SEC Filing | AnaptysBio, Inc.

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anab-20220331

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 10-Q


☒			Quarterly Report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the quarterly period ended March 31, 2022


☐			Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

For the transition period from to .

Commission File Number: 001-37985

ANAPTYSBIO, INC.

(Exact name of registrant as specified in its charter)


Delaware						20-3828755
(State or other jurisdiction of incorporation or organization)						(I.R.S. Employer Identification Number)

10770 Wateridge Circle, Suite 210

San Diego, CA 92121

(Address of principal executive offices and zip code)

(858) 362-6295

(Registrant’s telephone number, including area code)

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


Title of each class	Trading Symbol(s)	Name of each exchange on which registered
Common Stock, $0.001 par value	ANAB	The Nasdaq Stock Market LLC

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

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

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

Large Accelerated Filer

☐

Accelerated Filer

☐

Non-accelerated Filer

☒

Smaller Reporting Company

☒

Emerging Growth Company

☐

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

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

As of May 2, 2022, there were 28,186,065 shares of the Registrant’s Common Stock outstanding.

AnaptysBio, Inc.

Table of Contents


		Page Number
	PART I. FINANCIAL INFORMATION

Item 1.	Consolidated Financial Statements (unaudited)	1
	Consolidated Balance Sheets as of March 3 1 , 202 2 and December 31, 20 21	1
	Consolidated Statements of Operations and Comprehensive Loss for the Three M o n t h s E n d e d M arch 3 1 , 202 2 and 202 1	2
	Consolidated Statements of Stockholders' Equity for the Three Months Ended March 3 1 , 202 2	3
	Consolidated Statements of Stockholders’ Equity for the Three Months Ended March 3 1 , 202 1	4
	Consolidated Statements of Cash Flows for the Three Months Ended March 3 1 , 202 2 and 202 1	5
	Notes to the Unaudited Consolidated Financial Statements	6
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	30
Item 4.	Controls and Procedures	30

	PART II. OTHER INFORMATION

Item 1.	Legal Proceedings	31
Item 1A.	Risk Factors	31
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	66
Item 3.	Defaults Upon Senior Securities	66
Item 4.	Mine Safety Disclosures	67
Item 5.	Other Information	67
Item 6.	Exhibits	67
	Exhibit Index	67
	Signatures	68

PART I. FINANCIAL INFORMATION

Item 1. Consolidated Financial Statements (unaudited)

AnaptysBio, Inc.

Consolidated Balance Sheets

(in thousands, except par value data)

(unaudited)


	March 31, 2022		December 31, 2021


ASSETS
Current assets:
Cash and cash equivalents	$	166,412	$	495,729
Receivables from collaborative partners	921		876
Short-term investments	339,209		52,368
Prepaid expenses and other current assets	5,869		4,903

Total current assets	512,411		553,876
Property and equipment, net	2,162		2,283
Operating lease right-of-use assets	19,147		19,558
Long-term investments	91,195		67,097
Other long-term assets	256		256


Total assets	$	625,171	$	643,070
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable	$	2,481	$	1,741
Accrued expenses	15,763		12,853

Current portion of operating lease liability	1,537		1,505
Total current liabilities	19,781		16,099

Liability related to sale of future royalties	255,584		251,093
Operating lease liability, net of current portion	19,059		19,450






Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000 shares authorized and no shares, issued or outstanding at March 31, 2022 and December 31, 2021, respectively	—		—
Common stock, $0.001 par value, 500,000 shares authorized, 28,178 shares and 27,647 shares issued and outstanding at March 31, 2022 and December 31, 2021, respectively	28		28
Additional paid in capital	691,161		678,575
Accumulated other comprehensive loss	(2,434)		(422)
Accumulated deficit	(358,008)		(321,753)
Total stockholders’ equity	330,747		356,428
Total liabilities and stockholders’ equity	$	625,171	$	643,070

See accompanying notes to unaudited consolidated financial statements.

AnaptysBio, Inc.

Consolidated Statements of Operations and Comprehensive Loss

(in thousands, except per share data)

(unaudited)


	Three Months Ended March 31,
		2022		2021

Collaboration revenue		$	970	$	11,247


Operating expenses:
Research and development		22,516		24,185
General and administrative		10,203		5,423
Total operating expenses		32,719		29,608
Loss from operations		(31,749)		(18,361)
Other income (expense), net:


Interest income		342		195
Non-cash interest expense for the sale of future royalties		(4,854)		—
Other income, net		6		3
Total other income (expense), net		(4,506)		198



Net loss		(36,255)		(18,163)


Unrealized loss on available for sale securities		(2,012)		(107)

Comprehensive loss		$	(38,267)	$	(18,270)
Net loss per common share:
Basic and diluted		$	(1.31)	$	(0.66)

Weighted-average number of shares outstanding:
Basic and diluted		27,713		27,361

See accompanying notes to unaudited consolidated financial statements.

AnaptysBio, Inc.

Consolidated Statement of Stockholders’ Equity

(in thousands)

(unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance, December 31, 2021	27,647	$	28	$	678,575	$	(422)	$	(321,753)	$	356,428



Issuance of common stock from exercises of options and employee stock purchase plan	531	—		4,844		—		—		4,844




Stock-based compensation	—	—		7,742		—		—		7,742
Comprehensive loss, net	—	—		—		(2,012)		—		(2,012)
Net loss	—	—		—		—		(36,255)		(36,255)
Balance, March 31, 2022	28,178	28		691,161		(2,434)		(358,008)		330,747

See accompanying notes to unaudited consolidated financial statements.

AnaptysBio, Inc.

Consolidated Statement of Stockholders’ Equity

(in thousands)

(unaudited)


	Common Stock			Additional Paid-in Capital		Accumulated Other Comprehensive Loss		Accumulated Deficit		Total Stockholders’ Equity
	Shares	Amount
Balance, December 31, 2020	27,356	$	27	$	660,665	$	(4)	$	(263,957)	$	396,731



Shares issued under employee stock plans	11	—		167		—		—		167




Stock-based compensation	—	—		3,315		—		—		3,315
Comprehensive loss, net	—	—		—		(107)		—		(107)
Net loss	—	—		—		—		(18,163)		(18,163)
Balance, March 31, 2021	27,367	27		664,147		(111)		(282,120)		381,943

See accompanying notes to unaudited consolidated financial statements.

