Spyre Therapeutics Inc

Previous 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.

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. 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. The License Agreements pertaining to SPY001 and SPY002 between the Company and Paragon were executed in the second quarter of 2024, and the License Agreement pertaining to SPY003 was executed in October 2024. 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 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.

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"). 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) 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:

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 our programs:

Previous 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.

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 and we executed the SPY003 License Agreement in the fourth quarter of 2024. The SPY001 and SPY002 licenses are indication agnostic, and the SPY003 license is 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). We have sole development responsibility for SPY001, SPY002, and SPY003. We and Paragon have established a Joint Development Committee, comprised of two employees from Spyre and two employees from Paragon, to jointly direct research and development work for SPY004 prior to the execution of a license agreement for such program. We have final decision rights regarding the budget for the SPY004 research program. See the section titled “Paragon Agreement” for more information on the Paragon Agreement, including the Option.

Previous wording

SPY001 preclinical characterization studies were conducted in-house with support from third party vendors. SPY001 demonstrates similar potency and selectivity as vedolizumab in preclinicalin vitro models including surface plasmon residence (n=5 concentrations, study completed September 2023) and cellular adhesion assays (see Figure 1, n=6 replicates per group, study completed in August 2023). It also incorporates a half-life extending modification resulting in an increase in half-life of >three-fold in Tg276 transgenic mice that express human FcRn (n=5 per group, studies completed in August 2023) and an increase in half-life of >three-fold in NHPs (n=6 per group, studies completed in December 2023), compared to vedolizumab (see Figure 2).

Current wording

SPY001 preclinical characterization studies were conducted in-house with support from third party vendors. SPY001 demonstrates similar potency and selectivity as synthesized vedolizumab in preclinicalin vitro models including surface plasmon residence (n=5 concentrations) and cellular adhesion assays (see Figure 1, n=6 replicates per group). It also incorporates a half-life extending modification resulting in an increase in half-life of greater than three-fold in Tg276 transgenic mice that express human FcRn (n=5 per group) and an increase in half-life of greater than three-fold in NHPs (n=6 per group), compared to vedolizumab (see Figure 2).

Previous 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.

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 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 design includes enrolling 56 healthy adult participants into five SAD cohorts and two MAD cohorts. Additional cohorts may be added to the study to evaluate pharmacokinetics in healthy volunteers of various ethnicities to facilitate subsequent global clinical trials. 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

Figure 1. Potency and selectivity of SPY001 relative to vedolizumab in cellular assays.

Current wording

Figure 1. Potency and selectivity of SPY001 relative to synthesized vedolizumab in cellular assays (Data on file.).

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 TL1A, we believe SPY002 candidates have the potential to modulate the immune response in IBD patients, potentially reducing disease activity and promoting mucosal healing.

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 the 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 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.

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). The candidates also exhibited extended pharmacokinetic half-lives of greater than two to three-fold relative to synthesized 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).

Previous wording

Figure 3. Inhibition of TL1-A induced TF-1 cell apoptosis (left) and IFNγ secretion in primary human whole blood 1 donor of 4 donors profiled (right).

Current wording

Figure 3. Inhibition of TL1-A induced TF-1 cell apoptosis (left) and IFNγ secretion in primary human whole blood 1 donor of 4 donors profiled (right) (Data on file. Duvakitug was not benchmarked in IFNγ secretion assay; Duvakitug, RO7790121, and tulisokibart are synthesized comparator antibodies).

Previous wording

Figure 4. Pharmacokinetic concentration-time curves of SPY002 candidates compared to competing anti-TL1A molecules in non-human primates.

Current wording

Figure 4. Pharmacokinetic concentration-time curves of SPY002 candidates compared to synthesized competing anti-TL1A molecules in non-human primates (Data on file. Group size was n=5 for SPY002 mAbs and tulisokibart at final endpoints for half-life determination; No RO7790121 detected after day 28. Duvakitug not compared in these models given low human half-life (7-10 days).).

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. 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.

Current wording

SPY003 is a preclinical-stage program designed 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 have begun IND-enabling studies for SPY003 and expect to initiate FIH trials in the first quarter of 2025.

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 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.

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 have initiated combination toxicology studies. Subject to regulatory feedback, we intend to initiate clinical trials in 2025 that will include SPY120.

Previous 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.

Current wording

For the three and nine months ended September 30, 2024, we recognized $7.7 million and $34.2 million, respectively, in Research and development expenses that are due to Paragon under the Paragon Agreement. As of September 30, 2024, $14.5 million was unpaid and owed to Paragon under the Paragon Agreement.

Previous 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.

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. 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 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.

Current wording

Following the execution of each of the License Agreements, 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. During the three and nine ended September 30, 2024, we recognized nil and $5.5 million of expense related to license milestones inclusive of milestones related to the nomination of a development candidate for each of SPY001 and SPY002 and the first dosing of a human subject in a Phase 1 trial for SPY001. As of September 30, 2024, there were no amounts due related to development, regulatory and clinical milestones in connection with the License Agreements.

