You should read the following discussion and analysis of our financial condition
and results of operations together with our financial statements and related
notes included elsewhere in this annual report. This discussion and analysis
contains forward-looking statements based upon our current beliefs, plans and
expectations that involve risks, uncertainties and assumptions. Our actual
results may differ materially from those anticipated in these forward-looking
statements as a result of various factors, including those set forth under "Risk
Factors" or in other parts of this annual report.

Overview



We are a biopharmaceutical company focused on developing and commercializing
novel treatments for gastrointestinal, or GI, diseases. Our initial approved
products, VOQUEZNA TRIPLE PAK and VONOPRAZAN DUAL PAK, as well as our current
product candidate, VOQUEZNA, contain vonoprazan, an oral small molecule PCAB.
PCABs are a novel class of medicines that block acid secretion in the stomach.
Vonoprazan has shown rapid, potent, and durable anti-secretory effects and has
demonstrated clinical benefits over the current standard of care as a single
agent in the treatment of erosive gastroesophageal reflux disease, or erosive
GERD, and in combination with antibiotics for the treatment of H. pylori
infection. Takeda developed vonoprazan and has received marketing approval in
numerous countries in Asia and Latin America as well as Russia. Vonoprazan
generated approximately $850 million in net sales in its seventh] full year on
the market since its approval in Japan in late 2014. In May 2019, we in-licensed
the U.S., European, and Canadian rights to vonoprazan from Takeda.

In 2021 we reported positive topline data from two pivotal Phase 3 clinical
trials for vonoprazan: one for the treatment of H. pylori infection, or
PHALCON-HP, and a second for the treatment of erosive GERD, PHALCON-EE. In April
2021, we reported positive topline data from PHALCON-HP, and in October 2021, we
reported positive topline data from PHALCON-EE. These data are supplemented by
the extensive existing clinical data generated by Takeda as part of their
development program for vonoprazan in Japan and other markets. In September
2021, we submitted two new drug applications, or NDAs, for combination packs
that contain vonoprazan for the treatment of H. pylori infection in adults, one
in combination with amoxicillin and clarithromycin (vonoprazan triple therapy)
and the other in combination with amoxicillin alone (vonoprazan dual therapy).
In May 2022, the FDA approved the NDAs for vonoprazan triple therapy, under the
brand name VOQUEZNA TRIPLE PAK, and vonoprazan dual therapy, under the brand
name VOQUEZNA DUAL PAK. Prior to approval, in May 2021, we received qualified
infectious disease product, or QIDP, designations for VOQUEZNA TRIPLE PAK and
VOQUEZNA DUAL PAK, which, upon approval of these products, added five years of
regulatory exclusivity to the five years of new chemical entity, or NCE,
exclusivity for vonoprazan to which these products were, and future products we
develop containing vonoprazan will be, entitled.

In March 2022, we submitted an NDA for vonoprazan as a treatment for adults for
the healing of all grades of erosive GERD, maintenance of healing of all grades
of erosive GERD, and relief of heartburn associated with erosive GERD. If
approved, we expect to market the product under the brand name VOQUEZNA. In
August 2022, we announced that, consistent with current FDA recommendations for
all chemically synthesized drug compounds, we previously initiated post-approval
testing to determine whether nitrosamine impurities were present in our initial
commercial drug product for VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK. These
tests revealed trace levels of a nitrosamine impurity, N-nitroso-vonoprazan, or
NVP, that is not described within the FDA guidance document entitled "Control of
Nitrosamine Impurities in Human Drugs - Guidance for Industry." In January 2023,
we announced that, although the FDA established an acceptable daily intake level
(AI) for NVP at 96 ng/day, the FDA advised us that it would not be acting on our
erosive GERD NDA on or prior to the Prescription Drug User Fee Act (PDUFA)
target action date of January 11, 2023. Rather, the FDA requested additional
stability data demonstrating that the levels of NVP will remain at or below the
AI throughout the proposed shelf life of the product. In February 2023, we
received complete response letters from the FDA relating to our erosive GERD NDA
and post approval supplement relating to our approved H. pylori NDAs, both of
which address specifications and controls for NVP. These letters formalize FDA's
prior request that we provide additional stability data to demonstrate that
levels of NVP will remain at or below the AI throughout the proposed shelf life
of the product.

                                      146
--------------------------------------------------------------------------------


No additional deficiencies were cited by the FDA in either letter. We have
scheduled a meeting with the FDA in March 2023 to discuss our resubmission plan
and timeline. If we are unable to demonstrate to the FDA that we will be able to
maintain NVP levels at or below the AI, launches of VOQUEZNA TRIPLE PAK and
VOQUEZNA DUAL PAK will be further delayed and approval of our erosive GERD NDA
will continue to be delayed, which could substantially increase our costs and
delay or put at risk our ability to generate revenue and adversely affect our
commercial prospects.