AnaptysBio, Inc.

Consolidated Statements of Cash Flows

(in thousands)

(unaudited)


	Three Months Ended March 31,
	2022		2021
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss	$	(36,255)	$	(18,163)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization	162		125
Stock-based compensation	7,742		3,315

Accretion/amortization of investments, net	161		167
Amortization of right-of-use assets – operating	411		126
Non-cash interest expense	4,854		—

Changes in operating assets and liabilities:
Receivables from collaborative partners	(45)		(1,247)

Prepaid expenses and other assets	(1,221)		(2,402)
Accounts payable and other liabilities	3,536		(4,980)

Operating lease liabilities	(359)		(145)

Net cash used in operating activities	(21,014)		(23,204)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments	(322,477)		(6,238)
Sales and maturities of investments	9,620		63,284

Purchases of property and equipment	(55)		(317)
Net cash (used in) provided by investing activities	(312,912)		56,729
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock	4,844		167


Repayment of liability for sale of future royalties	(233)		—

Payments for debt issuance costs	(2)		—
Net cash provided by financing activities	4,609		167
Net (decrease) increase in cash and cash equivalents	(329,317)		33,692
Cash, cash equivalents and restricted cash, beginning of period	495,729		250,516
Cash, cash equivalents and restricted cash, end of period	$	166,412	$	284,208
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION

Non-cash investing and financing activities:
Amounts accrued for issuance costs related to the sale of future royalties	$	128	$	—

Amounts accrued for property and equipment	$	19	$	58

See accompanying notes to unaudited consolidated financial statements.

AnaptysBio, Inc.

Notes to Unaudited Consolidated Financial Statements

1. Description of the Business

AnaptysBio, Inc. (“we,” “us,” “our,” or the “Company”) was incorporated in the state of Delaware in November 2005. We are a clinical-stage biotechnology company developing first-in-class antibodies focused on unmet medical needs in inflammation. Our proprietary anti-inflammatory pipeline includes imsidolimab, our anti-IL-36R antibody, previously referred to as ANB019, for the treatment of dermatological inflammatory diseases, including generalized pustular psoriasis, or GPP, and moderate-to-severe hidradenitis suppurativa; rosnilimab, our anti-PD-1 agonist program, previously referred to as ANB030, for the treatment of moderate-to-severe alopecia areata; and our anti-BTLA agonist program, ANB032, which is broadly applicable to human inflammatory diseases associated with lymphoid and myeloid immune cell dysregulation. Our antibody pipeline has been developed using our proprietary somatic hypermutation, or SHM platform, which uses in vitro SHM for antibody discovery and is designed to replicate key features of the human immune system to overcome the limitations of competing antibody discovery technologies. We have also developed multiple therapeutic antibodies in an immuno-oncology collaboration with GSK, including an anti-PD-1 antagonist antibody (JEMPERLI (dostarlimab-gxly) GSK4057190), an anti-TIM-3 antagonist antibody (cobolimab, GSK4069889) and an anti-LAG-3 antagonist antibody (GSK4074386). We currently generate revenue from milestones and royalties achieved under our collaborative research and development arrangements.

Since our inception, we have devoted our primary effort to research and development activities. Our financial support has been provided primarily from the sale of our common and preferred stock, royalty monetization, as well as through funds received under our collaborative research and development agreements. Going forward, as we continue our expansion, we may seek additional financing and/or strategic investments. However, there can be no assurance that any additional financing or strategic investments will be available to us on acceptable terms, if at all. If events or circumstances occur such that we do not obtain additional funding, we will most likely be required to reduce our plans and/or certain discretionary spending, which could have a material adverse effect on our ability to achieve our intended business objectives. Our management believes our currently available resources will provide sufficient funds to enable us to meet our operating plans for at least the next twelve months from the issuance of our consolidated financial statements. The accompanying consolidated financial statements do not include any adjustments that might be necessary if we are unable to continue as a going concern.

2. Summary of Significant Accounting Policies

Basis of Presentation

The accompanying unaudited consolidated financial statements have been prepared pursuant to the rules and regulations of the Securities and Exchange Commission (the “SEC”). Certain information and note disclosures normally included in annual financial statements prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”) have been omitted. The accompanying unaudited consolidated financial statements include all known adjustments necessary for a fair presentation of the results of interim periods as required by U.S. GAAP. These adjustments consist primarily of normal recurring accruals and estimates that impact the carrying value of assets and liabilities. Also, certain reclassifications have been made to 2021 financial information to conform to the current year presentation of amortization of right-of-use assets - operating and operating lease liabilities on the Consolidated Statements of Cash Flows. Operating results for the three months ended March 31, 2022 are not necessarily indicative of the results that may be expected for the year ending December 31, 2022. Interim results are not necessarily indicative of results for a full year, particularly in light of the novel coronavirus (“COVID-19”) pandemic, and its impact on domestic and global economies. To limit the spread of COVID-19, governments have taken various actions, including the issuance of stay-at-home orders and social distancing guidelines, which have resulted in some businesses suspending operations or experiencing a reduction in demand for many products from direct or ultimate customers. Accordingly, businesses have adjusted, reduced or suspended operating activities. The effects of the stay-at-home orders and our work-from-home policies may negatively impact productivity, disrupt our business, and delay our development programs and regulatory and commercialization timelines, the magnitude of which will depend, in part, on the length and severity of the restrictions and other limitations on our ability to conduct our business in the ordinary course. Our future research and development expenses and general and administrative expenses may vary significantly if we experience an increased impact from the COVID-19 pandemic on the costs and timing associated with the conduct of our clinical trials and other related business activities, to date there has not been any material delays in clinical operations. The financial statements

should be read in conjunction with our audited financial statements for the year ended December 31, 2021 included in our Annual Report on Form 10-K.

Basis of Consolidation

The accompanying consolidated financial statements include us and our wholly-owned Australian subsidiary. All intercompany accounts and transactions have been eliminated in consolidation. We operate in one reportable segment, and our functional and reporting currency is the U.S. dollar.

