UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

WASHINGTON, DC 20549

FORM 10-Q

(Mark One)


☒			QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the quarterly period ended September 30, ~~2021~~2022


☐			TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934

For the transition period from to

Commission File Number: 001-39620

PRAXIS PRECISION MEDICINES, INC.

(Exact Name of Registrant as Specified in its Charter)


Delaware									47-5195942
(State or other jurisdiction of incorporation or organization)									(I.R.S. Employer Identification No.)

99 High Street, 30th Floor
Boston, MA									02110
(Address of principal executive offices)									(Zip Code)

Registrant’s telephone number, including area code: 617-300-8460

Securities registered pursuant to Section 12(b) of the Act:

Title of each class

Trading
Symbol(s)

Name of each exchange
on which registered

Common Stock, par value $0.0001 per share

PRAX

The Nasdaq Global Select Market

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes ☒ No ☐

Indicate by check mark whether the registrant has submitted electronically every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files). Yes ☒ No ☐

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act.

Large accelerated filer

☐☒

Accelerated filer

☐

Non-accelerated filer

☒☐

Smaller reporting company

☒

Emerging growth company

☒☐

If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ☐

Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Exchange Act). Yes ☐ No ☒

As of ~~October 29, 2021,~~November 4, 2022, the registrant had ~~44,855,777~~47,118,578, shares of common stock, $0.0001 par value per share, outstanding.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q contains express or implied forward-looking statements that are based on our management’s belief and assumptions and on information currently available to our management. Although we believe that the expectations reflected in these forward-looking statements are reasonable, these statements relate to future events or our future operational or financial performance, and involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by these forward-looking statements. Forward-looking statements contained in this Quarterly Report on Form 10-Q include, but are not limited to, statements about:

•the success, cost and timing of our product candidate development activities and clinical trials;

•our expectations regarding our ability to obtain and maintain intellectual property protection for our product candidates;

•the ability to license additional intellectual property relating to our product candidates from third parties and to comply with our existing license agreements and collaboration agreements;

•the ability and willingness of our third-party research institution collaborators to continue research and development activities relating to our product candidates;

•our ability to commercialize our product candidates, if approved, in light of the intellectual property rights of others;

•our ability to obtain funding for our operations, including funding necessary to complete further development and, if approved, commercialization of our product candidates;

•the commercialization of our product candidates, if approved;

•our plans to research, develop and, if approved, commercialize our product candidates;

•future agreements with third parties in connection with the commercialization of our product candidates, if approved, and any other approved product;

•the size and growth potential of the markets for our product candidates, and our ability to serve those markets;

•the rate and degree of market acceptance of our product candidates, if approved;

•the pricing and reimbursement of our product candidates, if approved;

•regulatory developments in the United States and foreign countries;

•our ability to contract with third-party suppliers and manufacturers and their ability to perform adequately;

•the success of competing therapies that are or may become available;

•our ability to attract and retain key scientific or management personnel;

•the accuracy of our estimates regarding expenses, future revenue, capital requirements and needs for additional financing; and

•the effect of the COVID-19 pandemic, including mitigation efforts and economic effects, and the ongoing conflict in Ukraine on any of the foregoing or other aspects of our business operations, including but not limited to our ongoing and planned preclinical studies and clinical trials.

In some cases, you can identify forward-looking statements by terminology such as “may,” “should,” “expects,” “intends,” “plans,” “anticipates,” “believes,” “estimates,” “predicts,” “potential,” “continue” or the negative of these terms or other comparable terminology. These statements are only predictions. You should not place undue reliance on forward-looking statements because they involve known and unknown risks, uncertainties, and other factors, which are, in some cases, beyond our control and which could materially affect results. Factors that may cause

actual results to differ materially from current expectations include, among other things, those listed under the section titled ~~“Risk Factors” in our Annual Report on Form 10-K for the year ended December 31, 2020 and under the section titled~~ "Risk Factors" in ~~this~~our Quarterly Report on Form ~~10-Q.~~10-Q for the quarter ended June 30, 2022. If one or more of these risks or uncertainties occur, or if our underlying assumptions prove to be incorrect, actual events or results may vary significantly from those implied or projected by the forward-looking statements. No forward-looking statement is a guarantee of future performance. You should read this Quarterly Report on Form 10-Q and the documents that we reference in this Quarterly Report on Form 10-Q and have filed with the Securities and Exchange Commission as exhibits hereto completely and with the understanding that our actual future results may be materially different from any future results expressed or implied by these forward-looking statements.

The forward-looking statements in this Quarterly Report on Form 10-Q represent our views as of the date of this Quarterly Report on Form 10-Q. We anticipate that subsequent events and developments will cause our views to change. However, while we may elect to update these forward-looking statements at some point in the future, we have no current intention of doing so except to the extent required by applicable law. You should therefore not rely on these forward-looking statements as representing our views as of any date subsequent to the date of this Quarterly Report on Form 10-Q.

This Quarterly Report on Form 10-Q also contains estimates, projections and other information concerning our industry, our business and the markets for our product candidates. Information that is based on estimates, forecasts, projections, market research or similar methodologies is inherently subject to uncertainties and actual events or circumstances may differ materially from events and circumstances that are assumed in this information. Unless otherwise expressly stated, we obtained this industry, business, market, and other data from our own internal estimates and research as well as from reports, research surveys, studies, and similar data prepared by market research firms and other third parties, industry, medical and general publications, government data and similar sources. While we are not aware of any misstatements regarding any third-party information presented in this Quarterly Report on Form 10-Q, their estimates, in particular, as they relate to projections, involve numerous assumptions, are subject to risks and uncertainties and are subject to change based on various factors, including those discussed under the section titled “Risk Factors” in our ~~Annual Report on Form 10-K for the year ended December 31, 2020 and elsewhere in this~~ Quarterly Report on Form ~~10-Q.~~10-Q for the quarter ended June 30, 2022.

Table of Contents


		Page
PART I.	FINANCIAL INFORMATION
Item 1.	Financial Statements (Unaudited)
	Condensed Consolidated Balance Sheets as of Septe mber S ~~eptember~~ 30, ~~2021~~2022 and December 31, ~~2020~~2021	1
	Condensed Consolidated Statements of Operations for the Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	2
	Condensed Consolidated Statements of Comprehensive Loss for the Three and Nine ~~Nine~~ Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	3
	Condensed Consolidated Statements of ~~Redeemable Convertible Preferred Stock and~~ Stockholders’ Equity ~~(Deficit)~~ for the Three and Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	4
	Condensed Consolidated Statements of Cash Flows for the Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021	6
	Notes to Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	1615
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2826
Item 4.	Controls and Procedures	2826
PART II.	OTHER INFORMATION	3027
Item 1.	Legal Proceedings	3027
Item 1A.	Risk Factors	3027
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	3227
Item 3.	Defaults Upon Senior Securities	3327
Item 4.	Mine Safety Disclosures	3327
Item 5.	Other Information	3327
Item 6.	Exhibits	3428
Signatures		3529

PART I—FINANCIAL INFORMATION

Item 1. Financial Statements.

PRAXIS PRECISION MEDICINES, INC.

CONDENSED CONSOLIDATED BALANCE SHEETS

(Unaudited)

(Amounts in thousands, except share and per share data)


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
Assets	Assets					Assets
Current assets:	Current assets:					Current assets:
Cash and cash equivalents	Cash and cash equivalents	$	165,679	$	296,608	Cash and cash equivalents	$	62,440	$	138,704
Marketable securities	Marketable securities	148,691		—		Marketable securities	61,300		137,207
Prepaid expenses and other current assets	Prepaid expenses and other current assets	4,969		5,718		Prepaid expenses and other current assets	8,572		11,498
Total current assets	Total current assets	319,339		302,326		Total current assets	132,312		287,409
Property and equipment, net	Property and equipment, net	625		82		Property and equipment, net	1,077		1,213
Operating lease right-of-use assets	Operating lease right-of-use assets	4,028		754		Operating lease right-of-use assets	3,097		3,653
Other non-current assets	Other non-current assets	416		15		Other non-current assets	416		472
Total assets	Total assets	$	324,408	$	303,177	Total assets	$	136,902	$	292,747
Liabilities and stockholders’ equity	Liabilities and stockholders’ equity					Liabilities and stockholders’ equity
Current liabilities:	Current liabilities:					Current liabilities:
Accounts payable	Accounts payable	$	7,544	$	4,088	Accounts payable	$	10,122	$	10,780
Accrued expenses	Accrued expenses	16,529		10,869		Accrued expenses	17,884		26,844
Operating lease liabilities	Operating lease liabilities	681		763		Operating lease liabilities	977		810
Total current liabilities	Total current liabilities	24,754		15,720		Total current liabilities	28,983		38,434
Long-term liabilities:	Long-term liabilities:					Long-term liabilities:
Non-current portion of operating lease liabilities	Non-current portion of operating lease liabilities	3,732		—		Non-current portion of operating lease liabilities	2,756		3,501
Total liabilities	Total liabilities	28,486		15,720		Total liabilities	31,739		41,935
Commitments and contingencies (Note 6)	Commitments and contingencies (Note 6)	0		0		Commitments and contingencies (Note 6)
Stockholders’ equity:	Stockholders’ equity:					Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized and no shares issued or outstanding as of September 30, 2021 and December 31, 2020		—		—
Common stock, $0.0001 par value; 150,000,000 shares authorized; 44,784,071 shares issued and outstanding as of September 30, 2021, and 38,268,543 shares issued and outstanding as of December 31, 2020		5		4
Preferred stock, $0.0001 par value; 10,000,000 shares authorized and no shares issued or outstanding as of September 30, 2022 and December 31, 2021						Preferred stock, $0.0001 par value; 10,000,000 shares authorized and no shares issued or outstanding as of September 30, 2022 and December 31, 2021	—		—
Common stock, $0.0001 par value; 150,000,000 shares authorized; 46,864,327 shares issued and outstanding as of September 30, 2022, and 45,300,514 shares issued and outstanding as of December 31, 2021						Common stock, $0.0001 par value; 150,000,000 shares authorized; 46,864,327 shares issued and outstanding as of September 30, 2022, and 45,300,514 shares issued and outstanding as of December 31, 2021	5		5
Additional paid-in capital	Additional paid-in capital	553,975		437,007		Additional paid-in capital	595,165		567,598
Accumulated other comprehensive loss	Accumulated other comprehensive loss	(25)		—		Accumulated other comprehensive loss	(536)		(176)
Accumulated deficit	Accumulated deficit	(258,033)		(149,554)		Accumulated deficit	(489,471)		(316,615)
Total stockholders’ equity	Total stockholders’ equity	295,922		287,457		Total stockholders’ equity	105,163		250,812
Total liabilities and stockholders’ equity	Total liabilities and stockholders’ equity	$	324,408	$	303,177	Total liabilities and stockholders’ equity	$	136,902	$	292,747

The accompanying notes are an integral part of these condensed consolidated financial statements.

PRAXIS PRECISION MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS

(Unaudited)

(Amounts in thousands, except share and per share data)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Operating expenses:	Operating expenses:									Operating expenses:
Research and development	Research and development	$	33,139	$	12,786	$	76,746	$	28,704	Research and development	$	30,439	$	33,139	$	126,711	$	76,746
General and administrative	General and administrative	11,634		3,431		31,929		7,552		General and administrative	13,851		11,634		46,822		31,929
Total operating expenses	Total operating expenses	44,773		16,217		108,675		36,256		Total operating expenses	44,290		44,773		173,533		108,675
Loss from operations	Loss from operations	(44,773)		(16,217)		(108,675)		(36,256)		Loss from operations	(44,290)		(44,773)		(173,533)		(108,675)
Other income:	Other income:									Other income:
Other income, net	Other income, net	73		1		201		134		Other income, net	345		73		677		201
Total other income	Total other income	73		1		201		134		Total other income	345		73		677		201
Loss before income taxes	Loss before income taxes	(44,700)		(16,216)		(108,474)		(36,122)		Loss before income taxes	$	(43,945)	$	(44,700)	$	(172,856)	$	(108,474)
Benefit from (provision for) income taxes		(5)		—		(5)		8
Provision for income taxes										Provision for income taxes	—		(5)		—		(5)
Net loss	Net loss	$	(44,705)	$	(16,216)	$	(108,479)	$	(36,114)	Net loss	$	(43,945)	$	(44,705)	$	(172,856)	$	(108,479)
Accretion and cumulative dividends on redeemable convertible preferred stock		—		(3,943)		—		(8,046)
Gain on repurchase of redeemable convertible preferred stock		—		—		—		493
Net loss attributable to common stockholders		$	(44,705)	$	(20,159)	$	(108,479)	$	(43,667)
Net loss per share attributable to common stockholders, basic and diluted	Net loss per share attributable to common stockholders, basic and diluted	$	(1.00)	$	(12.10)	$	(2.61)	$	(26.53)	Net loss per share attributable to common stockholders, basic and diluted	$	(0.96)	$	(1.00)	$	(3.79)	$	(2.61)
Weighted average common shares outstanding, basic and diluted	Weighted average common shares outstanding, basic and diluted	44,714,941		1,665,902		41,608,017		1,645,982		Weighted average common shares outstanding, basic and diluted	45,774,376		44,714,941		45,591,888		41,608,017

The accompanying notes are an integral part of these condensed consolidated financial statements.

PRAXIS PRECISION MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF COMPREHENSIVE LOSS

(Unaudited)

(Amounts in thousands)


		Three Months Ended September 30,				Nine Months Ended September 30,					Three Months Ended September 30,				Nine Months Ended September 30,
		2021		2020		2021		2020			2022		2021		2022		2021
Net loss	Net loss	$	(44,705)	$	(16,216)	$	(108,479)	$	(36,114)	Net loss	$	(43,945)	$	(44,705)	$	(172,856)	$	(108,479)
Unrealized gains (losses) on marketable securities, net of tax		25		—		(25)		—
Change in unrealized losses on marketable securities, net of tax										Change in unrealized losses on marketable securities, net of tax	144		25		(360)		(25)
Comprehensive loss	Comprehensive loss	$	(44,680)	$	(16,216)	$	(108,504)	$	(36,114)	Comprehensive loss	$	(43,801)	$	(44,680)	$	(173,216)	$	(108,504)

The accompanying notes are an integral part of these condensed consolidated financial statements.

