respect to the SPY001, SPY002, and SPY003 research programs, respectively, and we entered into the SPY001 License Agreement and the SPY002 License Agreement on May 14, 2024. We are negotiating a license agreement with respect to SPY003 as of the date of this Quarterly Report. Our Option available under the Paragon Agreement with respect to the SPY004 program remains unexercised.

Previous wording

Following the execution of each of the SPY001 License Agreement and SPY002 License Agreement, we will be obligated to pay Paragon up to $22.0 million upon the achievement of specific development, regulatory and clinical milestones for the first product under each agreement, respectively, that achieves such specified milestones. Upon execution of each of the SPY001 License Agreement and the SPY002 License Agreement, we expect to pay Paragon a $1.5 million fee for nomination of a development candidate, as applicable, and we expect to be obligated to make a further milestone payment of $2.5 million upon the first dosing of a human subject in a Phase 1 trial. With respect to the SPY002 License Agreement only, on a product by product basis, the Company will pay Paragon sublicensing fees of up to approximately $20.0 million upon the achievement of mostly commercial milestones. Subject to the execution of the Option with respect to the SPY003 or SPY004 research programs, we expect to be obligated to make similar payments upon and following the execution of license agreements with respect to these research programs, respectively.

Current wording

Following the execution of each of the SPY001 License Agreement and SPY002 License Agreement, we became obligated to pay Paragon up to $22.0 million upon the achievement of specific development, regulatory and clinical milestones for the first product under each agreement, respectively, that achieves such specified milestones. Pursuant to the SPY001 License Agreement, we recognized $4.0 million of license milestone expense during the three and six months ended June 30, 2024, inclusive of a $1.5 million fee for the nomination of a development candidate and $2.5 million upon the first dosing of a human subject in a Phase 1 trial. Pursant to the SPY002 License Agreement, we recognized $1.5 million of milestone expense payable to Paragon during the three and six months ended June 30, 2024, for the nomination of a development candidate, and we expect to recognize an additional $2.5 million of license milestone expense payable to Paragon upon the first dosing of a human subject in a Phase 1 trial. As of June 30, 2024, there was a $2.5 million outstanding liability related to recognized license milestone payments included in Related party accounts payable and other current liabilities. With respect to the SPY002 License Agreement only, on a product by product basis, the Company will pay sublicensing fees of up to approximately $20 million upon the achievement of mostly commercial milestones. With respect to the SPY003 research program and, subject to the execution of the Option, with respect to the SPY004 research program, we expect to be obligated to make similar payments upon and following the execution of license agreements with respect to these research programs, respectively.

Previous wording

On February 1, 2024, Alison Lawton resigned from the Board and the Board appointed Mark McKenna as a Class I director. Mr. McKenna and the Company are parties to a consulting agreement, pursuant to which Mr. McKenna agreed to continue to provide consulting services as an independent contractor to the Company, with an effective date of August 1, 2023 (the “Vesting Commencement Date”). As compensation for Mr. McKenna’s consulting services, on November 22, 2023, he was granted non-qualified stock options to purchase 477,000 shares of the Company’s Common Stock under the Company's equity incentive plan with an exercise price of $10.39 per share, which vest as to 25% on the one year anniversary of the Vesting Commencement

Current wording

On February 1, 2024, Alison Lawton resigned from the Board and the Board appointed Mark McKenna as a Class I director. Mr. McKenna and the Company are parties to a consulting agreement, pursuant to which Mr. McKenna agreed to continue to provide consulting services as an independent contractor to the Company, with an effective date of August 1, 2023 (the “Vesting Commencement Date”). As compensation for Mr. McKenna’s consulting services, on November 22, 2023, he was granted non-qualified stock options to purchase 477,000 shares of the Company’s Common Stock under the Company's 2016 Plan with an exercise price of $10.39 per share, which vest as to 25% on the one year anniversary of the Vesting Commencement Date and thereafter vest and become exercisable in 36 equal monthly installments, subject to Mr. McKenna’s continued service to the Company through each applicable vesting date.

Previous wording

Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. These estimates form the basis for judgments we make about the carrying values of our assets, liabilities and equity and the amount of revenues and expenses, which are not readily apparent from other sources. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ materially from these estimates under different assumptions or conditions.