Use of Estimates

The preparation of the accompanying consolidated financial statements in conformity with U.S. GAAP requires our management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. We base our estimates and assumptions on historical experience when available and on various factors that we believe to be reasonable under the circumstances. We evaluate our estimates and assumptions on an ongoing basis. The full extent to which the COVID-19 pandemic will directly or indirectly impact our business, results of operations, and financial condition, including expenses, reserves and allowances, manufacturing, clinical trials, research and development costs, and employee-related amounts, will depend on future developments that are highly uncertain, including as a result of new information that may emerge concerning COVID-19 and the actions taken to contain or treat it, as well as the economic impact on local, regional, national and international markets. Our actual results could differ from these estimates under different assumptions or conditions.

Net Loss Per Common Share

Basic net loss per common share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. Diluted net loss per share is computed by dividing net loss by the weighted-average number of common equivalent shares outstanding for the period, as well as any dilutive effect from outstanding stock options and warrants using the treasury stock method. For each period presented, there is no difference in the number of shares used to calculate basic and diluted net loss per share.

The following table sets forth the weighted-average outstanding potentially dilutive securities that have been excluded in the calculation of diluted net loss per share because to do so would be anti-dilutive (in common stock equivalent shares):


	Three Months Ended March 31,
(in thousands)		2022	2021

Options to purchase common stock		4,003	3,445

3. Balance Sheet Accounts and Supplemental Disclosures

Property and Equipment, net

Property and equipment, net consist of the following:


(in thousands)	March 31, 2022		December 31, 2021
Laboratory equipment	$	5,696	$	5,683
Office furniture and equipment	1,347		1,319
Leasehold improvements	203		203
Property and equipment, gross	7,246		7,205
Less: accumulated depreciation and amortization	(5,084)		(4,922)
Total property and equipment, net	$	2,162	$	2,283

Accrued Expenses

Accrued expenses consist of the following:


(in thousands)	March 31, 2022		December 31, 2021
Accrued compensation and related expenses	$	2,848	$	4,177
Accrued professional fees	652		569
Accrued research, development and manufacturing expenses	12,135		7,953
Other	128		154
Total accrued expenses	$	15,763	$	12,853

4. Collaborative Research and Development Agreements

GlaxoSmithKline Collaboration

In March 2014, we entered into a Collaboration and Exclusive License Agreement (the “GSK Agreement”) with TESARO, Inc. (“Tesaro”), an oncology-focused biopharmaceutical company now a part of GlaxoSmithKline (Tesaro and GlaxoSmithKline are hereinafter referred to, collectively, as “GSK”). Under the terms of the GSK Agreement, we agreed to perform certain discovery and early preclinical development of therapeutic antibodies with the goal of generating immunotherapy antibodies for subsequent preclinical, clinical, regulatory, and commercial development to be performed by GSK. Under the terms of the GSK Agreement, GSK paid an upfront license fee of $17.0 million in March 2014 and agreed to provide funding to us for research and development services related to antibody discovery programs for three specific targets. In November 2014, Amendment No. 1 to the GSK Agreement was agreed by both parties to add an antibody discovery program against an undisclosed fourth target for an upfront license fee of $2.0 million. Currently, under the GSK Agreement, GSK is developing JEMPERLI (dostarlimab), an anti-PD-1 antagonist antibody, as a monotherapy and in combination with additional therapies, for various solid tumor indications. In addition, under the collaboration, GSK is developing dostarlimab in combination with two other development programs form the GSK Agreement: cobolimab, an anti-TIM-3 antibody, and GSK40974386, an anti-LAG-3 antibody, for various solid tumor indications.

For each development program, we are eligible to receive milestone payments of up to $18.0 million if certain preclinical and clinical trial events are achieved by GSK, up to an additional $90.0 million if certain U.S. and European regulatory submissions and approvals in multiple indications are achieved, and up to an additional $165.0 million upon the achievement of specified levels of annual worldwide net sales. We will also be eligible to receive tiered 4-8% royalties related to worldwide net sales of products developed under the collaboration. Unless earlier terminated by either party upon specified circumstances, the GSK Agreement will terminate, with respect to each specific developed product, upon the later of the 12th anniversary of the first commercial sale of the product or the expiration of the last to expire of any patent. Prior to the adoption of ASC 606, Revenue from Contracts with Customers, we determined that the upfront license fees and research funding under the GSK Agreement, as amended, should be accounted for as a single unit of accounting and that the upfront license fees should be deferred and recognized as revenue over the same period that the research and development services are performed. In February 2016, Amendment No. 2 to the GSK Agreement was agreed by both parties to define the effective dates of the development programs of the GSK Agreement. We determined that the research and development services would be extended through December 31, 2016. As a result, the period over which the unrecognized license fees and discovery milestones were recognized was extended through December 31, 2016 and have since been recognized in full.

We assessed these arrangements in accordance with ASC 606 and concluded that the contract counterparty, GSK, is a customer. We identified the following material promises under the GSK Agreement: (1) the licenses under certain patent rights relating to six discovery programs (four targets) and transfer of certain development and regulatory information, (2) research and development (“R&D”) services, and (3) joint steering committee meetings. We considered the research and discovery capabilities of GSK for these specific programs, GSK’s inability to sub-license, and the fact that the discovery and optimization of these antibodies is proprietary and could not, at the time of contract inception, be provided by other vendors, to conclude that the license does not have stand-alone functionality and is therefore not distinct. Additionally, we determined that the joint steering committee participation would not have been provided without the R&D services and license agreement. Based on these assessments, we identified all services to be interrelated and therefore concluded that the promises should be combined into a single performance obligation at the inception of the arrangement.