Also in January 2023, we reported positive topline results from
PHALCON-NERD-301, a Phase 3 study evaluating the safety and efficacy of
vonoprazan for the daily treatment of adults with non-erosive GERD. We are also
in discussions with the FDA regarding the design of a Phase 3 trial to evaluate
the novel dosing regimen of vonoprazan as an as needed treatment for episodic
heartburn relief in patients with non-erosive GERD, a dosing regimen not
approved in the U.S. for PPIs. This trial would constitute our fourth Phase 3
trial for vonoprazan. In February 2022, we reported positive topline results
from PHALCON-NERD-201, a Phase 2 proof-of-concept study evaluating this novel
dosing regimen.

We plan to independently commercialize VOQUEZNA TRIPLE PAK, VOQUEZNA DUAL PAK
and, if approved, VOQUEZNA, in the United States. We plan to seek commercial
partnerships for vonoprazan in Europe and Canada, expand development of
vonoprazan into other indications, dosing regimens and alternative formulations
and packaging, and in-license or acquire additional clinical or commercial stage
product candidates for the treatment of GI diseases in a capital efficient
manner.

We commenced our operations in 2018 and have devoted substantially all of our
resources to date to organizing and staffing our company, business planning,
raising capital, in-licensing our initial product candidate, vonoprazan, meeting
with regulatory authorities, conducting our Phase 3 clinical trials of
vonoprazan, preparing applications for regulatory approval for vonoprazan and
preparing for a potential commercial launch. Our operations to date have been
funded primarily through the issuance of convertible promissory notes,
commercial bank debt, the proceeds from our initial public offering and our
follow-on public offering. From our inception through December 31, 2022, we have
raised aggregate gross proceeds of $90.3 million from the issuance of
convertible promissory notes, $100.0 million of debt, net proceeds from our
initial public offering of $191.5 million from the sale of 10,997,630 shares of
common stock, which included the exercise in full by the underwriters of their
option to purchase 1,434,473 additional shares at a public offering price of
$19.00 per share, after deducting underwriting discounts, commissions and
offering costs, and net proceeds of $88.6 million from the sale of 2,250,000
shares of common stock at a public offering price of $39.48 per share after
deducting underwriting discounts and commissions, and an additional $0.2 million
in offering costs. As of December 31, 2022, we had cash and cash equivalents of
$155.4 million. Based on our current operating plan, we believe that our
existing cash and cash equivalents together with the drawdown of the remaining
$100 million under our Loan Agreement with Hercules are sufficient to fund
operations for at least the next twelve months and receipt of $175 million in
additional milestone payments under our Revenue Interest Financing Agreement,
will be sufficient to fund our operations through the end of 2024.

We have not initiated commercial launch of any products and have incurred net
losses since our inception. Our net losses for the years ended December 31, 2022
and 2021 were $197.7 million and $143.9 million, respectively. As of December
31, 2022, we had an accumulated deficit of $727.1 million. Our net losses may
fluctuate significantly from quarter-to-quarter and year-to-year, depending on
the timing of our clinical development activities, other research and
development activities and pre-commercialization activities. We expect our
expenses and operating losses will increase as we continue to advance vonoprazan
through clinical trials, seek additional regulatory approvals for vonoprazan,
expand our quality, regulatory, manufacturing and commercialization
capabilities, incur significant commercialization expenses for marketing, sales,
manufacturing and distribution if we obtain marketing approval for VOQUEZNA for
erosive GERD in the U.S., protect our intellectual property, expand our general
and administrative support functions, including hiring additional personnel, and
incur additional costs associated with operating as a public company.

                                      147
--------------------------------------------------------------------------------


We have never generated any revenue and do not expect to generate any revenues
from product sales unless and until we obtain regulatory approval for VOQUEZNA,
or approval of our resubmission for VOQUEZNA TRIPLE PAK and VOQUEZNA DUAL PAK,
in the U.S. Accordingly, until such time as we can generate significant revenue
from sales of products containing vonoprazan, if ever, we expect to finance our
cash needs through equity offerings, our Loan Agreement, our Revenue Interest
Financing Agreement, additional debt financings or other capital sources,
including potential collaborations, licenses and other similar arrangements.
However, we may be unable to raise additional funds or enter into such other
arrangements when needed on favorable terms or at all, and this risk could be
exacerbated by the impact of the ongoing hostilities in the Ukraine on global
economic conditions. Our failure to raise capital or enter into such other
arrangements when needed would have a negative impact on our financial condition
and could force us to delay, limit, reduce or terminate our product development
or future commercialization efforts or grant rights to develop and market
product candidates that we would otherwise prefer to develop and market
ourselves.

License Agreement with Takeda



On May 7, 2019, we and Takeda entered into the Takeda License, pursuant to which
we in-licensed the U.S., European, and Canadian rights to vonoprazan fumarate.
During the term of the Takeda License, we and our affiliates are not permitted
to commercialize any pharmaceutical product, other than vonoprazan, that treats
acid-related disorders, except for certain generic and OTC competing products in
specified circumstances. We will be responsible at our cost for the development,
manufacture and commercialization of vonoprazan products. We are required to use
commercially reasonable efforts to develop and commercialize the vonoprazan
products in our licensed territory.

Under the Takeda License, Takeda has the sole right and authority, with our input, to prepare, file, prosecute, and maintain all Takeda and joint patents on a worldwide basis at its own cost. We are responsible, at our cost, for preparing, filing, prosecuting, and maintaining patents on inventions made solely by us in connection with vonoprazan, subject to input from Takeda.