Current wording

Our condensed consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States. The preparation of our condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. These estimates form the basis for judgments we make about the carrying values of our assets, liabilities and equity and the amount of revenues and expenses, which are not readily apparent from other sources. We base our estimates on historical experience and on various other assumptions that we believe are reasonable under the circumstances. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ materially from these estimates under different assumptions or conditions.

Previous wording

There have been no significant changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in "Management’s Discussion and Analysis of Financial Condition and Operations" included in our Annual Report.

Current wording

Other than the policy noted below, there have been no significant changes to our critical accounting policies and estimates as compared to the critical accounting policies and estimates disclosed in "Management’s Discussion and Analysis of Financial Condition and Operations" included in our Annual Report.

Previous wording

Development Fee and Royalty Revenue. For the three months ended March 31, 2024, we did not recognize any revenue in connection with our now terminated exclusive license and supply agreement with Immedica Pharma AB, dated March 21, 2021 (the "Immedica Agreement"). For the three months ended March 31, 2023, we recognized $0.2 million of development fee revenue in connection with the Immedica Agreement, which was attributable to the PEACE Phase 3 trial and BLA package.

Current wording

Development Fee and Royalty Revenue. For the three months ended June 30, 2024, we did not recognize any revenue in connection with our now terminated exclusive license and supply agreement with Immedica Pharma AB, dated March 21, 2021 (the "Immedica Agreement"). For the three months ended June 30, 2023, we recognized $0.7 million of development fee revenue in connection with the Immedica Agreement, which was attributable to the drug supply and royalties from an early access program in France.

Previous wording

Internal research and development expenses include compensation and related costs associated with our research and development employees, as well as costs associated with the Company's on-premises research laboratory. For the three months ended March 31, 2024 and 2023, internal research and development costs accounted for $3.6 million and $5.9 million, respectively. The decrease in internal research and development expenses is primarily due to a decrease in costs associated with our on-premises research laboratory that was decommissioned, including the elimination of related internal roles, in the first half of 2023.

Current wording

Internal research and development expenses include compensation and related costs associated with our research and development employees, as well as costs associated with the Company's on-premises research laboratory. For the three months ended June 30, 2024 and June 30, 2023, internal research and development costs accounted for $4.9 million and $7.0 million, respectively. The decrease was primarily due to decreased costs associated with our on-premises research laboratory that was decommissioned, including the elimination of related internal roles, in the first half of 2023, partially offset by increased costs associated with our IBD pipeline candidates.

Previous wording

Other income (expense). Other income for the three months ended March 31, 2024, totaled $3.9 million primarily driven by $4.4 million of interest earned on the Company's cash and marketable securities, partially offset by a $0.4 million expense related to the change in fair value of the contingent value right liability.

Current wording

Other expense, net. Other expense, net for the three months ended June 30, 2024, totaled $0.6 million primarily driven by a $0.5 million change in fair value of the contingent value right liability. There was no change in fair value of the contingent value right liability expense during the three months ended June 30, 2023.

Previous wording

Research and Development Expenses. Research and development expenses increased by $21.2 million, or 154%, to $34.9 million for the three months ended March 31, 2024, from $13.8 million for the three months ended March 31, 2023. Our Research and development expenses incurred during the three months ended March 31, 2024 primarily related to $26.9 million in costs associated with preclinical development and manufacturing costs associated with advancing our IBD pipeline, and $5.4 million in stock-based compensation expenses associated with the Parapyre Option Obligation, partially offset by a $9.7 million decrease in costs related to the Company's legacy rare disease pipeline and a $1.5 million decrease related to lower research and development headcount.

Current wording

Research and Development Expenses. Research and development expenses increased by $36.4 million, or 117%, to $67.6 million for the six months ended June 30, 2024, from $31.2 million for the six months ended June 30, 2023. The increase was primarily driven by $67.0 million of preclinical and clinical development and manufacturing costs associated with advancing our IBD pipeline, inclusive of $6.8 million in stock based compensation expense associated with the Parapyre Option Obligation, partially offset by a $30.6 million decrease in costs related to the Company's legacy rare disease pipeline.

Previous wording

External research and development expenses include costs associated with third parties contracted to conduct research and development activities on behalf of the Company, including through Paragon, CROs, CMOs, and third-party laboratories. For the three months ended March 31, 2024 and 2023, external research and development costs accounted for $31.3 million and $7.9 million, respectively. The increase in external research and development expenses is primarily due to increases in costs associated with our IBD pipeline candidates and stock compensation expense related to the Parapyre Option Obligation, partially offset by a decrease in activities associated with the Legacy Assets.