On October 23, 2020, Amendment No. 3 to the GSK Agreement (the “Amendment”) was agreed to by both parties to permit GSK to conduct development and commercialization in combination with any third-party molecules of Zejula, an oral, once-daily poly (ADP-ribose) polymerase (PARP) inhibitor, which has received U.S. approval for the maintenance treatment of adult patients with advanced epithelial ovarian, fallopian tube, or primary peritoneal cancer who are in a complete or partial response to first-line platinum-based chemotherapy, and is under development for additional cancer indications. In addition, under the Amendment, we were granted increased royalties upon sales of JEMPERLI, equal to 8% of Net Sales (as defined in the GSK Agreement) below $1.0 billion and from 12% up to 25% of Net Sales above $1.0 billion. The Amendment also provided for a one-time, non-refundable cash payment of $60.0 million that we received and recognized as revenue in the fourth quarter of 2020. GSK also agreed, starting January 1, 2021, to pay us a 1% royalty less third-party royalty deduction on all GSK net sales of Zejula. The $1.1 billion in cash milestone payments due under the GSK Agreement remain unchanged. Additionally, under the terms of the Amendment, GSK has agreed to certain diligence commitments with respect to the future development of JEMPERLI, and the parties have agreed to review such commitments under regular joint review committee meetings going forward.

We assessed this Amendment in accordance with ASC 606 and concluded the Amendment was a contract modification to the GSK Agreement. Based on our assessment, we identified the terms of the Amendment to be interrelated to the GSK Agreement’s single performance obligation, noting completion and delivery of terms under the Amendment were satisfied by both parties with the execution of the Amendment.

As of March 31, 2022, the transaction price for the GSK Agreement and Amendment includes the upfront payment, research reimbursement revenue, one-time payment associated with the Amendment, and milestones earned to date, which are allocated in their entirety to the single performance obligation.

We earned and recognized $1.0 million in royalty revenue during the three months ended March 31, 2022 related to GSK’s net sales of Zejula and JEMPERLI during the period based on estimates of GSK’s sales historical experience. Of the royalty revenue recognized, $0.3 million is JEMPERLI non-cash revenue related to the Royalty Monetization Agreement, see Note 5. GSK reports sales information to us on a one quarter lag and differences between actual and estimated royalty revenues will be adjusted in the following quarter. We earned and recognized $1.2 million in royalty revenue during the three months ended March 31, 2021 related to GSK’s net sales of Zejula during the period.

No clinical milestones were earned or recognized during the three months ended March 31, 2022. No other future clinical or regulatory milestones have been included in the transaction price, as all milestone amounts were subject to the revenue constraint. As part of the constraint evaluation, we considered numerous factors including the fact that the receipt of milestones is outside of our control and contingent upon success in future clinical trials, an outcome that is difficult to predict, and GSK’s efforts. Any consideration related to sales-based milestones, including royalties, will be recognized when the related sales occur as they were determined to relate predominantly to the intellectual property license granted to GSK and therefore have also been excluded from the transaction price. We will re-evaluate the variable transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

Milestones recognized through March 31, 2022 under the GSK Agreement are as follows:

Anti-PD-1

(JEMPERLI/Dostarlimab)

Anti-TIM-3
(GSK4069889A/Cobolimab)

Anti-LAG-3

(GSK40974386)

Milestone Event

Amount

Quarter Recognized

Amount

Quarter Recognized

Amount

Quarter Recognized

Initiated in vivo toxicology studies using good laboratory practices (GLPs)

$1.0M

Q2'15

$1.0M

Q4'15

$1.0M

Q3'16

IND clearance from the FDA

$4.0M

Q1'16

$4.0M

Q2'16

$4.0M

Q2'17

Phase 2 clinical trial initiation

$3.0M

Q2'17

$3.0M

Q4'17

$3.0M

Q4'19

Phase 3 clinical trial initiation - first indication

$5.0M

Q3'18

—

Phase 3 clinical trial initiation - second indication

$5.0M

Q2'19

—

Filing of the first BLA(1) - first indication

$10.0M

Q1'20

—

Filing of the first MAA(2) - first indication

$5.0M

Q1'20

—

Filing of the first BLA - second indication

$10.0M

Q1'21

—

First BLA approval - first indication

$20.0M

Q2'21

—

First MAA approval - first indication

$10.0M

Q2'21

—

First BLA approval - second indication

$20.0M

Q3'21

—

(1) Biologics License Application (“BLA”)

(2) Marketing Authorization Application (“MAA”)

Milestones achieved during the discovery period were recognized as revenue pro-rata through December 31, 2016. Milestones achieved during fiscal 2017 were recognized as revenue in the period earned, while milestones after December 31, 2017 are recognized upon determination that a significant reversal of revenue would not be probable. Cash is generally received within 30 days of milestone achievement.

We recognized $1.0 million in revenue under the GSK Agreement during the three months ended March 31, 2022, and $11.2 million during the three months ended March 31, 2021.

Contractual milestones that may be recognized in the future under the GSK agreement are as follows:

Anti-PD-1

(JEMPERLI/Dostarlimab)

Anti-TIM-3

(GSK4069889A/Cobolimab)

Anti-LAG-3

(GSK40974386)

Milestone Event

Amount

Pre clinical and Development

—

$10.0M

Regulatory

$15.0M

$90.0M

Commercial

$165.0M

Total Contractual Milestones Remaining

$180.0M

$265.0M

Antibody Generation Agreement with Bristol-Myers Squibb

In December 2011, we entered into a license and collaboration agreement (the “BMS Agreement”) with Celgene, now a part of Bristol-Myers Squibb (Celgene and Bristol-Myers Squibb are hereinafter referred to, collectively, as “BMS”), to develop therapeutic antibodies against multiple targets. We granted BMS the option to obtain worldwide commercial rights to antibodies generated against each of the targets under the agreement, which option was triggered on a target-by-target basis by our delivery of antibodies meeting certain pre-specified parameters pertaining to each target under the agreement.

The BMS Agreement provided for an upfront payment of $6.0 million from BMS, which we received in 2011 and recognized through 2014, milestone payments of up to $53.0 million per target, low single-digit royalties on net sales of antibodies against each target, and reimbursement of specified research and development costs.

There was no revenue recognized under this agreement during the three months ended March 31, 2022 and 2021.

