Protara Therapeutics, Inc. (TARA)

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 the unaudited condensed consolidated financial
statements and related notes appearing elsewhere in this Quarterly Report on Form 10-Q. 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 “Risk Factors” in Part I, Item 1A of our Annual Report on Form 10-K, our
actual results could differ materially from the results described in, or implied by, the forward-looking statements contained in the
following discussion and analysis.

Overview

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

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

We have devoted substantial
efforts to the development of our programs and do not have any approved products and, to date, have not generated any revenues from product
sales. Neither TARA-002 nor IV Choline Chloride have been approved by the U.S. Food and Drug Administration, or FDA, or other comparable
regulatory authorities for use for any indications. We do not expect to generate revenues in the near-term, and it is possible we may
never generate revenues in the future. To finance our current strategic plans, including the conduct of ongoing and future clinical trials
and further research and development costs, we will need to raise additional capital. See “Item 2. Management’s Discussion
and Analysis of Financial Condition and Results of Operations—Liquidity and Capital Resources” for additional information
about our liquidity and capital resource needs.

Since inception, we have
incurred significant operating losses. As of June 30, 2026, we had an accumulated deficit of approximately $341.9 million. We expect to
continue to incur significant expenses and increasing operating losses for at least the next few years as we continue our development
of, and seek marketing approvals for, our product candidates, prepare for and begin the commercialization of any approved products, and
add infrastructure and personnel to support our product development efforts and operations as a public company in the United States.

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

As of June 30, 2026, we
had approximately $161.9 million in unrestricted cash and cash equivalents and marketable debt securities.

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TARA-002 in NMIBC

Our lead oncology program
is TARA-002 in NMIBC, which is cancer found in the tissue that lines the inner surface of the bladder that has not spread into the bladder
muscle. Bladder cancer is the sixth most common cancer in the U.S., with NMIBC representing approximately 80% of bladder cancer diagnoses.
Approximately 65,000 patients are diagnosed with NMIBC in the U.S. each year. Very few new therapeutics have been approved for NMIBC
since the 1990s and the current standard of care for NMIBC includes intravesical Bacillus Calmette-Guérin, or BCG.

Following the completion
of our Phase 1a ADVANCED-1 and Phase 1b ADVANCED-1EXP trials in October 2024 and September 2024, respectively, to evaluate safety, preliminary
efficacy and the dosing of TARA-002, at the 40KE (Klinische Einheit, or KE, is a German term indicating a specified weight of dried cells
in vial) dose level, we initiated and are currently conducting our ADVANCED-2 clinical trial. ADVANCED-2 is a Phase 2 open-label clinical
trial evaluating intravesical TARA-002 in patients with high-grade carcinoma in situ, or CIS. Cohort A of the Phase 2 trial has completed
enrollment and enrolled 31 patients with CIS (± Ta/T1, with Ta defined as non-invasive papillary carcinoma and T1 defined as carcinoma
invading the lamina propria) who are either BCG-Naïve or BCG-Exposed and who have not received intravesical BCG for at least 24
months prior to CIS diagnosis. Cohort B of the Phase 2 trial is expected to enroll 75 to 100 patients with BCG-Unresponsive CIS (±
Ta/T1) and is designed to be registrational based on the FDA’s August 2024 Draft Guidance for Industry on BCG-Unresponsive Nonmuscle
Invasive Bladder Cancer: Developing Drugs and Biological Products for Treatment. Trial subjects in ADVANCED-2 receive an induction course,
with or without a reinduction, of six weekly intravesical instillations of TARA-002, followed by a maintenance course of three weekly
instillations every three months.

In February 2026, we presented
updated interim data from our ongoing Phase 2 open-label ADVANCED-2 trial reporting results that continue to support TARA-002’s
potential as a new therapy in the NMIBC treatment landscape and demonstrating meaningful and durable activity in BCG-Unresponsive and
BCG-Naïve NMIBC patients.

The dataset includes 43
BCG-Unresponsive patients and 31 BCG-Naïve patients who received at least one dose of TARA-002; 35 BCG-Unresponsive patients and
29 BCG-Naïve patients completed at least one response assessment and were evaluable for efficacy as of a January 28, 2026 data cutoff.
Complete response, or CR, rates at the six months and 12 months landmark time points include all participants who were either evaluable
at that time point or had experienced disease progression or treatment failure prior to the scheduled visit.

