Protara Therapeutics, Inc.: Form 10-Q for the period ended Mar 31, 2025

You should read the following discussion and analysis of our financial condition and results of operations together with the unaudited condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q.

Our actual results and timing of certain events may differ materially from the results discussed, projected, anticipated, or indicated in any forward-looking statements. We caution you that forward-looking statements are not guarantees of future performance and that our actual results of operations, financial condition and liquidity, and the development of the industry in which we operate may differ materially from the forward-looking statements contained in this Quarterly Report on Form 10-Q. In addition, even if our results of operations, financial condition and liquidity, and the development of the industry in which we operate are consistent with the forward-looking statements contained in this Quarterly Report on Form 10-Q, they may not be predictive of results or developments in future periods.

Overview

We are a New York City based clinical-stage biopharmaceutical company committed to advancing transformative therapies for the treatment of cancer and rare diseases. We were founded on the principle of applying modern scientific, regulatory or manufacturing advancements to established mechanisms in order to create new development opportunities. We prioritize creativity, integrity and tenacity to expedite our goal of bringing life-changing therapies to people with limited treatment options.

Our portfolio includes two development programs utilizing TARA-002, an investigational cell therapy based on the broad immunopotentiator, OK-432, which was originally granted marketing approval by the Japanese Ministry of Health and Welfare as an immunopotentiating cancer therapeutic agent. This cell therapy is currently approved in Japan and Taiwan for lymphatic malformations, or LMs, and multiple oncologic indications. We have secured worldwide rights to the asset excluding Japan and Taiwan and are exploring its use in oncology and rare disease indications. TARA-002 was developed from the same master cell bank of genetically distinct group A Streptococcus pyogenes as OK-432 (marketed as Picibanil® in Japan by Chugai Pharmaceutical Co., Ltd., or Chugai Pharmaceutical). We are currently developing TARA-002 in non-muscle invasive bladder cancer, or NMIBC, and in LMs. We are also pursuing intravenous, or IV, Choline Chloride, an investigational phospholipid substrate replacement therapy, for patients receiving parenteral support, or PS, which includes both nutrition and fluids.

Neither TARA-002 nor IV Choline Chloride have been approved for use for any indications.

TARA-002 in NMIBC

Our lead oncology program is TARA-002 in NMIBC, which is cancer found in the tissue that lines the inner surface of the bladder that has not spread into the bladder muscle. Bladder cancer is the sixth most common cancer in the United States, with NMIBC representing approximately 80% of bladder cancer diagnoses. Approximately 65,000 patients are diagnosed with NMIBC in the United States each year. Very few new therapeutics have been approved for NMIBC since the 1990s and the current standard of care for NMIBC includes intravesical Bacillus Calmette-Guérin, or BCG.

Following the completion of Phase 1a and 1b clinical trials to evaluate safety, preliminary efficacy and the dosing of TARA-002, at the 40KE (Klinische Einheit, or KE, is a German term indicating a specified weight of dried cells in vial) dose level, we initiated and are currently conducting our ADVANCED-2 clinical trial. ADVANCED-2 is a Phase 2 open-label clinical trial evaluating intravesical TARA-002 in at least 102 patients with high-grade carcinoma in situ, or CIS. Cohort A of the Phase 2 has completed enrollment and enrolled 31 patients with CIS (± Ta/T1 with Ta defined as non-invasive papillary carcinoma and T1 as defined as carcinoma invading the lamina propria), BCG-Naïve or BCG-Exposed, who have not received intravesical BCG for at least 24 months prior to CIS diagnosis. Cohort B of the Phase 2 trial is expected to enroll 75-100 patients with BCG-Unresponsive CIS (± Ta/T1) and is expected to be registrational based on the Food and Drug Administrations, or FDA’s, August 2024 Draft Guidance on BCG-Unresponsive Nonmuscle Invasive Bladder Cancer: Developing Drugs and Biological Products for Treatment.

