PROTHENA CORP PUBLIC LTD CO (PRTA)

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In addition to historical information, this Form 10-K contains forward-looking statements which may cause our actual results to differ materially from expectations, plans and anticipated results discussed in forward-looking statements. Factors that could cause our actual results to differ materially include, but are not limited to, the risks and uncertainties set forth in the “Summary of Risks Affecting Our Business” at the beginning of this Form 10-K, Item 1A “Risk Factors” of this Form 10-K, and in our other filings with the SEC.

This discussion should be read in conjunction with the Consolidated Financial Statements and Notes to the Consolidated Financial Statements presented in Item 8 of this Form 10-K.

Overview

Prothena is a late-stage clinical biotechnology company with expertise in protein dysregulation and a pipeline of investigational therapeutics with the potential to change the course of devastating neurodegenerative and rare peripheral amyloid diseases.

Fueled by our deep scientific expertise built over decades of research, we are advancing a pipeline of therapeutic candidates for a number of indications and novel targets for which our ability to integrate scientific insights around neurological dysfunction and the biology of misfolded proteins can be leveraged. Our wholly-owned programs include birtamimab for the potential treatment of AL amyloidosis, and a portfolio of programs for the potential treatment of Alzheimer’s disease including PRX012, which targets amyloid beta (Aβ), and PRX123, a novel dual Aβ-tau vaccine. Our partnered programs include prasinezumab for the potential treatment of Parkinson’s disease and other related synucleinopathies that targets alpha-synuclein in collaboration with Roche. In addition, we have partnered BMS-986446 (formerly PRX005) for the potential treatment for Alzheimer’s disease that targets tau and PRX019 for the potential treatment of neurodegenerative diseases with an undisclosed target in two separate license agreements with Bristol Myers Squibb (BMS). We are also entitled to certain potential milestone payments pursuant to our share purchase agreement with Novo Nordisk pertaining to our ATTR amyloidosis business (inclusive of coramitug, formerly PRX004).

We were formed on September 26, 2012, under the laws of Ireland and re-registered as an Irish public limited company on October 25, 2012. Our ordinary shares began trading on The Nasdaq Global Market under the symbol “PRTA” on December 21, 2012, and currently trade on The Nasdaq Global Select Market.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the U.S. (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We believe the following policies to be critical to the judgments and estimates used in the preparation of our financial statements.

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Revenue Recognition

Our collaboration revenue includes revenue recognized for milestone payments and reimbursements under our License Agreement with Roche as well as revenue recognized under our Collaboration Agreement with BMS. Our license and intellectual property revenue includes revenue from Novo Nordisk for the sale of intellectual property and related rights to the Company’s ATTR amyloidosis business and pipeline and milestones payments.

Revenue is recognized only when we satisfy an identified performance obligation by transferring a promised good or service to a customer. We recognize revenue associated with our collaboration arrangements, which may require us to exercise considerable judgment in estimating revenue to be recognized, including judgments made on day one accounting and judgments associated with the amount of revenue to be recognized over time as performance obligations are satisfied.

Contracts with Multiple Performance Obligations

Significant judgment is required to apply the authoritative accounting guidance at the outset of a collaboration arrangement, and over time. Our Collaboration Agreement with BMS and our License Agreement with Roche contain multiple performance obligations. In the identification of performance obligations, there is judgment involved in identifying the promised goods or services in the collaboration agreement, determining whether these are distinct in the context of the contract, and determining if these represent a performance obligation to a customer. These determinations are highly subjective and can differ between arrangement based on specific contractual terms. The identified performance obligations will impact most significantly the timing of revenue recognition, and is a point-in-time assessment performed at the outset of a collaboration arrangement. We account for the individual performance obligations separately if they are distinct. Factors considered in the determination of whether the license performance obligations are distinct included, among other things, the research and development capabilities of each of BMS and Roche and their respective sublicense rights, and for the remaining performance obligations the fact that they are not proprietary and can be and have been provided by other vendors. The transaction price is allocated to the separate performance obligation on a relative standalone selling price basis.

Milestone Revenue

We generally classify each of our milestones into one of three categories: (i) clinical milestones; (ii) regulatory and development milestones; and (iii) commercial milestones. Clinical milestones are typically achieved when a product candidate advances into or completes a defined phase of clinical research. For example, a milestone payment may be due to us upon the initiation of a clinical trial for a new indication. Regulatory and development milestones are typically achieved upon acceptance of the submission for marketing approval of a product candidate or upon approval to market the product candidate by the FDA or other regulatory authorities. For example, a milestone payment may be due to us upon submission for marketing approval of a product candidate by the FDA. Commercial milestones are typically achieved when an approved product reaches certain defined levels of net royalty sales by the licensee of a specified amount within a specified period.

At the inception of each arrangement that includes developmental, regulatory or commercial milestone payments, we evaluate whether achieving the milestones is considered probable and estimate the amount to be included in the transaction price using the most likely amount method, which includes judgment. If it is probable that a significant revenue reversal would not occur, the value of the associated milestone (such as a regulatory submission by Prothena) is included in the transaction price. Milestone payments that are not within our control, such as approvals from regulators or where attainment of the specified event is dependent on the development activities of a third party, are not considered probable of being achieved until those approvals are received or the specified event occurs. In general, we consider such milestone payments as variable consideration with constraint and therefore we recognize the revenue from such milestone payments as collaboration revenue at point in time when we can conclude it is probable that a significant revenue reversal will not occur in future periods.

Research and Development

We expense R&D costs as incurred. R&D expenses include, but are not limited to, salary and benefits, share-based compensation, clinical trial activities, drug development and manufacturing prior to FDA approval and third-party service fees, including clinical research organizations, investigative sites and contract manufacturing organizations. A significant portion of our research and development expenses in the Consolidated Statements of Operations are external costs, which we track on a program-specific basis when the applicable program was separately tracked in preclinical development. These research and development expenses include the conduct of preclinical studies and clinical trials, contract manufacturing activities and consulting services. The measurement of these research and development costs and/or effort can impact the research and development expenses in the Consolidated Statements of Operations and of prepaid assets and accrued liabilities on the

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Consolidated Balance Sheets. The level of judgment required to estimate research and development expenses varies based on the nature of the services being performed and the underlying support obtained. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided to us by our vendors on their actual costs incurred. We recognize costs for contract manufacturing based on evaluation of the progress to completion of specific tasks. As such, expense accruals related to clinical trials and contract manufacturing are recognized based on our estimate of the degree of completion of the events specified in the specific clinical study or trial contract or drug development and manufacturing contract, respectively. We estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. As actual costs become known, we adjust our accrued estimates. These estimates are based on certain assumptions and inputs that can be challenging to assess, including the evaluation of the status of and costs incurred for manufacturing activities, outsourced research and development programs and project milestones achieved. Although we do not expect our estimates to be materially different from amounts actually incurred, incomplete or inaccurate data from vendors could impact our understanding of the status and timing of services performed which could result in us reporting expenses that are too high or too low in any particular period.

We do not need to make significant estimates where costs incurred are supported by invoices or reports of costs incurred are obtained from a vendor that is directly performing the underlying services, such as a consultant, contract research organization or contract manufacturing organization. In some cases, however, expense is recorded using an underlying assumption of the progress to completion of specific activities. For example, costs may be recognized based on the passage of time for activities that span reporting periods. If the provision of services is not linear then this assumption could impact the amount of expense recognized. For other activities, such as for certain clinical trials, expense is recorded based on information obtained from vendors as an intermediary to those performing the underlying services, such as contract research organizations. These estimates are inherently more judgmental since the quality and availability of the underlying data may vary. We expect that the level of judgment in estimating research and development expenses may increase over time as we are entering later stage, more extensive, clinical trials.

The information contained in Note 2 to the Consolidated Financial Statements under the headings “Recently Issued Accounting Pronouncements Not Yet Adopted” and “Recently Adopted Accounting Pronouncement - Segment Reporting” are hereby incorporated by reference into this Part II, Item 7.

Results of Operations

Comparison of Years Ended December 31, 2024 and 2023

Revenue

Total revenue was $135.2 million and $91.4 million for the years ended December 31, 2024, and 2023, respectively.

Collaboration revenue from BMS increased $43.8 million for the year ended December 31, 2024, compared to the year ended December 31, 2023. Collaboration revenue from BMS for 2024 included recognition of $110.1 million from the PRX019 Global License Agreement and related development services and $25.0 million was related to BMS’s material rights for the US Rights and Global Rights for the TDP-43 Collaboration Target that expired unexercised as a result of the expiration of the research term of the Collaboration Agreement. Collaboration revenue from BMS for 2023 included recognition of $91.3 million from the Tau Global License Agreement and related development services. See Note 7, “Significant Agreements” to the Consolidated Financial Statements regarding the Collaboration Agreement with BMS for more information.

License and intellectual property revenue for the year ended December 31, 2024 was $50,000 compared to $50,000 for the year ended December 31, 2023. See Note 7, “Significant Agreements” to the Consolidated Financial Statements regarding the Novo Nordisk Share Purchase Agreement for more information.

Assuming no significant change in our business, we expect our 2025 revenue to decline over the prior year as our 2024 revenue was primarily comprised of nonrecurring revenue.

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Operating Expenses

Total operating expenses consist of R&D expenses, general and administrative (“G&A”) expenses. Our operating expenses were $289.7 million and $282.4 million for the years ended December 31, 2024, and 2023, respectively.

Our research activities are aimed at developing new drug products. Our development activities involve the translation of our research into potential new drugs. Our R&D expenses primarily consist of personnel costs and related expenses, including share-based compensation and external costs associated with clinical activities and drug development related to our drug programs, including birtamimab, BMS-986446 (PRX005), PRX012, PRX123, PRX019 and preclinical activities related to our discovery programs.

Our G&A expenses primarily consist of personnel costs and related expenses, including share-based compensation and consulting expenses.

Research and Development Expenses

Our R&D expense increased by $1.9 million for the year ended December 31, 2024, compared to the prior year. The increase for the year ended December 31, 2024, was primarily due to higher clinical trial expenses primarily related to the PRX012 and birtamimab programs, higher personnel expenses; offset in part by lower manufacturing expense and lower other R&D expenses.

The following table sets forth the R&D expenses for our major programs (specifically, any active program with successful first dosing in a Phase 1 clinical trial), which were birtamimab, prasinezumab, coramitug, BMS-986446 (PRX005), PRX012, PRX019 and other R&D expenses for the years ended December 31, 2024, and 2023 (in thousands):

(1)     On July 8, 2021, we sold shares of one of our wholly-owned subsidiaries to Novo Nordisk. In connection with the transaction, Novo Nordisk acquired our ATTR amyloidosis business, including the clinical stage antibody coramitug (PRX004). Expenses incurred relate to certain close out activities and transition services provided to Novo Nordisk.