PRAXIS PRECISION MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~REDEEMABLE CONVERTIBLE PREFERRED STOCK AND~~ STOCKHOLDERS’ EQUITY ~~(DEFICIT)~~

(Unaudited)

(Amounts in thousands, except share data)


		Common Stock			Additional Paid-In Capital				Accumulated Deficit				Accumulated Other Comprehensive Loss					Total Stockholders’ Equity (Deficit)			Common Stock				Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
		Shares	Amount														Shares					Amount
Balance at December 31, 2020		38,268,543	$	4			$	437,007			$	(149,554)			$	—					$	287,457
Balance at December 31, 2021																				Balance at December 31, 2021	45,300,514		$	5	$	567,598	$	(316,615)	$	(176)	$	250,812
Stock-based compensation expense	Stock-based compensation expense	—	—		4,666				—				—					4,666		Stock-based compensation expense	—		—		7,886		—		—		7,886
Issuance of common stock from at-the-market public offerings, net of issuance costs																				Issuance of common stock from at-the-market public offerings, net of issuance costs	70,410		—		1,368		—		—		1,368
Vesting of restricted stock units																				Vesting of restricted stock units	81,130		—		—		—		—		—
Shares withheld for taxes for vesting of restricted stock units																				Shares withheld for taxes for vesting of restricted stock units	(17,850)		—		(230)		—		—		(230)
Issuance of common stock upon exercise of stock options	Issuance of common stock upon exercise of stock options	352,506	—		851				—				—					851		Issuance of common stock upon exercise of stock options	72,278		—		333		—		—		333
Unrealized loss on marketable securities, net of tax		—	—		—				—				(86)					(86)
Change in unrealized loss on marketable securities, net of tax																				Change in unrealized loss on marketable securities, net of tax	—		—		—		—		(430)		(430)
Net loss	Net loss	—	—		—				(27,373)				—					(27,373)		Net loss	—		—		—		(68,717)		—		(68,717)
Balance at March 31, 2021		38,621,049	$	4	$	442,524			$	(176,927)			$	(86)				$	265,515
Balance at March 31, 2022																				Balance at March 31, 2022	45,506,482		$	5	$	576,955	$	(385,332)	$	(606)	$	191,022
Stock-based compensation expense	Stock-based compensation expense	—	—		5,400				—				—					5,400		Stock-based compensation expense	—		—		7,611		—		—		7,611
Issuance of common stock from follow-on public offering, net of offering costs of $229		5,750,000	1		98,412				—				—					98,413
Issuance of common stock under employee stock purchase plan																				Issuance of common stock under employee stock purchase plan	51,645		—		454		—		—		454
Vesting of restricted stock units																				Vesting of restricted stock units	6,361		—		—		—		—		—
Shares withheld for taxes for vesting of restricted stock units																				Shares withheld for taxes for vesting of restricted stock units	(2,225)		—		(17)		—		—		(17)
Issuance of common stock upon exercise of stock options	Issuance of common stock upon exercise of stock options	322,113	—		809				—				—					809		Issuance of common stock upon exercise of stock options	13,143		—		67		—		—		67
Change unrealized loss on marketable securities, net of tax		—	—		—				—				36					36
Change in unrealized loss on marketable securities, net of tax																				Change in unrealized loss on marketable securities, net of tax	—		—		—		—		(74)		(74)
Net loss	Net loss	—	—		—				(36,401)				—					(36,401)		Net loss	—		—		—		(60,194)		—		(60,194)
Balance at June 30, 2021		44,693,162	$	5	$	547,145			$	(213,328)			$	(50)				$	333,772
Balance at June 30, 2022																				Balance at June 30, 2022	45,575,406		$	5	$	585,070	$	(445,526)	$	(680)	$	138,869
Stock-based compensation expense	Stock-based compensation expense	—	—		6,521				—				—					6,521		Stock-based compensation expense	—		—		6,730		—		—		6,730
Issuance of common stock from at-the-market public offerings, net of issuance costs of $109																				Issuance of common stock from at-the-market public offerings, net of issuance costs of $109	1,105,006		—		2,962		—		—		2,962
Vesting of restricted stock units																				Vesting of restricted stock units	5,312		—		—		—		—		—
Shares withheld for taxes for vesting of restricted stock units																				Shares withheld for taxes for vesting of restricted stock units	(1,638)		—		(6)		—		—		(6)
Issuance of common stock upon exercise of stock options	Issuance of common stock upon exercise of stock options	90,909	—		309				—				—					309		Issuance of common stock upon exercise of stock options	180,241		—		409		—		—		409
Change unrealized loss on marketable securities, net of tax		—	—		—				—				25					25
Change in unrealized loss on marketable securities, net of tax																				Change in unrealized loss on marketable securities, net of tax	—		—		—		—		144		144
Net loss	Net loss	—	—		—				(44,705)				—					(44,705)		Net loss	—		—		—		(43,945)		—		(43,945)
Balance at September 30, 2021		44,784,071	$	5	$	553,975			$	(258,033)			$	(25)				$	295,922
Balance at September 30, 2022																				Balance at September 30, 2022	46,864,327		$	5	$	595,165	$	(489,471)	$	(536)	$	105,163

The accompanying notes are an integral part of these condensed consolidated financial statements.

PRAXIS PRECISION MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF ~~REDEEMABLE CONVERTIBLE PREFERRED STOCK AND~~ STOCKHOLDERS’ EQUITY ~~(DEFICIT)~~(continued)

(Unaudited)

(Amounts in thousands, except share data)

Series A
Redeemable
Convertible
Preferred Stock Series B
Redeemable
Convertible
Preferred Stock Series B-1
Redeemable
Convertible
Preferred Stock Series C
Redeemable
Convertible
Preferred Stock Series C-1
Redeemable
Convertible
Preferred Stock Common Stock Additional
Paid-In
Capital Accumulated
Deficit Accumulated Other
Comprehensive Loss Total
Stockholders’
Equity (Deficit)
Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount Shares Amount
Balance at December 31, 2019 8,075,799 $ 9,932 14,913,704 $ 49,969 2,666,666 $ 10,431 9,805,827 $ 50,789 — $ — 1,621,880 $ 1 $ — $ (81,009) $ — $ (81,008)
Repurchase of Series C redeemable convertible preferred stock — — — — — — (5,825,243) (30,493) — — — — — 493 — 493
Series C redeemable convertible preferred stock issuance costs — — — — — — — (37) — — — — — — — —
Vesting of restricted common stock awards — — — — — — — — — — 13,143 — — — — —
Stock-based compensation expense — — — — — — — — — — — — 147 — — 147
Accretion of redeemable convertible preferred stock to redemption value — 160 — 890 — 199 — 815 — — — — (147) (1,917) — (2,064)
Net loss — — — — — — — — — — — — — (8,330) — (8,330)
Balance at March 31, 2020 8,075,799 $ 10,092 14,913,704 $ 50,859 2,666,666 $ 10,630 3,980,584 $ 21,074 — $ — 1,635,023 $ 1 $ — $ (90,763) $ — $ (90,762)
Issuance of Series C redeemable convertible preferred stock, net of issuance costs of $4 — — — — — — 4,563,108 23,496 — — — — — — — —
Vesting of restricted common stock awards — — — �� — — — — — — 13,142 — — — — —
Stock-based compensation expense — — — — — — — — — — — — 285 — — 285
Accretion of redeemable convertible preferred stock to redemption value — 162 — 890 — 198 — 789 — — — — (285) (1,754) — (2,039)
Net loss — — — — — — — — — — — — — (11,568) — (11,568)
Balance at June 30, 2020 8,075,799 $ 10,254 14,913,704 $ 51,749 2,666,666 $ 10,828 8,543,692 $ 45,359 — $ — 1,648,165 $ 1 $ — $ (104,085) $ — $ (104,084)
Issuance of Series C-1 redeemable convertible preferred stock, net of issuance costs of $154 — — — — — — — — 19,444,453 110,096 — — — — — —
Vesting of restricted common stock awards — — — — — — — — — — 13,142 — — — — —
Stock-based compensation expense — — — — — — — — — — — — 953 — — 953
Issuance of common stock upon exercise of stock options — — — — — — — — — — 11,628 — 27 — — 27
Accretion of redeemable convertible preferred stock to redemption value — 162 — 899 — 201 — 885 — 1,796 — — (980) (2,963) — (3,943)
Net Loss — — — — — — — — — — — — — (16,216) — (16,216)
Balance at September 30, 2020 8,075,799 $ 10,416 14,913,704 $ 52,648 2,666,666 $ 11,029 8,543,692 $ 46,244 19,444,453 $ 111,892 1,672,935 $ 1 $ — $ (123,264) $ — $ (123,263)


	Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity
	Shares	Amount
Balance at December 31, 2020	38,268,543	$	4	$	437,007	$	(149,554)	$	—	$	287,457
Stock-based compensation expense	—	—		4,666		—		—		4,666
Issuance of common stock upon exercise of stock options	352,506	—		851		—		—		851
Change in unrealized loss on marketable securities, net of tax	—	—		—		—		(86)		(86)
Net loss	—	—		—		(27,373)		—		(27,373)
Balance at March 31, 2021	38,621,049	$	4	$	442,524	$	(176,927)	$	(86)	$	265,515
Stock-based compensation expense	—	—		5,400		—		—		5,400
Issuance of common stock from follow-on public offering, net of offering costs of $229	5,750,000	1		98,412		—		—		98,413
Issuance of common stock upon exercise of stock options	322,113	—		809		—		—		809
Change in unrealized loss on marketable securities, net of tax	—	—		—		—		36		36
Net loss	—	—		—		(36,401)		—		(36,401)
Balance at June 30, 2021	44,693,162	$	5	$	547,145	$	(213,328)	$	(50)	$	333,772
Stock-based compensation expense	—	—		6,521		—		—		6,521
Issuance of common stock upon exercise of stock options	90,909	—		309		—		—		309
Change unrealized loss on marketable securities, net of tax	—	—		—		—		25		25
Net loss	—	—		—		(44,705)		—		(44,705)
Balance at September 30, 2021	44,784,071	$	5	$	553,975	$	(258,033)	$	(25)	$	295,922

The accompanying notes are an integral part of these condensed consolidated financial statements.

PRAXIS PRECISION MEDICINES, INC.

CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS

(Unaudited)

(Amounts in thousands)


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2021		2020			2022		2021
Cash flows from operating activities:	Cash flows from operating activities:					Cash flows from operating activities:
Net loss	Net loss	$	(108,479)	$	(36,114)	Net loss	$	(172,856)	$	(108,479)
Adjustments to reconcile net loss to net cash used in operating activities:	Adjustments to reconcile net loss to net cash used in operating activities:					Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation expense	Depreciation expense	89		30		Depreciation expense	314		89
Stock-based compensation expense	Stock-based compensation expense	16,587		1,385		Stock-based compensation expense	22,227		16,587
Non-cash operating lease expense	Non-cash operating lease expense	942		517		Non-cash operating lease expense	556		942
Amortization of premiums and discounts on marketable securities, net	Amortization of premiums and discounts on marketable securities, net	1,454		—		Amortization of premiums and discounts on marketable securities, net	807		1,454
Changes in operating assets and liabilities:	Changes in operating assets and liabilities:					Changes in operating assets and liabilities:
Prepaid expenses and other current assets	Prepaid expenses and other current assets	749		(398)		Prepaid expenses and other current assets	2,326		749
Accounts payable	Accounts payable	4,031		544		Accounts payable	(658)		4,031
Accrued expenses	Accrued expenses	5,481		2,160		Accrued expenses	(8,431)		5,481
Operating lease liabilities	Operating lease liabilities	(566)		(515)		Operating lease liabilities	(578)		(566)
Other	Other	15		(4)		Other	56		15
Net cash used in operating activities	Net cash used in operating activities	(79,697)		(32,395)		Net cash used in operating activities	(156,237)		(79,697)
Cash flows from investing activities:	Cash flows from investing activities:					Cash flows from investing activities:
Purchases of property and equipment	Purchases of property and equipment	(519)		—		Purchases of property and equipment	(444)		(519)
Purchases of marketable securities	Purchases of marketable securities	(164,170)		—		Purchases of marketable securities	(83,022)		(164,170)
Maturities of marketable securities	Maturities of marketable securities	14,000		—		Maturities of marketable securities	157,761		14,000
Net cash used in investing activities		(150,689)		—
Net cash provided by (used in) investing activities						Net cash provided by (used in) investing activities	74,295		(150,689)
Cash flows from financing activities:	Cash flows from financing activities:					Cash flows from financing activities:
Proceeds from follow-on public offering, net of issuance costs	Proceeds from follow-on public offering, net of issuance costs	98,480		—		Proceeds from follow-on public offering, net of issuance costs	—		98,480
Payment of issuance costs for initial public offering and issuance of redeemable convertible preferred stock		(575)		(1,117)
Proceeds from exercise of options to purchase common stock		1,968		27
Proceeds from issuance of redeemable convertible preferred stock, net of issuance costs		—		133,442
Repurchase of Series C redeemable convertible preferred stock		—		(30,000)
Proceeds from at-the-market offerings, net of issuance costs						Proceeds from at-the-market offerings, net of issuance costs	4,330		—
Payment of issuance costs for at-the-market offerings and initial public offering						Payment of issuance costs for at-the-market offerings and initial public offering	(262)		(575)
Payments of tax withholdings related to vesting of restricted stock units						Payments of tax withholdings related to vesting of restricted stock units	(253)		—
Proceeds from exercise of options and employee stock purchase plan contributions						Proceeds from exercise of options and employee stock purchase plan contributions	1,263		1,968
Net cash provided by financing activities	Net cash provided by financing activities	99,873		102,352		Net cash provided by financing activities	5,078		99,873
Decrease in cash, cash equivalents and restricted cash	Decrease in cash, cash equivalents and restricted cash	(130,513)		69,957		Decrease in cash, cash equivalents and restricted cash	(76,864)		(130,513)
Cash, cash equivalents and restricted cash, beginning of period	Cash, cash equivalents and restricted cash, beginning of period	297,208		45,415		Cash, cash equivalents and restricted cash, beginning of period	139,720		297,208
Cash, cash equivalents and restricted cash, end of period	Cash, cash equivalents and restricted cash, end of period	$	166,695	$	115,372	Cash, cash equivalents and restricted cash, end of period	$	62,856	$	166,695
Reconciliation of cash, cash equivalents and restricted cash:	Reconciliation of cash, cash equivalents and restricted cash:					Reconciliation of cash, cash equivalents and restricted cash:
Cash and cash equivalents	Cash and cash equivalents	165,679		114,772		Cash and cash equivalents	62,440		165,679
Restricted cash	Restricted cash	1,016		600		Restricted cash	416		1,016
Total cash, cash equivalents and restricted cash	Total cash, cash equivalents and restricted cash	$	166,695	$	115,372	Total cash, cash equivalents and restricted cash	$	62,856	$	166,695
Supplemental disclosures of non-cash activities:	Supplemental disclosures of non-cash activities:					Supplemental disclosures of non-cash activities:
Operating lease right-of-use assets obtained in exchange for operating lease liabilities	Operating lease right-of-use assets obtained in exchange for operating lease liabilities	$	4,086	$	—	Operating lease right-of-use assets obtained in exchange for operating lease liabilities	$	—	$	4,086
Deferred offering costs included in accrued expenses		$	68	$	925
Offering costs included in accrued expenses						Offering costs included in accrued expenses	$	—	$	68
Purchases of property and equipment included in accrued expenses	Purchases of property and equipment included in accrued expenses	$	116	$	—	Purchases of property and equipment included in accrued expenses	$	—	$	116
Accretion of redeemable convertible preferred stock to redemption value		$	—	$	8,046

The accompanying notes are an integral part of these condensed consolidated financial statements.

PRAXIS PRECISION MEDICINES, INC.

NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS

(Unaudited)

1. Nature of the Business

Praxis Precision Medicines, Inc. (“Praxis” or the “Company”) is a clinical-stage biopharmaceutical company translating genetic insights into the development of therapies for central nervous system ~~(“CNS”~~("CNS") disorders characterized by neuronal excitation-inhibition imbalance. Normal brain function requires a delicate balance of excitation and inhibition in neuronal circuits, which, when dysregulated, can lead to abnormal function and disease. The Company is applying insights from genetic epilepsies to both rare and more prevalent neurological disorders, using its understanding of shared biological targets and circuits in the brain, to develop patient-guided therapies. The Company applies a deliberate and pragmatic precision approach, leveraging a suite of translational tools including novel transgenic and predictive translational animal models and electrophysiology markers, to enable an efficient path to proof-of-concept in patients. Through this approach, the Company has established a broad CNS portfolio including multiple ~~disclosed~~ programs across ~~CNS disorders, including depression, epilepsy,~~ movement disorders and ~~pain syndromes,~~epilepsy, with 3four clinical-stage product candidates. ~~The~~For its lead clinical-stage program, the Company ~~intends~~expects to ~~develop differentiated therapies that can deliver long-term benefits~~announce topline results from the Phase 2b clinical trial in essential tremor in the first quarter of 2023 and expects to ~~human health by meaningfully impacting patients and society. The Company’s most advanced programs, PRAX-114 and PRAX-944, are currently in Phase 2/3 and~~initiate a Phase 2 ~~development, respectively. PRAX-114 is an extrasynaptic GABA~~A ~~receptor preferring positive allosteric modulator currently being developed~~clinical trial for the treatment of ~~major depressive disorder and for~~Parkinson's disease in the ~~treatment~~first quarter of ~~women with menopausal and mood symptoms.~~2023. The Company ~~plans to initiate Phase 2 trials~~expects the initiation of ~~PRAX-114 in post-traumatic stress disorder and essential tremor ("ET")~~first-in-patient studies for its lead antisense oligonucleotide epilepsy program in the fourth quarter of ~~2021~~2022 and ~~intends to disclose plans for a Phase 2b trial in women with menopausal and mood symptoms in the fourth quarter of 2021. PRAX-944 is a selective~~its lead small molecule ~~inhibitor of T-type calcium channels currently being developed for the treatment of ET. The Company plans to initiate a Phase 2 trial of PRAX-944 in Parkinson's disease~~epilepsy program in the first ~~half~~quarter of ~~2022.~~2023, as well as the launch of an additional clinical epilepsy program this year. In addition, the Company ~~completed~~has established a ~~Phase 1 healthy volunteer trial~~robust pipeline of ~~its third clinical program, PRAX-562, a persistent sodium current blocker, for~~preclinical stage programs through internal research and in-licensing, including one of the ~~potential treatment~~largest portfolios of ~~a broad range of rare CNS disorders, such as severe pediatric epilepsies and rare adult cephalgias. The Company plans to initiate a Phase 2 trial in rare adult cephalgias~~targeted epilepsy programs in the fourth quarter of 2021. In addition to the clinical programs, the Company has multiple disclosed preclinical and discovery product candidates in development for severe genetic epilepsies and multiple undisclosed preclinical and discovery product candidates for a range of CNS disorders.industry.