5. Sale of Future Royalties

In October 2021, we signed a royalty monetization agreement (“Royalty Monetization Agreement”) with Sagard Healthcare Royalty Partners, LP (“Sagard”). Under the terms of the Royalty Monetization Agreement, we received $250.0 million in exchange for royalties payable to us under our GSK collaboration on annual global net sales of JEMPERLI below $1.0 billion starting in October 2021. The aggregate JEMPERLI royalties and milestones to be received by Sagard under the Royalty Monetization Agreement is capped at certain fixed multiples of the upfront payment based on time. Once Sagard receives an aggregate amount of either $312.5 million (125% of the upfront) by the end of 2026, or $337.5 million (135% of the upfront) during 2027, or $412.5 million (165% of the upfront) at any time after 2027, the Royalty Monetization Agreement will expire resulting in us regaining all subsequent JEMPERLI royalties and milestones. As of March 31, 2022, Sagard has received a total of $0.2 million in royalties and milestones.

The Royalty Monetization Agreement includes a call option pursuant to which at any time after December 1, 2024, we may reacquire our interest in the specified royalties by paying Sagard (in cash) a specified amount described as (a) in the case of a Reacquisition Date that falls within the period from (but excluding) December 1, 2024 to (and including) December 31, 2026, the greater of (i) $312.5 million minus the total Net Amount actually received by Purchaser prior to such Reacquisition Date, and (ii) an amount that, when paid to Sagard on such Reacquisition Date, will generate an internal rate of return (“IRR”) for Sagard of 9.0% over the Relevant Period; (b) in the case of a Reacquisition Date that falls within the period from (and including) January 1, 2027 to (and including) December 31, 2027, the greater of (i) $337.5 million minus the total Net Amount actually received by Purchaser prior to such Reacquisition Date and (ii) an amount that, when paid to Sagard on such Reacquisition Date, will generate an IRR for Sagard of 10% over the Relevant Period; and (c) in the case of a Reacquisition Date that occurs on or after January 1, 2028, the greater of (i) $412.5 million minus the total Net Amount actually received by Purchaser prior to such Reacquisition Date and (ii) an amount that, when paid to Sagard on such Reacquisition Date, will generate an IRR for Sagard of 10% over the Relevant Period.

The proceeds received from Sagard of $250.0 million were recorded as a liability, net of transaction costs of $0.4 million, which will be amortized over the estimated life of the arrangement using the effective interest rate method. Royalty and milestone revenue will be recognized as earned on net sales of JEMPERLI, and we will record the royalty payments to Sagard as a reduction of the liability when paid. As such payments are made to Sagard, the balance of the liability will be effectively repaid over the life of the Royalty Monetization Agreement.

We estimate the effective interest rate used to record non-cash interest expense under the Agreement based on the estimate of future royalty payments to be received by Sagard. As of March 31, 2022, the estimated effective rate under the agreement was 9.1%. Over the life of the arrangement, the actual effective interest rate will be affected by the amount and the timing of the royalty payments received by Sagard and changes in the Company’s forecasted royalties. At each reporting date, we will reassess our estimate of total future royalty payments to be received and if such payments are materially different than our original estimates, we will prospectively adjust the imputed interest rate and the related amortization of the royalty obligation.

We recognized non-cash royalty revenue of approximately $0.3 million and non-cash interest expense of approximately $4.9 million for the three months ended March 31, 2022. The interest and amortization of issuance costs is reflected as non-cash interest expense for the sale of future royalties in the Consolidated Statements of Operations.

The following table shows the activity within the liability account for the three months ended March 31, 2022:


(in thousands)	March 31, 2022
Liability related to sale of future royalties - beginning balance	$	251,093

Issuance costs related to the sale of future royalties	(130)
Amortization of issuance costs	20
Royalty payments to Sagard	(233)
Non-cash interest expense recognized	4,834
Liability related to sale of future royalties - ending balance	$	255,584

6. Fair Value Measurements and Available for Sale Investments

Fair Value Measurements

Our financial instruments consist principally of cash, cash equivalents, short-term and long-term investments, receivables, and accounts payable. Certain of our financial assets and liabilities have been recorded at fair value in the consolidated balance sheet in accordance with the accounting standards for fair value measurements.

Fair value is defined as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. Accounting guidance also establishes a fair value hierarchy that requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value:

Level 1 - Observable inputs that reflect quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2 - Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

Level 3 - Unobservable inputs that are supported by little or no market activities, therefore requiring an entity to develop its own assumptions.

Assets and Liabilities Measured at Fair Value on a Recurring Basis

The following table summarizes our assets and liabilities that require fair value measurements on a recurring basis and their respective input levels based on the fair value hierarchy:


	Fair Value Measurements at End of Period Using:
(in thousands)	Fair Value		Quoted Market Prices for Identical Assets (Level 1)		Significant Other Observable Inputs (Level 2)		Significant Unobservable Inputs (Level 3)
At March 31, 2022
Money market funds(1)	$	132,942	$	132,942	$	—	$	—
Mutual funds(1)	34,437		34,437		—		—
U.S. Treasury securities(2)	376,445		376,445		—		—
Certificates of deposit(2)	3,279		—		3,279		—
Agency securities(2)	26,110		—		26,110		—
Commercial and corporate obligations(2)	24,570		—		24,570		—

At December 31, 2021
Money market funds(1)	$	445,647	$	445,647	$	—	$	—
Mutual funds(1)	50,326		50,326		—		—
U.S. Treasury securities(2)	87,831		87,831		—		—
Certificates of deposit(2)	3,766		—		3,766		—
Agency securities(2)	5,814		—		5,814		—
Commercial and corporate obligations(2)	22,054		—		22,054		—

(1) Included in cash and cash equivalents in the accompanying consolidated balance sheets.

(2) Included in short-term or long-term investments in the accompanying consolidated balance sheets depending on the respective maturity date.

The following methods and assumptions were used to estimate the fair value of our financial instruments for which it is practicable to estimate that value:

Marketable Securities. For fair values determined by Level 1 inputs, which utilize quoted prices in active markets for identical assets, the level of judgment required to estimate fair value is relatively low. For fair values determined by Level 2

inputs, which utilize quoted prices in less active markets for similar assets, the level of judgment required to estimate fair value is also considered relatively low.

Fair Value of Other Financial Instruments

The carrying amounts of certain of our financial instruments, including cash and cash equivalents, accounts payable, and accrued expenses approximate fair value due to their short-term nature.