Previous wording

Research and Development Expenses. Research and development expenses increased by $15.2 million, or 88%, to $32.6 million for the three months ended June 30, 2024, from $17.4 million for the three months ended June 30, 2023. The increase was primarily driven by $25.5 million of preclinical and clinical development and manufacturing costs associated with advancing our IBD pipeline, partially offset by a $11.6 million decrease in costs related to the Company's legacy rare disease pipeline.

Current wording

Research and Development Expenses. Research and development expenses increased by $20.1 million, or 81%, to $44.7 million for the three months ended September 30, 2024, from $24.7 million for the three months ended September 30, 2023. The increase was primarily driven by a $20.8 million increase in preclinical and clinical development activities, a $8.1 million increase in manufacturing costs, and a $5.0 million increase in compensation costs driven by the build-out of our research and development organization, partially offset by a $12.0 million decrease in antibody discovery costs and a $1.8 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 June 30, 2024 and June 30, 2023, external research and development costs were $27.8 million and $10.4 million, respectively. The increase was primarily due to increased costs associated with our IBD pipeline candidates, partially offset by decreased costs related to the Company's legacy rare disease pipeline.

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 three months ended September 30, 2024 and 2023, external research and development costs were $38.9 million and $24.0 million, respectively. The increase was primarily due to increased costs associated with our IBD pipeline candidates, partially offset by decreased costs related to the Company's legacy rare disease pipeline.

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 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.

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 September 30, 2024 and 2023, internal research and development costs accounted for $5.8 million and $0.6 million, respectively. The increase was primarily due to increased compensation costs driven by the build-out of our research and development organization.

Previous wording

Interest Income. Interest income was $5.9 million and $0.4 million for the three months ended June 30, 2024 and 2023, respectively. The increase was primarily due to higher investment balances.

Current wording

Interest Income. Interest income was $5.2 million and $1.3 million for the three months ended September 30, 2024 and 2023, respectively. The increase was primarily due to higher investment balances.

Previous wording

Change in Fair Value of Forward Contract Liability. Non-cash expenses associated with the change in fair value of the forward contract liability were $58.2 million for the three months ended June 30, 2023. This expense was due to the change in fair value of the underlying Series A Preferred Stock between June 22, 2023 and June 30, 2023. There was no similar expense during the three months ended June 30, 2024.

Current wording

Change in Fair Value of Forward Contract Liability. Non-cash expense associated with the change in fair value of the forward contract liability was $25.4 million for the three months ended September 30, 2023. This expense was due to the change in fair value of the underlying Series A Preferred Stock between June 30, 2023 and the forward contract's settlement on July 7, 2023. There was no similar expense during the three months ended September 30, 2024.

Previous 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.

Current wording

Other (expense) income, net. Other (expense) income, net for the three months ended September 30, 2024 increased by $21.1 million versus the three months ended September 30, 2023 primarily driven by a $18.7 million change in fair value of the contingent value right liability during the current period compared to a $1.3 million decrease in fair value of the contingent right liability during the prior period.

Previous wording

The following table summarizes our results of operations for the six months ended June 30, 2024 and 2023, together with the changes in those items in dollars and as a percentage:

Current wording

The following table summarizes our results of operations for the nine months ended September 30, 2024 and 2023, together with the changes in those items in dollars and as a percentage:

Previous wording

Development Fee and Royalty Revenue. For the six months ended June 30, 2024, we did not recognize any revenue in connection with the Immedica Agreement. For the six months ended June 30, 2023, we recognized $0.9 million of development fee revenue in connection with the Immedica Agreement, which was attributable to the PEACE Phase 3 trial and drug supply and royalties from an early access program in France.

Current wording

Development Fee and Royalty Revenue. For the nine months ended September 30, 2024, we did not recognize any revenue in connection with the Immedica Agreement. For the nine months ended September 30, 2023, we recognized $0.9 million of development fee revenue in connection with the Immedica Agreement, which was attributable to the PEACE Phase 3 trial and drug supply and royalties from an early access program in France.

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 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.

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 nine months ended September 30, 2024 and 2023, external research and development costs accounted for $98.0 million and $42.5 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

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 six months ended June 30, 2024 and 2023, internal research and development costs accounted for $8.5 million and $12.5 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 an increase in costs associated with advancing our IBD pipeline candidates.

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 nine months ended September 30, 2024 and 2023, internal research and development costs accounted for $14.3 million and $13.3 million, respectively. The increase was primarily driven by an increase in compensation costs associated with an increase in research and development headcount, partially offset by 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.

Previous 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.

Current wording

General and Administrative Expenses. General and administrative expenses increased by $9.1 million, or 35%, to $35.0 million for the nine months ended September 30, 2024, from $25.9 million for the nine months ended September 30, 2023. The increase was primarily due to a $12.5 million increase in stock-based compensation expense, inclusive of a $2.4 million acceleration expense related to legacy Aeglea officers and directors, partially offset by a $2.6 million reduction in compensation costs primarily associated with lower legacy severance costs, and $1.4 million reduction in lease termination costs that were incurred in the prior year.