We paid Takeda upfront consideration consisting of a cash fee of $25.0 million,
1,084,000 shares of our common stock, the Takeda Warrant to purchase 7,588,000
shares of our common stock at an exercise price of $0.00004613 per share, and
issued Takeda a right to receive an additional common stock warrant, or the
Takeda Warrant Right, if Takeda's fully-diluted ownership of the Company
represented less than a certain specified percentage of the fully-diluted
capitalization, including shares issuable upon conversion of then outstanding
convertible promissory notes, calculated immediately prior to the closing of our
IPO. The Takeda Warrant Right expired without effect since no fair value had
been allocated to it upon completion of our IPO, and no additional warrant was
issued. We agreed to make milestone payments to Takeda upon achieving certain
tiered aggregate annual net sales of licensed products in the United States,
Europe and Canada up to a total maximum milestone amount of $250.0 million. We
also agreed to make tiered royalty payments at percentages in the low double
digits on net sales of licensed products, subject to specified offsets and
reductions. Royalties will be payable, on a product-by-product and
country-by-country basis from the first commercial sale of such product in such
country, until the latest of expiration of the licensed patents covering the
applicable product, expiration of regulatory exclusivity in such country, or 15
years following first commercial sale in such country.

                                      148
--------------------------------------------------------------------------------

Components of Results of Operations

Operating Expenses

Research and Development



To date, our research and development expenses have related to the development
of vonoprazan. Research and development expenses are recognized as incurred and
payments made prior to the receipt of goods or services to be used in research
and development are capitalized until the goods or services are received.

Research and development expenses include:

•

salaries, payroll taxes, employee benefits, and stock-based compensation charges for those individuals involved in research and development efforts;

•

external research and development expenses incurred under agreements with CROs, and consultants to conduct and support our ongoing clinical trials of vonoprazan; and

•

costs related to the manufacturing of vonoprazan for our clinical trials.



We plan to increase our research and development expenses for the foreseeable
future as we continue the development of vonoprazan. We cannot determine with
certainty the timing of initiation, the duration or the completion costs of
current or future clinical trials and nonclinical studies of vonoprazan or any
future product candidates due to the inherently unpredictable nature of clinical
and preclinical development. Clinical and preclinical development timelines, the
probability of success and development costs can differ materially from
expectations. In addition, we cannot forecast which product candidates may be
subject to future collaborations, when such arrangements will be secured, if at
all, and to what degree such arrangements would affect our development plans and
capital requirements.

Our future clinical development costs may vary significantly based on factors such as:



•
per patient trial costs;

•

the number of trials required for approval;

•

the number of sites included in the trials;

•

the countries in which the trials are conducted;

•

the length of time required to enroll eligible patients;

•

the number of patients that participate in the trials;

•

the number of doses evaluated in the trials;

•

the drop-out or discontinuation rates of patients;

•

potential additional safety monitoring requested by regulatory agencies;

•

the duration of patient participation in the trials and follow-up;

•

the phase of development of the product candidate; and

•

the efficacy and safety profile of the product candidate;


                                      149
--------------------------------------------------------------------------------

General and Administrative



General and administrative expenses consist of salaries and employee-related
costs, including stock-based compensation, for personnel in executive, finance,
accounting, legal, human resources and other administrative functions, legal
fees relating to intellectual property and corporate matters, and professional
fees for accounting and consulting services. We anticipate that our general and
administrative expenses will increase in the future to support our continued
research and development activities, pre-commercial preparation activities for
vonoprazan and, if any future product candidate receives marketing approval,
commercialization activities. We also anticipate increased expenses related to
audit, legal, regulatory, and tax-related services associated with maintaining
compliance with exchange listing and SEC requirements, director and officer
insurance premiums, and investor relations costs associated with operating as a
public company.

Interest Income

Interest income consists of interest on our money market funds.

Interest Expense



Beginning on May 3, 2022, interest expense includes interest on the Revenue
Interest Financing Agreement, which is based on the imputed effective rate
derived from expected future payments and the carrying value of the obligation.
The Company recalculates the effective interest rate each period based on the
current carrying value and the revised estimated future payments. Changes in
future payments from previous estimates are included in current and future
financing expense.

Beginning on September 17, 2021, interest expense consists of (i) cash interest
at a variable annual rate equal to the greater of (a) 5.50% and (b) the Prime
Rate (as reported in the Wall Street Journal) plus 2.25% (the "Interest Rate"),
(ii) payment-in-kind interest at a per annum rate of interest equal to 3.35%,
and (iii) amortization of the Hercules Loan Agreement debt discount recorded in
connection with the fair value of warrants issued to the lenders, the debt
issuance costs incurred, and the obligation to make a final payment.

Prior to September 17, 2021, interest expense consisted of interest on our
outstanding commercial bank debt with SVB at a variable annual rate equal to the
greater of (a) 7.25% and (b) Prime Rate (as reported by the Wall Street Journal)
plus 1.75% and amortization of the SVB Term Loan debt discount recorded in
connection with the fair value of warrants issued to the lenders, the debt
issuance costs incurred, and the obligation to make a final payment.