(2)     R&D costs include the costs incurred from the date when PRX019 was separately tracked in preclinical development.

(3)     Other R&D is comprised primarily of preclinical development and discovery programs that have not progressed to first patient dosing in a Phase 1 clinical trial and close out costs for programs that we are no longer advancing.

General and Administrative Expenses

Our G&A expenses increased by $5.4 million, for the year ended December 31, 2024, compared to the prior year primarily due to higher personnel expense.

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Other Income (Expense)

Interest income decreased by $5.2 million for the year ended December 31, 2024, compared to the prior year, primarily due to lower interest income from our cash and money market accounts resulting from lower interest rates and lower cash and money market balances.

Other income (expense), net for the year ended December 31, 2024, was primarily foreign exchange losses from transactions with vendors denominated in euros.

Provision for (benefit from) Income Taxes

The benefit from income taxes decreased by $6.8 million for the year ended December 31, 2024, compared to the same period in the prior year. The decline in benefit from income taxes for the year ended December 31, 2024, compared to the prior year, was primarily due to a lower increase in deferred tax assets related to Section 174 R&D Capitalization.

The tax provisions for all periods presented primarily reflect U.S. federal taxes associated with recurring profits attributable to intercompany services that our U.S. subsidiary performs for the Company. No tax benefit has been recorded related to tax losses recognized in Ireland and any deferred tax assets for those losses are offset by a valuation allowance.

Comparison of the years ended December 31, 2023 and 2022

Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” in our 2023 Annual Report on Form 10-K for a discussion of the results of operations for the year ended December 31, 2023 compared to the year ended December 31, 2022.

Liquidity and Capital Resources

Overview

Working capital was $436.9 million as of December 31, 2024, a decrease of $145.5 million from working capital of $582.4 million as of December 31, 2023. This decrease in working capital during the year ended December 31, 2024, was

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primarily attributable to cash use of $289.7 million for operating expenses (adjusted to exclude non-cash charges) offset in part by $80.0 million option exercise payment from BMS, interest income on investments of $25.8 million, and net proceeds received from stock option exercises of approximately $1.9 million.

As of December 31, 2024, we had $471.4 million in cash and cash equivalents. Based on our current business plans, we believe that our existing cash and cash equivalents at December 31, 2024 are sufficient to meet our obligations for at least the next twelve months. To operate beyond such period, or if we elect to increase our spending on research and development programs significantly above current long-term plans or enter into potential licenses and/or other acquisitions of complementary technologies, products or companies, we may need additional capital. Additionally, in order to develop and obtain regulatory approval for our potential products we will need to raise substantial additional capital. We expect to continue to finance future capital needs that exceed our existing cash and cash equivalents, payments pursuant to our agreements with Roche, BMS, and Novo Nordisk, and, to the extent necessary, other collaboration agreements with corporate partners, or other arrangements, and through proceeds from public or private equity or debt financings, and loans, including pursuant to the Amended Distribution Agreement (See Note 8, “Shareholders’ Equity” to the Consolidated Financial Statements for more information). We cannot assume that such additional financings will be available on acceptable terms, if at all, and such financings may only be available on terms dilutive to our shareholders.

In managing our liquidity needs in Ireland, we do not rely on unrepatriated earnings as a source of funds. As of December 31, 2024, $265.3 million of our outstanding cash and cash equivalents related to U.S. operations are considered permanently reinvested. We do not intend to repatriate these funds. However, if these funds were repatriated back to Ireland, we would incur a withholding tax from the dividend distribution.

The adequacy of our cash resources depends on many assumptions, including assumptions with respect to our expenses. These assumptions may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development of our product candidates. Our future capital requirements will depend on numerous factors, including, without limitation, the timing of initiation, progress, results and costs of our clinical trials; the results of our research and nonclinical studies; the costs of clinical manufacturing and of establishing commercial manufacturing arrangements; the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; the costs and timing of capital asset purchases; our ability to establish research collaborations, strategic collaborations, licensing or other arrangements; the costs to satisfy our obligations under current and potential future collaborations; the costs of any in-licensing transactions; and the timing, receipt, and amount of revenues or royalties, if any, from any approved drug candidates.

Our cash and cash equivalents may also be potentially supplemented in the future by proceeds from our collaboration partners BMS (formerly Celgene), Roche and milestone payments from Novo Nordisk. Pursuant to the Collaboration Agreement with Roche, we are eligible to receive payments for commercial and regulatory milestones and royalties on net sales of Collaboration Products. See Note 7, “Significant Agreements” to our Consolidated Financial Statements regarding the Roche License Agreement for more information. Pursuant to the Collaboration Agreement with BMS, we are eligible to receive payments for commercial and regulatory milestones and royalties on net sales of Collaboration Products. See Note 7, “Significant Agreements” to our Consolidated Financial Statements regarding the Collaboration Agreement with BMS for more information. Pursuant to the share purchase agreement with Novo Nordisk, we are eligible to receive development and sales milestone payments. See Note 7, “Significant Agreements” to our Consolidated Financial Statements regarding the Novo Nordisk Share Purchase Agreement for more information.

Cash Flows

The following table summarizes, for the periods indicated, selected items in our Consolidated Statements of Cash Flows (in thousands):

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Cash Used in Operating Activities

Net cash used in operating activities was $150.1 million for the year ended December 31, 2024, which was primarily due to ongoing research and development activities and general and administrative expenses to support those activities for a total of $289.7 million in operating expenses (adjusted to exclude non-cash charges of approximately $40.2 million) partially offset by $80.0 million option exercise payment from BMS, interest income on investments of $25.8 million, and cash from collection of accounts receivable of $5.2 million.

Cash Used in Investing Activities

Net cash used in investing activities was $0.3 million for the year ended December 31, 2024, which primarily consisted of expenditures to purchase property and equipment.

Cash Provided by Financing Activities

Net cash provided by financing activities was $1.6 million for the year ended December 31, 2024, primarily from proceeds from issuances of ordinary shares upon exercises of stock options of $1.9 million.

Years ended December 31, 2023 and 2022

Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” in our 2023 Annual Report on Form 10-K for a discussion of the cash flows for the years ended December 31, 2023 and 2022.

Off-Balance Sheet Arrangements

At December 31, 2024, we were not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Contractual Obligations

Our contractual obligations as of December 31, 2024, consisted of minimum cash payments under operating leases of $12.1 million, purchase obligations of $12.7 million (of which $1.8 million is included in current liabilities), and contractual obligations under license agreements of $0.3 million (of which nil is included in current liabilities). Purchase obligations consist of non-cancelable purchase commitments to suppliers. Operating leases represent our future minimum rental commitments under our non-cancelable operating leases. For additional information regarding the timing for our contractual obligations see Note 6, “Commitments and Contingencies” to Consolidated Financial Statements.

In June 2021, we entered into a lease agreement for office space in Dublin, Ireland, which commenced in August 2021 and had an initial term of one year. In addition, we entered into a lease agreement for additional office space in Dublin, Ireland, which commenced in August 2023 and had an initial term of one year. In April 2024, we renewed both leases, each for another one year term with termination dates in July 2025. Both leases have an automatic renewal clause, pursuant to which each agreement will be extended automatically for successive periods equal to their current terms, unless each agreement is cancelled by us. We do not consider the renewals in the lease term as we do not believe it to be reasonably certain that we will renew these leases, as our real estate needs are subject to change based on our business needs.

In October 2022, we entered into a noncancelable operating sublease to lease approximately 31,157 square feet of office and laboratory space in Brisbane, California. We are obligated to make lease payments totaling approximately $14.9 million over the lease term, which expires on September 30, 2028, unless terminated earlier. Of this obligation, approximately $12.0 million remains outstanding as of December 31, 2024.

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The following is a summary of our contractual obligations as of December 31, 2024 (in thousands):

(1) See Note 6, “Commitments and Contingencies” to our Consolidated Financial Statements.

(2) Purchase obligations as of the filing date includes additional $2.1 million purchase commitments to our contract manufacturers.

In addition to the contractual obligations above, we also expect to have future material cash requirements related to our clinical trials, discovery and pre-clinical programs, human capital and intellectual property. Assuming no significant change in our business, we expect the full year 2025 net cash used in operating and investing activities to be approximately $168 million to $175 million.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In addition to historical information, this Form 10-K contains forward-looking statements which may cause our actual results to differ materially from expectations, plans and anticipated results discussed in forward-looking statements. Factors that could cause our actual results to differ materially include, but are not limited to, the risks and uncertainties set forth in the “Summary of Risks Affecting Our Business” at the beginning of this Form 10-K, Item 1A “Risk Factors” of this Form 10-K, and in our other filings with the SEC.

This discussion should be read in conjunction with the Consolidated Financial Statements and Notes to the Consolidated Financial Statements presented in Item 8 of this Form 10-K.

Overview

Prothena is a late-stage clinical biotechnology company with expertise in protein dysregulation and a pipeline of investigational therapeutics with the potential to change the course of devastating neurodegenerative and rare peripheral amyloid diseases.

Fueled by our deep scientific expertise built over decades of research, we are advancing a pipeline of therapeutic candidates for a number of indications and novel targets for which our ability to integrate scientific insights around neurological dysfunction and the biology of misfolded proteins can be leveraged. Our wholly-owned programs include birtamimab for the potential treatment of AL amyloidosis, and a portfolio of programs for the potential treatment of Alzheimer’s disease including PRX012, which targets amyloid beta (Aβ), and PRX123, a novel dual Aβ-tau vaccine. Our partnered programs include prasinezumab, in collaboration with Roche for the potential treatment of Parkinson’s disease and other related synucleinopathies, and programs that target tau (BMS-986446, formerly PRX005), TDP-43, and an undisclosed target (PRX019) in collaboration with Bristol Myers Squibb (BMS) for the potential treatment of Alzheimer’s disease, amyotrophic lateral sclerosis (ALS), and other neurodegenerative diseases, respectively. We are also entitled to certain potential milestone payments pursuant to our share purchase agreement with Novo Nordisk pertaining to our ATTR amyloidosis business.

We were formed on September 26, 2012, under the laws of Ireland and re-registered as an Irish public limited company on October 25, 2012. Our ordinary shares began trading on The Nasdaq Global Market under the symbol “PRTA” on December 21, 2012, and currently trade on The Nasdaq Global Select Market.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the U.S. (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We believe the following policies to be critical to the judgments and estimates used in the preparation of our financial statements.