Available for Sale Investments

We invest our excess cash in agency securities, debt instruments of financial institutions and corporations, commercial obligations, and U.S. Treasury securities, which we classify as available for sale investments. These investments are carried at fair value and are included in the tables above. The aggregate market value, cost basis, and gross unrealized gains and losses of available for sale investments by security type, classified in cash equivalents, short-term and long-term investments as of March 31, 2022 are as follows:


(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Total Fair Value
Agency securities(1)	$	26,431	$	—	$	(321)	$	26,110

Certificates of deposit(2)	3,314		—		(35)		3,279
Commercial and corporate obligations(3)	24,929		—		(359)		24,570
U.S. Treasury securities(4)	377,956		1		(1,512)		376,445
Total available for sale investments	$	432,630	$	1	$	(2,227)	$	430,404

(1) Of our outstanding agency securities $6.0 million have maturity dates of less than one year and $20.1 million have maturity dates between one to two years as of March 31, 2022.

(2) Of our outstanding certificates of deposit, $1.6 million have maturity dates of less than one year and $1.7 million have a maturity date of between one to two years as of March 31, 2022.

(3) Of our outstanding commercial and corporate obligations $4.1 million have maturity dates of less than one year and $20.5 million have a maturity date of between one to two years as of March 31, 2022.

(4) Of our outstanding U.S. Treasury securities $327.6 million have maturity dates of less than one year and $48.9 million have a maturity date of between one to two years as of March 31, 2022.

The aggregate market value, cost basis, and gross unrealized gains and losses of available for sale investments by security type, classified in short-term and long-term investments as of December 31, 2021 are as follows:


(in thousands)	Amortized Cost		Gross Unrealized Gains		Gross Unrealized Losses		Total Fair Value
Agency securities(1)	$	5,821	$	—	$	(7)	$	5,814
Certificates of deposit(2)	3,770		—		(4)		3,766
Commercial and corporate obligations(3)	22,094		2		(42)		22,054
US Treasury securities(4)	87,995		—		(164)		87,831
Total available for sale investments	$	119,680	$	2	$	(217)	$	119,465

(1) Of our outstanding agency securities, $1.0 million have maturity dates of less than one year and $4.8 million have a maturity date of between one to two years as of December 31, 2021.

(2) Of our outstanding certificates of deposit, $1.3 million have a maturity date of less than one year and $2.5 million have a maturity date of between one to two years as of December 31, 2021.

(3) Of our outstanding commercial and corporate obligations, $4.8 million have maturity dates of less than one year and $17.3 million have a maturity date of between one to two years as of December 31, 2021.

(4) Of our outstanding U.S. Treasury securities, $45.3 million have maturity dates of less than one year and $42.5 million have a maturity date of between one to two years as of December 31, 2021.

The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of March 31, 2022 and December 31, 2021, aggregated by investment category and the length of time that individual securities have been in a continuous loss position:


	March 31, 2022
	Less than 12 Months				12 Months or Greater				Total
(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Agency securities	$	26,110	$	(321)	$	—	$	—	$	26,110	$	(321)
Commercial and corporate obligations	3,077		(35)		—		—		3,077		(35)
Certificates of deposit	24,570		(359)		—		—		24,570		(359)
US Treasury Securities	353,995		(1,512)		—		—		353,995		(1,512)
Total	$	407,752	$	(2,227)	$	—	$	—	$	407,752	$	(2,227)


	December 31, 2021
	Less than 12 Months				12 Months or Greater				Total
(in thousands)	Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses		Fair Value		Gross Unrealized Losses
Agency securities	$	4,477	$	(7)	$	—	$	—	$	4,477	$	(7)
Certificates of Deposit	2,870		(4)		—		—		2,870		(4)
Commercial and corporate obligations	18,524		(42)		—		—		18,524		(42)
US Treasury Securities	82,823		(164)		—		—		82,823		(164)
Total	$	108,694	$	(217)	$	—	$	—	$	108,694	$	(217)

As of March 31, 2022 and December 31, 2021, unrealized losses on available for sale investments were $2.2 million and $0.2 million, respectively. There were no securities in an unrealized loss position for greater than 12 months as of March 31, 2022. We do not intend to sell the investments and it is not more likely than not that we will be required to sell the investments before recovery of their amortized cost basis, accordingly, no allowance for credit losses were recorded.

7. Stockholders’ Equity

Common Stock

Of the 500,000,000 shares of common stock authorized, 28,177,590 shares were issued and outstanding as of March 31, 2022. Common stock reserved for future issuance upon the exercise, issuance or conversion of the respective equity instruments at March 31, 2022 are as follows:


Issued and Outstanding:
Stock options			3,968,639

Restricted stock units			887,043
Shares Reserved For:
2017 Equity Incentive Plan			2,448,430
2017 Employee Stock Purchase Plan			1,528,476
Total			8,832,588

8. Equity Incentive Plans

2017 Equity Incentive Plan

On January 12, 2017, our board of directors and stockholders approved and adopted the 2017 Equity Incentive Plan (the “2017 Plan”). The 2017 Plan became effective upon the execution and delivery of the underwriting agreement for our initial public offering on January 26, 2017, and replaced our existing 2006 Equity Incentive Plan. Under the 2017 Plan, we may grant stock options, stock appreciation rights, restricted stock, restricted stock units and other awards to individuals who are then our employees, officers, directors or consultants. In addition, the number of shares of stock available for issuance under the 2017 Plan will be automatically increased each January 1, beginning on January 1, 2018, by 4% of the aggregate number of outstanding shares of our common stock as of the immediately preceding December 31 or such lesser number as determined by our board of directors. The 2017 Plan automatically increased by 1,105,890 shares as of January 1, 2022.

Employee Stock Purchase Plan

On January 12, 2017, our board of directors and stockholders approved and adopted the 2017 Employee Stock Purchase Plan or the ESPP. The ESPP became effective upon the execution and delivery of the underwriting agreement for our initial public offering on January 26, 2017. In addition, the number shares of stock available for issuance under the ESPP will be automatically increased each January 1, beginning on January 1, 2018, by 1% of the aggregate number of outstanding shares of our common stock as of the immediately preceding December 31 or such lesser number as determined by our board of directors. The ESPP automatically increased by 276,472 shares as of January 1, 2022. The initial offering period for the ESPP began in May 2021, completed in November 2021, and a new offering period began in November 2021. Future offering periods are expected to start in May and November each year.