                                      150
--------------------------------------------------------------------------------

Results of Operations

Comparison of the Years Ended December 31, 2022 and 2021

The following table summarizes our results of operations for the years ended December 31, 2022 and 2021 (in thousands):


                                      Years Ended
                                     December 31,
                                2022           2021         Change
Operating expenses:
Research and development     $   71,441     $   72,338     $    (897 )
General and administrative      100,999         62,742     $  38,257
Total operating expenses        172,440        135,080        37,360
Loss from operations           (172,440 )     (135,080 )     (37,360 )
Other income (expense):
Interest income                   2,132             41         2,091
Interest expense                (27,305 )       (6,788 )     (20,517 )
Other expense                      (110 )       (2,056 )       1,946
Total other income expense      (25,283 )       (8,803 )     (16,480 )
Net loss                     $ (197,723 )   $ (143,883 )   $ (53,840 )


Research and Development Expenses. Research and development expenses were $71.4
million and $72.3 million for the years ended December 31, 2022 and 2021,
respectively. The decrease of $0.9 million consisted of consisted of a reduction
of $3.2 million of expenses related to regulatory requirements and $0.4 million
of chemistry manufacturing and controls, or CMC, costs related to vonoprazan,
partially offset by increases $2.7 million of personnel-related, consulting and
other research expenses.

General and Administrative Expenses. General and administrative expenses were
$101.0 million and $62.7 million for the years ended December 31, 2022 and 2021,
respectively. The increase of $38.2 million was due to increases of $21.0
million in professional services expenses for commercial, medical affairs and
other services, $15.7 million in personnel-related expenses, $1.7 million in
legal and other expenses in 2022, partially offset by a $0.2 million reduction
in consulting fees.

Other Income (Expense). Other expense of $25.3 million for the year ended
December 31, 2022 consisted of $27.4 million of interest expense under the
Hercules Loan and Revenue Interest Financing Agreements, partially offset by
$2.1 million of interest income on deposits. Other expense of $8.8 million for
the year ended December 31, 2021 consisted of $6.8 million of interest expense
and $2.0 million of charges related to early extinguishment of debt.

                                      151
--------------------------------------------------------------------------------

Liquidity and Capital Resources



We have incurred net losses and negative cash flows from operations since our
inception and anticipate we will continue to incur net losses for the
foreseeable future. As of December 31, 2022, we had cash and cash equivalents of
$155.4 million.

Loan Agreement with Hercules

On September 17, 2021, (the "Closing Date"), we entered into a Loan and Security
Agreement (the "Loan Agreement") with Hercules Capital, Inc., in its capacity as
administrative agent and collateral agent and as a lender (in such capacity, the
"Agent" or "Hercules") and the other financial institutions that from time to
time become parties to the Loan Agreement as lenders (collectively, the
"Lenders").

The Loan Agreement provides for term loans in an aggregate principal amount of
up to $200.0 million (the "Term Loan") under multiple tranches. The tranches
consist of (i) a first tranche consisting of term loans in an aggregate
principal amount of $100.0 million, all of which was funded on the Closing Date
(the "First Advance"), (ii) a second tranche consisting of up to an additional
$50.0 million, which became available to us upon achievement of the
protocol-specified primary efficacy endpoints in our Phase 3 trial studying
vonoprazan for the healing and maintenance of healing of erosive GERD with
acceptable safety data, such that the results support the submission of a New
Drug Application ("NDA") or supplemental NDA without the need to conduct another
Phase 3 study and will be available, if specified conditions are met, through
December 15, 2022, see amendment to later date below, (iii) a third and fourth
tranches consisting of an additional total $50.0 million, which became available
to us in May 2022 upon the achievement of (a) FDA approval of our NDA for
vonoprazan and amoxicillin, or its NDA for vonoprazan, amoxicillin and
clarithromycin, in each case for an indication relating to the treatment of H.
pylori with an approved indication on the claim that is generally consistent
with that sought in our NDA submission? and (b) filing of an NDA or supplemental
NDA for vonoprazan for indications relating to the healing and maintenance of
healing of erosive GERD. The third and fourth tranches will remain available
until September 30, 2023, and March 31, 2024, respectively. We intend to use the
proceeds of the Term Loan advances for working capital and general corporate
purposes. In addition, approximately $54 million of the proceeds from the First
Advance was used to satisfy in full and retire our indebtedness under its
previously outstanding credit facility with Silicon Valley Bank (the "SVB Term
Loan").

On September 27, 2022, the Company entered into an amendment to the Loan
Agreement, or the Second Loan Amendment, pursuant to which the date the second
tranche of funding of $50 million will remain available to the Company has been
moved until May 15, 2023, rather than December 15, 2022.