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Revenue Recognition

Our collaboration revenue includes revenue recognized for milestone payments and reimbursements under our License Agreement with Roche as well as revenue recognized under our Collaboration Agreement with BMS. Our license and intellectual property revenue includes revenue from Novo Nordisk for the sale of intellectual property and related rights to the Company’s ATTR amyloidosis business and pipeline and milestones payments.

Revenue is recognized only when we satisfy an identified performance obligation by transferring a promised good or service to a customer. We recognize revenue associated with our collaboration arrangements, which may require us to exercise considerable judgment in estimating revenue to be recognized, including judgments made on day one accounting and judgments associated with the amount of revenue to be recognized over time as performance obligations are satisfied.

Contracts with Multiple Performance Obligations

Significant judgment is required to apply the authoritative accounting guidance at the outset of a collaboration arrangement, and over time. Our License Agreement with Roche and our Collaboration Agreement with BMS contain multiple performance obligations. In the identification of performance obligations, there is judgment involved in identifying the promised goods or services in the collaboration agreement, determining whether these are distinct in the context of the contract, and determining if these represent a performance obligation to a customer. These determinations are highly subjective and can differ between arrangement based on specific contractual terms. The identified performance obligations will impact most significantly the timing of revenue recognition, and is a point-in-time assessment performed at the outset of a collaboration arrangement. We account for the individual performance obligations separately if they are distinct. Factors considered in the determination of whether the license performance obligations are distinct included, among other things, the research and development capabilities of each of Roche and BMS and their respective sublicense rights, and for the remaining performance obligations the fact that they are not proprietary and can be and have been provided by other vendors. The transaction price is allocated to the separate performance obligation on a relative standalone selling price basis.

Milestone Revenue

We generally classify each of our milestones into one of three categories: (i) clinical milestones; (ii) regulatory and development milestones; and (iii) commercial milestones. Clinical milestones are typically achieved when a product candidate advances into or completes a defined phase of clinical research. For example, a milestone payment may be due to us upon the initiation of a clinical trial for a new indication. Regulatory and development milestones are typically achieved upon acceptance of the submission for marketing approval of a product candidate or upon approval to market the product candidate by the FDA or other regulatory authorities. For example, a milestone payment may be due to us upon submission for marketing approval of a product candidate by the FDA. Commercial milestones are typically achieved when an approved product reaches certain defined levels of net royalty sales by the licensee of a specified amount within a specified period.

At the inception of each arrangement that includes developmental, regulatory or commercial milestone payments, we evaluate whether achieving the milestones is considered probable and estimates the amount to be included in the transaction price using the most likely amount method, which includes judgment. If it is probable that a significant revenue reversal would not occur, the value of the associated milestone (such as a regulatory submission by Prothena) is included in the transaction price. Milestone payments that are not within our control, such as approvals from regulators or where attainment of the specified event is dependent on the development activities of a third party, are not considered probable of being achieved until those approvals are received or the specified event occurs. In general, we consider such milestone payments as variable consideration with constraint and therefore we recognize the revenue from such milestone payments as collaboration revenue at point in time when we can conclude it is probable that a significant revenue reversal will not occur in future periods.

Research and Development

We expense R&D costs as incurred. R&D expenses include, but are not limited to, salary and benefits, share-based compensation, clinical trial activities, drug development and manufacturing prior to FDA approval and third-party service fees, including clinical research organizations, investigative sites and contract manufacturing organizations. A significant portion of our research and development expenses in the Consolidated Statements of Operations are external costs, which we track on a program-specific basis when the applicable program was separately tracked in preclinical development. These research and development expenses include the conduct of preclinical studies and clinical trials, contract manufacturing activities and consulting services. The measurement of these research and development cost and/or effort can impact the research and development expenses in the Consolidated Statements of Operations and of prepaid assets and accrued liabilities on the Consolidated Balance Sheets. The level of judgment required to estimate research and development expenses varies based on

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the nature of the services being performed and the underlying support obtained. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided to us by our vendors on their actual costs incurred. We recognize costs for contract manufacturing based on evaluation of the progress to completion of specific tasks. As such, expense accruals related to clinical trials and contract manufacturing are recognized based on our estimate of the degree of completion of the events specified in the specific clinical study or trial contract or drug development and manufacturing contract, respectively. We estimate the amount of work completed through discussions with internal personnel and external service providers as to the progress or stage of completion of the services and the agreed-upon fee to be paid for such services. As actual costs become known, we adjust our accrued estimates. These estimates are based on certain assumptions and inputs that can be challenging to assess, including the evaluation of the status of and costs incurred for manufacturing activities, outsourced research and development programs and project milestones achieved. Although we do not expect our estimates to be materially different from amounts actually incurred, incomplete or inaccurate data from vendors could impact our understanding of the status and timing of services performed which could result in us reporting expenses that are too high or too low in any particular period.

We do not need to make significant estimates where costs incurred are supported by invoices or reports of costs incurred are obtained from a vendor that is directly performing the underlying services, such as a consultant, contract research organization or contract manufacturing organization. In some cases, however, expense is recorded using an underlying assumption of the progress to completion of specific activities. For example, costs may be recognized based on the passage of time for activities that span reporting periods. If the provision of services is not linear then this assumption could impact the amount of expense recognized. For other activities, such as for certain clinical trials, expense is recorded based on information obtained from vendors as an intermediary to those performing the underlying services, such as contract research organizations. These estimates are inherently more judgmental since the quality and availability of the underlying data may vary. We expect that the level of judgment in estimating research and development expenses may increase over time as we are entering later stage, more extensive, clinical trials.

The information contained in Note 2 to the Consolidated Financial Statements under the heading “Recent Accounting Pronouncements” is hereby incorporated by reference into this Part II, Item 7.

Results of Operations

Comparison of Years Ended December 31, 2023 and 2022

Revenue

Total revenue was $91.4 million and $53.9 million for the years ended December 31, 2023, and 2022, respectively.

Collaboration revenue from BMS was $91.3 million for the year ended December 31, 2023, compared to $13.9 million for the year ended December 31, 2022. The increase of $77.5 million was primarily due to $72.9 million recognized for the Tau Global License Agreement ($17.9 million of deferred revenue recognized for the Global Right and $55.0 million for the option exercise fee) and $4.7 million under a Supply Agreement. See Note 7, “Significant Agreements” to the Consolidated Financial Statements regarding the Collaboration Agreement with BMS for more information.

License and intellectual property revenue for the year ended December 31, 2023 was $50,000 compared to $40.1 million for the year ended December 31, 2022. The decrease of $40.0 million was due to the $40.0 million milestone payment from Novo Nordisk related to the continued advancement of NNC6019 (formerly PRX004) in a Phase 2 clinical study for the treatment of ATTR cardiomyopathy in 2022 with no corresponding amount in 2023. See Note 7, “Significant Agreements” to the Consolidated Financial Statements regarding the Novo Nordisk Share Purchase Agreement for more information.

Assuming no significant change in our business, we expect our 2024 revenue to decline over the prior year as our 2023 revenue was primarily comprised of nonrecurring revenue.

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Operating Expenses

Total operating expenses consist of R&D expenses, general and administrative (“G&A”) expenses. Our operating expenses were $282.4 million and $185.5 million for the years ended December 31, 2023, and 2022, respectively.

Our research activities are aimed at developing new drug products. Our development activities involve the translation of our research into potential new drugs. Our R&D expenses primarily consist of personnel costs and related expenses, including share-based compensation and external costs associated with clinical activities and drug development related to our drug programs, including birtamimab, BMS-986446 (PRX005), PRX012, PRX123 and preclinical activities related to our discovery programs.

Our G&A expenses primarily consist of personnel costs and related expenses, including share-based compensation and consulting expenses.

Research and Development Expenses

Our R&D expense increased by $85.0 million for the year ended December 31, 2023, compared to the prior year. The increase for the year ended December 31, 2023, was primarily due to higher clinical trial expenses primarily related to the PRX012 and birtamimab programs, higher personnel expenses, and higher R&D consulting and other expenses; offset in part by lower manufacturing expense related primarily to the PRX019 and birtamimab programs.

The following table sets forth the R&D expenses for our major programs (specifically, any active program with successful first dosing in a Phase 1 clinical trial, which were birtamimab, prasinezumab, NNC6019 (PRX004), BMS-986446 (PRX005), PRX012 and other R&D expenses for the years ended December 31, 2023 and 2022, and the cumulative amounts to date (in thousands):

(1)Cumulative R&D costs to date include the costs incurred from the date when the applicable program was separately tracked in preclinical development. Expenditures in the early discovery stage are not tracked by program and accordingly have been excluded from the applicable cumulative amount.

(2)Through May 28, 2021, Prasinezumab costs include payments to Roche for our share of the development expenses incurred by Roche related to prasinezumab programs.

(3)     On July 8, 2021, we sold shares of one of our wholly-owned subsidiaries to Novo Nordisk. In connection with the transaction, Novo Nordisk acquired our ATTR amyloidosis business, including the clinical stage antibody NNC6019 (PRX004). Expenses incurred in 2023 and 2022 relate to certain close out activities and transition services provided to Novo Nordisk.

(4)     Other R&D is comprised primarily of preclinical development and discovery programs that have not progressed to first patient dosing in a Phase 1 clinical trial and close out costs for programs that we are no longer advancing.

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We expect our R&D expenses to be relatively flat in 2024 over the prior year.

General and Administrative Expenses

Our G&A expenses increased by $11.9 million, for the year ended December 31, 2023, compared to the prior year primarily due to higher personnel expense and higher consulting expense.

We expect our G&A expenses to increase in 2024 compared to the prior year, primarily related to anticipated higher personnel costs including share-based compensation.

Other Income (Expense)

Interest income increased by $24.7 million for the year ended December 31, 2023, compared to the prior year, primarily due to higher interest income from our cash and money market accounts resulting from higher interest rates.

Other income (expense), net for the year ended December 31, 2023, was primarily foreign exchange losses from transactions with vendors denominated in Euros.

Provision for (benefit from) Income Taxes

The benefit from income taxes increased by $4.8 million for the year ended December 31, 2023, compared to the same period in the prior year. The increase in benefit from income taxes for the year ended December 31, 2023, compared to the prior year, was primarily due to an increase in deferred tax assets related to Section 174 R&D Capitalization.