Praxis was incorporated in 2015 and commenced operations in 2016. The Company has funded its operations primarily with proceeds from the issuance of ~~convertible debt and~~ redeemable convertible preferred stock and from the sale of common stock through an initial public offering, ~~and~~ a follow-on public ~~offering.~~offering and at-the-market offerings under its shelf registration statement. From inception through September 30, ~~2021,~~2022, the Company raised ~~$509.4~~$520.8 million in aggregate cash proceeds from these transactions, net of issuance costs.

In May 2021, the Company completed a follow-on public offering in which the Company issued and sold 5,750,000 shares of its common stock at a public offering price of $18.25 per share, including 750,000 shares of common stock issued and sold pursuant to the underwriters' exercise, in full, of their option to purchase additional shares of common stock, for aggregate gross proceeds of $104.9 million. The Company received approximately $98.4 million in net proceeds after deducting discounts, commissions and offering expenses payable by the Company.

The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including but not limited to, risks associated with completing preclinical studies and clinical trials, receiving regulatory approvals for product candidates, development by competitors of new biopharmaceutical products, dependence on key personnel, protection of proprietary technology, compliance with government regulations and the ability to secure additional capital to fund operations. Programs currently under development will require significant additional research and development efforts, including preclinical and clinical testing and regulatory approval, prior to commercialization. These efforts require significant amounts of additional capital, adequate personnel and infrastructure and extensive compliance-reporting capabilities. Even if the Company’s product development efforts are successful, it is uncertain when, if ever, the Company will realize revenue from product sales.

Liquidity

In accordance with the Financial Accounting Standards Board (“FASB”) Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that these condensed consolidated financial statements are issued.

The Company has incurred recurring losses since its inception, including a net ~~losses~~loss of ~~$108.5~~$172.9 million for the nine months ended September 30, ~~2021.~~2022. In addition, as of September 30, ~~2021,~~2022, the Company had an accumulated deficit of ~~$258.0~~$489.5 million. The Company expects to continue to generate operating losses for the foreseeable future.

The analysis of the Company’s ability to continue as a going concern for the third quarter of 2022 included consideration of the Company’s current cash needs, ongoing research and development plans which are limited to advancing product candidates through, but not beyond their current clinical trial phases, anticipated cost savings resulting from its operational cost reduction plans, including ongoing efforts to eliminate costs not related to the

Company’s strategic focus. Such estimates contain significant judgment as the Company’s ongoing efforts to eliminate costs not related to the Company’s strategic focus contains uncertainties as to whether the Company ~~expects~~can attain such benefits. Based on the analysis, the Company concluded that its available cash, cash equivalents and marketable securities as of September 30, ~~2021 of $314.4 million~~2022 will be sufficient to fund ~~the operating expenses~~current prioritized operations and capital expenditure requirements ~~necessary~~into the first quarter of 2024, which is at least 12 months from the filing date of this Quarterly Report on Form 10-Q with the SEC. As a result, the Company concluded that it did not identify conditions or events that raise substantial doubt about the Company’s ability to ~~advance its research efforts and clinical trials for at least~~continue as a going concern within one year from the date ~~of issuance of~~ these ~~condensed consolidated~~ financial ~~statements. The future viability of the Company is dependent on its ability to raise additional capital to finance its operations.~~statements were issued. The Company’s ~~inability to raise capital as and when needed could have a negative impact on its financial condition and ability to pursue its business strategies. There can be no assurance that the~~ current operating plan ~~will~~is based on assumptions that may prove to be ~~achieved~~wrong, and the Company could use its capital resources sooner than it expects, in which case the Company would evaluate further reductions in its expenses or ~~that~~obtaining additional ~~funding will~~financing sooner than it otherwise would, which additional financing may not be available or may only be available on terms that are not acceptable to the ~~Company, or at all.~~Company.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying condensed consolidated financial statements have been prepared in conformity with generally accepted accounting principles in the United States of America (“GAAP”). Any reference in these notes to applicable guidance is meant to refer to the authoritative GAAP as found in the Accounting Standards Codification (“ASC”) and ASUs of the FASB.

The significant accounting policies used in preparation of these condensed consolidated financial statements for the three and nine months ended September 30, ~~2021~~2022 are consistent with those discussed in Note 2 to the consolidated financial statements included in the Company's ~~2020~~2021 Annual Report on Form 10-K, other than as noted below.

Unaudited Interim Condensed Consolidated Financial Information

The accompanying condensed consolidated balance sheet as of September 30, ~~2021,~~2022, the condensed consolidated statements of operations for the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the condensed consolidated statements of comprehensive loss for the three and nine months ended September 30, ~~2021~~2022 and ~~2020,~~2021, the condensed consolidated statements of cash flows for the nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 and the condensed consolidated statements of ~~redeemable convertible preferred stock and~~ stockholders’ equity ~~(deficit)~~ for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited annual consolidated financial statements, and in the opinion of management reflect all adjustments, which include only normal recurring adjustments necessary for the fair statement of the Company’s financial position as of September 30, ~~2021,~~2022, the results of its operations for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 and its cash flows for the nine months ended September 30, ~~2021~~2022 and ~~2020.~~2021. Financial statement disclosures for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 are condensed and do not include all disclosures required for an annual set of financial statements in accordance with GAAP.

The results for the three and nine months ended September 30, ~~2021~~2022 are not necessarily indicative of results to be expected for the year ended December 31, ~~2021,~~2022, any other interim periods, or any future year or period.

Use of Estimates

The preparation of condensed consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements and the reported amounts of expenses during the reporting periods. Significant estimates and assumptions reflected in these condensed consolidated financial statements include, but are not limited to, ~~the accrual for~~accrued and prepaid research and development ~~expense,~~expenses, stock-based compensation expense and the recoverability of the Company’s net deferred tax assets and related valuation ~~of equity awards prior to the Company's initial public offering.~~allowance. Estimates are periodically reviewed in light of changes in circumstances, facts and experience. Changes in estimates are recorded in the period in which they become known. Actual results could differ materially from those estimates.

Recently Issued Accounting Pronouncements

~~Marketable Securities~~

The Company invests its excess cash in money market funds and debt instruments of the U.S. Treasury, financial institutions, corporations and U.S. government agencies with strong credit ratings and an investment grade rating at or above A-1 or P-1 by two of the three nationally recognized statistical rating organizations. The Company does not ~~believe that it is exposed~~expect any recently issued accounting pronouncements to ~~more than~~have a nominal amount of credit risk in its marketable securities. The Company has established guidelines relative to diversification and maturities that maintain safety and liquidity, and periodically reviews and modifies these guidelines to maximize trends in yields and interest rates without compromising safety and liquidity. The Company classifies its investments in debt instruments as available-for-sale. Available-for-sale investments are reported at fair value at each balance sheet date, and include any unrealized holding gains and losses in accumulated other comprehensive gain (loss), a component of stockholders’ equity. Realized gains and losses are included in the Company's condensed consolidated statements of operations. All of the Company's available-for-sale securities are available for use in its current operations. As a result, the Company has categorized all of these securities as current assets even though the stated maturity of some individual securities may be one year or more beyond the balance sheet date.

The Company evaluates securities for impairment at the end of each reporting period. Impairment is evaluated considering numerous factors, and their relative significance varies depending on the situation. Factors considered include whether a decline in fair value below the amortized cost basis is due to credit-related factors or non-credit-related factors, the financial condition and near-term prospects of the Company, and the Company's intent and ability to hold the investment to allow for an anticipated recovery in fair value. A credit-related impairment is recognized as an allowance on the balance sheet with a corresponding adjustment to earnings. Any impairment that is not credit-related is recognized in other comprehensive (loss) income, net of applicable taxes unless deemed other than temporary.

~~Recent Accounting Pronouncements~~

~~Recently Adopted Accounting Pronouncements~~

~~In December 2019, the FASB issued ASU No. 2019-12,~~ ~~Income Taxes (Topic 740)—Simplifying the Accounting for Income Taxes~~ ("ASU 2019-12"). The ASU simplifies the accounting for income taxes by eliminating certain exceptions to the guidance in ASC 740, Income Taxes, related to the approach for allocating income tax expense or benefit for the year to continuing operations, discontinued operations, other comprehensive income, and other charges or credits recorded directly to shareholders’ equity; the methodology for calculating income taxes in an interim period; and the recognition of deferred tax liabilities for outside basis differences. On January 1, 2021, the Company early adopted ASU 2019-12 on a prospective basis, with no material impact on its ~~condensed consolidated~~ financial ~~statements and related disclosures.~~

~~Recently Issued Accounting Pronouncements~~

~~In June 2016, the FASB issued ASU No. 2016-13,~~ ~~Financial Instruments—Credit Losses (Topic 326)—Measurement of Credit Losses on Financial Instruments,~~ which has been subsequently amended by ASU No. 2018-19, ASU No. 2019-04, ASU No. 2019-05, ASU No. 2019-10, ASU No. 2019-11 and ASU No. 2020-03 (“ASU 2016-13”). The provisions of ASU 2016-13 modify the impairment model to utilize an expected loss methodology in place of the currently used incurred loss methodology and require a consideration of a broader range of reasonable and supportable information to inform credit loss estimates. ASU 2016-13 is effective for the Company on January 1, 2023, with early adoption permitted. Given the Company will lose its emerging growth company status on December 31, 2021, it expects to reflect the adoption of this standard in its annual report on Form 10-K for the year ended December 31, 2021. The Company is evaluating the potential impact that this standard may have on its financial position and results of operations, but does not expect the impact to be significant.statements.

3. Marketable Securities

The following is a summary of the Company's investment portfolio atas of September 30, 2022 and December 31, 2021 (in thousands)~~. The Company did not have any marketable securities as of December 31, 2020.~~:


	As of September 30, 2022
			Gross Unrealized					Estimated
	Cost		Gains		Losses			Fair Value
Available-for-sale securities:
Corporate debt securities	$	44,819	$	—		$	(498)	$	44,321
Commercial paper	12,996		—			—		12,996
Debt securities issued by U.S. government agencies	4,021		—			(38)		3,983
Total securities with a maturity of one year or less	$	61,836	$	—		$	(536)	$	61,300

Total available-for-sale securities	$	61,836	$	—		$	(536)	$	61,300


												As of December 31, 2021
				Gross Unrealized					Estimated					Gross Unrealized					Estimated
		Cost		Gains		Losses			Fair Value			Cost		Gains		Losses			Fair Value
Available-for-sale securities:	Available-for-sale securities:										Available-for-sale securities:
Corporate debt securities	Corporate debt securities	$	51,642	$	1		$	(10)	$	51,633	Corporate debt securities	$	52,214	$	—		$	(31)	$	52,183
Commercial paper	Commercial paper	41,976		—			—		41,976		Commercial paper	34,993		—			—		34,993
Debt securities issued by U.S. government agencies	Debt securities issued by U.S. government agencies	12,156		6			—		12,162		Debt securities issued by U.S. government agencies	12,111		—			(8)		12,103
Other debt securities	Other debt securities	$	6,428	$	—		$	(1)	6,427		Other debt securities	6,398		1			—		6,399
Total securities with a maturity of one year or less	Total securities with a maturity of one year or less	$	112,202	$	7		$	(11)	$	112,198	Total securities with a maturity of one year or less	$	105,716	$	1		$	(39)	$	105,678

Corporate debt securities	Corporate debt securities	36,514		—			(21)		36,493		Corporate debt securities	31,667		—			(138)		31,529
Total securities with a maturity of one to two years	Total securities with a maturity of one to two years	$	36,514	$	—		$	(21)	$	36,493	Total securities with a maturity of one to two years	$	31,667	$	—		$	(138)	$	31,529
Total available-for-sale securities	Total available-for-sale securities	$	148,716	$	7		$	(32)	$	148,691	Total available-for-sale securities	$	137,383	$	1		$	(177)	$	137,207

As of September 30, 2022, the Company had 9 securities with a total fair market value of $48.3 million in an unrealized loss position. As of December 31, 2021, the Company had 14 securities with a total fair market value of ~~$87.5~~$95.8 million in an unrealized loss position. The Company believes that any unrealized losses associated with the decline in value of its securities is temporary and primarily related to the change in market interest rates since purchase, and believes that it is more likely than not that it will be able to hold its debt securities to maturity. Therefore, the Company anticipates a full recovery of the amortized cost basis of its debt securities at ~~maturity.~~maturity and an allowance was not recognized.

Securities are evaluated for impairment at the end of each reporting period. The Company did not record any impairment related to its available-for-sale securities during the three and nine months ended September 30, 2022 and 2021.

4. Fair Value Measurements

Fair value is defined as the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. The Company categorizes financial assets measured at fair value based on a fair value hierarchy. The following fair value hierarchy is used to classify financial assets based on observable inputs and unobservable inputs used to value the financial assets:

•Level 1: Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets;

•Level 2: Quoted prices for similar assets in active markets, quoted prices in markets that are not active, or inputs which are unobservable, either directly or indirectly, for substantially the full term of the asset; or

•Level 3: Prices or valuation techniques that require inputs that are both significant to the valuation of the asset and unobservable.

The following tables present information about the Company’s financial assets measured at fair value on a recurring basis and ~~indicates~~indicate the level of the fair value hierarchy utilized to determine such fair values as of September 30, 2022 and December 31, 2021 (in thousands):


		As of September 30, 2021									As of September 30, 2022
		Level 1		Level 2		Level 3		Total			Level 1		Level 2		Level 3		Total
Assets:	Assets:									Assets:
Cash equivalents:	Cash equivalents:									Cash equivalents:
Money market funds	Money market funds	$	151,452	$	—	$	—	$	151,452	Money market funds	$	58,218	$	—	$	—	$	58,218
Marketable securities:	Marketable securities:									Marketable securities:
Corporate debt securities	Corporate debt securities	—		88,126		—		88,126		Corporate debt securities	—		44,321		—		44,321
Commercial paper	Commercial paper	—		41,976		—		41,976		Commercial paper	—		12,996		—		12,996
Debt securities issued by U.S. government agencies	Debt securities issued by U.S. government agencies	12,162		—		—		12,162		Debt securities issued by U.S. government agencies	3,983		—		—		3,983
Other debt securities		—		6,427		—		6,427
		$	163,614	$	136,529	$	—	$	300,143		$	62,201	$	57,317	$	—	$	119,518

As of December 31, 2020
Level 1 Level 2 Level 3 Total
Assets:
Cash equivalents:
Money market funds $ 290,931 $ — $ — $ 290,931
$ 290,931 $ — $ — $ 290,931


	As of December 31, 2021
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	131,372	$	—	$	—	$	131,372
Marketable securities:
Corporate debt securities	—		83,712		—		83,712
Commercial paper	—		34,993		—		34,993
Debt securities issued by U.S. government agencies	12,103		—		—		12,103
Other debt securities	—		6,399		—		6,399
	$	143,475	$	125,104	$	—	$	268,579

5. Accrued Expenses

Accrued expenses consisted of the following (in thousands):


		September 30, 2021		December 31, 2020			September 30, 2022		December 31, 2021
Accrued external research and development expenses	Accrued external research and development expenses	$	10,348	$	4,206	Accrued external research and development expenses	$	12,978	$	17,763
Accrued personnel-related expenses	Accrued personnel-related expenses	3,909		5,516		Accrued personnel-related expenses	2,648		7,180
Accrued professional services		1,324		133
Accrued other	Accrued other	948		1,014		Accrued other	2,258		1,901
Total accrued expenses	Total accrued expenses	$	16,529	$	10,869	Total accrued expenses	$	17,884	$	26,844

6. Commitments and Contingencies

In May 2021, the Company entered into a sublease agreement for office space located in Boston, Massachusetts ~~which became the Company's corporate headquarters beginning on October 1, 2021. The sublease~~that expires on January 31, 2026, with no option to renew or terminate early. The base rent increases by approximately 2% annually. The Company issued a letter of credit to the landlord ~~for $0.4 million~~ related to the security deposit, secured by restricted cash, which is reflected within other non-current assets on the accompanying condensed consolidated balance sheet as of September 30, 2021. This lease qualifies as an operating lease. At inception, the Company recorded an operating lease right-of-use asset and operating lease liability of $4.1 million. As of September 30, 2021, the Company had an operating lease right-of-use asset of $3.8 million, current operating lease liability of approximately $0.5 million, and non-current operating lease liability of approximately $3.7 million included in the condensed consolidated balance sheet.