Current wording

External research and development expenses include costs associated with third parties contracted to conduct research and development activities on behalf of the Company, including through Paragon, CROs, CMOs, and third-party laboratories. For the six months ended June 30, 2024 and June 30, 2023, external research and development costs accounted for $59.1 million and $18.6 million, respectively. The increase was primarily due to increased costs associated with our IBD pipeline candidates and stock compensation expense related to the Parapyre Option Obligation, partially offset by decreased costs related to the Company's legacy rare disease pipeline.

Previous wording

General and Administrative Expenses. General and administrative expenses increased by $7.6 million, or 146%, to $12.8 million for the three months ended March 31, 2024, from $5.2 million for the three months ended March 31, 2023. The increase in general and administrative expenses was primarily due to a $6.0 million increase in stock-based compensation expense and a $1.5 million increase in professional services and legal fees.

Current wording

General and Administrative Expenses. General and administrative expenses increased by $7.1 million, or 41%, to $24.4 million for the six months ended June 30, 2024, from $17.3 million for the six months ended June 30, 2023. The increase was primarily due to a $10.8 million increase in stock-based compensation expense, inclusive of a $2.9 million acceleration expense related to legacy Aeglea officers and directors, and a $1.9 million increase in professional service fees primarily related to transaction support, partially offset by a $5.5 million decrease in restructuring costs.

Previous wording

We are a preclinical stage biotechnology company with a limited operating history, and due to our significant research and development expenditures, we have generated operating losses since our inception and have not generated any revenue from the sale of any products. There can be no assurance that profitable operations will ever be achieved, and, if achieved, whether profitability can be sustained on a continuing basis.

Current wording

We are a clinical stage biotechnology company with a limited operating history, and due to our significant research and development expenditures, we have generated operating losses since our inception and have not generated any revenue from the commercial sale of any products. There can be no assurance that profitable operations will ever be achieved, and, if achieved, whether profitability can be sustained on a continuing basis.

Previous wording

Since our inception and through March 31, 2024, we have funded our operations by raising an aggregate of approximately $1.1 billion of gross proceeds from the sale and issuance of convertible preferred stock and common stock, pre-funded warrants, the collection of grant proceeds, and the licensing of our product rights for commercialization of pegzilarginase in Europe and certain countries in the Middle East. As of March 31, 2024, we had an accumulated deficit of $808.3 million.

Current wording

Since our inception and through June 30, 2024, we have funded our operations by raising an aggregate of approximately $1.1 billion of gross proceeds from the sale and issuance of convertible preferred stock and common stock, pre-funded warrants, the collection of grant proceeds, and the licensing of our product rights for commercialization of pegzilarginase in Europe and certain countries in the Middle East. As of June 30, 2024, we had an accumulated deficit of $847.1 million.

Previous wording

Our primary use of cash is to fund the development of our product candidates, and advance our pipeline. This includes both the research and development costs and the general and administrative expenses required to support those operations. Since we are a preclinical stage biotechnology company, we have incurred significant operating losses since our inception and we anticipate such losses, in absolute dollar terms, to increase as we pursue clinical development of our product candidates, prepare for the potential commercialization of our product candidates, and expand our development efforts in our pipeline of nonclinical candidates. Based on current operating plans, we have sufficient resources to fund operations for at least one year from the issuance date of the financial statements included in this Quarterly Report with existing cash, cash equivalents, and marketable securities. We will need to secure additional financing in the future to fund additional research and development, and before a commercial drug can be produced, marketed and sold. If the Company is unable to obtain additional financing or generate license or product revenue, the lack of liquidity could have a material adverse effect on the Company.

Current wording

Our primary use of cash is to fund the development of our product candidates, and advance our pipeline. This includes both the research and development costs and the general and administrative expenses required to support those operations. Since we are a clinical stage biotechnology company, we have incurred significant operating losses since our inception and we anticipate such losses, in absolute dollar terms, to increase as we continue to pursue clinical development of our product candidates, prepare for the potential commercialization of our product candidates, and expand our development efforts in our pipeline of nonclinical candidates. Based on current operating plans, we have sufficient resources to fund operations for at least one year from the issuance date of the financial statements included in this Quarterly Report with existing cash, cash equivalents, and marketable securities. We will need to secure additional financing in the future to fund additional research and development, and before a commercial drug can be produced, marketed and sold. If the Company is unable to obtain additional financing or generate license or product revenue, the lack of liquidity could have a material adverse effect on the Company.