We presented interim data from the ADVANCED-2 trial at the American Urology Association annual conference in April 2025 via a poster presentation with an April 16, 2025 data cutoff. The BCG-Unresponsive dataset included a total of five patients, all of whom were six- and nine-month evaluable, and three of whom were evaluable at 12 months. The complete response, or CR, rate at any time in BCG-Unresponsive patients was 100% (5/5). The CR rate in BCG-Unresponsive patients was 100% (5/5) at six months, 80% (4/5) at nine months, and 67% (2/3) at 12 months.

The BCG-Naïve dataset included a total of 21 patients, including 16 evaluable at six months, eight at nine months, and seven at 12 months. The CR rate at any time in BCG-Naïve patients was 76% (16/21). The CR rate in BCG-Naïve patients was 63% (10/16) at six months, 63% (5/8) at nine months, and 43% (3/7) at 12 months.

The majority of adverse events were Grade 1 and transient with no Grade 3 or greater treatment-related adverse events, or TRAEs, as assessed by study investigators. No patients discontinued treatment due to TRAEs. The most common adverse events were in line with typical responses to bacterial immunopotentiation, such as flu-like symptoms. The most common urinary symptoms reflect urinary tract instrumentation effects, such as bladder spasm, burning sensation, and urinary tract infection. Most bladder irritations resolved shortly after administration or within a few hours to a few days.

We expect to share an interim analysis in Cohort B (BCG-Unresponsive) of the clinical trial by the end of 2025, which will include data from approximately 25 six-month evaluable patients. Based on the positive responses demonstrated by TARA-002 in BCG-Naïve patients, we expect to engage with FDA on the design of a registration study in BCG-Naïve patients, as a potential follow-on indication for TARA-002.

We intend to discuss with the FDA a protocol for a registrational trial evaluating TARA-002 in BCG-Naïve patients, and expect to provide an update on the design of this clinical trial following regulatory alignment in the second half of 2025.

In addition to the ADVANCED-2 trial, we plan to continue to explore the anti-tumor activity related to the administration of TARA-002 via systemic administration. We continue to believe that combination therapy may play a meaningful role in the NMIBC treatment paradigm and intend to evaluate TARA-002 in combination with other therapies. Given what we have observed to date of TARA-002’s mechanism of action and safety profile, we believe it has strong potential as a combination agent, and we continue to evaluate potential combination therapy options for our clinical program. We also continue to conduct non-clinical studies on TARA-002 to better characterize the mechanism of action to help us understand how TARA-002 may perform in potential combinations with other agents used to treat NMIBC, and to help us define other cancer targets for TARA-002, both within urothelial cancer and other types of cancer affecting different parts of the body.

IV Choline Chloride Program for Parenteral Support

We are also pursuing IV Choline Chloride, an investigational phospholipid substrate replacement therapy, for patients receiving PS, which includes both nutrition and fluids. Choline is a known important substrate for phospholipids that are critical for healthy liver function and also plays an important role in modulating gene expression, cell membrane signaling, brain development, neurotransmission, muscle function and bone health. PS patients are unable to synthesize choline from enteral nutrition sources, and there are currently no available PS formulations containing choline. Every year in the U.S. there are approximately 90,000 people who require PS at home and of those approximately 30,000 are on long-term PS. IV Choline Chloride has the potential to become the first FDA-approved IV choline formulation for PS patients.

An IV formulation of choline is recommended for patients on parenteral nutrition, or PN, by the American Society for Parenteral and Enteral Nutrition, or ASPEN, in their Recommendations for Changes in Commercially Available Parenteral Multivitamin and Multi–Trace Element Products, as well as by the European Society for Clinical Nutrition and Metabolism, or ESPEN, in their Guideline on Home Parenteral Nutrition. IV Choline Chloride has been granted Orphan Drug Designation by the FDA for the prevention and/or treatment of choline deficiency in patients on long-term PN. The U.S. Patent and Trademark Office, or USPTO, has issued us a U.S. patent claiming a choline composition and a U.S. patent claiming a method for treating choline deficiency with a choline composition, each with a term expiring in 2041.

In April 2024, we announced alignment with the FDA on a registrational path forward for IV Choline Chloride. Previously, we had been pursuing an indication in intestinal failure-associated liver disease, or IFALD, and following feedback from the FDA, are pursuing a broader indication as a source of choline when oral or enteral nutrition is not possible, insufficient, or contraindicated. Feedback from the FDA on our IV Choline Chloride program indicated that a single study with an endpoint of restoring choline levels in PS patients could serve as the basis for a regulatory submission for IV Choline Chloride.