                                      152
--------------------------------------------------------------------------------


The Term Loan will mature on October 1, 2026 (the "Maturity Date"). The Term
Loan bears (i) cash interest at a variable annual rate equal to the greater of
(a) 5.50% and (b) the Prime Rate (as reported in the Wall Street Journal) plus
2.25% (the "Interest Rate") and (ii) payment-in-kind interest at a per annum
rate of interest equal to 3.35%. We may make payments of interest only through
October 1, 2024, which was extended to October 1, 2025, upon the achievement of
the Second Performance Milestone in May 2022 prior to September 30, 2024 and the
condition that no default or event of default exists, and which is further
extendable to October 1, 2026, subject to FDA approval of our NDA (or
supplemental NDA) for vonoprazan for an indication relating to the healing and
maintenance of healing of erosive GERD with an approved indication on the label
that is generally consistent with that sought in our NDA submission (or
supplemental NDA submission) (the "Third Performance Milestone") on or prior to
September 30, 2025 and no default or event of default exists (the "interest only
period"). After the interest-only period, the principal balance and related
interest will be required to be repaid in equal monthly installments and
continuing until the Maturity Date.

The Loan Agreement contains customary closing fees, prepayment fees and
provisions, events of default, and representations, warranties and covenants,
including a financial covenant requiring us to maintain certain levels of cash
subject to a control agreement in favor of the Agent (minus accounts payable not
paid within 120 days of invoice) ("Qualified Cash"), and commencing on May 15,
2023, trailing three-month net product revenue from the sale of vonoprazan and
products containing vonoprazan. The revenue covenant will be waived at any time
in which we maintain Qualified Cash equal to at least 60.0% (prior to the Third
Performance Milestone), and 35% (following the Third Performance Milestone) of
the total outstanding Term Loan principal amount, or our market capitalization
is at least $900.0 million.

Under the Second Loan Amendment, the commencement date for the covenant based on trailing three-month net product revenue from the sale of vonoprazan and products containing vonoprazan was moved from May 15, 2023, to November 15, 2023.

As collateral for the obligations, we granted to Hercules a senior security interest in all of our right, title, and interest in, to and under substantially all of our property, inclusive of intellectual property.



In connection with the entry into the Loan Agreement, we issued to Hercules a
warrant (the "Warrant") to purchase a number of shares of our common stock equal
to 2.5% of the aggregate amount of the Term Loan advances funded, and will issue
to Hercules additional warrants when future Term Loan advances are funded. On
the Closing Date, we issued a Warrant for 74,782 shares of common stock. The
Warrant will be exercisable for a period of seven years from the date of
issuance at a per-share exercise price equal to $33.43, which was the closing
price of our common stock on September 16, 2021.

Revenue Interest Financing Agreement



On May 3, 2022, we entered into a Revenue Interest Financing Agreement (the
"Revenue Interest Financing Agreement"), with entities managed or advised by
NovaQuest Capital Management ("NQ"), Sagard Holdings Manager LP ("Sagard") and
Hercules Capital, Inc. ("Hercules" together with NQ and Sagard, the "Initial
Investors") pursuant to which we can receive up to $260 million in funding from
the Initial Investors. Under the terms of the Revenue Interest Financing
Agreement, we received $100 million at the initial closing and can receive an
additional $160 million upon FDA approval of vonoprazan for treatment of erosive
GERD on or before March 31, 2024. In addition, we had the right to obtain a
written commitment from a third party for up to (i) at any time prior to
December 31, 2022, $15,000,000 in additional funding upon FDA approval of
vonoprazan for erosive GERD ("Approval Additional Funding"), and (ii) at any
time prior to June 30, 2024, $25,000,000 in additional funding for achievement
of a sales milestone ("Milestone Additional Funding", and, together with the
Approval Additional Funding, the "Additional Investor Funding").The Initial
Investors had a right of first offer for any Additional Investor Funding.

                                      153
--------------------------------------------------------------------------------


On October 31, 2022, we entered into a Joinder and Waiver Agreement with the
Initial Investors and CO Finance LVS XXXVII LLC ("the Additional Investor"), and
Hercules Capital, Inc. in its capacity as administrative agent and collateral
agent for itself and the lenders under that certain Loan Agreement (the "Joinder
Agreement") in respect of the Revenue Interest Financing Agreement. Under the
terms of the Joinder Agreement, the Initial Investors waived their rights of
first offer regarding the Additional Investor Funding and the Additional
Investor joined the Revenue Interest Financing Agreement to extend commitments
for the Additional Investor Funding. The total amount funded by the Initial
Investors and any subsequent investors is referred to herein as the "Investment
Amount."

Under the Revenue Interest Financing Agreement, the Initial Investors, and
subsequent to the payment of the Approval Additional Funding, the Additional
Investor, are entitled to receive a 10% royalty on net sales of products
containing vonoprazan. The royalty rate is subject to a step-down on net sales
exceeding certain annual thresholds and if we receive FDA approval for
vonoprazan for an indication relating to the treatment of heartburn associated
with non-erosive GERD. The investors' right to receive royalties on net sales
will terminate when the investors have aggregate payments equal to 200% of the
Investment Amount. In addition, at any time after the earlier of (i) April 30,
2024 and (ii) the date that the payment for erosive GERD regulatory approval is
made, we have the right to make a cap payment equal to 200% of the Investment
Amount less any royalties already paid, at which time the agreement will
terminate.

If the investors have not received aggregate payments of at least 100% of the
Investment Amount by December 31, 2028, and at least 200% of the Investment
Amount by December 31, 2037, each a Minimum Amount, then we will be obligated to
make a cash payment to the investors in an amount sufficient to gross the
investors up to the applicable Minimum Amount.