Previous wording

Cash used in operating activities for the three months ended March 31, 2024 was $28.5 million and reflected a net loss of $43.9 million and $2.4 million in net accretion of discount on marketable securities, partially offset by stock-based compensation of $13.8 million and a $3.5 million decrease in net operating assets and liabilities driven by timing of payments.

Current wording

Cash used in operating activities for the six months ended June 30, 2024 was $90.8 million and reflected a net loss of $82.7 million, a $25.7 million decrease in net operating assets and liabilities driven by timing of payments to vendors, and $6.0 million in net accretion of discount on marketable securities, partially offset by stock-based compensation of $22.5 million.

Previous wording

Cash used in investing activities for the three months ended March 31, 2024 was $105.0 million and primarily consisted of $152.7 million in purchases of marketable securities, partially offset by $47.8 million in maturities and sales of marketable securities.

Current wording

Cash used in investing activities for the six months ended June 30, 2024 was $225.5 million and primarily consisted of $331.1 million in purchases of marketable securities, partially offset by $105.6 million in maturities and sales of marketable securities.

Previous wording

Cash provided by investing activities for the three months ended March 31, 2023 was $17.8 million from maturities and sales of marketable securities.

Current wording

Cash provided by investing activities for the six months ended June 30, 2023, was $24.5 million and consisted of $21.0 million in maturities and sales of marketable securities and $3.0 million cash assumed from the Asset Acquisition.

Previous wording

Cash provided by financing activities for the three months ended March 31, 2024 was $172.2 million, which primarily consisted of the net proceeds from the issuance of the Series B Preferred Stock in the March 2024 PIPE of $169.2 million and $4.4 million from proceeds from stock option exercises and sales of Common Stock under our Employee Stock Purchase Plan.

Current wording

Cash provided by financing activities for the six months ended June 30, 2024 was $172.5 million, which primarily consisted of the net proceeds from the issuance of the Series B Preferred Stock in the March 2024

Previous wording

Cash provided by financing activities for the three months ended March 31, 2023, was $0.1 million, which primarily consisted of the sale of Common Stock under our 2016 Employee Stock Purchase Plan.

Current wording

Cash provided by financing activities for the six months ended June 30, 2023, was $210.0 million, which primarily consisted of the gross proceeds from the issuance of the Series A Preferred Stock in the June 2023 PIPE.

Previous wording

Through the Asset Acquisition, we received the Option to license the IPR&D rights related to four research programs. On July 12, 2023 and on December 14, 2023, we exercised the Option with respect to two of these research programs, respectively. The exercise of the Option allows for us to enter into an exclusive license agreement with Paragon for the respective research program. Upon license execution, we expect to be obligated to pay Paragon up to $22.0 million based on specific development, regulatory and clinical milestones for each licensed research program. As of March 31, 2024, none of the $22.0 million obligation was accrued for since the related license agreements are still being negotiated. As of the date of the filing of this Quarterly Report, the Option remains unexercised with respect to the two remaining research programs under the Paragon Agreement. Should the Option for these research programs be exercised and upon entry into license agreements with respect to such research programs, we expect to be obligated to pay Paragon up to $22.0 million per research program based on certain development, regulatory and clinical milestones.

Current wording

Through the Asset Acquisition, we received the Option to license certain intellectual property rights related to four research programs. The exercise of the Option allows for us to enter into an exclusive license agreement with Paragon for the respective research program. Thus far we have exercised the Option with respect to SPY001, SPY002, and SPY003, and we have entered into license agreements for SPY001 and SPY002. On June 5, 2024, we exercised the Option with respect to the SPY003 research program and, as of the date of this Quarterly Report, are negotiating a license agreement. Upon license execution, we expect to be obligated to pay Paragon up to $22.0 million based on specific development, regulatory and clinical milestones for the SPY003 research program. As of June 30, 2024, none of the $22.0 million obligation was accrued for, because the SPY003 license agreement is currently being negotiated. As of the date of the filing of this Quarterly Report, the Option remains unexercised with respect to the one remaining research program, SPY004, under the Paragon Agreement. Should the Option for SPY004 be exercised and upon entry into a license agreement with respect to SPY004, we expect to be obligated to pay Paragon up to an additional $22.0 million based on certain development, regulatory and clinical milestones.