For the BCG-Unresponsive
cohort, the CR rate at any time was 65.7% (23/35). The CR rate was 68.2% (15/22) at six months and 33.3% (5/15) at 12 months. Among responders,
the Kaplan-Meier, or KM, estimated probability of maintaining a CR for six months was 71.1% (95% confidence interval, or CI: 46.7, 95.5),
and 100% (5/5) maintained their CR from nine to 12 months. Re-induction therapy successfully converted 61.5% (8/13) non-responders to
a CR at six months.

For the BCG-Naïve cohort,
the CR rate at any time was 72.4% (21/29). The CR rate was 66.7% (18/27) at six months and 57.9% (11/19) at 12 months. Among responders,
the KM estimated probability of maintaining a CR for six months was 73.1% (95% CI: 52.9, 93.4), and 100% (11/11) maintained their CR
from nine to 12 months. Re-induction therapy successfully converted 66.7% (4/6) non-responders to a CR at six months.

The majority of treatment-related
adverse events, or TRAEs, were Grade 1 and transient with no Grade 3 or greater TRAEs and no related serious adverse events, or SAEs,
as assessed by study investigators. No patients discontinued treatment due to TRAEs. The most commonly occurring TRAEs were dysuria (14%),
bladder spasm (9%), fatigue (7%) and micturition urgency (5%).

In March 2026, we announced that we have received confirmation on the
six-month CR rate of the 25th BCG-Unresponsive patient in our ongoing Phase 2 open-label ADVANCED-2 trial of TARA-002 in patients with
CIS (± Ta/T1) NMIBC. The average six-month CR rate in the 25 BCG-Unresponsive patients was 68.0%, which was consistent with the
68.2% CR rate at six months that was announced by us in February 2026, and was meaningfully above 41.9%.

In May 2026, we presented additional updated interim data from our
ongoing Phase 2 open-label ADVANCED-2 trial demonstrating meaningful and durable activity in BCG-Naïve NMIBC patients. The dataset
included a total of 31 patients of whom 29 were evaluable for efficacy, with 27 patients evaluable at six months and 20 patients evaluable
at 12 months, as of an April 5, 2026 data cutoff. The CR rate at any time was 72.4% (21/29). The CR rate was 66.7% (18/27) at six months
and 55.0% (11/20) at 12 months. Among responders, the KM estimated probability of maintaining a CR for six months was 73.1% (95% CI: 52.9,
93.4). 91.7% (11/12) maintained their CR from nine to 12 months and 66.7% (4/6) of re-induced patients converted to a CR at six months.

18

The majority of TRAEs were Grade 1 and transient, with no Grade 3 or
greater TRAEs reported, as assessed by study investigators. No patients discontinued treatment due to TRAEs. The most commonly reported
TRAEs were dysuria, fatigue, and hematuria.

We expect to complete enrollment
of the BCG-Unresponsive registrational cohort of the ADVANCED-2 trial in the fourth quarter of 2026. Enrollment is complete in the BCG-Naïve
cohort of the ADVANCED-2 trial with 31 patients. Although we initiated our ADVANCED-3 trial in June 2026, we have made the strategic decision to redesign the ADVANCED-3 trial to be a multi-cohort, open-label, exploratory trial to evaluate
the efficacy and safety of intravesical TARA-002 in high-grade, high-risk BCG-Naïve and BCG-Exposed CIS (± Ta/T1) patients
and papillary (Ta/T1) patients across BCG exposures, in order to accelerate and expand the breadth of data available at or around the
time of the potential launch of TARA-002 in BCG-Unresponsive CIS patients.