The tax provisions for all periods presented primarily reflect U.S. federal taxes associated with recurring profits attributable to intercompany services that our U.S. subsidiary performs for the Company. No tax benefit has been recorded related to tax losses recognized in Ireland and any deferred tax assets for those losses are offset by a valuation allowance.

Comparison of the years ended December 31, 2022 and 2021

Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations—Results of Operations” in our 2022 Annual Report on Form 10-K for a discussion of the results of operations for the year ended December 31, 2022 compared to the year ended December 31, 2021.

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Liquidity and Capital Resources

Overview

Working capital was $582.4 million as of December 31, 2023, a decrease of $86.6 million from working capital of $669.0 million as of December 31, 2022. This decrease in working capital during the year ended December 31, 2023, was primarily attributable to cash use of $282.4 million for operating expenses (adjusted to exclude non-cash charges) offset in part by $55.0 million in cash from BMS related to the tau global option exercise fee, net proceeds of approximately $20.7 million from the underwriters partial exercise of their 30-day option to purchase additional ordinary shares as part of the December 2022 public offering, interest income on investments of $31.0 million, net proceeds received from stock option exercises of approximately $21.5 million and proceeds of approximately $2.9 million from issuances of ordinary shares pursuant to the December 2021 Distribution Agreement.

As of December 31, 2023, we had $618.8 million in cash and cash equivalents. Although we believe, based on our current business plans, that our existing cash and cash equivalents will be sufficient to meet our obligations for at least the next twelve months, we anticipate that we will require additional capital in the future in order to continue the research and development of our drug candidates. Additionally, in order to develop and obtain regulatory approval for our potential products we will need to raise substantial additional funds. We expect to raise any such additional funds through public or private equity or debt financings, collaborative agreements with corporate partners, or other arrangements, including pursuant to the December 2021 Distribution Agreement (See Note 8, “Shareholders’ Equity” to the Consolidated Financial Statements for more information). We cannot assume that such additional financings will be available on acceptable terms, if at all, and such financings may only be available on terms dilutive to our shareholders.

In managing our liquidity needs in Ireland, we do not rely on unrepatriated earnings as a source of funds. As of December 31, 2023, $224.3 million of our outstanding cash and cash equivalents related to U.S. operations are considered permanently reinvested. We do not intend to repatriate these funds. However, if these funds were repatriated back to Ireland, we would incur a withholding tax from the dividend distribution.

The adequacy of our cash resources depends on many assumptions, including assumptions with respect to our expenses. These assumptions may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development of our product candidates. Our future capital requirements will depend on numerous factors, including, without limitation, the timing of initiation, progress, results and costs of our clinical trials; the results of our research and nonclinical studies; the costs of clinical manufacturing and of establishing commercial manufacturing arrangements; the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; the costs and timing of capital asset purchases; our ability to establish research collaborations, strategic collaborations, licensing or other arrangements; the costs to satisfy our obligations under current and potential future collaborations; the costs of any in-licensing transactions; and the timing, receipt, and amount of revenues or royalties, if any, from any approved drug candidates.

Our cash and cash equivalents may also be potentially supplemented in the future by proceeds from our collaboration partners and milestone payments from Novo Nordisk. Pursuant to the Collaboration Agreement with Roche, we are eligible to receive payments for commercial and regulatory milestones and royalties on net sales of Collaboration Products. See Note 7, “Significant Agreements” to our Consolidated Financial Statements regarding the Roche License Agreement for more information. Pursuant to the Collaboration Agreement with BMS (formerly Celgene), we are eligible to receive payments for commercial and regulatory milestones and royalties on net sales of Collaboration Products. See Note 7, “Significant Agreements” to our Consolidated Financial Statements regarding the Collaboration Agreement with BMS for more

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information. Pursuant to the share purchase agreement with Novo Nordisk, we are eligible to receive development and sales milestone payments. See Note 7, “Significant Agreements” to our Consolidated Financial Statements regarding the Novo Nordisk Share Purchase Agreement for more information.

Cash Flows

The following table summarizes, for the periods indicated, selected items in our Consolidated Statements of Cash Flows (in thousands):

Cash Used in Operating Activities

Net cash used in operating activities was $133.9 million for the year ended December 31, 2023, which was primarily due to ongoing research and development activities and general and administrative expenses to support those activities for a total of $282.4 million in operating expenses (adjusted to exclude non-cash charges of approximately $33.7 million) partially offset by $55.0 million in cash from BMS related to the tau global option exercise fee and interest income on investments of $31.0 million.

Cash Used in Investing Activities

Net cash used in investing activities was $2.8 million for the year ended December 31, 2023, which primarily consisted of expenditures to purchase property and equipment.

Cash Provided by Financing Activities

Net cash provided by financing activities was $45.1 million for the year ended December 31, 2023, primarily from net proceeds of approximately $20.7 million from the underwriters partial exercise of their 30-day option to purchase additional ordinary shares as part of the December 2022 public offering, proceeds from issuances of ordinary shares upon exercises of stock options of $21.5 million and net proceeds of $2.9 million from issuances of ordinary shares pursuant to the December 2021 Distribution Agreement.

Years ended December 31, 2022 and 2021

Refer to “Item 7. Management’s Discussion and Analysis of Financial Condition and Results of Operations — Liquidity and Capital Resources” in our 2022 Annual Report on Form 10-K for a discussion of the cash flows for the years ended December 31, 2022 and 2021.

Off-Balance Sheet Arrangements

At December 31, 2023, we were not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Contractual Obligations

Our contractual obligations as of December 31, 2023, consisted of minimum cash payments under operating leases of $14.8 million, purchase obligations of $12.4 million (of which $6.3 million is included in current liabilities), and contractual obligations under license agreements of $0.4 million (of which $60,000 is included in current liabilities). Purchase obligations consist of non-cancelable purchase commitments to suppliers. Operating leases represent our future minimum rental

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commitments under our non-cancelable operating leases. For additional information regarding the timing for our contractual obligations see Note 6, “Commitments and Contingencies” to our Consolidated Financial Statements.

We had a noncancelable operating sublease covering 128,751 square feet of office and laboratory space in South San Francisco, California, which expired on December 31, 2023. We also had a sub-sublease covering approximately 46,641 square feet of such space, which terminated in connection with the sublease.

In June 2021, we entered into a lease agreement for office space in Dublin, Ireland, which commenced in August 2021 and had an initial term of one year. In April 2023, the Company renewed the lease for another one year term with a termination date of July 2024. In addition, the Company entered into a lease agreement for additional office space in Dublin, Ireland, which commenced in August 2023 and has an initial term of one year. Both of these leases have an automatic renewal clause, pursuant to which the agreement will be extended automatically for successive periods equal to the current term, unless the agreement is cancelled by us.

In October 2022, we entered into a noncancelable operating sublease to lease approximately 31,157 square feet of office and laboratory space in Brisbane, California. We are obligated to make lease payments totaling approximately $14.9 million over the lease term, which expires on September 30, 2028, unless terminated earlier. Of this obligation, approximately $14.7 million remains outstanding as of December 31, 2023.

The following is a summary of our contractual obligations as of December 31, 2023 (in thousands):

(1) See Note 6, “Commitments and Contingencies” to our Consolidated Financial Statements.

(2) Purchase obligations as of the filing date includes additional $2.9 million purchase commitments to our contract manufacturers.

In addition to the contractual obligations above, we also expect to have future material cash requirements related to our clinical trials, discovery and pre-clinical programs, human capital and intellectual property. Assuming no significant change in our business, we expect the full year 2024 net cash used in operating and investing activities to be approximately $208 million to $225 million.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In addition to historical information, this Form 10-K contains forward-looking statements which may cause our actual results to differ materially from expectations, plans and anticipated results discussed in forward-looking statements. Factors that could cause our actual results to differ materially include, but are not limited to, the risks and uncertainties set forth in the “Summary of Risks Affecting Our Business” at the beginning of this Form 10-K, Item 1A “Risk Factors” of this Form 10-K, and in our other filings with the SEC.

This discussion should be read in conjunction with the Consolidated Financial Statements and Notes to the Consolidated Financial Statements presented in Item 8 of this Form 10-K.

Overview

Prothena is a late-stage clinical biotechnology company with expertise in protein dysregulation and a pipeline of investigational therapeutics with the potential to change the course of devastating neurodegenerative and rare peripheral amyloid diseases.

Fueled by our deep scientific expertise built over decades of research, we are advancing a pipeline of therapeutic candidates for a number of indications and novel targets for which our ability to integrate scientific insights around neurological dysfunction and the biology of misfolded proteins can be leveraged. Our wholly-owned programs include birtamimab for the potential treatment of AL amyloidosis, a portfolio of programs for the potential treatment of Alzheimer’s disease including PRX012, which targets Amyloid beta (Aβ), and PRX123, a novel dual Aβ-tau vaccine. Our partnered programs include prasinezumab, in collaboration with Roche for the potential treatment of Parkinson’s disease and other related synucleinopathies, and programs that target tau (PRX005), TDP-43, and an undisclosed target (PRX019) in collaboration with BMS for the potential treatment of Alzheimer’s disease, ALS, and other neurodegenerative diseases. We are also entitled to certain potential milestone payments pursuant to our share purchase agreement with Novo Nordisk pertaining to our ATTR amyloidosis business.

We were formed on September 26, 2012, under the laws of Ireland and re-registered as an Irish public limited company on October 25, 2012. Our ordinary shares began trading on The Nasdaq Global Market under the symbol “PRTA” on December 21, 2012, and currently trade on The Nasdaq Global Select Market.

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Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the U.S. (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions for the reported amounts of assets, liabilities, revenues, expenses and related disclosures. We believe the following policies to be critical to the judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

Our collaboration revenue includes revenue recognized for milestone payments and reimbursements under our License Agreement with Roche as well as revenue recognized under our Collaboration Agreement with BMS. Our license and intellectual property revenue includes revenue from Novo Nordisk for the sale of intellectual property and related rights to the Company’s ATTR amyloidosis business and pipeline and milestones payments.

Revenue is recognized only when we satisfy an identified performance obligation by transferring a promised good or service to a customer.

Contracts with Multiple Performance Obligations

Our License Agreement with Roche and our Collaboration Agreement with BMS contain multiple performance obligations. We account for the individual performance obligations separately if they are distinct. Factors considered in the determination of whether the license performance obligations are distinct included, among other things, the research and development capabilities of each of Roche and BMS and their respective sublicense rights, and for the remaining performance obligations the fact that they are not proprietary and can be and have been provided by other vendors. The transaction price is allocated to the separate performance obligation on a relative standalone selling price basis.