Stock Options

Stock options granted to employees and non-employees generally vest over a four-year period while stock options granted to directors vest over a one year period. Each stock option award has a maximum term of 10 years from the date of grant, subject to earlier cancellation prior to vesting upon cessation of service to us. A summary of the activity related to stock option awards during the three months ended March 31, 2022 is as follows:


	Shares Subject to Options	Weighted-Average Exercise Price per Share		Weighted-Average Remaining Contractual Term (in years)	Aggregate Intrinsic Value (in thousands)
Outstanding at January 1, 2022	3,460,295	$	28.84	7.17	$	42,987
Granted	1,149,550	$	30.39
Exercises	(530,340)	$	9.13
Forfeitures and cancellations	(110,866)	$	28.33
Outstanding at March 31, 2022	3,968,639	$	31.94	6.17	$	10,002
Exercisable at March 31, 2022	1,590,922	$	37.28	4.96	$	5,884

Time-based Restricted Stock Units

Each Restricted Stock Unit (“RSUs”) represents one equivalent share of our common stock to be issued after satisfying the applicable continued service-based vesting criteria over a specified period. These RSUs vest in full upon the 24-month anniversary of the Vesting Commencement Date, subject to continued service on such date. The fair value of these RSUs is based on the closing price of our common stock on the date of the grant. We measure compensation expense over the expected vesting period on a straight-line basis. The RSUs do not entitle the participants to the rights of holders of common stock, such as voting rights, until the shares are issued.


	Number of Shares	Weighted average grant date fair value		Aggregate Intrinsic Value (in thousands)
Outstanding at December 31, 2021	—	$	—	$	—
Granted	887,043	$	26.50
Vested	—	$	—
Cancelled	—	$	—
Outstanding at March 31, 2022	887,043	$	26.50	$	21,945
Restricted Stock Units expected to vest at March 31, 2022	887,043			$	21,945

Stock-Based Compensation Expense

We recognize stock-based compensation expense for awards issued to employees and non-employees over the requisite service period based on the estimated grant-date fair value of such awards. We record the expense for stock-based compensation awards subject to performance-based milestone vesting over the requisite service period when management determines that achievement of the milestone is probable. Management evaluates when the achievement of a performance-based milestone is probable based on the expected satisfaction of the performance conditions at each reporting date. The estimated fair values of stock option awards granted to employees were determined on the date of grant using the Black-Scholes option valuation model with the following weighted-average assumptions:


	Three Months Ended March 31,

	2022			2021
Risk-free interest rate		2.0	%		0.7	%
Expected volatility		88.5	%		93.0	%
Expected dividend yield		—	%		—	%
Expected term (in years)		6.18			6.18
Weighted-average grant date fair value per share	$	22.63		$	22.47

We determine the appropriate risk-free interest rate, expected term for employee stock-based awards, contractual term for non-employee stock-based awards, and volatility assumptions. The weighted-average expected option term for employee and non-employee stock-based awards reflects the application of the simplified method, which defines the life as the average of the contractual term of the options and the weighted-average vesting period for all option tranches. Expected volatility for 2022 and 2021 incorporates the historical volatility of our stock price. The risk-free interest rate is based upon U.S. Treasury securities with remaining terms similar to the expected or contractual term of the stock-based payment awards. The assumed dividend yield is based on our expectation of not paying dividends in the foreseeable future.

Total non-cash stock-based compensation expense for all stock awards that was recognized in the consolidated statements of operations and comprehensive loss is as follows:


	Three Months Ended March 31,
(in thousands)	2022		2021
Research and development	$	1,656	$	1,194
General and administrative	6,086		2,121
Total	$	7,742	$	3,315

On March 20, 2022, our then Chief Executive Officer (“former CEO”), resigned by mutual agreement with the Board of Directors. In connection with his separation agreement, we modified certain equity awards and recognized approximately $3.2 million in non-cash stock-based compensation expense. Given the former CEO had substantially rendered the required services per his separation agreement, we recorded the full expense related to the modification in the period ending March 31, 2022. Additionally, On March 21, 2022, we awarded our newly appointed Interim President and Chief Executive Officer RSUs

for 887,043 shares of the company’s common stock. The fair value of the award will be recognized as part of compensation cost, occurring ratably over the stated 24-month requisite service period. During the three months ended March 31, 2022, we recognized $0.3 million of non-cash stock-based compensation cost related to the award.

At March 31, 2022, there was $35.4 million of unrecognized compensation cost related to unvested stock option awards, which is expected to be recognized over a remaining weighted-average vesting period of 2.48 years, $23.2 million of unrecognized cost related to unvested RSUs awards, which is expected to be recognized over a period of 1.97 years and $0.1 million of unrecognized compensation cost related to the ESPP, which is expected to be recognized over a remaining weighted-average vesting period of 0.12 years.

9. Commitments and Contingencies

Operating Leases

On May 4, 2020, we entered into a lease agreement with Wateridge Property Owner, LP, with respect to facilities in the building at 10770 Wateridge Circle, San Diego, California 92121 (the “Lease Agreement”). Under the Lease Agreement, we agreed to lease approximately 45,000 square feet of space for a term of 124 months, beginning on April 5, 2021. The terms of the Lease Agreement provide us with an option to extend the term of the lease for an additional five years, as well as a one-time option to terminate the lease after seven years with the payment of a termination fee. The exercise of the lease option is at our sole discretion, which we currently do not anticipate exercising and as such was not recognized as part of the ROU asset and lease liability. The monthly base rent will be $4.20 per rentable square foot and will be increased by 3% annually. Under the Lease Agreement, we are also responsible for our pro rata share of real estate taxes, building insurance, maintenance, direct expenses, and utilities. Upon lease commencement, on April 5, 2021, we recognized an ROU asset of $20.6 million, with a corresponding lease liability of $20.7 million on the consolidated balance sheets. The ROU asset includes adjustments for prepayments, initial direct costs, and lease incentives. As of March 31, 2022, we have recorded $0.3 million as a security deposit in accordance with the terms of the Lease Agreement.

