Protara Therapeutics, Inc. (TARA) FY 2024 MD&A

Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations

You should read the following
discussion and analysis of our financial condition and results of operations together with our financial statements and related notes
appearing elsewhere in this Annual Report on Form 10-K. Some of the information contained in this discussion and analysis or set forth
elsewhere in this Annual Report on Form 10-K, including information with respect to our plans and strategy for our business and related
financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors
set forth in the “Risk Factors” section of this document, our actual results could differ materially from the results described
in, or implied by, the forward-looking statements contained in the following discussion and analysis.

Overview

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

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

We are also pursuing intravenous,
or IV, Choline Chloride, an investigational phospholipid substrate replacement therapy, for patients receiving parenteral support, or
PS, which includes both nutrition and fluids. Choline is a known important substrate for phospholipids that are critical for healthy liver
function and also plays an important role in modulating gene expression, cell membrane signaling, brain development and neurotransmission,
muscle function and bone health. PS patients are unable to synthesize choline from enteral nutrition sources, and there are currently
no available PS formulations containing choline.

For additional information regarding our various clinical trials
and programs, see “Item 1. Business.” We have devoted substantial efforts to the development of these programs and do not
have any approved products and have not generated any revenue from product sales. Neither TARA-002 nor IV Choline Chloride have been approved
for use for any indications. We do not expect to generate revenues in the near-term, and it is possible we may never generate revenues
in the future. To finance our current strategic plans, including the conduct of ongoing and future clinical trials and further research
and development costs, we will need to raise additional capital. See “Item 7. Management’s Discussion and Analysis of Financial
Condition and Results of Operations—Liquidity and Capital Resources” for additional information about our liquidity and capital
resource needs.

Since inception, we have
incurred significant operating losses. As of December 31, 2024, we had an accumulated deficit of approximately $245.0 million. We expect
to continue to incur significant expenses and increasing operating losses for at least the next few years as we continue our development
of, and seek marketing approvals for, our product candidates, prepare for and begin the commercialization of any approved products, and
add infrastructure and personnel to support our product development efforts and operations as a public company in the United States.

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

As of December 31, 2024,
we had approximately $170.3 million in cash and cash equivalents, and marketable debt securities.

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Financial Overview

Research and Development

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

General and Administrative

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

Other Income (Expense), net

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

Critical Accounting Policies and Significant Judgments and Estimates

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

While our significant accounting policies are described in more detail
in the notes to our consolidated financial statements and related notes appearing elsewhere in this Annual Report on this Form 10-K, we
believe the following accounting policies to be most critical to the judgments and estimates used in the preparation of our financial
statements.

Our critical accounting policy is the accounting for prepaid and accrued
research and development expenses.

Research and Development Prepaid and Accrued
Expenses

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

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Results of Operations

Comparison of the Years Ended December 31,
2024 and 2023

The following table summarizes our results of operations (in thousands):

Research and development
expenses

The following table summarizes our research and development expenses
(in thousands):

Research and development expenses were $31.7 million for the year ended
December 31, 2024, which represented an increase of approximately $6.7 million as compared to the year ended December 31, 2023. This increase
was primarily due to a $6.1 million increase in direct expenses for our product candidates and a $0.6 million increase in indirect expenses.
The increase in indirect expenses was primarily due to a $1.0 million increase in personnel-related expenses offset by a decrease of $0.3
million in indirect clinical manufacturing expenses.

General and administrative
expenses

General and administrative expenses were $17.5 million for the year
ended December 31, 2024, which represented a decrease of approximately $1.2 million as compared to the year ended December 31, 2023. This
decrease was primarily due to a net decrease of $1.2 million in personnel-related expenses.

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Other income (expense),
net

Other income (expense), net was $4.6 million for the year ended December
31, 2024, which represented an increase of approximately $1.4 million as compared to the year ended December 31, 2023, due primarily to
higher investment returns on a higher invested balance as well as a $0.4 million increase in other income.