Milestone Revenue

We generally classify each of our milestones into one of three categories: (i) clinical milestones; (ii) regulatory and development milestones; and (iii) commercial milestones. Clinical milestones are typically achieved when a product candidate advances into or completes a defined phase of clinical research. For example, a milestone payment may be due to us upon the initiation of a clinical trial for a new indication. Regulatory and development milestones are typically achieved upon acceptance of the submission for marketing approval of a product candidate or upon approval to market the product candidate by the FDA or other regulatory authorities. For example, a milestone payment may be due to us upon submission for marketing approval of a product candidate by the FDA. Commercial milestones are typically achieved when an approved product reaches certain defined levels of net royalty sales by the licensee of a specified amount within a specified period.

At the inception of each arrangement that includes developmental, regulatory or commercial milestone payments, we evaluate whether achieving the milestones is considered probable and estimates the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the value of the associated milestone (such as a regulatory submission by Prothena) is included in the transaction price. Milestone payments that are not within our control, such as approvals from regulators or where attainment of the specified event is dependent on the development activities of a third party, are not considered probable of being achieved until those approvals are received or the specified event occurs. In general, we consider such milestone payments as variable consideration with constraint and therefore we recognize the revenue from such milestone payments as collaboration revenue at point in time when we can conclude it is probable that a significant revenue reversal will not occur in future periods.

Research and Development

We expense R&D costs as incurred. R&D expenses include, but are not limited to, salary and benefits, share-based compensation, clinical trial activities, drug development and manufacturing prior to FDA approval and third-party service fees, including clinical research organizations, investigative sites and contract manufacturing organizations. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided to us by our vendors on their actual costs incurred. We recognize costs for contract manufacturing based on evaluation of the progress to completion of specific tasks. The objective of our accrual policy is to match the recording of the expenses in our Consolidated Financial Statements to the actual services we have received and efforts expended. As such, expense accruals related to clinical trials and contract manufacturing are recognized based on our estimate of the degree of completion of the events specified in the specific clinical

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study or trial contract or drug development and manufacturing contract, respectively. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in our Consolidated Financial Statements as prepaid or accrued research and development. Amounts due may be fixed fee, fee for service, and may include upfront payments, monthly payments, and payments upon the completion of milestones or receipt of deliverables.

The information contained in Note 2 to the Consolidated Financial Statements under the heading “Recent Accounting Pronouncements” is hereby incorporated by reference into this Part II, Item 7.

Results of Operations

Comparison of Years Ended December 31, 2022, 2021 and 2020

Revenue

Total revenue was $53.9 million, $200.6 million, and $0.9 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Collaboration revenue includes revenue recognized under our Collaboration Agreement with BMS. For the year ended December 31, 2022, collaboration revenue recognized from BMS was $13.9 million for US Development Services related to the Tau/PRX005 program. For the year ended December 31, 2021, collaboration revenue recognized from BMS was $79.7 million of the total transaction consideration of $104.9 million for the PRX005 US License and US Development Services, see Note 7, “Significant Agreements” to the Consolidated Financial Statements regarding the Collaboration Agreement with BMS for more information.

Collaboration revenue also includes milestone payments and reimbursements under our License Agreement with Roche. For the year ended December 31, 2021, collaboration revenue from Roche included a $60.0 million clinical milestone recognized upon first patient dosed in the global Phase 2b for prasinezumab PADOVA study. For the years ended December 31, 2021 and 2020, collaboration revenue also included reimbursements under our License Agreement with Roche. See Note 7, “Significant Agreements” to the Consolidated Financial Statements regarding the Roche License Agreement for more information.

License and intellectual property revenue for the year ended December 31, 2022 included $40.0 million in milestone payment from Novo Nordisk related to the continued advancement of NNC6019 (formerly PRX004) in a Phase 2 clinical study for the treatment of ATTR cardiomyopathy. For the year ended December 31, 2021, License and intellectual property revenue included $60.7 million in revenue from the sale of intellectual property and related rights to the Company’s ATTR amyloidosis business and pipeline to Novo Nordisk. See Note 7, “Significant Agreements” to the Consolidated Financial Statements regarding the Novo Nordisk Share Purchase Agreement for more information. For the years ended December 31, 2022, 2021 and 2020, license revenue also included license fees recognized under a License Agreement entered into on March 1, 2020, between the Company's wholly owned subsidiary, Prothena Biosciences Limited, and F. Hoffmann-La Roche Ltd. See Note 7, “Significant Agreements” to the Consolidated Financial Statements regarding the Roche License Agreement for more information.

Assuming no significant change in our business, we expect our 2023 revenue to decline over the prior year as our 2022 revenue was primarily comprised of nonrecurring intellectual property revenue.

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Operating Expenses

Total operating expenses consist of R&D expenses, general and administrative (“G&A”) expenses. Our operating expenses were $185.5 million, $128.6 million and $113.6 million for the years ended December 31, 2022, 2021 and 2020, respectively.

Our research activities are aimed at developing new drug products. Our development activities involve the translation of our research into potential new drugs. Our R&D expenses primarily consist of personnel costs and related expenses, including share-based compensation and external costs associated with clinical activities and drug development related to our drug programs, including birtamimab, prasinezumab, PRX004 (through July 8, 2021), PRX005, PRX012, PRX123 and preclinical activities related to our discovery programs. Through May 28, 2021, pursuant to our License Agreement with Roche, we made payments to Roche for our share of the development expenses incurred by Roche related to the prasinezumab program, which is included in our R&D expenses. On May 28, 2021, we announced the exercise of our rights under the terms of the ongoing worldwide collaboration with Roche to receive potential U.S. commercial sales milestones and tiered royalties in lieu of a U.S. profit and loss share for prasinezumab in Parkinson’s disease.

Our G&A expenses primarily consist of personnel costs and related expenses, including share-based compensation and professional service expenses.

Research and Development Expenses

Our R&D expense increased by $53.3 million, or 65%, for the year ended December 31, 2022, compared to the prior year. The increase for year ended December 31, 2022, was primarily due to higher manufacturing expenses primary related to the birtamimab, PRX019, PRX012, and PRX123 programs, higher personnel expenses, higher clinical trial expenses primarily related to the PRX012 and birtamimab programs and higher R&D consulting and other expenses; offset in part by lower collaboration expenses related to the prasinezumab program with Roche as a result of the cost share opt-out exercised in May 202l and lower manufacturing expense related to the NNC6019 program.

For the year ended December 31, 2021, our R&D expense increased by $7.4 million, or 10%, compared to the prior year. The increase for year ended December 31, 2021, was primarily due to higher personnel expenses, higher clinical trial expenses primarily related to the birtamimab and PRX005 programs (offset in part by lower PRX004 clinical trial expense) and higher R&D consulting expenses; offset in part by lower collaboration expenses related to the prasinezumab program with Roche as a result of the cost share opt-out exercised in May 202l and lower manufacturing expenses primary related to the PRX005 and birtamimab programs.

The following table sets forth the R&D expenses for our major programs (specifically, any program with successful first dosing in a Phase 1 clinical trial, which were birtamimab, prasinezumab, PRX003, NNC6019, PRX005, PRX012 and other R&D expenses for the years ended December 31, 2022, 2021 and 2020, and the cumulative amounts to date (in thousands):

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(1)Cumulative R&D costs to date for birtamimab include the costs incurred from the date when the program was separately tracked in preclinical development. Expenditures in the early discovery stage are not tracked by program and accordingly have been excluded from this cumulative amount.

(2)Cumulative R&D costs to date for prasinezumab and related antibodies include the costs incurred from the date when the program was separately tracked in nonclinical development. Expenditures in the early discovery stage are not tracked by program and accordingly have been excluded from this cumulative amount. Through May 28, 2021, Prasinezumab costs include payments to Roche for our share of the development expenses incurred by Roche related to prasinezumab programs. For the years ended December 31, 2022, 2021 and 2020, respectively, nil, $0.2 million and $0.6 million of reimbursements from Roche for development services were recorded as part of collaboration revenue.

(3)Cumulative R&D costs to date for PRX003 include the costs incurred from the date when the program was separately tracked in nonclinical development. Expenditures in the early discovery stage are not tracked by program and accordingly have been excluded from this cumulative amount. Based on the Phase 1b multiple ascending dose study results announced in September 2017, we announced that we will not advance PRX003 into mid-stage clinical development for psoriasis or psoriatic arthritis as previously planned.

(4)Cumulative R&D costs to date for NNC6019 (PRX004) include the costs incurred from the date when the program was separately tracked in nonclinical development. Expenditures in the early discovery stage are not tracked by program and accordingly have been excluded from this cumulative amount. On July 8, 2021, we sold shares of one of our wholly-owned subsidiaries to Novo Nordisk. In connection with the transaction, Novo Nordisk acquired our ATTR amyloidosis business, including the clinical stage antibody NNC6019 (PRX004). Expenses incurred in 2022 relate to certain close out activities and transition services provided to Novo Nordisk.

(5)Cumulative R&D costs to date for PRX005 include the costs incurred from the date when the program was separately tracked in nonclinical development. Expenditures in the early discovery stage are not tracked by program and accordingly have been excluded from this cumulative amount.

(6)Cumulative R&D costs to date for PRX012 include the costs incurred from the date when the program was separately tracked in nonclinical development. Expenditures in the early discovery stage are not tracked by program and accordingly have been excluded from this cumulative amount.

(7)Other R&D is comprised of preclinical development and discovery programs that have not progressed to first patient dosing in a Phase 1 clinical trial.

We expect our R&D expenses to increase in 2023 over the prior year, primarily due to anticipated higher personnel costs including share-based compensation and anticipated increase in spending for clinical trials and manufacturing related to our active clinical trials.

General and Administrative Expenses

Our G&A expenses increased by $3.6 million, or 8%, for the year ended December 31, 2022, compared to the prior year. The increase for the year ended December 31, 2022, compared to the prior year, was primarily due to higher personnel expense, and higher consulting expense; offset in part by lower legal fees and lower expense for our director and officer insurance premium.

For the year ended December 31, 2021, our G&A expenses increased by $7.6 million, or 20%, compared to the prior year. The increase for the year ended December 31, 2021, compared to the prior year, was primarily due to higher personnel expense, higher legal expenses, higher expense for our director and officer insurance premium and higher consulting expense.

We expect our G&A expenses to increase in 2023 compared to the prior year, primarily related to anticipated higher personnel costs including share-based compensation.

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Other Income (Expense)

_________________________

nm = not meaningful

Interest income increased by $6.3 million, or 15,017%, for the year ended December 31, 2022, compared to the prior year, primarily due to higher interest income from our cash and money market accounts resulting from higher interest rates.