In September 2024, we presented the results of THRIVE-1, a prospective, observational study evaluating the prevalence of choline deficiency and liver injury in patients dependent on PS in the U.S., U.K, and Europe at the ESPEN Congress. The study found that 78% of patients who are dependent on PS were choline deficient, and that 63% of choline deficient participants had liver dysfunction, including steatosis, cholestasis and hepatobiliary injury, underscoring the need for IV Choline supplementation in this patient population.

We plan to advance the development of IV Choline Chloride as a source of choline for adult and adolescent patients on long-term PS and intend to initiate THRIVE-3, a registrational Phase 3 clinical trial, in the third quarter of 2025. THRIVE-3 is a seamless Phase 2b/3 trial with a dose confirmation portion (n=24) followed by a double-blinded, randomized, placebo-controlled portion to assess the efficacy and safety of IV Choline Chloride over 24 weeks in adolescents and adults on long-term PS when oral or enteral nutrition is not possible, insufficient, or contraindicated (n=100). The primary endpoint of the clinical trial is a pharmacokinetic, or PK, endpoint measuring the change from baseline in plasma choline concentration. We also plan to include a number of secondary endpoints related to liver, bone, and memory. The FDA has also granted IV Choline Chloride Fast Track Designation as a source of choline when oral or enteral nutrition is not possible, insufficient, or contraindicated.

TARA-002 in LMs

We are also pursuing TARA-002 in LMs, which are rare, non-malignant cysts of the lymphatic vascular system that primarily form in the head and neck region of children before the age of two. In July 2020, the FDA granted Rare Pediatric Disease Designation for TARA-002 for the treatment of LMs and in May 2022 the European Commission granted Orphan Drug Designation to TARA-002 for the treatment of LMs. In addition to the clinical experience in Japan, we have secured the rights to a dataset from one of the largest ever conducted Phase 2 trials in LMs, in which OK-432 was administered via a compassionate use program led by the University of Iowa to over 500 pediatric and adult patients. We have an open investigational new drug application, or IND, for TARA-002 in LMs with the Vaccines and Related Products Division of the FDA, or Vaccines Division.

In October 2023, we initiated STARBORN-1, which is a Phase 2 single-arm, open-label, prospective clinical trial to evaluate the safety and efficacy of intracystic injection of TARA-002 for the treatment of macrocystic and mixed-cystic LMs (≥ 50% macrocystic disease) in participants six months to less than 18 years of age in the U.S. Including an age de-escalation safety lead-in, the clinical trial will enroll approximately 30 patients who will receive up to four injections of TARA-002 spaced approximately six weeks apart. The primary endpoint of the clinical trial is the proportion of participants with macrocystic LMs and mixed-cystic LMs who demonstrated clinical success, defined as having either a CR (90% to 100% reduction from baseline in total LM volume) or substantial response (60% to less than 90% reduction in total LM volume) as measured by axial imaging.

In September 2024, we announced interim data from the first safety cohort in the STARBORN-1 trial. Of three patients treated in the first cohort, which enrolled individuals six years to less than 18 years of age, two patients treated with TARA-002 achieved a CR after receiving one injection of TARA-002; the responses were seen in a patient with a macrocystic LM and a patient with a maxillofacial cyst called a ranula. The tolerability observed in this cohort was consistent with patients’ historical experience with OK-432 and included treatment emergent adverse events, or TEAEs, of pain, swelling, fatigue and body temperature increases. All TEAEs were mild to moderate and resolved. We expect to provide an interim update from our STARBORN-1 trial in the second half of 2025.

Other Potential Opportunities

We believe TARA-002 may also have the potential to be used to treat other maxillofacial cysts based on the historical literature from the TARA-002 predecessor, OK-432, as well as recent data from the STARBORN-1 trial in which the one pediatric patient with a ranula achieved a CR after a single 1KE injection of TARA-002. While completing STARBORN-1 in LMs is our priority, we believe there may be an opportunity in the future to explore the potential of TARA-002 to treat different types of maxillofacial cysts.