Liquidity and Capital Resources

Overview

As of December 31, 2024 and 2023, our cash and cash equivalents, and
marketable debt securities were $170.3 million and $65.6 million, respectively. We have not generated revenues since our inception and
have incurred net losses of approximately $44.6 million and $40.4 million for the years ended December 31, 2024 and 2023, respectively.
As of December 31, 2024, we had working capital of approximately $161.2 million and stockholder’s equity of approximately $167.1
million. During the year ended December 31, 2024, cash flows used in operating activities were approximately $35.8 million, consisting
primarily of a net loss of approximately $44.6 million, which includes non-cash activities of approximately $4.8 million, inclusive of
$4.1 million in stock-based compensation expense, as well as working capital adjustments of $4.0 million. Since inception, we have met
our liquidity requirements principally through the sale of our common stock, preferred stock and pre-funded warrants in private placements
and public offerings. In addition, we may receive proceeds upon the exercise of the common warrants issued in the April 2024 private placement
described below.

Liquidity

On November 3, 2023, we filed a shelf registration statement on Form
S-3, or the Shelf Registration Statement, which became effective in November 2023. The Shelf Registration Statement permits the offering,
issuance and sale by us of up to a maximum aggregate offering price of $300.0 million of common stock, preferred stock, debt securities
and warrants in one or more offerings and in any combination. In December 2024, we sold and issued approximately $100.1 million in gross
proceeds of common stock and pre-funded warrants in a public offering, or the December 2024 Public Offering, under the Shelf Registration
Statement. The net proceeds were approximately $93.4 million. In January 2025, the underwriters partially exercised their option, or the
Underwriters’ Option, to purchase a portion of the additional shares of common stock pursuant to the underwriting agreement,
or the Underwriting Agreement, which resulted in gross proceeds of approximately $2.7 million and net proceeds of approximately $2.5 million.

In April 2024, the Company entered into a private placement transaction,
or the April 2024 Private Placement, whereby the Company sold and issued common stock, warrants and in, in some circumstances, pre-funded
warrants to certain purchasers. At the close of the April 2024 Private Placement, the Company received net proceeds of approximately $42.0
million after deducting placement agent fees and offering expenses.

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

We believe that our current
financial resources, as of the date of the issuance of our consolidated financial statements included elsewhere in this Annual Report
on this Form 10-K, are sufficient to satisfy our estimated liquidity needs for at least 12 months.

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

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Cash Flows

The following table summarizes our sources and uses of cash (in thousands):

Comparison of the Years Ended December 31, 2024 and 2023

Net cash provided by (used in) operating activities was approximately
$(35.8) million for the year ended December 31, 2024 compared to approximately $(37.6) million for the year ended December 31, 2023. The
decrease of approximately $1.7 million in cash used in operating activities was primarily driven by a decrease in working capital adjustments,
primarily related to changes in prepaid expenses and other current assets, accounts payable, and accrued expenses resulting from the timing
of payments to our service providers of $8.1 million, offset in part by an increase in net loss of $4.2 million and by a $2.2 million
decrease in non-cash items, consisting principally of stock-based compensation expense.

Net cash provided by (used
in) investing activities was approximately $19.2 million for the year ended December 31, 2024 compared to approximately $53.1 million
for the year ended December 31, 2023. The decrease of $34.0 million resulted primarily from an increase of $17.2 million of marketable
debt securities purchased as well as a decrease of $16.7 million of proceeds from marketable debt securities matured.

Net cash provided by (used in) financing activities was $139.9 million
for the year ended December 31, 2024 compared to $(0.1) million for the year ended December 31, 2023. The increase of approximately $140.0
million resulted primarily from the net proceeds of the December 2024 Public Offering of $94.0 million and the April 2024 Private Placement
of $42.0 million, as well as proceeds from the exercise of common warrants of $3.8 million.

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Contractual and Other Obligations

Operating lease obligations

Our operating lease obligations
primarily consist of lease payments on our corporate headquarters in New York, New York, as well as lease payments for our development
laboratory, a manufacturing facility and an additional manufacturing space, all located in North America which are described in further
detail in Note 9 of our consolidated financial statements included in this Annual Report on Form 10-K. Future contractual payments on
operating lease obligations due within one year of December 31, 2024 are $1.4 million, and future contractual payments on operating lease
obligations due greater than one year from December 31, 2024 are $3.7 million.

Other obligations

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

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

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

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