Previous wording

Acquired In-process Research and Development Expenses. Acquired in-process research and development expenses were $130.5 million for the three months ended June 30, 2023, as the acquisition of Pre-Merger Spyre was determined by management to be an asset acquisition, in accordance with U.S. GAAP as the product candidates were determined to have no alternative future use. There was no similar expense during the three months ended June 30, 2024.

Current wording

Acquired In-process Research and Development Expenses. Acquired in-process research and development expenses were $130.2 million for the nine months ended September 30, 2023, as the acquisition of Pre-Merger Spyre was determined by management to be an asset acquisition, in accordance with U.S. GAAP as the product candidates were determined to have no alternative future use. There was no similar expense during the nine months ended September 30, 2024.

Previous wording

Interest Income. Interest income was $10.4 million and $0.8 million for the six months ended June 30, 2024 and 2023, respectively. The increase was primarily due to higher investment balances.

Current wording

Interest Income. Interest income was $15.5 million and $2.0 million for the nine months ended September 30, 2024 and 2023, respectively. The increase was primarily due to higher investment balances.

Previous wording

Change in Fair Value of Forward Contract Liability. Non-cash expenses associated with the change in fair value of the forward contract liability were $58.2 million for the six months ended June 30, 2023. This expense was due to the change in fair value of the underlying Series A Preferred Stock between June 22, 2023 and June 30, 2023. There was no similar expense during the six months ended June 30, 2024.

Current wording

Change in Fair Value of Forward Contract Liability. Non-cash expense associated with the change in fair value of the forward contract liability was $83.5 million for the nine months ended September 30, 2023. This expense was due to the change in fair value of the underlying Series A Preferred Stock between June 22, 2023 and the forward contract's settlement on July 7, 2023. There was no similar expense during the nine months ended September 30, 2024.

Previous 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.

Current wording

Since our inception and through September 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 September 30, 2024, we had an accumulated deficit of $916.1 million.

Previous 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.

Current wording

Cash used in operating activities for the nine months ended September 30, 2024 was $120.2 million and reflected a net loss of $151.7 million. Our net loss was offset in part by non-cash expenses of $35.6 million for share-based compensation expense and a $19.6 million change in fair value of CVR liability, offset by a $15.3 million net change in operating assets and liabilities and $9.0 million in net accretion of discount on marketable securities. The net change in operating assets and liabilities was primarily driven by timing of payments to vendors.

Previous wording

Cash used in operating activities for the six months ended June 30, 2023 was $34.3 million and reflected a net loss of $235.5 million. Our net loss was offset in part by non-cash expenses of $130.5 million for acquired IPR&D, $58.2 million change in fair value of forward contract liability, $3.6 million for stock-based compensation, $2.6 million loss on disposal of long-lived assets, $1.0 million for depreciation and amortization, and $0.9 million loss on lease abandonment. The net change in operating assets and liabilities of $4.6 million primarily related to the continuing wind down of legacy operations.

Current wording

Cash used in operating activities for the nine months ended September 30, 2023 was $68.9 million and reflected a net loss of $275.6 million. Our net loss was offset in part by non-cash expenses of $130.2 million for acquired IPR&D, $83.5 million change in fair value of forward contract liability, $8.4 million for stock-based compensation, $2.6 million impairment loss on lease abandonment, $1.0 million for depreciation and amortization, and $0.9 million on disposal of long-lived assets. The net change in operating assets and liabilities of $3.3 million primarily related to the continuing wind down of legacy operations.

Previous 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.

Current wording

Cash used in investing activities for the nine months ended September 30, 2024 was $182.7 million and primarily consisted of $366.2 million in purchases of marketable securities, partially offset by $183.4 million in maturities and sales of marketable securities.

Previous 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.

Current wording

Cash used in investing activities for the nine months ended September 30, 2023, was $73.1 million and primarily consisted of $112.6 million in purchases of marketable securities, partially offset by $21.0 million in maturities and sales of marketable securities, $15.0 million in proceeds from the sale of in-process research & development asset, and $3.0 million cash assumed from the Asset Acquisition.

Previous 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

Current wording

Cash provided by financing activities for the nine months ended September 30, 2024 was $185.3 million, which primarily consisted of the net proceeds from the issuance of the Series B Preferred Stock in the March 2024 PIPE of $168.9 million, $11.8 million in net proceeds from the issuance of common stock in connection with the ATM, and $6.2 million from proceeds from stock option exercises and sales of Common Stock under our 2016 Employee Stock Purchase Plan and the exercise of pre-funded warrants.

Previous 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.

Current wording

Cash provided by financing activities for the nine months ended September 30, 2023, was $197.5 million, which primarily consisted of net 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 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.

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 and entered into license agreements with respect to SPY001, SPY002, and SPY003. Under the terms of each License Agreement, we are obligated to pay Paragon up to $22.0 million based on specific development, regulatory and clinical milestones for the first product under each agreement. With respect to the SPY002 License Agreement only, on a product by product basis, we are obligated to pay sublicensing fees of up to approximately $20 million upon the achievement of mostly commercial milestones.