~~Future lease payments under the non-cancellable sublease agreement as of September 30, 2021 were as follows (in thousands):~~

Year Ended December 31, Future Lease Payments
2021 $ —
2022 1,160
2023 1,270
2024 1,296
2025 1,321
2026 110
Total future lease payments $ 5,157
Less: interest (942)
Present value of operating lease liabilities $ 4,215

~~As of September 30, 2021, the remaining lease term and discount rate of the sublease agreement was4.3 years and 9.0%, respectively.~~

1110

In October 2018, the Company entered into a sublease agreement for office space located in Cambridge, Massachusetts that expires on December 31, 2021, with no option to renew or terminate early. The base rent increases by approximately 1% annually. The Company issued a letter of credit to the landlord for $0.6 million related to the security deposit, secured by restricted cash, which is reflected within prepaid expenses and other current assets on the accompanying condensed consolidated balance sheets as of September 30, ~~2021~~2022 and December 31, ~~2020, as the lease term expires less than twelve months from the condensed consolidated balance sheet dates.~~2021. This lease qualifies as an operating lease.

7. Common Stock and Preferred Stock

Common Stock

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the authorized capital stock of the Company included 150,000,000 shares of common stock, $0.0001 par value.

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the Company did not hold any treasury shares.

Shares Reserved for Future Issuance

The Company has reserved the following shares of common stock for future issuance:


		September 30, 2021	December 31, 2020		September 30, 2022	December 31, 2021
Shares reserved for exercise of outstanding stock options	Shares reserved for exercise of outstanding stock options	6,414,070	5,944,546	Shares reserved for exercise of outstanding stock options	9,159,415	6,468,501
Shares reserved for future awards under the 2020 Stock Option and Incentive Plan	Shares reserved for future awards under the 2020 Stock Option and Incentive Plan	3,011,438	3,036,776	Shares reserved for future awards under the 2020 Stock Option and Incentive Plan	1,364,855	2,667,780
Shares reserved for future awards under the 2020 Employee Stock Purchase Plan	Shares reserved for future awards under the 2020 Employee Stock Purchase Plan	654,204	327,102	Shares reserved for future awards under the 2020 Employee Stock Purchase Plan	929,661	654,204
Shares reserved for vesting of restricted stock units	Shares reserved for vesting of restricted stock units	383,196	—	Shares reserved for vesting of restricted stock units	789,419	440,079
Total shares of authorized common stock reserved for future issuance	Total shares of authorized common stock reserved for future issuance	10,462,908	9,308,424	Total shares of authorized common stock reserved for future issuance	12,243,350	10,230,564

Preferred Stock

As of September 30, ~~2021~~2022 and December 31, ~~2020,~~2021, the authorized capital stock of the Company included 10,000,000 shares of undesignated preferred stock, $0.0001 par value.

8. Stock-Based Compensation

2020 Stock Option and Incentive Plan

The total number of shares of common stock authorized for issuance under the 2020 Stock Option and Incentive Plan (the "2020 Plan”) as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~5,184,455~~7,449,480 shares and ~~3,271,028~~5,184,455 shares, respectively.

2017 Stock Incentive Plan

The total number of shares of common stock authorized for issuance under the 2017 Stock Incentive Plan (the "2017 Plan”) as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 was 5,937,763 shares. Any authorization to issue new options under the 2017 Plan was cancelled upon the effectiveness of the 2020 Plan and no further awards will be granted under the 2017 Plan.

2020 Employee Stock Purchase Plan

The total number of shares of common stock authorized for issuance under the 2020 Employee Stock Purchase Plan (the "2020 ESPP”) as of September 30, ~~2021~~2022 and December 31, ~~2020~~2021 was ~~654,204~~981,306 shares and ~~327,102~~654,204 shares, respectively.

1211

Restricted Stock Units

The following table summarizes the Company’s restricted stock unit activity:


		Shares	Weighted Average Grant Date Fair Value			Shares	Weighted Average Grant Date Fair Value
Unvested as of December 31, 2020		—	$	—
Unvested as of December 31, 2021					Unvested as of December 31, 2021	440,079	$	41.86
Issued	Issued	403,113	46.57		Issued	652,328	15.00
Vested	Vested	—	—		Vested	(92,803)	48.11
Forfeited	Forfeited	(19,917)	46.35		Forfeited	(210,185)	22.76
Unvested as of September 30, 2021		383,196	$	46.58
Unvested as of September 30, 2022					Unvested as of September 30, 2022	789,419	$	23.42

As of September 30, 2022, total unrecognized compensation cost related to unvested restricted stock units was $14.6 million, which is expected to be recognized over a weighted-average period of 2.88 years.

Stock Options

The following table summarizes the Company’s stock option activity:

Number of
Shares Weighted
Average
Exercise Price
per Share Weighted
Average
Remaining
Contractual
Term Aggregate
Intrinsic Value
(In years) (In thousands)
Outstanding as of December 31, 2020 5,944,546 $ 7.47
Granted 1,644,153 43.26
Exercised (765,528) 2.57 $ 18,009
Cancelled or Forfeited (409,101) 14.94
Outstanding as of September 30, 2021 6,414,070 $ 16.75 8.80 $ 54,154
Exercisable as of September 30, 2021 1,702,574 $ 6.17 8.23 $ 21,152
Vested and expected to vest as of September 30, 2021 6,414,070 $ 16.75 8.80 $ 54,154


	Number of Shares	Weighted Average Exercise Price per Share		Weighted Average Remaining Contractual Term	Aggregate Intrinsic Value
				(In years)	(In thousands)
Outstanding as of December 31, 2021	6,468,501	$	16.92
Granted	3,932,802	9.29
Exercised	(265,662)	3.04			$	850
Cancelled or Forfeited	(976,226)	17.99
Outstanding as of September 30, 2022	9,159,415	$	13.94	8.49	$	327
Exercisable as of September 30, 2022	2,993,364	$	14.69	7.55	$	71
Vested and expected to vest as of September 30, 2022	8,956,409	$	13.91	8.56	$	318

The aggregate intrinsic value of stock options outstanding, exercisable, and vested and expected to vest is calculated as the difference between the exercise price of the underlying stock options and the estimated fair value of the Company’s common stock for those stock options that had exercise prices lower than the estimated fair value of the Company’s common stock at September 30, ~~2021.~~2022. The aggregate intrinsic value of stock options exercised is calculated as the difference between the exercise price of the underlying stock options and the estimated fair value of the Company’s common stock on the date of exercise for those stock options that had exercise prices lower than the estimated fair value of the Company’s common stock on the exercise date.

Stock Option Valuation

The weighted-average assumptions that the Company used in the Black-Scholes option pricing model to determine the grant-date fair value of stock options granted to employees and non-employees on the date of grant were as follows for the three and nine months ended September 30, ~~2021:~~2022:

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2021
Risk-free interest rate 1.01 % 0.77 %
Expected term (in years) 6.00 6.10
Expected volatility 85.98 % 85.60 %
Expected dividend yield — % — %

~~The weighted-average grant-date fair value of the Company’s stock options granted during the three and nine months ended September 30, 2021 was $13.45 per share and $30.91 per share, respectively.~~


	Three Months Ended September 30,			Nine Months Ended September 30,
	2022			2022
Risk-free interest rate	2.76		%	2.50		%
Expected term (in years)	6.00			6.07
Expected volatility	88.08		%	89.22		%
Expected dividend yield	—		%	—		%
Weighted average grant-date fair value per share	$	2.16		$	6.70

1312

As of September 30, 2022, total unrecognized compensation cost related to unvested stock options was $53.0 million, which is expected to be recognized over a weighted-average period of 2.38 years.

Stock-Based Compensation

Stock-based compensation expense was allocated as follows (in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Research and development $ 2,787 $ 384 $ 7,136 $ 639
General and administrative 3,734 569 9,451 746
Total stock-based compensation expense $ 6,521 $ 953 $ 16,587 $ 1,385

As of September 30, 2021, total unrecognized compensation expense related to unvested stock-based awards was $75.2 million, which is expected to be recognized over a weighted-average period of 2.85 years.


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Research and development	$	1,999	$	2,787	$	8,200	$	7,136
General and administrative	4,731		3,734		14,027		9,451
Total stock-based compensation expense	$	6,730	$	6,521	$	22,227	$	16,587

9. Net Loss per Share

~~Basic and diluted net loss per share attributable to common stockholders was calculated as follows (in thousands, except share and per share data):~~

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Numerator:
Net loss $ (44,705) $ (16,216) $ (108,479) $ (36,114)
Accretion and cumulative dividends on redeemable convertible preferred stock — (3,943) — (8,046)
Gain on repurchase of redeemable convertible preferred stock — — — 493
Net loss attributable to common stockholders $ (44,705) $ (20,159) $ (108,479) $ (43,667)
Denominator:
Weighted average common shares outstanding, basic and diluted 44,714,941 1,665,902 41,608,017 1,645,982
Net loss per share attributable to common stockholders, basic and diluted $ (1.00) $ (12.10) $ (2.61) $ (26.53)

The following potential shares of common stock, presented based on amounts outstanding at each period end, were excluded from the calculation of diluted net loss per share ~~attributable to common stockholders~~ for the periods indicated because including them would have been anti-dilutive:

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
Outstanding stock options 6,414,070 5,814,944 6,414,070 5,814,944
Unvested restricted common stock and restricted stock units 383,196 8,763 383,196 8,763
Series A redeemable convertible preferred stock — 3,773,820 — 3,773,820
Series B redeemable convertible preferred stock — 6,969,173 — 6,969,173
Series B-1 redeemable convertible preferred stock — 1,246,133 — 1,246,133
Series C redeemable convertible preferred stock — 3,992,463 — 3,992,463
Series C-1 redeemable convertible preferred stock — 9,086,388 — 9,086,388
6,797,266 30,891,684 6,797,266 30,891,684


	Three Months Ended September 30,		Nine Months Ended September 30,
	2022	2021	2022	2021
Outstanding stock options	9,159,415	6,414,070	9,159,415	6,414,070
Unvested restricted stock units	789,419	383,196	789,419	383,196
Potential shares issuable under the 2020 ESPP	48,182	—	48,182	—
	9,997,016	6,797,266	9,997,016	6,797,266

The shares of common stock issuable upon conversion of the redeemable convertible preferred stock for the three and nine months ended September 30, 2020 assumed automatic conversion in the event of a qualified public offering.

10. Related Party Transactions

On September 11, 2019, the Company entered into a Cooperation and License Agreement (the “License Agreement”) with RogCon Inc. (“RogCon”). Under the License Agreement, RogCon granted to the Company an exclusive, worldwide license under RogCon’s intellectual property to research, develop and commercialize products for the treatment of all forms of epilepsy and/or neurodevelopmental disorders in each case caused by any mutation of the SCN2A gene. Pursuant to the terms of the License Agreement, the Company will conduct, at its own cost and expense, the research and development activities assigned to it under the associated research plan. In addition, the Company is responsible for reimbursing RogCon for any costs associated with research and development activities RogCon performs at the request of the Company. One of the founders of RogCon became the Company’s General Counsel in June 2020. The Company continues to reimburse RogCon for its out-of-pocket costs incurred for activities performed under the License Agreement. Expenses incurred during all periods presented were not material. As of September 30, ~~2021,~~2022, the Company had accrued expenses of $0.3 million due to RogCon under the License Agreement.

11. Restructuring

In June 2022, the Company began a strategic realignment to focus resources on its Movement Disorders and Epilepsy franchises, which resulted in a reduction of the Company’s workforce.

The Company incurred $1.0 million of costs related to the realignment, of which $0.6 million has been recognized in research and development expenses and $0.4 million has been recognized in general and administrative expenses in the condensed consolidated statement of operations during the nine months ended September 30, 2022. These costs relate to employee severance, benefits and related costs. The Company does not expect to incur any additional significant costs related to the strategic realignment.

As of September 30, 2022, all of the $1.0 million costs were paid.

12. Subsequent Events

The Company considers events or transactions that occur after the balance sheet date but prior to the issuance of the condensed consolidated financial statements to provide additional evidence for certain estimates or to identify matters that require additional disclosure. The Company has concluded that no subsequent events have occurred that require disclosure.

1514

Item 2. 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 condensed consolidated financial statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q and the audited financial information and the notes thereto included in our Annual Report on Form 10-K, which was filed with the Securities and Exchange Commission ~~or SEC,~~(the "SEC") on ~~March 17, 2021.~~February 28, 2022. Some of the information contained in this discussion and analysis or set forth elsewhere in this Quarterly Report on Form 10-Q, 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 our ~~Annual Report on Form 10-K for the year ended December 31, 2020 and set forth in the "Risk Factors" section of this~~ Quarterly Report on Form 10-Q for the six months ended June 30, 2022, 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 clinical-stage biopharmaceutical company translating genetic insights into the development of therapies for central nervous system, or CNS, disorders characterized by neuronal excitation-inhibition imbalance. Normal brain function requires a delicate balance of excitation and inhibition in neuronal circuits, which, when dysregulated, ~~leads~~can lead to abnormal function and disease. We are applying insights from genetic epilepsies to ~~broader~~both rare and more prevalent neurological ~~and psychiatric~~ disorders, using our understanding of shared biological targets and circuits in the ~~brain.~~brain, to develop patient-guided therapies. We apply a deliberate and pragmatic precision approach, leveraging a suite of translational tools including novel transgenic and predictive translational animal models and electrophysiology markers, to enable an efficient path to proof-of-concept in patients. Through this approach, we have established a broad CNS portfolio ~~including~~with multiple ~~disclosed~~ programs across ~~CNS disorders, including depression, epilepsy,~~ movement disorders and ~~pain syndromes,~~epilepsy, with ~~three~~four clinical-stage product candidates. WeFor our lead clinical-stage program, we expect ~~multiple~~to announce topline results from the Phase 2b clinical trial ~~readouts from all three programs~~in essential tremor, or ET, in the ~~next year~~first quarter of 2023 and ~~anticipate the launch of~~expect to initiate a ~~new~~Phase 2 clinical ~~development program in the next year. We intend to develop differentiated therapies that can deliver long-term benefits to human health by meaningfully impacting patients and society.~~

~~Our most advanced clinical program, PRAX-114, is an extrasynaptic GABAA receptor preferring positive allosteric modulator, or PAM,~~trial for the treatment of ~~patients suffering from major depressive disorder,~~Parkinson's disease, or ~~MDD, and~~

for the treatment of women with menopausal and mood symptoms. We completed a multi-cohort, three-part Phase 2a clinical trial in Australia for PRAX-114, in which Parts A and C of the trial treated patients with MDD while Part B focused on patients with perimenopausal depression, or PMD. For all parts of the trial, PRAX-114 was generally well-tolerated. In Parts A and C, we observed marked improvements in depression scores in MDD patients within two weeks of treatment that were maintained throughout the treatment period. In Part B, we observed improvements in both menopausal and mood symptoms, with mean decreases from baseline at Day 15 of 60% in frequency of moderate-to-severe hot flashes, 68%PD, in the ~~total score~~first quarter of the Perimenopausal Depression Questionnaire, 47% in the Hamilton Depression Rating Scale total score, 65% in the Hamilton Anxiety Rating Scale total score, and 40% in the total score of the Symptoms of Depression Questionnaire, with values trending toward baseline following discontinuation of PRAX-114.2023. We expect ~~to disclose plans~~the initiation of first-in-patient studies for ~~the Phase 2b study~~our lead antisense oligonucleotide, or ASO, epilepsy program in the fourth quarter of ~~2021.~~2022 and our lead small molecule epilepsy program in the first quarter of 2023, as well as the launch of an additional clinical epilepsy program this year. In addition, we have established a robust pipeline of preclinical-stage programs through internal research and in-licensing, including one of the largest portfolios of targeted epilepsy programs in the industry.