Our lease payments are fixed, and we recognize lease expense for leases on a straight-line basis over the lease term. Operating lease ROU assets and lease liabilities are recorded based on the present value of the future minimum lease payments over the lease term at commencement date. As our lease does not provide an implicit rate, we used our incremental borrowing rate based on the information available at effective date of adoption in determining the present value of future payments. The weighted-average discount rate used was 4.0% and the weighted-average remaining lease term is approximately 9.4 years.

The following non-cancellable office lease costs are included in our consolidated statements of cash flow (in thousands):


		Three Months Ended March 31,
Leases	Classification on the Cash Flow	2022		2021
Operating lease cost	Operating	$	619	$	133
Cash paid for amounts included in the measurement of lease liabilities	Operating	568		151

At March 31, 2022, the future minimum annual obligations for the Company’s operating lease liabilities are as follows (in thousands):


Years Ending December 31,
2022	$	1,749
2023	2,386
2024	2,457
2025	2,531
2026	2,607
Thereafter	13,239
Total minimum payments required	24,969
Less imputed interest	(4,373)
Total	$	20,596

Shareholder Litigation

On March 25, 2020, a putative securities class action was filed in the United States District Court for the Southern District of California naming the Company and certain of its current or former officers as defendants. The complaint purports to assert claims under Section 10(b) of the Exchange Act Rule 10b-5, and Section 20(a) of the Exchange Act, on behalf of persons and entities who acquired our common stock between October 10, 2017 and November 7, 2019 (the “Class Period”). An amended complaint was filed on September 30, 2020 alleging that, during the Class Period, the defendants made material misrepresentations or omissions regarding our etokimab product candidate that artificially inflated our stock price. The plaintiff sought, among other things, damages in an unspecified amount, as well as costs and expenses. On September 20, 2021, the Court granted defendants’ motion to dismiss the amended complaint with leave to amend. Plaintiff did not file a further amended complaint and, on November 30, 2021, the Court dismissed the action with prejudice.

On May 3, 2021, a shareholder derivative complaint was filed in the same Court based on allegations substantially similar to those in the class action, and purporting to assert claims on the Company’s behalf against current or former officers and directors for alleged violation of Sections 14(a) and 20(a) of the Exchange Act, breach of fiduciary duties, unjust enrichment, waste of corporate assets and insider selling. The parties to that derivative action agreed to the following: (1) the action should be dismissed without prejudice, meaning that the dismissal would not preclude the company, or another shareholder acting on behalf of the company, from asserting such claims in the future; (2) the plaintiffs and the defendants will all bear their own fees and costs incurred in connection with the action; and (3) neither the plaintiffs nor their counsel have received, or will receive, payment, compensation or consideration of any kind, directly or indirectly, in connection with the action or its dismissal. By Order dated January 14, 2022, the Court directed the Company to provide, in its filing on Form 10-K for the year ending December 31, 2021, notice to shareholders of the proposed dismissal without prejudice, which the Company did. On March 22, 2022, the Court entered an order dismissing the action without prejudice.

From time to time, we may be involved in legal proceedings arising in the ordinary course of our business. We investigate these claims as they arise and accrue estimates for resolution of legal and other contingencies when losses are probable and estimable. Regardless of outcome, litigation can have an adverse impact on us due to defense and settlement costs, diversion of management resources, negative publicity and reputational harm, and other factors.

10. Subsequent Event

On April 27, 2022, we announced positive top-line data from our Phase 1 trial of ANB032, our investigational wholly owned anti-BTLA agonist antibody. Top-line data demonstrated favorable safety, tolerability, and a rapid and sustained pharmacokinetic and pharmacodynamic profile that supports advancement of ANB032 into subsequent patient trials.

SPECIAL NOTE REGARDING FORWARD-LOOKING STATEMENTS

This Quarterly Report on Form 10-Q (“Quarterly Report”) contains forward-looking statements within the meaning of Section 21E of the Securities Exchange Act of 1934, as amended (the “Exchange Act”), and section 27A of the Securities Act of 1933, as amended (the “Securities Act”). The words “believe,” “may,” “will,” “potentially,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” and “expect,” and similar expressions that convey uncertainty of future events or outcomes, are intended to identify forward-looking statements.

The forward-looking statements in this report include, among other things, statements about:

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

•our plans to develop and commercialize antibodies, including our lead product candidate: imsidolimab for patients with generalized pustular psoriasis (“GPP”) and skin toxicities associated with treatments with hidradenitis suppurativa;

•the impact of the coronavirus (“COVID-19”) pandemic on our business and the United States (“U.S.”) and global economies;

•the likelihood that the clinical data generated in any study we performed, are performing, or plan to perform in a non-U.S. jurisdiction will be subsequently accepted by the U.S. Food and Drug Administration (“FDA”) and/or by foreign regulatory authorities outside of the jurisdiction where the study was being performed;

•the timing and ability of our collaborators to develop and commercialize our partnered product candidates;

•the potential benefits and advantages of our product candidates and approaches versus those of our competitors;

•our ability to execute on our strategy, including advancing our lead product candidates, identifying emerging opportunities in key therapeutic areas, continuing to expand our wholly-owned pipeline, and retaining rights to strategic products in key commercial markets;

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

•the timing of and our ability to obtain and maintain regulatory approvals for imsidolimab and our other product candidates;

•our ability to develop our product candidates;

•the rate and degree of market acceptance and clinical utility of any approved product candidates;

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

•our commercialization, marketing, and manufacturing capabilities and strategy;

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

•regulatory developments in the U.S., the United Kingdom, Australia, and other foreign countries;

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

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

•our use of the net proceeds from our public offerings and other financing transactions;

•our ability to identify additional products or product candidates with significant commercial potential that are consistent with our commercial objectives; and

•our estimates regarding expenses, future revenue, capital requirements, and needs for additional financing.

These forward-looking statements are subject to a number of risks, uncertainties, and assumptions, including those described in Part II, Item 1A, “Risk Factors,” and elsewhere in this Quarterly Report. Moreover, we operate in a competitive and rapidly changing environment, and new risks emerge from time to time. It is not possible for our management to predict all