ITEM 7. MANAGEMENT S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS You should read the following discussion and analysis of our financial condition and results of operations together with our f

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

You should read the following discussion and analysis of our financial condition and results of operations together with our financial

statements and related notes appearing in this Annual Report. Some of the information contained in this discussion and analysis or set forth elsewhere in this Annual Report, including information with respect to our plans and strategy for our

business and related financing, includes forward-looking statements that involve risks and uncertainties. As a result of many factors, including those factors set forth in the Risk Factors section of this Annual Report on Form 10-K, or this Annual Report, 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. As used in this

report, unless the context suggests otherwise, we , us , our , the Company or Aeglea refers to Aeglea BioTherapeutics, Inc. and its consolidated subsidiaries taken as a whole.

We are a clinical-stage

biotechnology company developing human enzyme therapeutics to benefit people with rare metabolic diseases. Our vision is to redefine what was thought possible and pioneer bold science to deliver groundbreaking medicines to devastating rare diseases.

Our two clinical programs are pegtarviliase for Homocystinuria and pegzilarginase for Arginase 1 Deficiency. Both clinical programs are focused on the underlying key metabolites that drive the clinical manifestations of these devastating rare

metabolic diseases. We are on a mission to change lives by bringing innovative therapies to underserved rare disease communities.

primary focus is the advancement of pegtarviliase through clinical development, regulatory approval and into commercialization. We believe pegtarviliase has the potential to be a

best-in-class enzyme therapy for the treatment of Classical Homocystinuria. Pegtarviliase is currently being studied in a Phase 1/2 clinical trial to assess safety and

efficacy in patients with Classical Homocystinuria, also known as Homocystinuria due to cystathionine -synthase deficiency. We estimate that there are approximately 30,000 Classical Homocystinuria patients in global addressable markets and we

estimate about 80% of these patients are unable to control their tHcy levels to targeted clinical thresholds with the currently available treatments. With significantly elevated homocysteine levels, these patients are continuing to experience

irreversible progression and remain at risk for catastrophic thromboembolic events resulting in death.

Our other clinical program is

pegzilarginase for the treatment of Arginase 1 Deficiency. We reported positive topline data for pegzilarginase for our global pivotal PEACE (Pegzilarginase Effect on Arginase 1 Deficiency Clinical Endpoints) Phase 3 trial in December 2021 and are

continuing to evaluate the safety of pegzilarginase in an open-label study for patients who participated in our previously completed trials. Based on the results from PEACE and a previous Phase 1/2 clinical trial, a Marketing Authorization

Application, or MAA, was submitted to the European Medicines Agency, or EMA, by Immedica Pharma AB, or Immedica, our commercial partner in Europe and several countries in the Middle East. We announced in August 2022 that the MAA was validated by the

EMA and is currently under review. We submitted a Biologics License Application, or BLA, to the U.S. Food and Drug Administration, or FDA, for pegzilarginase and announced in June 2022 that we had received a Refuse to File, or RTF, letter from the

FDA. The FDA requested additional data to support effectiveness, such as evidence showing that plasma arginine and metabolite reduction predicts clinical benefit in patients with ARG1-D or clinical data

demonstrating a treatment effect on clinically meaningful outcomes. Previously the agency had requested an additional randomized placebo-controlled trial of a duration longer than 24 weeks given that efficacy data based on effort-dependent clinical

outcome assessments and related endpoints have a high potential for bias. The FDA also requested additional information relating to Chemistry Manufacturing and Controls, or CMC, in the RTF letter. Dialogue with the FDA regarding the pegzilarginase

In addition to our clinical programs, we have leveraged enzyme engineering to create additional pipeline candidates for

the treatment of Cystinuria and other undisclosed diseases. These programs represent innovative solutions for diseases that previously were not believed to be addressable with enzyme therapies. For example, Cystinuria is a rare genetic disease

characterized by frequent and recurrent kidney stone formation due to increased amounts of cystine in the urine. We engineered and optimized AGLE-325 to reduce plasma cystine and cysteine levels and therefore

reduce urine cystine concentrations as an approach to inhibit cystine crystal and kidney stone formation. We announced in January 2023 that we are halting work on our preclinical pipeline candidates, including

AGLE-325 for Cystinuria and that we will evaluate potential strategic options for these programs in order to maximize value.