~~Our second~~Within Movement Disorders, our lead clinical ~~program,~~candidate, PRAX-944, is ~~a potentially differentiated selective small molecule inhibitor of T-type calcium channels~~being developed for the treatment of ~~ET.~~ET and PD. We ~~are currently conducting a~~expect to report topline results from the Phase ~~2a proof-of-concept, open-label trial in~~2b placebo-controlled Essential1 Study for daytime treatment of ET ~~patients. Preliminary site data from six participants~~ in the low dose cohort showed tremor reduction, which compares favorably to the standard of care agents and historical placebo response. Based on the observed safety profile in the healthy volunteer titration study and the safety and preliminary efficacy data in ET participants administered up to 40mg daily, we added a second cohort to the ongoing ET Phase 2a trial where patients will be titrated to a dose of up to 120mg/day of PRAX-944. We expect preliminary open-label safety, tolerability and efficacy data from the second dose cohort in the Phase 2a trial in the fourthfirst quarter of ~~2021, followed by~~2023. Following topline ~~data~~results, we intend to meet with the U.S. Food and Drug Administration, or the FDA, for an end-of-Phase 2 meeting in the first half of ~~2022, which is expected to include data from the randomized withdrawal phase of the study.~~2023 and initiate our Phase 3 development program in ET in mid-2023. We also completed dosing in a two-part Phase 1 study to explore a faster titration regimen, which is designed to evaluate the safety, tolerability and PK of titrating PRAX-944 up to 120 mg in a 10-day regimen in participants aged 18 to 54 years (Part A) and 55 to 75 years (Part B). In addition, we initiated the PRAX-944 Phase 2b Essential1 Study for treatment of ET and expect topline results in the second half of 2022. The Essential1 Study is a placebo-controlled, dose-ranging clinical trial designed to evaluate the safety, tolerability and efficacy of PRAX-944 at 20, 60 or 120 mg per day. We also intendplan to initiate a Phase 2, placebo-controlled trial to evaluate the efficacy, safety, PK and ~~efficacy~~tolerability of PRAX-944 as a non-dopaminergic treatment for the motor symptoms of ~~Parkinson’s disease~~PD in the first quarter of 2023, and expect to report topline results in the second half of ~~2022.~~2023.

Our most advanced rare disease product candidate and third clinical program, PRAX-562, is the first selective persistent sodium current blocker in development for the treatment of a broad range of rare, devastating CNS disorders, such as rare adult cephalgias and severe pediatric epilepsies. We completed the dosing and safety follow-up period for the single ascending dose and multiple ascending dose cohorts up to 150 mg and 120 mg, respectively, in a Phase 1 healthy volunteer study. PRAX-562 was well-tolerated, with no clinically significant safety findings. In this study,Within Epilepsy, we used auditory steady state response, or ASSR, as an exploratory electroencephalogram, or EEG, biomarker to determine the doses required to achieve pharmacological blockade of persistent sodium current, which we believe is a potential indicator of efficacy in patients. We observed dose-related changes and a reduction in ASSR of greater than 50% after 14 days with daily dosing, as compared to baseline. Based on the observed signal in the ASSR marker in the Phase 1 study, we have started dosing patients in the United States in a Phase 1, placebo-controlled, two-cohort EEG study to validate the observed signal, and we expect topline data in the first half of 2022. The study is intended to evaluate ASSR as a biomarker for the PRAX-562 program to further support selection of therapeutic dose levels in Phase 2 studies.

~~We intend~~plan to initiate the first ~~proof-of-concept trial~~dose cohort of PRAX-562 in patients with rare adult cephalgias, including Short-lasting Unilateral Neuralgiform headache attacks with Conjunctival injection and Tearing, Short-lasting Unilateral Neuralgiform headache with Autonomic symptoms, and Trigeminal Neuralgia in the ~~fourth quarter of 2021. We also plan to initiate a Phase 2 trial~~EMBRAVE study for treatment of developmental epileptic encephalopathies, or DEEs, in the first half of 2022. The FDA has granted both rare pediatric disease and orphan drug designations for PRAX-562 for the treatment of SCN2A and SCN8A developmental epileptic encephalopathies, or SCN2A-DEE and SCN8A-DEE, respectively.

In addition to our clinical programs, we have multiple disclosed preclinical and discovery product candidates in development for severe genetic epilepsies and multiple undisclosed preclinical and discovery product candidates for a range of CNS disorders. Our most advanced preclinical stage program is PRAX-222, an ~~antisense oligonucleotide, or~~ ASO designed to decrease the expression levels of the protein encoded by the gene SCN2A in pediatric patients with ~~gain-of-function mutations~~early-seizure-onset SCN2A Developmental and Epileptic Encephalopathy, or DEE, in ~~SCN2A causing developmental epileptic encephalopathy.~~the fourth quarter of 2022. Following collection of the safety and efficacy data from the first cohort of patients in the EMBRAVE study, the data will be evaluated and submitted to the FDA to seek authorization for dose escalation. Topline results from the initial dose cohort are expected in 2023. We ~~completed the Investigational New Drug enabling toxicology study for PRAX-222 and~~ plan to initiate ~~regulatory submissions in order to begin~~ a Phase 1/2, ~~trial for treatment of SCN2A-DEE~~placebo-controlled study with PRAX-562 in the first ~~half~~quarter of ~~2022. The FDA has granted both rare pediatric disease and orphan drug designations for PRAX-222~~2023 for the treatment of ~~SCN2A-DEE. We have one~~rare pediatric DEEs, with initial cohorts in SCN2A and SCN8A DEEs, and expect to report topline results in 2023. In October 2022, we received additional detail from the FDA regarding the clinical hold for our Investigational New Drug application for PRAX-562 for the treatment of pediatric patients with SCN2A and SCN8A DEEs. Based on the feedback from the FDA, we expect that no new preclinical or clinical studies will be required to clear the clinical hold. In addition, we expect to initiate a Phase 1 study with PRAX-628 in the fourth quarter of 2022 and subsequently initiate a Phase 2 study in focal epilepsy in 2023.

Our disclosed preclinical pipeline also consists of discovery ~~program~~programs in development for KCNT1 related epilepsy, three ASOs targeting SCN2A in patients with loss-of-function mutations, PCDH19 and SYNGAP1, respectively, and two additional discovery programs for undisclosed targets in ~~March 2021 we entered~~movement disorders and epilepsy. We plan to advance ASO candidate PRAX-080 for PCDH19 into ~~an innovative research collaboration with The Florey Institute~~preclinical development in 2023.

Following the completion of ~~Neuroscience and Mental Health to develop three additional novel ASOs~~the PRAX-114 Phase 2 Acapella Study for the treatment of ~~patients with severe genetic epilepsies, including~~Major Depressive Disorder in the third quarter of 2022, we do not currently plan to pursue further development of PRAX-114 for psychiatric disorders. The PRAX-114 Phase 2 Acapella study (N=110) was intended to provide additional understanding of the dose range and to evaluate the safety and efficacy of PRAX-114 at doses of 10, 20, 40 and 60 mg. Topline data indicated a ~~novel approach targeting SCN2A loss-of-function mutations.~~linear dose response trend on the primary endpoint of change from baseline in the 17-item Hamilton Depression Rating Scale total score at Day 15, but were not statistically significant. In multiple secondary endpoints evaluating 40 mg of PRAX-114 relative to placebo, nominal statistical significance was achieved at Day 4, but not maintained at subsequent timepoints.

We were incorporated in 2015 and commenced operations in 2016. Since inception, we have devoted substantially all of our resources to developing our preclinical and clinical product candidates, building our intellectual property, or IP, portfolio, business planning, raising capital and providing general and administrative support for these operations. We employ a “virtual” research and development model, relying heavily upon external consultants, collaborators and contract research organizations, or CROs, to conduct our preclinical and clinical activities. Since inception, we have financed our operations primarily with proceeds from the ~~issuances~~sale and issuance of ~~convertible debt, redeemable convertible preferred stock, and common stock from our initial public offering, or IPO, in October 2020 and follow-on public offering in May 2021.~~

On May 18, 2021, we completed a follow-on public offering in which we issued and sold 5,750,000 shares of our common stock at a public offering price of $18.25 per share, including 750,000 shares of common stock issued and sold pursuant to the underwriters' exercise, in full, of their option to purchase additional shares of common stock, for aggregate gross proceeds of $104.9 million. We received approximately $98.4 million in net proceeds after deducting discounts, commissions, and offering expenses payable by us.equity securities.

We are a development stage company and we have not generated any revenue from product sales, and do not expect to do so for several years, if at all. All of our ~~programs~~product candidates are still in preclinical and clinical development. Our ability to generate product revenue sufficient to achieve profitability will depend heavily on the successful development and eventual commercialization of one or more of our product candidates, if approved. We have incurred recurring operating losses since inception, including a net loss of ~~$108.5~~$172.9 million for the nine months ended September 30, ~~2021.~~2022. As of September 30, ~~2021,~~2022, we had an accumulated deficit of ~~$258.0~~$489.5 million. We expect to incur significant expenses and operating losses for the foreseeable future as we expand our research and development activities. In addition, our losses from operations may fluctuate significantly from quarter-to-quarter and year-to-year, depending on the timing of our clinical trials and our expenditures on other research and

development activities. We anticipate that our expenses will ~~increase significantly~~be maintained or increased in connection with our ongoing activities, as we:

•advance our lead product ~~candidates, PRAX-114 and~~candidate, PRAX-944, to ~~and through~~a late stage clinical ~~trials;~~trial;

•advance our PRAX-562 product candidate toin the Phase 2 clinical ~~trials;~~trial;

•advance our PRAX-222 product candidate in the EMBRAVE clinical trial;

•advance our PRAX-628 product candidate in the Phase 1 clinical trial;

•advance our preclinical ~~programs~~candidates to clinical trials;

•further invest in our pipeline;

•further invest in our manufacturing capabilities;

•seek regulatory approval for our ~~investigational medicines;~~product candidates;

•maintain, expand, protect and defend our ~~intellectual property~~IP portfolio;

•acquire or in-license technology;

•~~secure facilities~~establish a sales, marketing and distribution infrastructure to ~~support continued growth in our research, development~~commercialize any products for which we may obtain marketing approval; and ~~commercialization efforts;~~

•when needed, increase our headcount to support our development efforts and ~~to expand our clinical development team;~~

•~~incur additional costs and general and administrative headcount growth associated with our continued operations as a public company; and~~

•~~incur additional costs as a public company as we transition out of emerging growth company and smaller reporting company status at the end of 2021.~~any future commercialization efforts.

In addition, as we progress toward potential marketing approval for any of our product candidates, we expect to incur significant commercialization expenses related to product manufacturing, marketing, sales and distribution.

As a result, we will need substantial additional funding to support our continuing operations and pursue our growth strategy. Until such time as we can generate significant revenue from product sales, if ever, we expect to finance our operations through the sale of equity, debt financings or other capital sources, including potential collaborations with other companies or other strategic transactions. We may be unable to raise additional funds or enter into such other agreements or arrangements when needed on favorable terms, or at all. If we fail to raise capital or enter into such agreements as, and when, needed, we may have to significantly delay, scale back or

discontinue the development and commercialization of one or more of our product candidates or delay our pursuit of potential in-licenses or acquisitions.

Because of the numerous risks and uncertainties associated with ~~drug~~product development, we are unable to predict the timing or amount of increased expenses or when or if we will be able to achieve or maintain profitability. Even if we are able to generate product sales, we may not become profitable. If we fail to become profitable or are unable to sustain profitability on a continuing basis, then we may be unable to continue our operations at planned levels and be forced to reduce or terminate our operations.

As of September 30, ~~2021,~~2022, we had cash, cash equivalents and marketable securities of ~~$314.4~~$123.7 million. We believe that our ~~existing~~ cash, cash equivalents and marketable securities as of September 30, 2022 will enable us to fund our operating expenses and capital ~~expenditure requirements~~expenditures into the ~~second~~first quarter of ~~2023.~~2024. We have based this ~~estimate~~analysis on our current cash needs, ongoing research and development plans which are limited to advancing product candidates through, but not beyond their current clinical trial phases, anticipated cost savings resulting from our operational cost reduction plans, including ongoing efforts to eliminate costs not related to our strategic focus. Such estimates contain significant judgement as our ongoing efforts to eliminate costs not related to our strategic focus contains uncertainties as to whether we can attain such benefits. Our current operating plan is based on assumptions that may prove to be wrong, and we could ~~exhaust~~use our ~~available~~ capital resources sooner than we ~~expect.~~expect, in which case we would evaluate further reductions in our expenses or obtaining additional financing sooner than we otherwise would, which additional financing may not be available or may only be available on terms that are not acceptable to us. See “—Liquidity and Capital Resources.”

Restructuring

In June 2022, we began a strategic realignment to focus resources on our Movement Disorders and Epilepsy franchises, which resulted in a reduction of our workforce.

We incurred $1.0 million of costs related to the realignment, of which $0.6 million has been recognized in research and development expenses and $0.4 million has been recognized in general and administrative expenses in the condensed consolidated statement of operations during the nine months ended September 30, 2022. These costs relate to employee severance, benefits and related costs. We do not expect to incur any additional significant costs related to the strategic realignment.

As of September 30, 2022, all of the $1.0 million costs were paid.

COVID-19 Business Update

In light of the ongoing COVID-19 pandemic, we ~~have implemented business continuity plans designed~~continue to ~~address~~experience some disruptions and ~~mitigate~~increased risk in our operations and those third parties upon whom we rely. These include disruptions and risks related to the conduct of our clinical trials and preclinical studies as policies at various clinical sites and federal, state, local and foreign laws, rules and regulations continue to evolve, including quarantines, travel restrictions and redirection of healthcare resources toward pandemic response efforts. The COVID-19 pandemic has impacted the enrollment of some of our ongoing clinical trials, including slower patient enrollment and treatment in some of our clinical studies, the impact of ~~the COVID-19 pandemic on~~which has varied by clinical study and program, but none of which have significantly impacted our ~~employees and our business, including our preclinical studies and~~overall clinical ~~trials. We are continuing to operate during this period and have taken measures to secure our research and development activities.~~trial timelines. While we ~~are experiencing~~have experienced limited financial impacts ~~at this time,~~to date, given the global economic slowdown, the overall disruption of global healthcare systems and the other risks and uncertainties associated with the pandemic such as increased inflation, our business, financial condition and results of operations could be

materially adversely affected. We continue to closely monitor the COVID-19 pandemic as we evolve our business continuity plans, clinical development plans and response strategy.

In addition, while we have taken and are continuing to take steps to mitigate against possible delays, our planned clinical trials may be affected by the COVID-19 pandemic, including (i) delays or difficulties in enrolling and retaining patients in our planned clinical trials, including patients that may not be able or willing to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services; (ii) delays or difficulties in clinical site initiation, including difficulties in recruiting and retaining clinical site investigators and clinical site staff; (iii) diversion or prioritization of healthcare resources away from the conduct of clinical trials and towards the COVID-19 pandemic, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials, and because, who, as healthcare providers, may have heightened exposure to COVID-19 and adversely impact our clinical trial operations; (iv) interruption of our future clinical supply chain or key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal, state/provincial or municipal governments, employers and others; and (v) limitations in outsourced third-party resources that would otherwise be focused on the conduct of our planned clinical trials, including because of sickness of third-party personnel or their families, or the desire of third-party personnel to avoid contact with large groups of people.

Financial Operations Overview

Revenue

We have not generated any revenue since inception and do not expect to generate any revenue from the sale of products for several years, if at all. If our development efforts for our current or future product candidates are successful and result in marketing approval or collaboration or license agreements with third parties, we may generate revenue in the future from a combination of product sales or payments from such collaboration or license ~~agreements that we may enter into with third parties.~~agreements.

Operating Expenses

Research and Development ~~Expenses~~Expense

The nature of our business and primary focus of our activities generate a significant amount of research and development costs. Research and development expenses represent costs incurred by us for the following:

•costs to develop our portfolio;

•discovery efforts leading to development candidates;

•clinical development costs for our ~~programs;~~product candidates; and

•costs to develop our manufacturing technology and infrastructure.

The costs above comprise the following categories:

•personnel-related expenses, including salaries, benefits and stock-based compensation expense;

•expenses incurred under agreements with third parties, such as consultants, investigative sites and ~~contract research organizations,~~CROs, that conduct our preclinical and clinical studies and in-licensing arrangements;

•costs incurred to maintain compliance with regulatory requirements;

•costs incurred with third-party contract development and manufacturing organizations to acquire, develop and manufacture materials for preclinical and clinical studies; and

•depreciation, amortization and other direct and allocated expenses, including rent ~~insurance~~ and other operating costs, incurred as a result of our research and development activities.