Upon the occurrence of an event of default taking place prior to April 1, 2025,
between April 1, 2025, and April 1, 2028, and after April 1, 2028, we are
obligated to pay 1.30 times Investment Amount, 1.65 times Investment Amount, and
2.0 times investment amount, respectively, less any amounts the Company
previously paid pursuant to the agreement. Upon the occurrence of a change in
control event taking place prior to the earlier of April 1, 2024, or FDA
approval of vonoprazan for erosive GERD, we are obligated to pay 200% of the
Investment Amount plus either 15% of the Investment Amount if occurrence prior
to May 3, 2023, or plus 30% of the Investment Amount if occurrence thereafter.

At-the-Market-Offering



On November 10, 2020, we entered into an Open Market Sale AgreementSM, or the
Sales Agreement, with Jefferies LLC, or the Sales Agent, under which we may,
from time to time, sell shares of our common stock having an aggregate offering
price of up to $125.0 million through the Sales Agent, or the ATM Offering.
Sales of our common stock made pursuant to the Sales Agreement, if any, will be
made under our shelf registration statement on Form S-3 which was filed on
November 10, 2020 and declared effective by the SEC on November 16, 2020. We are
not obligated to, and we cannot provide any assurances that we will, make any
sales of the shares under the Sales Agreement. The Sales Agreement may be
terminated by the Sales Agent or us at any time. For the year ended December 31,
2022, we sold 2,414,897 shares of our common stock under the ATM Offering for
net proceeds of approximately $24.6 million after deducting $0.8 million of
issuance costs. As of December 31, 2022, we utilized $25.4 million of the
available $125.0 million under the ATM Offering.

                                      154
--------------------------------------------------------------------------------

Underwritten Public Offering



On December 16, 2020, the Company completed an underwritten public offering, in
which it sold 2,250,000 shares of its common stock at a price of $42.00 per
share for total gross proceeds of $94.5 million. The net purchase price after
deducting underwriting discounts and commissions was $39.48 per share, which
generated net proceeds of $88.8 million. We incurred an additional $0.2 million
of offering expenses in connection with the public offering.

Funding Requirements



Based on our current operating plan, we believe that our existing cash and cash
equivalents together with the drawdown of the remaining $100 million under our
Loan Agreement with Hercules are sufficient to fund operations for at least the
next twelve months and receipt of $175 million in additional milestone payments
under our Revenue Interest Financing Agreement, will be sufficient to fund our
operations through the end of 2024. We expect such amounts will allow us to
complete our ongoing Phase 3 clinical trial studying vonoprazan for non-erosive
GERD (daily dosing), and , if our post-complete response letter resubmissions
concerning NVP are approved by FDA, launch vonoprazan for H. pylori and erosive
GERD. However, our forecast of the period of time through which our financial
resources will be adequate to support our operations is a forward-looking
statement that involves risks and uncertainties and actual results could vary
materially. We have based this estimate on assumptions that may prove to be
wrong, and we could deplete our capital resources sooner than we expect.
Additionally, the process of testing product candidates in clinical trials is
costly, and the timing of progress and expenses in these trials is uncertain.

                                      155
--------------------------------------------------------------------------------

Our future capital requirements will depend on many factors, including:

•


the initiation, type, number, scope, results, costs and timing of our clinical
trials of vonoprazan, and preclinical studies or clinical trials of other
potential product candidates we may choose to pursue in the future, including
feedback received from regulatory authorities;

•

the costs and timing of manufacturing for vonoprazan or any future product candidates, including commercial scale manufacturing if any product candidate is approved;

•

the costs, timing and outcome of regulatory review of vonoprazan or any future product candidates;

•

the costs of obtaining, maintaining and enforcing our patents and other intellectual property rights;

•

our efforts to enhance operational systems and hire additional personnel to satisfy our obligations as a public company, including enhanced internal controls over financial reporting;

•


the costs associated with hiring additional personnel and consultants as our
business grows, including additional executive officers and clinical development
personnel;

•

the timing and amount of the milestone or other payments we must make to Takeda and any future licensors;

•

the costs and timing of establishing or securing sales and marketing capabilities for vonoprazan or any future product candidate;

•

our ability to achieve sufficient market acceptance, coverage and adequate reimbursement from third-party payers and adequate market share and revenue for any approved products;

•

patients' willingness to pay out-of-pocket for any approved products in the absence of coverage and/or adequate reimbursement from third-party payers;

•

the terms and timing of establishing and maintaining collaborations, licenses and other similar arrangements; and

•

costs associated with any products or technologies that we may in-license or acquire.



Until such time, if ever, as we can generate substantial product revenues to
support our cost structure, we expect to finance our cash needs through equity
offerings, the Loan Agreement, the Revenue Interest Financing Agreement, debt
financings, or other capital sources, including potential collaborations,
licenses and other similar arrangements. To the extent that we raise additional
capital through the sale of equity or convertible debt securities, the ownership
interest of our stockholders will be or could be diluted, and the terms of these
securities may include liquidation or other preferences that adversely affect
the rights of our common stockholders. Debt financing and 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. If we raise funds through
collaborations, or other similar 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 and/or may reduce the value of our common stock. If we are
unable to raise additional funds through equity or debt financings when needed,
we may be required to delay, limit, reduce or terminate our product development
or future commercialization efforts or grant rights to develop and market our
product candidates even if we would otherwise prefer to develop and market such
product candidates ourselves.