Financial Overview

We have devoted substantial efforts to the development of our programs and do not have any approved products and have not generated any revenue from product sales. We do not expect to generate revenues in the near-term, and it is possible we may never generate revenues in the future. To finance our current strategic plans, including the conduct of ongoing and future clinical trials and further research and development costs, we will need to raise additional capital. See “—Liquidity and Capital Resources” for additional information about our liquidity and capital resource needs.

Since inception, we have incurred significant operating losses. As of March 31, 2025, we had an accumulated deficit of approximately $256.9 million. We expect to continue to incur significant and increasing expenses and operating losses for at least the next few years as we continue our development of, and seek marketing approvals for, our product candidates, prepare for and begin the commercialization of any approved products, and add infrastructure and personnel to support our product development efforts and operations as a public company in the United States.

As a clinical-stage company, our expenses and results of operations are likely to fluctuate significantly from quarter-to-quarter and year-to-year. We believe that our period-to-period comparisons of our results of operations should not be relied upon as indicative of our future performance.

As of March 31, 2025, we had approximately $157.5 million in unrestricted cash and cash equivalents and marketable debt securities.

Financial Overview

Research and Development

Research and development expenses consist primarily of costs incurred for the development of TARA-002 and IV Choline Chloride, which include personnel-related expenses, including salaries, benefits, travel and stock-based compensation expense, external expenses incurred under agreements with contract research organizations, or CROs, contract development and manufacturing organizations, or CDMOs, the cost of acquiring, developing and manufacturing clinical trial materials, clinical and non-clinical related costs, costs associated with regulatory operations and facilities, depreciation and other expenses, which include expenses for rent and maintenance of facilities and other supplies.

General and Administrative

General and administrative expenses consist primarily of personnel-related expenses, including salaries, benefits, travel and stock-based compensation expense, in executive and other administrative functions. Other general and administrative expenses also include professional fees for business and market development, legal, intellectual property matters, consulting and accounting services, facility related costs, as well as expenses related to audit, legal, regulatory and tax-related services associated with maintaining compliance with our Nasdaq Global Market, or Nasdaq, listing and Securities and Exchange Commission, or SEC, requirements, director and officer liability insurance premiums and investor relations costs associated with being a public company.

Other Income (Expense), net

Other Income (Expense), net consists of interest and investment income and other income. Interest and investment income consists of interest and dividend income on our cash and cash equivalents and marketable debt securities and amortization of premiums and/or accretion of discounts.

Critical Accounting Policies and Significant Judgments and Estimates

Our management’s discussion and analysis of our financial position and results of operations is based on our financial statements, which have been prepared in accordance with accounting principles generally accepted in the United States of America, or GAAP. The preparation of financial statements in conformity with GAAP requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and other market-specific or other relevant assumptions that we believe to be reasonable under the circumstances. Actual results may differ materially from those estimates or assumptions.

Our critical accounting policy is the accounting for accrued research and development expenses. We record accruals for estimated costs of research, preclinical, clinical and manufacturing development within accrued expenses which are significant components of research and development expenses. A substantial portion of our ongoing research and development activities are conducted by third-party service providers. We accrue costs incurred under these third-party arrangements based on estimates of actual work completed in accordance with the respective agreements. We determine the estimated costs to accrue through discussions with internal personnel and our external service providers as to the percentage of completion of the services and the agreed-upon fees to be paid for such services. Payments made to third parties under these arrangements in advance of performance of the related services are recorded as prepaid expenses until the services are rendered.

It is important that the discussion of our operating results that follow be read in conjunction with our accounting policies which have been disclosed in our Annual Report on Form 10-K filed with the SEC on March 5, 2025.

Results of Operations

Comparison of the Three Months Ended March 31, 2025 and 2024

The following table summarizes our results of operations (in thousands) for the three months ended March 31, 2025 and 2024:

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Research and development expenses

The following table summarizes our research and development expenses (in thousands) for the three months ended March 31, 2025 and 2024:

Research and development expenses were $9.1 million for the three months ended March 31, 2025, which represented an increase of approximately $1.4 million as compared to the three months ended March 31, 2024. This increase was primarily due to a $2.6 million increase in direct expenses for our product candidates partially offset by a $1.2 million decrease in indirect expenses. The decrease in indirect expenses was primarily due to a $0.7 million decrease in personnel-related expenses and a decrease of $0.6 other research and development expenses not directly attributable to a single product candidate.