Interest income, decreased by $1.3 million, or 97%, for the year ended December 31, 2021, compared to the prior year, primarily due to lower interest income from our cash and money market accounts resulting from lower interest rates.

Other income (expense), net for the years ended December 31, 2022, 2021 and 2020, was primarily foreign exchange gains (losses) from transactions with vendors denominated in Euros.

Provision for (benefit from) Income Taxes

_________________________

nm = not meaningful

The provision for (benefit from) income taxes were $(8.7) million, $4.9 million and $(0.3) million for the years ended December 31, 2022, 2021 and 2020, respectively. The benefit from income taxes increased by $13.6 million for the year ended December 31, 2022, compared to the same period in the prior year primarily due to an increase in deferred tax asset (DTA) of $10.5 million related to Section 174 R&D Capitalization requirements, which became effective in 2022.

Whereas, for the year ended December 31, 2021, the provision for income taxes increased by $5.2 million, compared to the same period of the prior year, primarily due to a decrease in deferred tax asset related to our February 12, 2021 option exchange program and a change in our share-based compensation 162(m) limitations associated with the increase in the number of covered employees under the American Rescue Plan Act.

The tax provisions for all periods presented primarily reflect U.S. federal taxes associated with recurring profits attributable to intercompany services that our U.S. subsidiary performs for the Company. No tax benefit has been recorded related to tax losses recognized in Ireland and any deferred tax assets for those losses are offset by a valuation allowance.

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Liquidity and Capital Resources

Overview

Working capital was $669.0 million as of December 31, 2022, an increase of $117.6 million from working capital of $551.4 million as of December 31, 2021. This increase in working capital during the year ended December 31, 2022, was primarily attributable to a higher cash and cash equivalents balance resulting from net proceeds of approximately $172.6 million from our public offering in December 2022, $51.0 million from our December 2021 Distribution Agreement, $40.0 million development milestone payment from Novo Nordisk, and proceeds from stock option exercises of approximately $17.8 million, partially offset by cash use of $185.5 million for operating expenses (adjusted to exclude non-cash charges).

As of December 31, 2022, we had $710.4 million in cash and cash equivalents. Although we believe, based on our current business plans, that our existing cash and cash equivalents will be sufficient to meet our obligations for at least the next twelve months, we anticipate that we will require additional capital in the future in order to continue the research and development of our drug candidates. Additionally, in order to develop and obtain regulatory approval for our potential products we will need to raise substantial additional funds. We expect to raise any such additional funds through public or private equity or debt financings, collaborative agreements with corporate partners, or other arrangements, including pursuant to the December 2021 Distribution Agreement (See Note 8, “Shareholders’ Equity” to the Consolidated Financial Statements for more information). We cannot assume that such additional financings will be available on acceptable terms, if at all, and such financings may only be available on terms dilutive to our shareholders.

In managing our liquidity needs in Ireland, we do not rely on unrepatriated earnings as a source of funds. As of December 31, 2022, $204.2 million of our outstanding cash and cash equivalents related to U.S. operations are considered permanently reinvested. We do not intend to repatriate these funds. However, if these funds were repatriated back to Ireland, we would incur a withholding tax from the dividend distribution.

The adequacy of our cash resources depends on many assumptions, including assumptions with respect to our expenses. These assumptions may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development of our product candidates. Our future capital requirements will depend on numerous factors, including, without limitation, the timing of initiation, progress, results and costs of our clinical trials; the results of our research and nonclinical studies; the costs of clinical manufacturing and of establishing commercial manufacturing arrangements; the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; the costs and timing of capital asset purchases; our ability to establish research collaborations, strategic collaborations, licensing or other arrangements; the costs to satisfy our obligations under current and potential future collaborations; the costs of any in-licensing transactions; and the timing, receipt, and amount of revenues or royalties, if any, from any approved drug candidates.

Our cash and cash equivalents may also be potentially supplemented in the future by proceeds from our collaboration partners and milestone payments from Novo Nordisk. Pursuant to the Collaboration Agreement with Roche, we are eligible to receive payments for commercial and regulatory milestones and royalties on net sales of Collaboration Products. See Note 7, “Significant Agreements” to our Consolidated Financial Statements regarding the Roche License Agreement for more information. Pursuant to the Collaboration Agreement with BMS (formerly Celgene), we are eligible to receive payments for commercial and regulatory milestones and royalties on net sales of Collaboration Products. See Note 7, “Significant Agreements” to our Consolidated Financial Statements regarding the Collaboration Agreement with BMS for more information. Pursuant to the share purchase agreement with Novo Nordisk, we are eligible to receive development and sales milestone payments. See Note 7, “Significant Agreements” to our Consolidated Financial Statements regarding the Novo Nordisk Share Purchase Agreement for more information.

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Cash Flows for the Years Ended December 31, 2022, 2021 and 2020

The following table summarizes, for the periods indicated, selected items in our Consolidated Statements of Cash Flows (in thousands):

Cash Used in Operating Activities

Net cash used in operating activities was $108.8 million for the year ended December 31, 2022, primarily due to the use of $185.5 million for operating expense (adjusted to exclude non-cash charges of approximately $26.9 million) and partially offset by a $40.0 million development milestone payment from Novo Nordisk.

Net cash provided by operating activities was $92.6 million for the year ended December 31, 2021, primarily due to the option exercise fee of $80.0 million from BMS, milestone payment of $60.0 million from Roche and upfront payment of $60.0 million from Novo Nordisk offset in part by the use of $128.6 million for operating expense (adjusted to exclude non-cash charges of approximately $36.0 million).

Net cash used in operating activities was $80.4 million for the year ended December 31, 2020, primarily due to use of $113.6 million for operating expense (adjusted to exclude non-cash charges of approximately $27.3 million).

Cash Used in Investing Activities

Net cash used in investing activities was $0.5 million, $0.6 million and $0.2 million for the years ended December 31, 2022, 2021 and 2020, respectively. Net cash used in investing activities for the years ended December 31, 2022, 2021 and 2020 was primarily related to purchases of property and equipment.

Cash Provided by Financing Activities

Net cash provided by financing activities was $241.5 million for the year ended December 31, 2022, primarily from net proceeds from issuances of ordinary shares pursuant to the December 2022 public offering of $172.6 million, net proceeds from issuances of ordinary shares pursuant to the December 2021 Distribution Agreement of $51.0 million, and proceeds from issuances of ordinary shares upon exercises of stock options of $17.8 million.

Net cash provided by financing activities was $190.3 million for the year ended December 31, 2021, primarily from net proceeds from issuance of ordinary shares pursuant to our May 2021 Distribution Agreement (as discussed below) of $96.7 million, net proceeds from issuance of ordinary shares in public offering of $78.0 million, and proceeds from issuances of ordinary shares upon exercises of stock options of $15.5 million.

Net cash provided by financing activities was $0.2 million and for the year ended December 31, 2020, which was proceeds from issuances of ordinary shares upon exercises of stock options.

Off-Balance Sheet Arrangements

At December 31, 2022, we were not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Contractual Obligations

Our contractual obligations as of December 31, 2022, consisted of minimum cash payments under operating leases of $21.3 million, purchase obligations of $11.5 million (of which $5.6 million is included in accrued current liabilities), and contractual obligations under license agreements of $0.4 million (of which $29 thousand is included in accrued current

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liabilities). Purchase obligations consist of non-cancelable purchase commitments to suppliers. Operating leases represent our future minimum rental commitments under our non-cancelable operating leases. For additional information regarding the timing for our contractual obligations See Note 6, “Commitments and Contingencies” to our Consolidated Financial Statements.

In March 2016, we entered into a noncancelable operating sublease to lease 128,751 square feet of office and laboratory space in South San Francisco, California. We are obligated to make lease payments totaling approximately $39.2 million over the lease term. Of this obligation, approximately $6.5 million remains outstanding as of December 31, 2022. We sub-sublease approximately 46,641 square feet of the office and laboratory in South San Francisco, California to Assembly Biosciences, Inc. See Note 6, “Commitments and Contingencies” to our Consolidated Financial Statements for additional information regarding sub-sublease rental income.

In June 2021, we entered into a lease agreement for office space in Dublin, Ireland, which commenced in August 2021 and had a term of one year. This lease has an automatic renewal clause, pursuant to which the agreement will be extended automatically for successive periods equal to the current term, unless cancelled by us. In May 2022, we renewed the lease for another one year term starting August 2022.

In October 2022, we entered into a noncancelable operating sublease to lease approximately 31,157 square feet of office and laboratory space in Brisbane, California. We are obligated to make lease payments totaling approximately $14.9 million over the lease term, which expires on September 30, 2028, unless terminated earlier. Of this obligation, approximately $14.7 million remains outstanding as of December 31, 2022.

As of the filing date, the term of the sublease has not commenced as we did not have the right to use or control physical access to the facility, and therefore no accounting relating to the sublease has been recorded in the Balance Sheet as of December 31, 2022. We expect to have the right to use or control the access to the facility in the second half of 2023.

The following is a summary of our contractual obligations as of December 31, 2022 (in thousands):

(1) See Note 6, “Commitments and Contingencies” to our Consolidated Financial Statements.

In addition to the contractual obligations above, we also expect to have future material cash requirements related to our clinical trials, discovery and pre-clinical programs, human capital and intellectual property. Assuming no significant change in our business, we expect the full year 2023 net cash used in operating and investing activities to be approximately $213 million to $229 million.

ITEM 7. MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS

In addition to historical information, this Form 10-K contains forward-looking statements which may cause our actual results to differ materially from expectations, plans and anticipated results discussed in forward-looking statements. Factors that could cause our actual results to differ materially include, but are not limited to, the risks and uncertainties set forth in the “Summary of Risks Affecting Our Business” at the beginning of this Form 10-K, Item 1A “Risk Factors” of this Form 10-K, and in our other filings with the U.S. Securities and Exchange Commission.

This discussion should be read in conjunction with the Consolidated Financial Statements and Notes presented in Item 8 of this Form 10-K.

Overview

Prothena is a late-stage clinical biotechnology company with expertise in protein dysregulation and a pipeline of investigational therapeutics with the potential to change the course of devastating neurodegenerative and rare peripheral amyloid diseases.