                                      156
--------------------------------------------------------------------------------


Including our existing cash and cash equivalents, we believe that we have
sufficient working capital on hand to fund operations such that there is no
substantial doubt as to our ability to continue as a going concern at the date
the financial statements were issued. There can be no assurance that we will be
successful in acquiring additional funding, that our projections of future
working capital needs will prove accurate, or that any additional funding would
be sufficient to continue operations in future years. Based on our current
operating plan, we believe that our existing cash and cash equivalents together
with the drawdown of the remaining $100 million under our Loan Agreement with
Hercules are sufficient to fund operations for at least the next twelve months
and receipt of $175 million in additional milestone payments under our Revenue
Interest Financing Agreement, will be sufficient to fund our operations through
the end of 2024.

Cash Flows

The following table sets forth a summary of the net cash flow activity for each of the periods indicated (in thousands):



                                         Years Ended
                                        December 31,
                                     2022           2021        $ Change
Net cash provided by (used in):
Operating activities              $ (146,530 )   $ (148,457 )   $   1,927
Investing activities                  (1,041 )         (328 )        (713 )
Financing activities                 120,042         44,708        75,334
Net decrease in cash              $  (27,529 )   $ (104,077 )   $  76,548



Operating Activities

Net cash used in operating activities was approximately $146.5 million and
$148.5 million for the years ended December 31, 2022 and 2021, respectively. The
net cash used in operating activities for the year ended December 31, 2022 was
due to approximately $152.0 million spent on ongoing research and development
and general and administrative activities offset by a $5.5 million change in
operating assets and liabilities. The net change in operating assets and
liabilities primarily related to a $7.7 million increase in accounts payable and
accrued expenses in support of the growth in our operating activities, partially
offset by a $2.2 million increase in prepaid assets and other assets. The net
cash used in operating activities for the year ended December 31, 2021 was due
to approximately $121.1 million spent on ongoing research and development and
general and administrative activities and a $27.4 million net change in
operating assets and liabilities. The net change in operating assets and
liabilities primarily related to a $28.2 million decrease in accounts payable
and accrued expenses (including clinical trial expenses) in support of the
growth in our operating activities, partially offset by a $0.8 million decrease
in prepaid and other assets.

Investing Activities

Net cash used in investing activities for the years ended December 31, 2022 and
2021 was primarily due to the cash we paid for acquiring property, plant and
equipment.

Financing Activities

Net cash provided by financing activities for the year ended December 31, 2022
was $120 million, was due to the net proceeds from the revenue interest
financing liability and issuance of common stock under the ATM Offering. Net
cash provided by financing activities for the year ended December 31, 2021 was
$44.7 million, due to $96.9 million of net proceeds from the loan agreement with
Hercules and $1.9 million of proceeds related to stock option exercises
partially offset by the $54.1 million repayment of the SVB Term Loan.

                                      157
--------------------------------------------------------------------------------

Contractual Obligations and Commitments



The following table summarizes our contractual obligations as of December 31,
2022 (in thousands):

                                                                    Payments Due by Period
                                                     Less than             1-3                 3-5               More than
                                    Total             1 Year              Years               Years               5 Years
Total debt, including
interest
  and final payment fee (1)      $   124,471         $       -         $    29,707         $    94,764         $            -
Minimum operating lease
  payments                       $     2,000               734               1,266                   -                      -
Total                            $   126,471         $     734         $    30,973         $    94,764         $            -

(1) Our outstanding long-term debt bears interest at a variable rate. The interest amounts included herein are based on the interest rate in effect as of December 31, 2022.




In addition to the contractual obligations summarized above, on May 5, 2020, we
entered into a Commercial Supply Agreement with Takeda, pursuant to which Takeda
will supply commercial quantities of vonoprazan bulk drug product. We incurred
$0.7 million and $1.8 million of expenses related to the Commercial Supply
Agreement during the years ended December 31, 2022 and 2021, respectively. We
have no remaining minimum purchase obligation related to this agreement.

Additionally, on December 30, 2020, we entered into a Supply and Packaging
Services Agreement with Sandoz, pursuant to which Sandoz has agreed to supply
commercial quantities of amoxicillin capsules and clarithromycin tablets, to
package these antibiotics with vonoprazan, in finished convenience packs, and to
supply us with these convenience packs. The supply agreement commits the Company
to a minimum purchase obligation of approximately $3.8 million during the first
24-month period following the launch of the final product. As of December 31,
2022, we are unable to estimate the timing of future expenses and, therefore,
any related payments are not included in the table above. We have not incurred
any expenses under the agreement during the year ended December 31, 2022.