General and administrative expenses

General and administrative expenses were $5.0 million for the three months ended March 31, 2025, which represented an increase of approximately $0.9 million as compared to the three months ended March 31, 2024. This increase was primarily due to an increase of $0.4 million in personnel-related expenses as well as increases in market development and investor relations activities of $0.2 million and $0.2 million, respectively.

Other income (expense), net

Other income (expense), net was $2.2 million for the three months ended March 31, 2025, which represented an increase of approximately $1.5 million as compared to the three months ended March 31, 2024, due primarily to higher investment returns on a higher invested balance as well as a $0.5 million increase in other income.

Liquidity and Capital Resources

Overview

As of March 31, 2025 and December 31, 2024, our unrestricted cash and cash equivalents and marketable debt securities were $157.5 million and $170.3 million, respectively. We have not generated revenues since our inception and have incurred net losses of $11.9 million and $11.1 million for the three months ended March 31, 2025 and 2024, respectively. As of March 31, 2025, we had working capital of $119.5 million and stockholder’s equity of $158.5 million. During the three months ended March 31, 2025, net cash flows used in operating activities were $14.7 million, consisting primarily of a net loss of $11.9 million including non-cash expenses of $1.0 million, as well as working capital adjustments of $(3.8) million. Since inception, we have met our liquidity requirements principally through the sale of our common stock, preferred stock and pre-funded warrants in private placements and public offerings, including those described in Note 10 to our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q (which descriptions are summaries only, do not purport to be complete and are qualified in their entirety by reference to the documents referenced therein and included as an exhibit to this Quarterly Report on Form 10-Q and/or the Annual Report on Form 10-K). In addition, we may receive additional proceeds upon the exercise of the common warrants issued in the April 2024 Private Placement. More recently, on January 8, 2025, the Underwriters of the December 2024 Public Offering notified us of their determination to exercise the Underwriters’ Option in part, and purchased an additional 438,738 shares of common stock, at the public offering price less underwriting discounts and commissions, which resulted in net proceeds of approximately $2.5 million after deducting placement agent fees and offering expenses.

We are in the business of developing biopharmaceuticals and have no current or near-term revenues. We have incurred substantial clinical and other costs in our drug development efforts. We will need to raise additional capital in order to fully realize management’s plans.

We believe that our current financial resources, as of the date of the issuance of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q, are sufficient to satisfy our estimated liquidity needs for at least twelve months from the date of filing this Quarterly Report on Form 10-Q.

As a result of volatility in the capital markets, economic conditions, general global economic uncertainty, political and regulatory change and uncertainty, global pandemics, and other factors, we do not know whether additional capital will be available when needed, or that, if available, we will be able to obtain additional capital on reasonable terms. If we are unable to raise additional capital due to volatile global financial markets, general economic uncertainty or other factors, we may need to curtail planned development activities. Despite recent moderation, the sustained elevated interest rates in recent years have had, and may continue to have, a negative effect on market prices for common stock of public companies, especially those in the biotech industry and those that have no current or near-term revenue. Further, a recession or market correction, supply chain disruptions and/or continued inflation could materially affect our business and the value of our common stock.

Cash Flows

The following table summarizes our sources and uses of cash (in thousands) for the three months ended March 31, 2025 and 2024:

Comparison of the Three Months Ended March 31, 2025 and 2024

Net cash provided by (used in) operating activities was approximately $(14.7) million for the three months ended March 31, 2025 compared to approximately $(10.4) million for the three months ended December 31, 2024. The increase of approximately $4.3 million in cash used in operating activities was primarily driven by an increase in working capital adjustments, primarily related to changes in prepaid expenses and other current assets, accounts payable, and accrued expenses resulting from the timing of payments to our service providers of $3.0 million as well as an increase in net loss of $0.8 million and a $0.5 million decrease in non-cash items, consisting principally of stock-based compensation expense.