Fueled by our deep scientific expertise built over decades of research, we are advancing a pipeline of therapeutic candidates for a number of indications and novel targets for which our ability to integrate scientific insights around neurological dysfunction and the biology of misfolded proteins can be leveraged. Our wholly-owned programs include birtamimab for the potential treatment of AL amyloidosis, a portfolio of programs for the potential treatment of Alzheimer’s disease including PRX012 that targets Aβ (Amyloid beta) and a novel dual Aβ-Tau vaccine. Our partnered programs include prasinezumab, in collaboration with Roche for the potential treatment of Parkinson’s disease and other related synucleinopathies, and programs that target tau (PRX005), TDP-43, and an undisclosed target in collaboration with BMS for the potential treatment of Alzheimer’s disease, amyotrophic lateral sclerosis (ALS), or other neurodegenerative diseases. We are also entitled to certain potential milestone payments pursuant to the Company’s share purchase agreement with Novo Nordisk pertaining to our ATTR amyloidosis business.

We were formed on September 26, 2012, under the laws of Ireland and re-registered as an Irish public limited company on October 25, 2012. Our ordinary shares began trading on The Nasdaq Global Market under the symbol “PRTA” on December 21, 2012, and currently trade on The Nasdaq Global Select Market.

Critical Accounting Policies and Estimates

Management’s discussion and analysis of our financial condition and results of operations is based on our consolidated financial statements, which have been prepared in accordance with the accounting principles generally accepted in the U.S. (“GAAP”). The preparation of these consolidated financial statements requires us to make estimates and assumptions for the

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reported amounts of assets, liabilities, revenues, expenses and related disclosures. We believe the following policies to be critical to the judgments and estimates used in the preparation of our financial statements.

Revenue Recognition

Revenue is recognized only when we satisfy an identified performance obligation by transferring a promised good or service to a customer.

Contracts with Multiple Performance Obligations

Our License Agreement with Roche contains multiple performance obligations. We account for the individual performance obligations separately if they are distinct. Factors considered in the determination of whether the license performance obligations are distinct included, among other things, the research and development capabilities of Roche and Roche’s sublicense rights, and for the remaining performance obligations the fact that they are not proprietary and can be and have been provided by other vendors. The transaction price is allocated to the separate performance obligation on a relative standalone selling price basis.

We do not disclose the value of unsatisfied performance obligations for (i) contracts with an original expected length of one year or less and (ii) contracts for which we recognize revenue at the amount to which we have the right to invoice for services performed.

Collaboration Revenue

Upon adoption of Financial Accounting Standards Board (the “FASB”) Accounting Standards Codification (“ASC”) 606 on January 1, 2018, we recognize research and development (“R&D”) reimbursements as collaboration revenue earned over time as services are performed. Prior to adoption of ASC 606, we recorded research reimbursement as collaboration revenue and development reimbursement as an offset to R&D expense once the license revenue cap was met.

Milestone Revenue

We generally classify each of its milestones into one of three categories: (i) clinical milestones; (ii) regulatory and development milestones; and (iii) commercial milestones. Clinical milestones are typically achieved when a product candidate advances into or completes a defined phase of clinical research. For example, a milestone payment may be due to us upon the initiation of a clinical trial for a new indication. Regulatory and development milestones are typically achieved upon acceptance of the submission for marketing approval of a product candidate or upon approval to market the product candidate by the U.S. Food and Drug Administration (the “FDA”) or other regulatory authorities. For example, a milestone payment may be due to us upon submission for marketing approval of a product candidate by the FDA. Commercial milestones are typically achieved when an approved product reaches certain defined levels of net royalty sales by the licensee of a specified amount within a specified period.

In general, we consider such milestone payments as variable consideration with constraint and therefore we recognize the revenue from such milestone payments as collaboration revenue at point in time when we can conclude it is probable that a significant revenue reversal will not occur in future periods.

Research and Development

We expense R&D costs as incurred. R&D expenses include, but are not limited to, salary and benefits, share-based compensation, clinical trial activities, drug development and manufacturing prior to FDA approval and third-party service fees, including clinical research organizations and investigative sites. We recognize costs for certain development activities, such as clinical trials, based on an evaluation of the progress to completion of specific tasks using data such as patient enrollment, clinical site activations, or information provided to us by our vendors on their actual costs incurred. The objective of our accrual policy is to match the recording of the expenses in our Consolidated Financial Statements to the actual services we have received and efforts we have expended. As such, expense accruals related to clinical trials are recognized based on our estimate of the degree of completion of the events specified in the specific clinical study or trial contract. Payments for these activities are based on the terms of the individual arrangements, which may differ from the pattern of costs incurred, and are reflected in our Consolidated Financial Statements as prepaid or accrued research and development. Amounts due may be fixed fee, fee for service, and may include upfront payments, monthly payments, and payments upon the completion of milestones or receipt of deliverables.

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The information contained in Note 2 to the Consolidated Financial Statements under the heading “Recent Accounting Pronouncements” is hereby incorporated by reference into this Part II, Item 7.

Results of Operations

Comparison of Years Ended December 31, 2021, 2020 and 2019

Revenue

_________________________

nm = not meaningful

Total revenue was $200.6 million, $0.9 million, and $0.8 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Collaboration revenue includes milestone payments and reimbursements under our License Agreement with Roche. For the year ended December 31, 2021, collaboration revenue from Roche included a $60.0 million clinical milestone recognized upon first patient dosed in the global Phase 2b for prasinezumab PADOVA study. For the years ended December 31, 2021, 2020 and 2019, collaboration revenue included reimbursements under our License Agreement with Roche. See Note 7, “Significant Agreements” to the Consolidated Financial Statements regarding the Roche License Agreement for more information.

Collaboration revenue also includes revenue recognized under our Collaboration Agreement with BMS. For the year ended December 31, 2021, collaboration revenue recognized from BMS was $79.7 million of the total transaction consideration of $104.9 million for the PRX005 US License and US Development Services, see Note 7, “Significant Agreements” to the Consolidated Financial Statements regarding the Collaboration Agreement with Bristol Myers Squibb for more information.

License and intellectual property revenue included $60.7 million in revenue from the sale of intellectual property and related rights to the Company’s ATTR amyloidosis business and pipeline to Novo Nordisk in the year ended December 31, 2021. See Note 7, “Significant Agreements” to the Consolidated Financial Statements regarding the Novo Nordisk Share Purchase Agreement for more information. For the years ended December 31, 2021 and 2020 license revenue included license fees paid under License Agreement entered into on March 1, 2020, between the Company's wholly owned subsidiary, Prothena Biosciences Limited, and F. Hoffmann-La Roche Ltd. See Note 7, “Significant Agreements” to the Consolidated Financial Statements regarding the Roche License Agreement for more information.

Assuming no significant change in our business, we expect our 2022 revenue to decline over the prior year as our 2021 revenue was primarily comprised of nonrecurring milestone and license and intellectual property revenue.

Operating Expenses

_________________________

nm = not meaningful

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Total operating expenses consist of R&D expenses, general and administrative (“G&A”) expenses and restructuring and related impairment charges (credits). Our operating expenses were $128.6 million, $113.6 million and $86.5 million for the years ended December 31, 2021, 2020 and 2019, respectively.

Our research activities are aimed at developing new drug products. Our development activities involve the translation of our research into potential new drugs. Our R&D expenses primarily consist of personnel costs and related expenses, including share-based compensation and external costs associated with clinical activities and drug development related to our drug programs, including birtamimab (formerly NEOD001), prasinezumab, PRX004 (through July 8, 2021), PRX005, PRX012, our dual Aβ-tau vaccine and preclinical activities related to our discovery programs. Through May 28, 2021, pursuant to our License Agreement with Roche, we made payments to Roche for our share of the development expenses incurred by Roche related to the prasinezumab program, which is included in our R&D expenses. On May 28, 2021, we announced the exercise of our rights under the terms of the ongoing worldwide collaboration with Roche to receive potential U.S. commercial sales milestones and tiered royalties in lieu of a U.S. profit and loss share for prasinezumab in Parkinson’s disease.

Our G&A expenses primarily consist of personnel costs and related expenses, including share-based compensation and professional service expenses.

Research and Development Expenses

Our R&D expense increased by $7.4 million, or 10%, for the year ended December 31, 2021, compared to the prior year. The increase for year ended December 31, 2021, was primarily due to higher personnel expenses, higher clinical trial expenses primarily related to the birtamimab and PRX005 programs (offset in part by lower PRX004 clinical trial expense) and higher R&D consulting expenses; offset in part by lower collaboration expenses related to the prasinezumab program with Roche as a result of the cost share opt-out exercised in May 202l and lower manufacturing expenses primary related to the PRX005 and birtamimab programs.

For the year ended December 31, 2020, our R&D expenses increased by $24.0 million, or 47%, compared to the prior year. The increase for the year ended December 31, 2020, was primarily due to higher manufacturing costs primarily related to our PRX005, birtamimab and PRX012 programs and to a lesser extent PRX004, higher collaboration expense with Roche related to the prasinezumab program and higher R&D consulting expense.

The following table sets forth the R&D expenses for our major programs (specifically, any program with successful first dosing in a Phase 1 clinical trial, which were birtamimab, prasinezumab, PRX003, PRX004 (through July 8, 2021)) and other R&D expenses for the years ended December 31, 2021, 2020 and 2019, and the cumulative amounts to date (in thousands):

(1)Cumulative R&D costs to date for birtamimab (NEOD001) include the costs incurred from the date when the program was separately tracked in preclinical development. Expenditures in the early discovery stage are not tracked by program and accordingly have been excluded from this cumulative amount.

(2)Cumulative R&D costs to date for prasinezumab and related antibodies include the costs incurred from the date when the program was separately tracked in nonclinical development. Expenditures in the early discovery stage are not tracked by program and accordingly have been excluded from this cumulative amount. Through May 28, 2021, Prasinezumab costs include payments to Roche for our share of the development expenses incurred by Roche related to prasinezumab programs. For the years ended December 31, 2021, 2020 and 2019, respectively, $0.2 million, $0.6 million and $0.8 million of reimbursements from Roche for development services were recorded as part of collaboration revenue.

(3)Cumulative R&D costs to date for PRX003 include the costs incurred from the date when the program was separately tracked in nonclinical development. Expenditures in the early discovery stage are not tracked by program and accordingly have been excluded

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from this cumulative amount. Based on the Phase 1b multiple ascending dose study results announced in September 2017, we announced that we will not advance PRX003 into mid-stage clinical development for psoriasis or psoriatic arthritis as previously planned.

(4)Cumulative R&D costs to date for PRX004 include the costs incurred from the date when the program was separately tracked in nonclinical development. Expenditures in the early discovery stage are not tracked by program and accordingly have been excluded from this cumulative amount. On July 8, 2021, we sold shares of one of our wholly-owned subsidiaries to Novo Nordisk. In connection with the transaction, Novo Nordisk acquired our ATTR amyloidosis business, including the clinical stage antibody PRX004.