We expense research and development costs as incurred. We recognize external development costs based on an evaluation of the progress to completion of specific tasks using information provided to us by our vendors and our clinical investigative sites. Payments for these activities are based on the terms of the individual agreements, which may differ from the pattern of costs incurred, and are reflected in our consolidated balance sheets as prepaid

expenses or accrued ~~research and development~~ expenses. Non-refundable advance payments for goods or services to be received in the future for use in research and development activities are deferred and capitalized, even when there is no alternative future use for the research and development. The capitalized amounts are expensed as the related goods are delivered or the services are performed.

AAs a company operating in a virtual environment, a significant portion of our research and development costs have been external costs. We track direct external research and development expenses to specific ~~programs~~franchises and product candidates upon commencement. Due to the number of ongoing ~~programs~~studies and our ability to use resources across several projects, indirect or shared operating costs incurred for our research and development ~~programs,~~franchises, such as personnel, facility costs and certain consulting costs, are not recorded or maintained on a ~~program-specific~~franchise-specific basis.

Our major programs, PRAX-114, PRAX-944 and PRAX-562, are those for which we have initiated clinical activities. Our discovery-stage programs are those which are at an earlier point in the development process. The following table reflects our research and development expenses, including direct ~~program-specific~~ expenses summarized by major ~~program, discovery-stage program costs~~franchise and other exploratory CNS indications and indirect or shared operating costs recognized as research and development expenses during each period presented (in thousands):

Three Months Ended
September 30, Nine Months Ended
September 30,
2021 2020 2021 2020
PRAX-114 $ 8,776 $ 4,077 $ 18,567 $ 9,137
PRAX-944 5,682 1,707 10,015 3,284
PRAX-562 3,104 885 9,256 2,527
Discovery-stage programs 5,099 2,154 12,689 4,050
Personnel-related (including stock-based compensation) 8,334 3,098 21,584 7,443
Other indirect research and development expenses 2,144 865 4,635 2,263
Total research and development expenses $ 33,139 $ 12,786 $ 76,746 $ 28,704


	Three Months Ended September 30,				Nine Months Ended September 30,
	2022		2021		2022		2021
Movement disorders	$	9,262	$	6,735	$	26,777	$	12,107
Epilepsy	7,630		4,942		32,579		15,707
Psychiatry	2,642		9,188		28,394		19,029
Other exploratory CNS indications	414		1,475		2,853		2,957
Personnel-related (including stock-based compensation)	8,714		8,334		30,590		21,584
Other indirect research and development expenses	1,777		2,465		5,518		5,362
Total research and development expenses	$	30,439	$	33,139	$	126,711	$	76,746

Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages of clinical development, primarily due to the increased size and duration of later-stage clinical trials. We expect that our research and development expenses will ~~continue to~~be maintained or increase in the foreseeable future as we advance our product candidates through the development phase, and as we continue to discover and develop additional product candidates, build manufacturing capabilities and expand into additional therapeutic areas.

At this time, we cannot reasonably estimate or know the nature, timing and estimated costs of the efforts that will be necessary to complete the development of, and obtain regulatory approval for, any of our product candidates. We are also unable to predict when, if ever, material net cash inflows will commence from sales or licensing of our product candidates. This is due to the numerous risks and uncertainties associated with drug development, including the uncertainty of:

•our ability to add and retain key research and development personnel;

•the timing and progress of preclinical and clinical development activities;

•the number and scope of preclinical and clinical programs we decide to pursue;

•our ability to successfully complete clinical trials with safety, tolerability and efficacy profiles that are satisfactory to the ~~U.S. Food and Drug Administration, or~~ FDA or any comparable foreign regulatory authority;

•our ability to successfully develop, obtain regulatory approval for, and then successfully commercialize, our product candidates;

•our successful enrollment in and completion of clinical trials;

•the costs associated with the development of any additional product candidates we identify in-house or acquire through collaborations;

•our ability to discover, develop and utilize biomarkers to demonstrate target engagement, pathway engagement and the impact on disease progression of our product candidates;

•our ability to establish and maintain agreements with third-party manufacturers for clinical supply for our clinical trials and commercial manufacturing, if our product candidates are approved;

•the terms and timing of any collaboration, license or other arrangement, including the terms and timing of any milestone payments thereunder;

•our ability to obtain and maintain patent, trade secret and other ~~intellectual property~~IP protection and regulatory exclusivity for our product candidates, if ~~and when~~ approved;

•our receipt of marketing approvals from applicable regulatory authorities;

•our ability to commercialize products, if ~~and when~~ approved, whether alone or in collaboration with others; and

•the continued acceptable safety profiles of the product candidates following approval.

A change in any of these variables with respect to the development of any of our product candidates would significantly change the costs, timing and viability associated with the development of that product candidate. For example, if the FDA or another regulatory authority were to delay our planned start of clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect, or if we experience significant delays in enrollment in any of our planned clinical trials, we could be required to expend significant additional financial resources and time to complete our clinical development activities. We may never obtain regulatory approval for any of our product candidates. Drug commercialization will take several years and ~~millions of dollars in~~require significant development costs.

General and Administrative ~~Expenses~~Expense

General and administrative expenses consist primarily of personnel-related costs, including salaries, benefits and stock-based compensation, for personnel in our executive, finance, legal, commercial and administrative functions. General and administrative expenses also include legal fees relating to corporate matters; professional fees for accounting, auditing, tax and administrative consulting services; commercial-related costs to support market assessments and scenario planning; insurance costs; administrative travel expenses; and facility-related expenses,

which include direct depreciation costs and allocated expenses for office rent and other operating costs. ~~These costs relate to the operation of the business, unrelated to the research and development function, or any individual program.~~ Costs to secure and defend our ~~intellectual property, or~~ IP are expensed as incurred and are classified as general and administrative expenses. These costs relate to the operation of the business and are unrelated to the research and development function or any individual franchise or product candidate.

We anticipate that our general and administrative expenses ~~will~~may increase in the future as we increase our headcount, when needed, to support the expected growth in our research and development activities and the potential commercialization of our product candidates. We also expect to incur increased expenses associated with being a public company, particularly when we are no longer an emerging growth company or a smaller company, including increased costs of accounting, audit, legal, regulatory and tax-related services associated with maintaining compliance with exchange listing and SEC requirements, director and officer insurance costs and investor and public relations costs. We also expect to incur additional IP-related expenses as we file patent applications to protect innovations arising from our research and development activities.

Other Income

Other Income, Net

Other income, net consists of interest income from our cash, cash equivalents and marketable securities and amortization of investment premiums and discounts.

Income Taxes

Since our inception, we have not recorded any U.S. federal or state income tax benefits for the net losses we have incurred in each year or for our earned research and development tax credits due to our uncertainty of realizing a benefit from those items. Income taxes are determined at the applicable tax rates adjusted for non-deductible expenses, research and development tax credits and other permanent differences. Our income tax provision may be significantly affected by changes to our estimates. The income tax ~~benefit (provision)~~provision for the three and nine months ended September 30, ~~2021~~2022 and ~~2020~~2021 was not material.

Results of Operations

Comparison of the Three Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

The following table summarizes our consolidated statements of operations for each period presented (in thousands):


		Three Months Ended September 30,				Change			Three Months Ended September 30,				Change
		2021		2020					2022		2021
Operating expenses:	Operating expenses:							Operating expenses:
Research and development	Research and development	$	33,139	$	12,786	$	20,353	Research and development	$	30,439	$	33,139	$	(2,700)
General and administrative	General and administrative	11,634		3,431		8,203		General and administrative	13,851		11,634		2,217
Total operating expenses	Total operating expenses	44,773		16,217		28,556		Total operating expenses	44,290		44,773		(483)
Loss from operations	Loss from operations	(44,773)		(16,217)		(28,556)		Loss from operations	(44,290)		(44,773)		483
Total other income:
Other income:								Other income:
Other income, net	Other income, net	73		1		72		Other income, net	345		73		272
Total other income	Total other income	73		1		72		Total other income	345		73		272
Loss before income taxes	Loss before income taxes	(44,700)		(16,216)		(28,484)		Loss before income taxes	$	(43,945)	$	(44,700)	$	755
Provision for income taxes	Provision for income taxes	(5)		—		(5)		Provision for income taxes	—		(5)		5
Net loss	Net loss	$	(44,705)	$	(16,216)	$	(28,489)	Net loss	$	(43,945)	$	(44,705)	$	760

Research and Development Expense

The following table summarizes our research and development expenses for each period presented, along with the changes in those items (in thousands):

Three Months Ended
September 30, Change
2021 2020
PRAX-114 $ 8,776 $ 4,077 $ 4,699
PRAX-944 5,682 1,707 3,975
PRAX-562 3,104 885 2,219
Discovery-stage programs 5,099 2,154 2,945
Personnel-related (including stock-based compensation) 8,334 3,098 5,236
Other indirect research and development expenses 2,144 865 1,279
Total research and development expenses $ 33,139 $ 12,786 $ 20,353

~~Research and development expenses increased approximately $20.4~~


	Three Months Ended September 30,				Change
	2022		2021
Movement disorders	$	9,262	$	6,735	$	2,527
Epilepsy	7,630		4,942		2,688
Psychiatry	2,642		9,188		(6,546)
Other exploratory CNS indications	414		1,475		(1,061)
Personnel-related (including stock-based compensation)	8,714		8,334		380
Other indirect research and development expenses	1,777		2,465		(688)
Total research and development expenses	$	30,439	$	33,139	$	(2,700)

The $2.7 million ~~from approximately $12.8 million for the three months ended September 30, 2020 to $33.1 million for the three months ended September 30, 2021. The increase~~decrease in research and development expenses was primarily attributable to the following:

•$~~5.2~~6.5 million ~~increase~~decrease in ~~personnel-related costs due~~expense related to ~~increased headcount, including an increase~~our psychiatry franchise, driven primarily by a decrease in clinical-related spend for our PRAX-114 Phase 2/3 Aria clinical trial for which we announced topline results in the second quarter of ~~$2.4 million in stock-based compensation expense;~~2022;

•$~~4.7~~2.7 million increase in expense related to our ~~PRAX-114 program,~~epilepsy franchise, driven primarily by an increase in preclinical activities for PRAX-628 and our earlier stage assets and an increase in clinical-related ~~and toxicology~~ spend ~~for our Phase 2/3~~to support the initiation of the PRAX-222 EMBRAVE clinical ~~trial for this program;~~trial; and

•$~~4.0~~2.5 million increase in expense related to our ~~PRAX-944 program,~~movement disorders franchise, driven primarily by an increase in ~~toxicology and~~ clinical-related ~~spend;~~

•~~$2.9 million increase in expense related to~~spend for our ~~discovery-stage programs, primarily driven by an increase in preclinical activities for such programs;~~

•~~$2.2 million increase in expense related to our PRAX-562 program, primarily driven by an increase in spend to support our upcoming~~PRAX-944 Phase 2b Essential1 clinical ~~trails; and~~

•$1.3 million increase in other indirect research and development expenses, driven by an increase in facility and other allocated overhead costs primarily attributable to increased research and development headcounttrial and our ~~new office location, as well as an increase in technology spend.~~Phase 1 healthy volunteers trial.

General and Administrative Expense

~~General and administrative expenses increased $8.2~~The $2.2 million ~~from $3.4 million for the three months ended September 30, 2020 to $11.6 million for the three months ended September 30, 2021. The~~ increase in general and administrative expenses was primarily ~~attributable~~due to ~~the following:~~

•~~$4.7 million~~an increase in personnel-related costs ~~primarily driven by increased headcount, including an increase of $3.2 million in stock-based compensation expense;~~

•$1.8 million increase in professional fees, including $1.0 million of increased commercial-related spend to support assessments of our clinical-stage programs, a $0.3 million increase in general and administrative infrastructure costs and a $0.3 million increase in audit and legal fees; and

•~~$1.7 million increase in other general and administrative expenses, including a $1.1 million increase in insurance and related costs, primarily~~ due to ~~becoming a public company, and a $0.2 million increase in technology related costs.~~increased headcount.

Other Income

Other income for the three months ended September 30, 2022 and 2021 ~~and 2020,~~was comprised of interest income on our cash, cash equivalents and marketable securities and investment premium and discount ~~amortization, was not material.~~amortization.

Comparison of the Nine Months Ended September 30, ~~2021~~2022 and ~~2020~~2021

The following table summarizes our consolidated statements of operations for each period presented (in thousands):


		Nine Months Ended September 30,				Change			Nine Months Ended September 30,				Change
		2021		2020					2022		2021
Operating expenses:	Operating expenses:							Operating expenses:
Research and development	Research and development	$	76,746	$	28,704	$	48,042	Research and development	$	126,711	$	76,746	$	49,965
General and administrative	General and administrative	31,929		7,552		24,377		General and administrative	46,822		31,929		14,893
Total operating expenses	Total operating expenses	108,675		36,256		72,419		Total operating expenses	173,533		108,675		64,858
Loss from operations	Loss from operations	(108,675)		(36,256)		(72,419)		Loss from operations	(173,533)		(108,675)		(64,858)
Total other income:
Other income:								Other income:
Other income, net	Other income, net	201		134		67		Other income, net	677		201		476
Total other income	Total other income	201		134		67		Total other income	677		201		476
Loss before income taxes	Loss before income taxes	(108,474)		(36,122)		(72,352)		Loss before income taxes	$	(172,856)	$	(108,474)	$	(64,382)
Benefit from (provision for) income taxes		(5)		8		(13)
Provision for income taxes								Provision for income taxes	—		(5)		5
Net loss	Net loss	$	(108,479)	$	(36,114)	$	(72,365)	Net loss	$	(172,856)	$	(108,479)	$	(64,377)

Research and Development Expense

2321

~~Research and Development Expense~~

The following table summarizes our research and development expenses for each period presented, along with the changes in those items (in thousands):

Nine Months Ended
September 30, Change
2021 2020
PRAX-114 $ 18,567 $ 9,137 $ 9,430
PRAX-944 10,015 3,284 6,731
PRAX-562 9,256 2,527 6,729
Discovery-stage programs 12,689 4,050 8,639
Personnel-related (including stock-based compensation) 21,584 7,443 14,141
Other indirect research and development expenses 4,635 2,263 2,372
Total research and development expenses $ 76,746 $ 28,704 $ 48,042


	Nine Months Ended September 30,				Change
	2022		2021
Movement disorders	$	26,777	$	12,107	$	14,670
Epilepsy	32,579		15,707		16,872
Psychiatry	28,394		19,029		9,365
Other exploratory CNS indications	2,853		2,957		(104)
Personnel-related (including stock-based compensation)	30,590		21,584		9,006
Other indirect research and development expenses	5,518		5,362		156
Total research and development expenses	$	126,711	$	76,746	$	49,965

~~Research and development expenses increased approximately $48.0~~The $50.0 million ~~from $28.7 million for the nine months ended September 30, 2020 to $76.7 million for the nine months ended September 30, 2021. The~~ increase in research and development expenses was primarily attributable to the following:

•$~~14.1~~16.9 million increase in ~~personnel-related costs~~expense related to our epilepsy franchise, driven primarily ~~due to increased headcount, including~~by an increase in preclinical activities for PRAX-628 and our earlier stage assets, an increase in clinical-related spend for our PRAX-562 Phase 1 trials in healthy volunteers, an increase in clinical-related spend to support the initiation of ~~$6.5~~the PRAX-222 EMBRAVE clinical trial, and the payment of a $2.0 million license fee to Ionis Pharmaceuticals, Inc. in ~~stock-based compensation expense;~~January of 2022 upon exercise of our exclusive option to obtain the rights and license to further develop and commercialize PRAX-222;

•$14.7 million increase in expense related to our movement disorders franchise, driven primarily by an increase in clinical-related spend for our PRAX-944 Phase 2b Essential1 clinical trial, an increase in clinical-related spend for our PRAX-114 Phase 2 clinical trial evaluating PRAX-114 for the treatment of ET, and an increase in clinical-related spend for our PRAX-944 Phase 1 healthy volunteer trials;

•$9.4 million increase in expense related to our ~~PRAX-114 program, driven by an increase in toxicology and clinical-related spend for our Phase 2/3 clinical trial for this program;~~

•~~$8.6 million increase in expense related to our discovery-stage programs, primarily driven by an increase in preclinical activities for such programs;~~

•~~$6.7 million increase in expense related to our PRAX-944 program,~~psychiatry franchise, driven primarily by an increase in ~~toxicology~~clinical-related spend for our PRAX-114 Phase 2 Acapella clinical trial which was initiated in the second quarter of 2021 and ~~clinical-related spend;~~

•~~$6.7 million increase~~our Phase 2 placebo-controlled study evaluating PRAX-114 for the treatment of post-traumatic stress disorder which was initiated in ~~expense related to our PRAX-562 program, primarily driven by an increase in toxicology and clinical-related spend;~~the fourth quarter of 2021; and

•$~~2.4~~9.0 million increase in ~~other indirect research and development expenses, driven by an increase in facility and other allocated overhead~~personnel-related costs ~~primarily attributable~~due to increased ~~research and development headcount, as well as an increase in technology spend.~~headcount.