In addition to our existing
clinical trials in NMIBC, we plan to continue to explore the anti-tumor activity related to the administration of TARA-002 via systemic
administration. We continue to believe that combination therapy may play a meaningful role in the NMIBC treatment paradigm and intend
to evaluate TARA-002 in combination with other therapies. Given what we have observed to date of TARA-002’s mechanism of action
and safety profile, we believe it has strong potential as a combination agent, and we continue to evaluate potential combination therapy
options for our clinical program. We also continue to conduct non-clinical studies on TARA-002 to better characterize the mechanism of
action to help us understand how TARA-002 may perform in potential combinations with other agents used to treat NMIBC, and to help us
define other cancer targets for TARA-002, both within urothelial cancer and other types of cancer affecting different parts of the body.

IV Choline Chloride for
Patients on PS

We are also pursuing IV
Choline Chloride, an investigational phospholipid substrate replacement therapy, for patients receiving PS which includes both nutrition
and fluids. Choline is a known important substrate for phospholipids that are critical for healthy liver function and also p

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

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

Overview

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

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

We are also pursuing IV
Choline Chloride, an investigational phospholipid substrate replacement therapy, for patients receiving PS which includes both nutrition
and fluids. Choline is a known important substrate for phospholipids that are critical for healthy liver function and also plays an important
role in modulating gene expression, cell membrane signaling, brain development, neurotransmission, muscle function and bone health. PS
patients are unable to synthesize choline from enteral nutrition sources, and there are currently no available PS formulations containing
choline. See “Item 1. Business” for additional information regarding our various clinical trial programs.

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

Since inception, we have
incurred significant operating losses. As of December 31, 2025, we had an accumulated deficit of approximately $302.4 million. We expect
to continue to incur significant expenses and increasing operating losses for at least the next few years as we continue our development
of, and seek marketing approvals for, our product candidates, prepare for and begin the commercialization of any approved products and
add infrastructure and personnel to support our product development efforts and operations as a public company in the U.S.

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

As
of December 31, 2025, we had approximately $197.9 million in unrestricted cash and cash equivalents, and marketable debt securities.

79

Financial
Overview

Research
and Development

Research
and development expenses consist primarily of costs incurred for the development of our current and potential future product candidates,
which include personnel-related expenses, including salaries, benefits, travel and stock-based compensation expense, external expenses
incurred under agreements with CROs or CDMOs, the cost of acquiring, developing and manufacturing clinical trial materials, clinical
and non-clinical related costs and costs associated with regulatory operations and facilities, which includes depreciation and other
expenses such as rent, maintenance and other supplies.

General
and Administrative

General and administrative
expenses consist primarily of personnel-related costs, including salaries, benefits, travel expenses and stock-based compensation, for
executive management and other administrative personnel. General and administrative expenses also include professional fees for legal,
investor relations, consulting, auditing and accounting services, business and market development activities, as well as costs related
to human resources, information technology and facilities. In addition, these expenses include costs associated with operating as a public
company, such as expenses related to our Nasdaq listing and SEC compliance and director and officer liability insurance premiums.

Other
Income (Expense), net

Other income (expense), net
consists of interest and investment income (expense) and other income (expense). Interest and investment income (expense) consists of
interest and dividend income on our cash and cash equivalents and marketable debt securities and amortization of premiums and/or accretion
of discounts. Other income (expense) may also include non-operating items, such as refundable tax credits and other miscellaneous income
not related to our core operating activities.

Critical
Accounting Policies and Significant Judgments and Estimates

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

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

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

Research
and Development Prepaid and Accrued Expenses

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

80

Results
of Operations

Comparison
of the Years Ended December 31, 2025 and 2024

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

Research
and development expenses

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

Research and development
expenses were $42.6 million for the year ended December 31, 2025, which represented an increase of approximately $10.9 million as compared
to the year ended December 31, 2024. This increase was primarily due to a $10.1 million increase in direct expenses for our product candidates
and a $0.9 million increase in indirect expenses. The increase in direct expenses was primarily due to site expansion and enrollment efforts
for the ADVANCED-2 trial for NMIBC, start-up costs related to the ADVANCED-3 trial for NMIBC, as well as start-up and enrollment costs
related to the THRIVE-3 trial for IV Choline Chloride. The increase in indirect expenses was primarily due to a $2.0 million increase
in personnel-related expenses offset by a decrease of $1.1 million in research and development expenses not directly attributable to one
specific product candidate.

General
and administrative expenses

The
following table summarizes our general and administrative expenses (in thousands):

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