We have incurred net losses in each year since inception. Our net losses were

$83.8 million, $65.8 million, and $80.9 million for the years ended December 31, 2022, 2021, and 2020, respectively, and have resulted from costs incurred in connection with our research and development programs and from general

and administrative expenses associated with our operations. As of December 31, 2022, we had an accumulated deficit of $425.6 million. We expect to continue to incur operating losses over the next several years. Our net losses may fluctuate

significantly from quarter to quarter and from year to year. We anticipate that our expenses will increase as we continue our clinical development activities for our product candidates, concurrently develop our pipeline product candidates, expand

and protect our intellectual property portfolio, hire additional personnel, and continue to operate as a public company. Accordingly, based on recurring losses from operations incurred since inception, the expectation of continued operating losses,

and the need to raise additional capital to finance our future operations, we determined that there is substantial doubt about our ability to continue as a going concern within twelve months of the issuance date of these financial statements.

Business and Macroeconomic Conditions

The extent of the impact of macroeconomic events and conditions, including inflation, increasing interest rates, increasing financial market

volatility and uncertainty, the impact of war or military conflict, including the war in Ukraine and its potential supply chain impact, and public health pandemics, including the current COVID-19 pandemic and

its variants, on our operational and financial performance will continue to depend on certain developments, including the impact on our clinical studies, employee or industry events, and effect on our suppliers and manufacturers, all of which are

uncertain and cannot be predicted. Adverse effects of these large macroeconomic conditions have been prevalent in many of the areas where we, our CROs, suppliers or third-party business partners conduct business and as a result, we have experienced

disruptions and may continue to experience more pronounced disruptions in our operations. With respect to our clinical trials, we have had patients miss scheduled dosings and experienced delays in enrollment due to the

COVID-19 pandemic. We may continue to experience such delays as well as delays due to labor shortages and supply chain disruptions in distribution of clinical trial materials, study monitoring and data

analysis that could materially adversely impact our business, results of operations and overall financial performance in future periods. As of the filing date of this Annual Report, the extent to which these macroeconomic events and conditions may

impact our financial condition, results of operations or guidance is uncertain. The effect of these macroeconomic events and conditions may not be fully reflected in our results of operations and overall financial performance until future periods.

See Part I, Item 1A Risk Factors for further discussion of the possible impact of these macroeconomic conditions, including inflation, increasing interest rates and the COVID-19 pandemic, on our

Components of Operating Results

We have recognized license

and development revenue from a license and supply agreement, or Immedica Agreement, with Immedica, and expect to continue to recognize revenue as we satisfy our performance obligations under the agreement. We may also be entitled to receive

additional milestone payments pursuant to the Immedica Agreement upon achievement of specified milestones. As the recognition of future license and development revenue will be based on costs incurred to date relative to total estimated costs at

completion and the uncertainty of when the events underlying various milestones are resolved, we expect our license and development revenue will fluctuate from period to period.

We have not generated any revenue from commercial product sales. Our ability to generate product revenues in the future will depend on the

successful development, regulatory approval, and commercialization of our product candidates. In the future, we may also seek to generate revenue from a combination of research and development payments, license fees and other upfront or milestone

payments, including under the Immedica Agreement.

Research and development expenses

Research and development expenses consist primarily of costs incurred for the discovery and development of our product candidates, including,

pegtarviliase and pegzilarginase. We contract with external providers for nonclinical studies and clinical trials. Our research and development expenses include:

Research and development costs are expensed as incurred. Advance payments for goods or

services to be rendered in the future for use in research and development activities are deferred and capitalized. The capitalized amounts are expensed as the related goods are delivered or the services are performed.

Research and development expenses have historically represented the largest component of our total operating expenses.

Our expenditures on current and future nonclinical and clinical development programs are subject to numerous uncertainties in timing and cost

to completion. The duration, costs, and timing of clinical trials and development of our product candidates will depend on a variety of factors, including:

The process of conducting the necessary clinical research to obtain FDA and other regulatory approval is costly and

time consuming and the successful development of our product candidates is highly uncertain. The risks and uncertainties associated with our research and development projects are discussed more fully in Part I, Item 1A of this Annual Report titled

Risk Factors. As a result of these risks and uncertainties, we are unable to determine with any degree of certainty the duration and completion costs of our research and development projects, or if, when, or to what extent we will

generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval. We may never succeed in achieving regulatory approval for any of our product candidates.