General and Administrative Expense

~~General and administrative expenses increased approximately $24.4~~The $14.9 million ~~from $7.6 million for the nine months ended September 30, 2020 to $31.9 million for the nine months ended September 30, 2021. The~~ increase in general and administrative expenses was primarily attributable to the following:

•$~~13.1~~10.9 million increase in personnel-related costs ~~primarily driven by~~due to increased ~~headcount, including an increase of $8.7 million in stock-based compensation expense;~~headcount; and

•$~~6.3~~3.4 million increase in professional fees, including ~~$3.5 million of increased commercial-related spend to support assessments of our clinical-stage programs,~~ a ~~$1.1~~$1.6 million increase in ~~audit and~~ legal fees ~~and a $0.9 million increase in general and administrative infrastructure costs; and~~

•~~$4.9 million increase in other general and administrative expenses, including a $3.2 million increase in insurance and related costs~~ due to ~~becoming a public company, a $0.7 million increase in donations~~increased corporate activity and ~~sponsorships and a $0.5 million increase in technology spend.~~patent-related work.

Other Income

Other income for the nine months ended September 30, 2022 and 2021, ~~and 2020,~~was comprised of interest income on our cash, cash equivalents and marketable securities and investment premium and discount ~~amortization, was not material.~~amortization.

Liquidity and Capital Resources

Sources of Liquidity

Since our inception, we have incurred significant losses in each period. We have not yet commercialized any of our product candidates, which are in various phases of preclinical and clinical development, and we do not expect to generate revenue from sales of any products for several years, if at all.

To date, we have financed our operations primarily with proceeds from the ~~sale and~~ issuance of ~~our~~ redeemable convertible preferred stock and from the sale ~~and issuance of convertible debt, and the sale and issuance~~ of common stock ~~in our IPO and~~through an initial public offering, a follow-on public ~~offering.~~offering and at-the-market offerings under our shelf registration statement. From inception through September 30, ~~2021,~~2022, we

have raised ~~$509.4~~$520.8 million in aggregate cash proceeds from ~~these~~such transactions, net of issuance costs. As of September 30, ~~2021,~~2022, we had cash, cash equivalents and marketable securities of ~~$314.4~~$123.7 million.

On November 3, 2021, we entered into an Open Market Sale Agreement, or the sales agreement, with Jefferies LLC, or Jefferies, to provide for the offering, issuance and sale of up to an aggregate amount of $125.0 million of common stock from time to time in at-the-market offerings for which Jefferies acts as sales agent. During the three months ended September 30, 2022, we issued and sold 1,105,006 shares under the sales agreement for aggregate net proceeds of $3.0 million after deducting commissions and offering expenses payable by us. During the nine months ended September 30, 2022, we issued and sold 1,175,416 shares under the sales agreement for aggregate net proceeds of $4.3 million after deducting commissions and offering expenses payable by us. We have issued and sold a total of 1,567,413 shares under the sales agreement for aggregate net proceeds of $11.4 million after deducting commissions and offering expenses payable by us.

Historical Cash Flows

The following table provides information regarding our cash flows for each period presented (in thousands):


		Nine Months Ended September 30,					Nine Months Ended September 30,
		2021		2020			2022		2021
Net cash (used in) provided by:	Net cash (used in) provided by:					Net cash (used in) provided by:
Operating activities	Operating activities	$	(79,697)	$	(32,395)	Operating activities	$	(156,237)	$	(79,697)
Investing activities	Investing activities	(150,689)		—		Investing activities	74,295		(150,689)
Financing activities	Financing activities	99,873		102,352		Financing activities	5,078		99,873
Net (decrease) increase in cash, cash equivalents and restricted cash		$	(130,513)	$	69,957
Net decrease in cash, cash equivalents and restricted cash						Net decrease in cash, cash equivalents and restricted cash	$	(76,864)	$	(130,513)

Operating Activities

Our cash flows from operating activities are greatly influenced by our use of cash for operating expenses and working capital requirements to support our business. We have historically experienced negative cash flows from operating activities as we have invested in developing our portfolio, drug discovery efforts and related infrastructure. The cash used in operating activities resulted primarily from our net losses adjusted for non-cash charges and changes in ~~components of working capital,~~operating assets and liabilities, which are primarily the result of increased expenses and timing of vendor payments.

During the nine months ended September 30, 2022, net cash used in operating activities of $156.2 million was primarily due to our $172.9 million net loss and $7.3 million in changes in operating assets and liabilities primarily related to a decrease in accrued expenses, partially offset by $23.9 million of non-cash charges primarily related to stock-based compensation.

During the nine months ended September 30, 2021, net cash used in operating activities of $79.7 million was primarily due to our $108.5 million net loss, partially offset by $19.1 million of non-cash charges primarily related to stock-based compensation and $9.7 million in changes in operating assets and liabilities ~~and $19.1 million of non-cash charges~~ primarily related to ~~stock-based compensation.~~an increase in accrued expenses and accounts payable.

Investing Activities

During the nine months ended September 30, ~~2020,~~2022, net cash ~~used in operating~~provided by investing activities of ~~$32.4~~$74.3 million was primarily ~~due~~related to ~~our $36.1 million net loss,~~maturities of marketable securities, partially offset by ~~$1.8 million in changes in operating assets and liabilities and $1.9 million~~purchases of ~~non-cash charges.~~

~~Investing Activities~~marketable securities.

During the nine months ended September 30, 2021, net cash used in investing activities of $150.7 million was primarily related to the purchase of marketable securities, partially offset by the maturities of marketable securities. ~~There were no cash flows from investing activities during~~

Financing Activities

During the nine months ended September 30, ~~2020.~~

2022, net cash provided by financing activities of $5.1 million consisted of net proceeds from at-the-market offerings of $4.3 million and proceeds from purchases of common stock under our employee stock purchase plan and from the exercise of stock options, partially offset by the

2523

~~Financing Activities~~payment of issuance costs for our at-the-market offerings and the payment of taxes related to the vesting of restricted stock units.

During the nine months ended September 30, 2021, net cash provided by financing activities of $99.9 million consisted of net proceeds from our follow-on public offering of $98.5 million and net proceeds from the exercise of stock options, ~~of $2.0 million,~~ partially offset by the payment of issuance costs for our ~~IPO.~~

During the nine months ended September 30, 2020, net cash provided by financing activities of $102.4 million consisted of proceeds from the issuance of Series C-1 redeemable convertible preferred stock and exercise of stock options, partially offset by cash paid for the repurchase of our Series C redeemable convertible preferred stock and payment of issuance costs.initial public offering.

Plan of Operation and Future Funding Requirements

We expect our expenses to increase substantially in connection with our ongoing research and development activities, particularly as we advance the preclinical activities and clinical trials of our product candidates. ~~In addition, we expect to incur additional costs associated with operating as a public company and as we transition from being an emerging growth company and a smaller reporting company.~~ As a result, we expect to incur substantial operating losses and negative operating cash flows for the foreseeable future. We anticipate that our expenses will increase substantially if and as we:

•advance the clinical development of our ~~PRAX-114, PRAX-944~~clinical-stage product candidates within our movement disorders and ~~PRAX-562 product candidates;~~epilepsy franchises;

•advance the development of any additional product candidates;

•conduct research and continue preclinical development of potential product candidates;

•make strategic investments in manufacturing capabilities;

•maintain our ~~current intellectual property~~IP portfolio and opportunistically acquire complementary ~~intellectual property;~~IP;

•seek to obtain regulatory approvals for our product candidates;

•potentially establish a sales, marketing and distribution infrastructure and scale-up manufacturing capabilities to commercialize any products for which we may obtain regulatory approval;

•when needed, add clinical, scientific, operational, financial and management information systems and personnel, including personnel to support our product development and potential future commercialization efforts and to support our operations as a public company; and

•experience any delays or encounter any issues with any of the above, including but not limited to failed studies, complex results, safety issues or other regulatory challenges.

In June 2022, following the Aria Study topline results, we announced a strategic realignment to focus resources on our Movement Disorders and Epilepsy franchises, which resulted in a reduction of our workforce and future operating expenses and extended our cash runway.

We are unable to estimate the exact amount of our working capital requirements, but based on our current operating plan, we believe that our ~~existing~~ cash, cash equivalents and marketable securities as of September 30, 2022 will enable us to fund our operating expenses and capital expenditure requirements into the ~~second~~first quarter of ~~2023. However, we~~2024. We have based this ~~estimate~~analysis on our current cash needs, ongoing research and development plans which are limited to advancing product candidates through, but not beyond their current clinical trial phases, anticipated cost savings resulting from our operational cost reduction plans, including ongoing efforts to eliminate costs not related to our strategic focus. Such estimates contain significant judgement as our ongoing efforts to eliminate costs not related to our strategic focus contains uncertainties as to whether we can attain such benefits. Our current operating plan is based on assumptions that may prove to be wrong, and we could ~~exhaust~~use our capital resources sooner than we ~~expect.~~expect, in which case we would evaluate further reductions in our expenses or obtaining additional financing sooner than we otherwise would, which additional financing may not be available or may only be available on terms that are not acceptable to us.

Because of the numerous risks and uncertainties associated with product development and ~~because the extent to which we may enter into~~potential collaborations with third parties for the development of our product candidates, ~~is unknown,~~ we may incorrectly estimate the timing and amounts of increased capital outlays and operating expenses associated with completing the research and development of our product candidates. Our funding requirements and timing and amount of our operating expenditures will depend on many factors, including, but not limited to:

•the scope, progress, results and costs of preclinical studies and clinical trials for our ~~programs~~franchises and product candidates;

•the number and characteristics of ~~programs~~product candidates and technologies that we develop or may in-license;

•the costs and timing of future commercialization activities, including manufacturing, marketing, sales and distribution, for any of our product candidates for which we receive marketing approval;

•the costs necessary to obtain regulatory approvals, if any, for products in the United States and other jurisdictions, and the costs of post-marketing studies that could be required by regulatory authorities in jurisdictions where approval is obtained;

•the costs and timing of preparing, filing and prosecuting patent applications, maintaining and enforcing our ~~intellectual property~~IP rights and defending any ~~intellectual property-related~~IP-related claims;

•the continuation of our existing licensing arrangements and entry into new collaborations and licensing arrangements;

•the costs we incur in maintaining business operations;

•the costs associated with being a public company;

•the revenue, if any, received from commercial sales of any product candidates for which we receive marketing approval;

•the effect of competing technological and market developments;

•the impact of any business interruptions to our operations or to those of our manufacturers, suppliers or other vendors resulting from the COVID-19 pandemic or similar public health crisis; and

•the extent to which we acquire or invest in businesses, products and technologies, including entering into licensing or collaboration arrangements for product candidates, although we currently have no commitments or agreements to complete any such acquisitions or investments in businesses.

Identifying potential product candidates and conducting preclinical testing and clinical trials is a time consuming, expensive and uncertain process that takes years to complete, and we may never generate the necessary data or results required to obtain marketing approval and achieve product sales. In addition, our product candidates, if approved, may not achieve commercial success. Our commercial revenues, if any, will be derived from sales of products that we do not expect to be commercially available for many years, if ever. Accordingly, we will need to obtain substantial additional funds to achieve our business objectives.

Adequate additional funds may not be available to us on acceptable terms, or at all. We do not currently have any committed external source of funds. Market volatility ~~resulting from the COVID-19 pandemic or other factors~~ could also adversely impact our ability to access capital as and when needed. To the extent that we raise additional capital through the sale of equity or convertible debt securities, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of holders of our common stock. Additional debt financing and preferred equity financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends and may require the issuance of warrants, which could potentially result in dilution to the holders of our common stock.

If we raise additional funds through collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit or terminate our product development programs or any future commercialization efforts or grant rights to develop and market product candidates to third parties that we would otherwise prefer to develop and market ourselves.

~~Contractual Obligations~~

As of September 30, 2021, there have been no significant changes to our contractual obligations from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Contractual Obligations and Commitments” included in our Annual Report on Form 10-K filed with the SEC on March 17, 2021, other than our new sublease agreement entered into in May 2021 for office space in Boston, Massachusetts. The space is being used as our new corporate headquarters as of October 1, 2021 and the sublease expires on January 31, 2026, with no option to renew or terminate early. The base rent increases by 2% annually. Starting in January 2022, we are obligated to pay $5.2 million in total future lease payments over the remaining term of the lease.

~~Off-Balance Sheet Arrangements~~

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

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 condensed consolidated financial statements, which have been prepared in accordance with generally accepted accounting principles in the United States. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the

disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no changes to our critical accounting policies from those described under the heading “Management’s Discussion and Analysis of Financial Condition and Results of Operations – Critical Accounting Policies and Significant Judgments and Estimates” included in our Annual Report on Form 10-K filed with the SEC on ~~March 17, 2021.~~February 28, 2022.

~~JOBS Act and Emerging Growth Company Status~~

In April 2012, the JOBS Act was enacted. As an emerging growth company, or EGC, under the JOBS Act, we may delay the adoption of certain accounting standards until such time as those standards apply to private companies. Other exemptions and reduced reporting requirements under the JOBS Act for EGCs include presentation of only two years of audited financial statements in a registration statement for an initial public offering, an exemption from the requirement to provide an auditor’s report on internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes-Oxley Act of 2002, an exemption from any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation and less extensive disclosure about our executive compensation arrangements. Additionally, the JOBS Act provides that an EGC can take advantage of an extended transition period for complying with new or revised accounting standards. This allows an EGC to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have elected to avail ourselves of the extended transition period and, therefore, while we are an EGC we will not be subject to new or revised accounting standards at the same time that they become applicable to other public companies that are not EGCs, unless we choose to early adopt a new or revised accounting standard.

~~We will remain an emerging growth company until December 31, 2021.~~

Recently Issued Accounting Pronouncements

We have reviewed all recently issued standards and have determined that, other than as disclosed in Note 2 to our condensed consolidated financial statements appearing elsewhere in this Quarterly Report on Form 10-Q, such standards will not have a material impact on our condensed consolidated financial statements or do not otherwise apply to our current operations.

Item 3. Quantitative and Qualitative Disclosures About Market Risk.

~~Reserved.~~We are exposed to market risk related to changes in interest rates. Our primary exposure to market risk is interest rate sensitivity, which is affected by changes in the general level of U.S. interest rates, particularly because our cash, cash equivalents and marketable securities are or may be in the form of money market funds or marketable debt securities and are or may be invested in U.S. Treasury and U.S. government agency obligations. However, because of the short-term nature and low risk profile of the instruments in our portfolio, an immediate change in market interest rates of 100 basis points would not have a material impact on the fair market value of our investment portfolio or on our financial position or results of operations.

Item 4. Controls and Procedures.

Management’s Evaluation of Our Disclosure Controls and Procedures

We maintain “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended ~~or the Exchange Act,~~(the "Exchange Act") as controls and other procedures of an issuer that are designed to ensure that information required to be disclosed by the issuer in the reports that ~~we file~~it files or ~~submit~~submits under the Exchange Act is recorded, processed, summarized and reported, within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by the issuer in the reports that ~~we file~~it files or ~~submit~~submits under the Exchange Act is accumulated and communicated to ~~our~~the issuer's management, including ~~our~~its principal executive and principal financial officers, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure. Our management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and our management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures.