Additionally, on May 3, 2022, we entered into a Revenue Interest Financing
Agreement (the "Revenue Interest Financing Agreement"), with entities managed or
advised by NovaQuest Capital Management ("NQ"), Sagard Holdings Manager LP
("Sagard") and Hercules Capital, Inc. ("Hercules" together with NQ and Sagard,
the "Initial Investors") and received $100 million at the initial closing (the
"Investment Amount"). Under the Revenue Interest Financing Agreement, the
Initial Investors are entitled to receive a 10% royalty on net sales of products
containing vonoprazan. The investors' right to receive royalties on net sales
will terminate when the investors have aggregate payments equal to 200% of the
Investment Amount. We have not made any payments under the Revenue Interest
Financing Agreement during the year ended December 31, 2022.

We enter into contracts in the normal course of business for our contract
research services, contract manufacturing services, professional services and
other services and products for operating purposes. These contracts generally
provide for termination after a notice period, and, therefore, are cancelable
contracts and not included in the table above.

                                      158
--------------------------------------------------------------------------------

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 financial statements, which have been prepared in
accordance with generally accepted accounting principles in the United States,
or GAAP. The preparation of our financial statements requires us to make
estimates and assumptions that affect the reported amounts of assets,
liabilities and expenses and the disclosure of contingent assets and liabilities
in our financial statements and accompanying notes. We evaluate these estimates
and judgments on an ongoing basis. We base our estimates on 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.

While our significant accounting policies are more fully described in Note 1 to
our financial statements, we believe that the following accounting policies are
the most critical for fully understanding and evaluating our financial condition
and results of operations.

Accrued Research and Development Expenses



As part of the process of preparing our financial statements, we are required to
estimate our accrued expenses as of each balance sheet date. This process
involves reviewing open contracts and purchase orders, communicating with our
personnel to identify services that have been performed on our behalf and
estimating the level of service performed and the associated cost incurred for
the service when we have not yet been invoiced or otherwise notified of the
actual cost. We make estimates of our accrued expenses as of each balance sheet
date based on facts and circumstances known to us at that time. We periodically
confirm the accuracy of our estimates with the service providers and make
adjustments, if necessary. The significant estimates in our accrued research and
development expenses include the costs incurred for services performed by our
vendors in connection with research and development activities for which we have
not yet been invoiced.

Our research and development activities include estimates of the services
received and efforts expended pursuant to quotes and contracts with vendors that
conduct research and development on our behalf. The financial terms of these
agreements are subject to negotiation, vary from contract to contract and may
result in uneven payment flows. There may be instances in which payments made to
our vendors will exceed the level of services provided and result in a
prepayment of the research and development expense. In accruing service fees, we
estimate the time period over which services will be performed and the level of
effort to be expended in each period. If the actual timing of the performance of
services or the level of effort varies from our estimate, we adjust the accrual
or prepaid expense accordingly. Advance payments for goods and services that
will be used in future research and development activities are expensed when the
activity has been performed or when the goods have been received rather than
when the payment is made.

Although we do not expect our estimates to be materially different from amounts
actually incurred, if our estimates of the status and timing of services
performed differ from the actual status and timing of services performed, it
could result in us reporting amounts that are too high or too low in any
particular period. To date, there have been no material differences between our
estimates of such expenses and the amounts actually incurred.

Stock-Based Compensation Expense



Stock-based compensation expense represents the cost of the grant date fair
value of equity awards recognized over the requisite service period of the
awards (generally the vesting period) on a straight-line basis with forfeitures
recognized as they occur. We use the Black-Scholes valuation model to determine
the fair value of our stock awards. Through December 31, 2022, our stock-based
compensation expense consisted of recognized fair value related to our issuance
of restricted stock awards, for which the fair value is determined based on the
fair value of the underlying common stock, stock options, and ESPP awards.

                                      159
--------------------------------------------------------------------------------



Other Company Information

JOBS Act

As an emerging growth company under the Jumpstart Our Business Startups Act of
2012, or the JOBS Act, we can take advantage of an extended transition period
for complying with new or revised accounting standards. This allows an emerging
growth company to delay the adoption of certain accounting standards until those
standards would otherwise apply to private companies. We have irrevocably
elected not to avail ourselves of this exemption and, therefore, we will be
subject to the same new or revised accounting standards as other public
companies that are not emerging growth companies. We intend to rely on other
exemptions provided by the JOBS Act, including without limitation, not being
required to comply with the auditor attestation requirements of Section 404(b)
of Sarbanes-Oxley.

We will remain an emerging growth company until the earliest of (i) the last day
of the fiscal year following the fifth anniversary of the consummation of our
IPO, (ii) the last day of the fiscal year in which we have total annual gross
revenue of at least $1.235 billion, (iii) the last day of the fiscal year in
which we are deemed to be a "large accelerated filer" as defined in Rule 12b-2
under the Exchange Act, which would occur if the market value of our common
stock held by non-affiliates exceeded $700.0 million as of the last business day
of the second fiscal quarter of such year, or (iv) the date on which we have
issued more than $1.0 billion in non-convertible debt securities during the
prior three-year period.

Recent Accounting Pronouncements



The information required by this item is included in Note 1, Organization, Basis
of Presentation and Summary of Significant Accounting Policies included in Item
15 of this annual report.

Off-Balance Sheet Arrangements

During the periods presented we did not have, nor do we currently have, any off-balance sheet arrangements as defined under SEC rules.

© Edgar Online, source Glimpses