(5)Cumulative R&D costs to date for PRX005 include the costs incurred from the date when the program was separately tracked in nonclinical development. Expenditures in the early discovery stage are not tracked by program and accordingly have been excluded from this cumulative amount.

(6)Other R&D is comprised of preclinical development and discovery programs that have not progressed to first patient dosing in a Phase 1 clinical trial.

We expect our R&D expenses to increase in 2022 over the prior year, primarily due to anticipated higher personnel costs including share-based compensation, increase in spending for our late stage program birtamimab and higher manufacturing expense associated with our pre-clinical programs.

General and Administrative Expenses

Our G&A expenses increased by $7.6 million, or 20%, for the year ended December 31, 2021, compared to the prior year. The increase for the year ended December 31, 2021, compared to the prior year, was primarily due to higher personnel expense, higher legal expenses, higher expense for our director and officer insurance premium and higher consulting expense.

For the year ended December 31, 2020, our G&A expenses increased by $3.0 million, or 8%, compared to the prior year. The decrease for the year ended December 31, 2020, was primarily due to higher costs for our director and officer insurance premiums.

We expect our G&A expenses to increase in 2022 compared to the prior year, primarily related to anticipated higher personnel costs including share-based compensation.

Other Income (Expense)

_________________________

nm = not meaningful

Interest income decreased by $1.3 million, or 97%, for the year ended December 31, 2021, compared to the prior year, primarily due to lower interest income from our cash and money market accounts resulting from lower interest rates.

Interest income, decreased by $6.8 million, or 83%, for the year ended December 31, 2020, compared to the prior year, primarily due to lower interest income from our cash and money market accounts resulting from lower interest rates and lower cash and money market balances.

Other income (expense), net for the years ended December 31, 2021, 2020 and 2019, was primarily foreign exchange gains (losses) from transactions with vendors denominated in Euros.

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Provision for (benefit from) Income Taxes

_________________________

nm = not meaningful

The provision for (benefit from) income taxes were $4.9 million, $(0.3) million and $0.4 million for the years ended December 31, 2021, 2020 and 2019, respectively. The provision for income taxes increased by $5.2 million for the year ended December 31, 2021, compared to the same period in the prior year was primarily due to a decrease in deferred tax asset related to our February 12, 2021 option exchange program and a change in our share-based compensation 162(m) limitations associated with the increase in the number of covered employees under the American Rescue Plan Act.

The benefit from income taxes increased by $0.7 million for the year ended December 31, 2020, compared to the same period of the prior year, primarily due to a decrease in tax shortfall related to higher stock option cancellations in the prior year.

The tax provisions for all periods presented primarily reflect U.S. federal taxes associated with recurring profits attributable to intercompany services that our U.S. subsidiary performs for the Company. No tax benefit has been recorded related to tax losses recognized in Ireland and any deferred tax assets for those losses are offset by a valuation allowance.

Liquidity and Capital Resources

Overview

Working capital was $551.4 million as of December 31, 2021, an increase of $277.9 million from working capital of $273.4 million as of December 31, 2020. This increase in working capital during the year ended December 31, 2021, was primarily attributable to a higher cash and cash equivalents balance resulting from the net proceeds of $96.7 million from our May 2021 Distribution Agreement, net proceeds of approximately $78.0 million from our public offering in March 2021, option exercise fee of $80.0 million from BMS, milestone payment of $60.0 million from Roche, upfront payment of $60.0 million from Novo Nordisk, and proceeds from stock option exercises of approximately $15.5 million, partially offset by cash use of $128.6 million for operating expenses (adjusted to exclude non-cash charges).

As of December 31, 2021, we had $579.1 million in cash and cash equivalents. Although we believe, based on our current business plans, that our existing cash and cash equivalents will be sufficient to meet our obligations for at least the next twelve months, we anticipate that we will require additional capital in the future in order to continue the research and development of our drug candidates. Additionally, in order to develop and obtain regulatory approval for our potential products we will need to raise substantial additional funds. We expect to raise any such additional funds through public or private equity or debt financings, collaborative agreements with corporate partners, or other arrangements. We cannot assume that such additional financings will be available on acceptable terms, if at all, and such financings may only be available on terms dilutive to our shareholders.

In managing our liquidity needs in Ireland, we do not rely on unrepatriated earnings as a source of funds. As of December 31, 2021, $182.9 million of our outstanding cash and cash equivalents related to U.S. operations are considered permanently reinvested. We do not intend to repatriate these funds. However, if these funds were repatriated back to Ireland, we would incur a withholding tax from the dividend distribution.

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The adequacy of our cash resources depends on many assumptions, including assumptions with respect to our expenses. These assumptions may prove to be wrong, and we could use our available capital resources sooner than we currently expect. Because of the numerous risks and uncertainties associated with the development and commercialization of our product candidates, we are unable to estimate the amounts of increased capital outlays and operating expenses associated with completing the development of our product candidates. Our future capital requirements will depend on numerous factors, including, without limitation, the timing of initiation, progress, results and costs of our clinical trials; the results of our research and nonclinical studies; the costs of clinical manufacturing and of establishing commercial manufacturing arrangements; the costs of preparing, filing and prosecuting patent applications and maintaining, enforcing and defending intellectual property-related claims; the costs and timing of capital asset purchases; our ability to establish research collaborations, strategic collaborations, licensing or other arrangements; the costs to satisfy our obligations under current and potential future collaborations; the costs of any in-licensing transactions; and the timing, receipt, and amount of revenues or royalties, if any, from any approved drug candidates.

Our cash and cash equivalents may also be potentially supplemented in the future by proceeds from our collaboration partners and milestone payments from Novo Nordisk. Pursuant to the Collaboration Agreement with Roche, we are eligible to receive payments for commercial and regulatory milestones and royalties on net sales of Collaboration Products. See Note 7, “Significant Agreements” to our Consolidated Financial Statements regarding the Roche License Agreement for more information. Pursuant to the Collaboration Agreement with BMS (formerly Celgene), we are eligible to receive payments for commercial and regulatory milestones and royalties on net sales of Collaboration Products. See Note 7, “Significant Agreements” to our Consolidated Financial Statements regarding the Collaboration Agreement with Bristol Myers Squibb for more information. Pursuant to the share purchase agreement with Novo Nordisk, we are eligible to receive development and sales milestone payments. See Note 7, “Significant Agreements” to our Consolidated Financial Statements regarding the Novo Nordisk Share Purchase Agreement for more information.

Cash Flows for the Years Ended December 31, 2021, 2020 and 2019

The following table summarizes, for the periods indicated, selected items in our Consolidated Statements of Cash Flows (in thousands):

Cash Used in Operating Activities

Net cash provided by operating activities was $92.6 million for the year ended December 31, 2021, primarily due to the option exercise fee of $80.0 million from BMS, milestone payment of $60.0 million from Roche and upfront payment of $60.0 million from Novo Nordisk offset in part by the use of $128.6 million for operating expense (adjusted to exclude non-cash charges of approximately $36.0 million).

Net cash used in operating activities was $80.4 million for the year ended December 31, 2020, primarily due to use of $113.6 million for operating expense (adjusted to exclude non-cash charges of approximately $27.3 million).

Net cash used in operating activities was $53.0 million for the year ended December 31, 2019, primarily due to use of $86.5 million for operating expense (adjusted to exclude non-cash charges of approximately $29.2 million).

Cash Used in Investing Activities

Net cash used in investing activities was $0.6 million, $0.2 million and $0.5 million for the years ended December 31, 2021, 2020 and 2019, respectively. Net cash used in investing activities for the years ended December 31, 2021, 2020 and 2019 was primarily related to purchases of property and equipment.

Cash Provided by Financing Activities

Net cash provided by financing activities was $190.3 million for the year ended December 31, 2021, primarily from net proceeds from issuance of ordinary shares pursuant to our May 2021 Distribution Agreement of $96.7 million, net proceeds

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from issuance of ordinary shares in public offering of $78.0 million, and proceeds from issuances of ordinary shares upon exercises of stock options of $15.5 million.

Net cash provided by financing activities was $0.2 million and $0.2 million for the years ended December 31, 2020 and 2019, respectively, which were proceeds from issuances of ordinary shares upon exercises of stock options.

At December 31, 2021, we were not a party to any off-balance sheet arrangements that have, or are reasonably likely to have, a current or future effect on our financial condition, changes in financial condition, revenue or expenses, results of operations, liquidity, capital expenditures or capital resources.

Contractual Obligations

Our contractual obligations as of December 31, 2021, consisted of minimum cash payments under operating leases of $13.0 million, purchase obligations of $12.2 million (of which $2.8 million is included in accrued current liabilities), and contractual obligations under license agreements of $0.5 million (of which $0.1 million is included in accrued current liabilities). Purchase obligations consist of non-cancelable purchase commitments to suppliers. Operating leases represent our future minimum rental commitments under our non-cancelable operating leases. For additional information regarding the timing for our contractual obligations See Note 6, “Commitments and Contingencies” to our Consolidated Financial Statements.

In March 2016, we entered into a noncancelable operating sublease to lease 128,751 square feet of office and laboratory space in South San Francisco, California. We are obligated to make lease payments totaling approximately $39.2 million over the lease term. Of this obligation, approximately $12.9 million remains outstanding as of December 31, 2021. We sub-sublease approximately 46,641 square feet of the office and laboratory in South San Francisco, California to Assembly Biosciences, Inc. See Note 6, “Commitments and Contingencies” to our Consolidated Financial Statements for additional information regarding sub-sublease rental income.

In June 2021, we entered into a new lease agreement for new office space in Dublin, Ireland, which commenced in August 2021 and has a term of one year. This new lease has an automatic renewal clause, pursuant to which the agreement will be extended automatically for successive periods equal to the current term, unless cancelled by us. As of December 31, 2021, we are obligated to make lease payments over the remaining term of the Dublin lease of approximately €63,000, or $72,000 as converted using an exchange rate as of December 31, 2021.

The following is a summary of our contractual obligations as of December 31, 2021 (in thousands):

(1) See Note 6, “Commitments and Contingencies” to our Consolidated Financial Statements.

In addition to the contractual obligations above, we also expect to have future material cash requirements related to our clinical trials, discovery and pre-clinical programs, human capital and intellectual property. Assuming no significant change in our business, we expect the full year 2022 net cash used in operating and investing activities to be approximately $120 million to $132 million.