Net cash provided by (used in) investing activities was approximately $(58.4) million for the three months ended March 31, 2025 compared to approximately $23.1 million for the three months ended March 31, 2024. The change in cash provided by (used in) investing activities of $81.5 million resulted primarily from an increase of $65.8 million in marketable debt securities purchased as well as a decrease of $15.6 million in proceeds from marketable debt securities matured.

Net cash provided by (used in) financing activities was $1.7 million for the three months ended March 31, 2025 compared to $(0.1) million for the three months ended March 31, 2024. The change in cash provided by (used in) financing activities of approximately $1.8 million resulted primarily from the net proceeds of $2.5 million from the issuance of common stock in connection with the exercise of the Underwriters’ option, offset partially by $0.6 million of cash paid in connection with the December 2024 Public Offering.

Contractual and Other Obligations

Operating lease obligations

Our operating lease obligations primarily consist of lease payments on our corporate headquarters in New York, New York, as well as lease payments for our development laboratory, a manufacturing facility and an additional manufacturing space, all located in North America which are described in further detail in Note 8 of our condensed consolidated financial statements included in this Quarterly Report on Form 10-Q.

Other obligations

From time to time, we enter into certain types of contracts that contingently require us to indemnify parties against third-party claims, supply agreements and agreements with directors and officers. The terms of such obligations vary by contract and in most instances a maximum dollar amount is not explicitly stated therein. Generally, amounts under these contracts cannot be reasonably estimated until a specific claim is asserted, thus no liabilities have been recorded for these obligations on our condensed consolidated balance sheet for the periods presented.

We enter into contracts in the normal course of business with CROs, CDMOs and clinical sites for the conduct of clinical trials, non-clinical research studies, professional consultants for expert advice and other vendors for clinical supply manufacturing or other services. These contracts generally provide for termination on notice, and therefore are cancelable contracts.

Certain of these agreements require us to pay milestones to such third parties upon achievement of certain development, regulatory or commercial milestones as further described in Note 9 of our condensed consolidated financial statements included elsewhere in this Quarterly Report on Form 10-Q. Amounts related to contingent milestone payments are not considered contractual obligations as they are contingent on the successful achievement of certain development, regulatory approval and commercial milestones, which may not be achieved.

We also have obligations to make future payments to third parties that become due and payable on the achievement of certain milestones, including future payments to third parties with whom we have entered into research, development and commercialization agreements. We have not included these commitments on our condensed consolidated balance sheet for the periods presented because the achievement and timing of these milestones is not fixed and determinable.

Off-Balance Sheet Arrangements

We did not have, during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under the applicable regulations of the SEC.

Management’s Evaluation of our Disclosure Controls and Procedures

We maintain disclosure controls and procedures, as defined in Rules 13a-15(e) or 15d-15(e) under the Securities Exchange Act of 1934, or Exchange Act, that are designed to ensure that information required to be disclosed in the reports that we file or submit under the Exchange Act is (1) recorded, processed, summarized, and reported within the time periods specified in the SEC’s rules and forms and (2) accumulated and communicated to our management, including our principal executive officer and principal financial officer, as appropriate, to allow timely decisions regarding required disclosure.

As of March 31, 2025, our management, with the participation of our principal executive and principal financial officer, evaluated the effectiveness of our disclosure controls and procedures as of the end of the period covered by this Quarterly Report on Form 10-Q. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives, and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Our principal executive and principal financial officer have concluded based upon the evaluation described above that, as of March 31, 2025, our disclosure controls and procedures were effective at the reasonable assurance level.

We continue to review and document our disclosure controls and procedures, including our internal controls and procedures for financial reporting, and may from time to time make changes aimed at enhancing their effectiveness and to ensure that our systems evolve with our business.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting during the quarter ended March 31, 2025, as such term is defined in Rules 13a-15(f) and 15(d)-15(f) promulgated under the Exchange Act, that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

There were no material changes to the risk factors previously disclosed in “Part II, Item 1A—Risk Factors” of our Annual Report on Form 10-K for the year ended December 31, 2024, filed with the SEC on March 5, 2025.