General and administrative expenses

General and administrative expenses consist primarily of salaries and other related costs, including stock-based compensation, for personnel in

executive, finance, accounting, legal, commercial development, operations, and human resources functions. Other significant costs include legal fees relating to corporate matters and fees for insurance, accounting, consulting, facilities, and

recruiting services.

We expect that our general and administrative expenses will increase in the future to support our continued research

and development activities. These increases will likely include higher costs related to the hiring of additional personnel and fees to outside consultants, lawyers and accountants, among other expenses. Additionally, we have incurred and expect to

continue to incur increased costs associated with being a public company, including expenses related to services associated with maintaining compliance with Nasdaq listing rules and SEC requirements, insurance, and investor relations costs.

consists of interest earned on our cash, cash equivalents, marketable securities, and restricted cash.

We serve as a holding company for our ten wholly owned subsidiary corporations in the United States, United Kingdom, and European Union. We

file a consolidated U.S. corporate federal income tax return with our eight United States subsidiaries. Additionally, we operate in the United Kingdom and our income tax return is subject to audit and adjustment by local tax authorities. We use the

asset and liability method of accounting for income taxes. Under this method, deferred tax assets and liabilities are recognized for the expected future tax consequences of temporary differences between the financial statements and the tax bases of

assets and liabilities. A valuation allowance is established against the deferred tax assets to reduce their carrying value to an amount that is more likely than not to be realized. The deferred tax assets and liabilities are classified as

noncurrent along with the related valuation allowance. Due to our lack of earnings history, the net deferred tax assets have been fully offset by a valuation allowance.

We recognize benefits of uncertain tax positions if it is more likely than not that such

positions will be sustained upon examination based solely on the technical merits, as the largest amount of benefits that is more likely than not to be realized upon the ultimate settlement. Our policy is to recognize interest and penalties related

to the unrecognized tax benefits as a component of income tax expense.

Critical Accounting Policies and Estimates

Our consolidated financial statements are prepared in accordance with generally accepted accounting principles in the United States, or GAAP.

The preparation of these consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets, liabilities, revenue, costs and expenses, and related disclosures. These estimates form the basis

for judgments we make about the carrying values of our assets, liabilities and equity and the amount of revenues and expenses, which are not readily apparent from other sources. We base our estimates on historical experience and on various other

assumptions that we believe are reasonable under the circumstances. On an ongoing basis, we evaluate our estimates and assumptions. Our actual results may differ materially from these estimates under different assumptions or conditions.

Our critical accounting policies are those policies which require the most significant judgments and estimates in the preparation of our

consolidated financial statements. We believe that the assumptions and estimates associated with our most critical accounting policies are those relating to accrued research and development costs.

We define our critical accounting policies as those accounting principles generally accepted in the United States that require us to make

subjective estimates and judgments about matters that are uncertain and are likely to have a material impact on our financial condition and results of operations, as well as the specific manner in which we apply those principles. Our significant

accounting policies are more fully described in Note 2 to our audited consolidated financial statements appearing elsewhere in this Annual Report.

license agreements related to our technologies that we have determined are within the scope of Accounting Standards Codification 606. Based on the terms and conditions of our agreements, we identify the goods and services that we promise to transfer

to the customer, which may consist of the licensing of technologies, the performance of research and development activities, and/or the supply of products related to our technologies. Based on the nature of the goods and services provided and the

customer s intended benefit of the arrangement, we evaluate which of the promised goods and services are distinct and, therefore, represent a performance obligation, which may require us to combine certain promised goods and services that are

determined to not be distinct from one another. We also evaluate whether an agreement provides the customer an option to purchase future goods or services at a discounted price, or a material right, which would also represent a performance

In exchange for the performance obligations, we estimate the amount of consideration promised by the customer, or transaction

price, which may include both fixed and variable consideration. Variable consideration, which may consist of various milestone payments based upon the achievement of certain events or conditions, sales-based royalties, or payments contingent on the

performance of research and development services, are included in the transaction price only if we expect to receive such consideration and determine it is likely that the inclusion of the variable consideration will not result in a significant

reversal in the cumulative amount of revenue recognized under the arrangement. Sales-based royalty and milestone payments that we determine are predominantly related to the license of our intellectual property are excluded from the transaction price

we expect to receive until the underlying sales occur.

We allocate the estimated transaction price to the identified performance

obligations based on the relative estimated stand-alone selling price, or SSP, of each performance. SSP is based on the observable price of our goods and services, or when SSP is not directly observable, we estimate SSP based on factors such as