Our management, with the participation of our Chief Executive Officer and Chief Financial Officer (our principal executive officer and principal financial officer, respectively), evaluated the effectiveness of our disclosure controls and procedures as of September 30, ~~2021.~~2022. Based on the evaluation of our disclosure controls and procedures as of September 30, ~~2021,~~2022, our Chief Executive Officer and Chief Financial Officer concluded that, as of such date, our disclosure controls and procedures were effective at the reasonable assurance level.

Changes in Internal Control Over Financial Reporting

There were no changes in our internal control over financial reporting that occurred during the period covered by this Quarterly Report on Form 10-Q that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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PART II—OTHER INFORMATION

Item 1. Legal Proceedings.

As of the date of this Quarterly Report on Form 10-Q, we are not party to any material legal matters or claims. We may become party to legal matters and claims arising in the ordinary course of business. We cannot predict the outcome of any such legal matters or claims, and despite the potential outcomes, the existence thereof may have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.

Item 1A. Risk Factors.

~~The risk factor set forth below updates, and should be read in conjunction with,~~There have been no material changes from the risk factors previously disclosed in the section entitled "Risk Factors" of our ~~Annual~~Quarterly Report on Form ~~10-K~~10-Q for the ~~year~~quarter ended ~~December 31, 2020~~June 30, 2022 filed with the SEC on ~~March 17, 2021.~~

~~If we encounter difficulties enrolling patients in our future clinical trials, our clinical development activities could be delayed or otherwise adversely affected.~~

We have and may in the future experience difficulties in patient enrollment in our clinical trials for a variety of reasons. The timely completion of clinical trials in accordance with their protocols depends, among other things, on our ability to enroll a sufficient number of patients who remain in the study until its conclusion.

~~Patient enrollment is affected by many factors, including:~~

•~~the patient eligibility criteria defined in the protocol;~~

•~~the size of the patient population required for analysis of the trial’s primary endpoints;~~

•~~in the case clinical trials focused on rare disease, the small size of the patient population and the potential of a patient being undiagnosed or misdiagnosed;~~

•~~the proximity of patients to trial sites;~~

•~~the design of the trial;~~

•~~our ability to recruit clinical trial investigators with the appropriate competencies and experience;~~

•competing clinical trials and clinicians’ and patients’ perceptions as to the potential advantages and risks of the product candidate being studied in relation to other available therapies, including any new drugs that may be approved for the indications that we are investigating;

•the impacts of the COVID-19 pandemic on clinical trial sites, personnel and patient travel (see —Business interruptions resulting from COVID-19 or a similar pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide may adversely affect our business);

•~~our ability to obtain and maintain patient consents; and~~

•~~the risk that patients enrolled in clinical trials will drop out of the trials before completion.~~

In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Since the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials in such clinical trial site.

Our inability to enroll a sufficient number of patients for our clinical trials would result in significant delays or might require us to abandon one or more clinical trials altogether. Delays in patient enrollment may result in increased costs, affect the timing or outcome of the planned clinical trials, product candidate development and approval process and jeopardize our ability to seek and obtain the regulatory approval required to commence product sales and generate revenue, which could prevent completion of these trials, adversely affect our ability to advance the development of our product candidates, cause the value of our company to decline and limit our ability to obtain additional financing if needed.

We are also required to register certain clinical trials and post the results of completed clinical trials on a government-sponsored database, such as www.ClinicalTrials.gov in the United States, within certain timeframes. Failure to do so can result in fines, adverse publicity and civil and criminal sanctions.

~~Business interruptions resulting from COVID-19 or a similar pandemic, epidemic or outbreak of an infectious disease in the United States or worldwide may adversely affect our business.~~

If a pandemic, epidemic or outbreak of an infectious disease occurs in the United States or worldwide our business may be adversely affected. In December 2019, a novel strain of coronavirus named SARS-CoV-2 was identified in Wuhan, China. This virus continues to spread globally, including in the United States and the disease it causes, COVID-19, has been declared a pandemic by the World Health Organization. The COVID-19 pandemic has impacted the global economy and may impact our operations, including the potential interruption of our clinical trial activities, regulatory reviews and our supply chain. Furthermore, the spread of the virus may affect the operations of key governmental agencies, such as the FDA, which may delay the development or approval process for our product candidates.

~~The COVID-19 pandemic has and may in the future delay enrollment in our clinical trials due to prioritization of hospital resources~~ or patients being either unwilling to enroll in our trials or unable to comply with clinical trial protocols if quarantines impede patient movement or interrupt healthcare services, which would delay our ability to conduct clinical trials or release clinical trial results and could delay our ability to obtain regulatory approval and commercialize our product candidates. For example, we had previously observed delays in our trial enrollment in Australia for our PRAX-944 Phase 2a trial due to stringent COVID-19 lockdown restrictions. While we didn’t experience a material impact on this trial from the delay in enrollment, we cannot predict the scope and severity of potential shutdowns or disruptions of businesses due to COVID-19 in the future.

The spread of COVID-19 may also result in the inability of our suppliers to deliver components or raw materials on a timely basis or at all. Three vaccines for COVID-19 were granted Emergency Use Authorization by the FDA in late 2020 and early 2021, and more are likely to be authorized in the coming months. The resultant demand for vaccines and potential for manufacturing facilities and materials to be commandeered under the Defense Production Act of 1950, or equivalent foreign legislation, may make it more difficult to obtain materials or manufacturing slots for the products needed for our clinical trials, which could lead to delays in these trials. In addition, hospitals may reduce staffing and reduce or postpone certain treatments in response to the spread of an infectious disease. Such events may result in a period of business disruption, and in reduced operations, or doctors and medical providers may be unwilling to participate in our clinical trials, any of which could materially affect our business, financial condition and results of operations.

We continue to closely monitor the COVID-19 pandemic as we evolve our business continuity plans, clinical development plans and response strategy. The extent to which the COVID-19 pandemic impacts our business will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the novel coronavirus and the actions to contain the coronavirus or treat its impact, among others. At present, we are not experiencing significant impact or delays from the COVID-19 pandemic on our business, operations and, if approved, commercialization plans. In addition, we have taken steps to mitigate against COVID-19 pandemic-related delays, and may take additional measures, intended to help minimize the risk of the virus to our employees, including temporarily requiring all employees to work remotely, suspending all non-essential travel worldwide for our employees, and discouraging employee attendance at industry events and in-person work-related meetings, which could negatively affect our business.

While we have taken and are continuing to take steps to mitigate against possible delays, our planned clinical trials may be affected by the COVID-19 pandemic, including (i) delays or difficulties in enrolling and retaining patients in our planned clinical trials, including patients that may not be able or willing to comply with clinical trial protocols if

quarantines impede patient movement or interrupt healthcare services; (ii) delays or difficulties in clinical site initiation, including difficulties in recruiting and retaining clinical site investigators and clinical site staff; (iii) diversion or prioritization of healthcare resources away from the conduct of clinical trials and towards the COVID-19 pandemic, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials, and because, who, as healthcare providers, may have heightened exposure to COVID-19 and adversely impact our clinical trial operations; (iv) interruption of our future clinical supply chain or key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal, state/provincial or municipal governments, employers and others; and (v) limitations in outsourced third-party resources that would otherwise be focused on the conduct of our planned clinical trials, including because of sickness of third-party personnel or their families, or the desire of third-party personnel to avoid contact with large groups of people. A significant outbreak of other infectious diseases in the future also could result in a widespread health crisis that could adversely affect the economies and financial markets worldwide, resulting in an economic downturn that could impact our business, financial condition and results of operations.

We will no longer be an “emerging growth company” or a “smaller reporting company” and the reduced disclosure requirements applicable to emerging growth companies and smaller reporting companies will no longer apply to us.

We are currently an emerging growth company but because as of June 30, 2021, the market value of our common stock that was held by non-affiliates exceeded $700 million, we be a large-accelerated filer and will no longer qualify for such status commencing December 3, 2021. As a result, we will be subject to certain disclosure requirements that are applicable to other public companies that have not been applicable to us as an emerging growth company. These requirements include:

•~~compliance with the auditor attestation requirements in the assessment of our internal control over financial reporting;~~

•compliance with any requirement that may be adopted by the Public Company Accounting Oversight Board regarding mandatory audit firm rotation or a supplement to the auditor’s report providing additional information about the audit and the financial statements;

•~~full disclosure obligations regarding executive compensation; and~~

•~~compliance with the requirements of holding a nonbinding advisory vote on executive compensation and~~

We are also currently a smaller reporting company, but based on the market value of our common stock that was held by non-affiliates as of June 30, 2021, we have determined that we will no longer be a smaller reporting company as of January 1,August 8, 2022. However, for so long as we remain a smaller reporting company, we are permitted and intend to rely on exemptions from certain disclosure requirements that are applicable to other public companies that are not smaller reporting companies. Similar to emerging growth companies, smaller reporting companies are able to provide simplified executive compensation disclosure and have certain other reduced disclosure obligations, including, among other things, being required to provide only two years of audited financial statements and not being required to provide selected financial data, supplemental financial information or risk factors. As of January 1, 2022, we will no longer be able to rely on these reduced requirements.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

Recent Sales of Unregistered Equity Securities

~~None.~~We did not make any sales of unregistered securities during the three months ended September 30, 2022.

Use of Proceeds from Public Offering of Common Stock

In October 2020, we completed the initial public offering of our common stock, or IPO, pursuant to which we issued and sold 11,500,000 shares of our common stock at a price to the public of $19.00 per share. We received aggregate gross proceeds from our IPO of approximately $218.5 million, or aggregate net cash proceeds of approximately $200.3 million after deducting underwriting discounts and commissions and offering expenses.

All of the shares issued and sold in the IPO were registered under the Securities Act pursuant to a Registration Statement on Form S‑1 (File No. 333-249074), which was declared effective by the Securities and Exchange Commission ~~or the SEC,~~ on October 15, 2020. ~~There has been no material change in~~

Purchases of Equity Securities by the ~~planned use~~Issuer and Affiliated Purchasers

We did not make any repurchases of ~~proceeds from our IPO as described in our final prospectus filed pursuant to Rule 424(b)(4) under~~shares of common stock during the ~~Securities Act with the SEC on October 16, 2020.~~

three months ended September 30, 2022.

Item 3. Defaults Upon Senior Securities.

Not applicable.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

~~None~~None.

3327

Item 6. Exhibits.



Exhibit Number						Description

3.1						Amended and Restated Certificate of Incorporation of Praxis Precision Medicines, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K (File No. 001-39620) filed on October 20, 2020).

3.2						Amended and Restated Bylaws of Praxis Precision Medicines, Inc. (incorporated by reference to Exhibit 3.1 to the Registrant's Current Report on Form 8-K (File No. 001-39620) filed on January 7, 2022).

10.1						~~Retention Incentive Award Letter~~Transition Agreement dated ~~August 30, 2021,~~July 26, 2022, by and between Praxis Precision Medicines, Inc. and Bernard Ravina~~(incorporated~~ (incorporated by reference to Exhibit 10.1 to the Registrant's Current R e ~~port~~Report on Form 8-K (File No. 001-39620) filed on ~~August 30, 2021~~).July 26, 2022.

31.1*						Certification of Principal Executive Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

31.2*						Certification of Principal Financial Officer Pursuant to Rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as Adopted Pursuant to Section 302 of the Sarbanes-Oxley Act of 2002.

32.1**						Certification of Principal Executive Officer and Principal Financial Officer Pursuant to 18 U.S.C. Section 1350, as Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of 2002.

101.INS*						Inline XBRL Instance Document

101.SCH*						Inline XBRL Taxonomy Extension Schema Document

101.CAL*						Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF*						Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB*						Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE*						Inline XBRL Taxonomy Extension Presentation Linkbase Document

104						Cover Page Interactive Data File (embedded within the Inline XBRL document)

*Filed herewith.

** The certifications furnished in Exhibit 32.1 hereto are deemed to accompany this Quarterly Report on Form 10-Q and will not be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934, as amended. Such certifications will not be deemed to be incorporated by reference into any filings under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, except to the extent that the Registrant specifically incorporates it by reference.

3428

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.

PRAXIS PRECISION MEDICINES, INC.

Date:

November ~~3, 2021~~9, 2022

By:

/s/ Marcio Souza

Marcio Souza

Chief Executive Officer and Director (Principal Executive Officer)

Date:

November ~~3, 2021~~9, 2022

By:

/s/ Timothy Kelly

Timothy Kelly

Chief Financial Officer (Principal Financial Officer)

3529


	Series A Redeemable Convertible Preferred Stock			Series B Redeemable Convertible Preferred Stock			Series B-1 Redeemable Convertible Preferred Stock			Series C Redeemable Convertible Preferred Stock			Series C-1 Redeemable Convertible Preferred Stock			Common Stock			Additional Paid-In Capital		Accumulated Deficit		Accumulated Other Comprehensive Loss		Total Stockholders’ Equity (Deficit)
	Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount		Shares	Amount
Balance at December 31, 2019	8,075,799	$	9,932	14,913,704	$	49,969	2,666,666	$	10,431	9,805,827	$	50,789	—	$	—	1,621,880	$	1	$	—	$	(81,009)	$	—	$	(81,008)
Repurchase of Series C redeemable convertible preferred stock	—	—		—	—		—	—		(5,825,243)	(30,493)		—	—		—	—		—		493		—		493
Series C redeemable convertible preferred stock issuance costs	—	—		—	—		—	—		—	(37)		—	—		—	—		—		—		—		—
Vesting of restricted common stock awards	—	—		—	—		—	—		—	—		—	—		13,143	—		—		—		—		—
Stock-based compensation expense	—	—		—	—		—	—		—	—		—	—		—	—		147		—		—		147
Accretion of redeemable convertible preferred stock to redemption value	—	160		—	890		—	199		—	815		—	—		—	—		(147)		(1,917)		—		(2,064)
Net loss	—	—		—	—		—	—		—	—		—	—		—	—		—		(8,330)		—		(8,330)
Balance at March 31, 2020	8,075,799	$	10,092	14,913,704	$	50,859	2,666,666	$	10,630	3,980,584	$	21,074	—	$	—	1,635,023	$	1	$	—	$	(90,763)	$	—	$	(90,762)
Issuance of Series C redeemable convertible preferred stock, net of issuance costs of $4	—	—		—	—		—	—		4,563,108	23,496		—	—		—	—		—		—		—		—
Vesting of restricted common stock awards	—	—		—	��		—	—		—	—		—	—		13,142	—		—		—		—		—
Stock-based compensation expense	—	—		—	—		—	—		—	—		—	—		—	—		285		—		—		285
Accretion of redeemable convertible preferred stock to redemption value	—	162		—	890		—	198		—	789		—	—		—	—		(285)		(1,754)		—		(2,039)
Net loss	—	—		—	—		—	—		—	—		—	—		—	—		—		(11,568)		—		(11,568)
Balance at June 30, 2020	8,075,799	$	10,254	14,913,704	$	51,749	2,666,666	$	10,828	8,543,692	$	45,359	—	$	—	1,648,165	$	1	$	—	$	(104,085)	$	—	$	(104,084)
Issuance of Series C-1 redeemable convertible preferred stock, net of issuance costs of $154	—	—		—	—		—	—		—	—		19,444,453	110,096		—	—		—		—		—		—
Vesting of restricted common stock awards	—	—		—	—		—	—		—	—		—	—		13,142	—		—		—		—		—
Stock-based compensation expense	—	—		—	—		—	—		—	—		—	—		—	—		953		—		—		953
Issuance of common stock upon exercise of stock options	—	—		—	—		—	—		—	—		—	—		11,628	—		27		—		—		27
Accretion of redeemable convertible preferred stock to redemption value	—	162		—	899		—	201		—	885		—	1,796		—	—		(980)		(2,963)		—		(3,943)
Net Loss	—	—		—	—		—	—		—	—		—	—		—	—		—		(16,216)		—		(16,216)
Balance at September 30, 2020	8,075,799	$	10,416	14,913,704	$	52,648	2,666,666	$	11,029	8,543,692	$	46,244	19,444,453	$	111,892	1,672,935	$	1	$	—	$	(123,264)	$	—	$	(123,263)


	As of December 31, 2020
	Level 1		Level 2		Level 3		Total
Assets:
Cash equivalents:
Money market funds	$	290,931	$	—	$	—	$	290,931
	$	290,931	$	—	$	—	$	290,931


Year Ended December 31,	Future Lease Payments
2021	$	—
2022	1,160
2023	1,270
2024	1,296
2025	1,321
2026	110
Total future lease payments	$	5,157
Less: interest	(942)
Present value of operating lease liabilities	$	4,215