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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 September 30, 2023
OR
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)
Delaware20-3828755
(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 classTrading Symbol(s)Name of each exchange on which registered
Common Stock, $0.001 par value ANABThe 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 FilerAccelerated Filer
Non-accelerated FilerSmaller 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 October 30, 2023, there were 26,575,178 shares of the Registrant’s Common Stock outstanding.



AnaptysBio, Inc.
Table of Contents
 
Page Number
PART I. FINANCIAL INFORMATION
PART II. OTHER INFORMATION



PART I. FINANCIAL INFORMATION
Item 1. Consolidated Financial Statements (unaudited)
AnaptysBio, Inc.
Consolidated Balance Sheets
(in thousands, except par value data)
(unaudited)
September 30, 2023December 31, 2022
ASSETS
Current assets:
Cash and cash equivalents$26,295 $71,308 
Receivables from collaborative partners3,269 1,419 
Short-term investments386,752 369,933 
Prepaid expenses and other current assets11,684 4,545 
Total current assets428,000 447,205 
Property and equipment, net2,254 2,089 
Operating lease right-of-use assets16,613 17,898 
Long-term investments40,203 142,935 
Other long-term assets256 256 
Total assets$487,326 $610,383 
LIABILITIES AND STOCKHOLDERS’ EQUITY
Current liabilities:
Accounts payable$6,521 $2,784 
Accrued expenses30,916 21,633 
Current portion of operating lease liability1,741 1,637 
Total current liabilities39,178 26,054 
Liability related to sale of future royalties311,272 304,413 
Operating lease liability, net of current portion16,493 17,813 
Stockholders’ equity:
Preferred stock, $0.001 par value, 10,000 shares authorized and no shares, issued or outstanding at September 30, 2023 and December 31, 2022, respectively
  
Common stock, $0.001 par value, 500,000 shares authorized, 26,575 shares and 28,513 shares issued and outstanding at September 30, 2023 and December 31, 2022, respectively
27 29 
Additional paid in capital694,591 717,797 
Accumulated other comprehensive loss(2,350)(5,246)
Accumulated deficit(571,885)(450,477)
Total stockholders’ equity120,383 262,103 
Total liabilities and stockholders’ equity $487,326 $610,383 
 See accompanying notes to unaudited consolidated financial statements.
1


AnaptysBio, Inc.
Consolidated Statements of Operations and Comprehensive Loss
(in thousands, except per share data)
(unaudited)
Three Months Ended
September 30,
Nine Months Ended
September 30,
2023202220232022
Collaboration revenue$3,318 $1,293 $8,152 $3,479 
Operating expenses:
Research and development30,878 22,064 98,758 65,424 
General and administrative10,172 8,862 31,670 27,236 
Total operating expenses41,050 30,926 130,428 92,660 
Loss from operations(37,732)(29,633)(122,276)(89,181)
Other income (expense), net:
Interest income4,854 2,262 13,993 3,711 
Non-cash interest expense for the sale of future royalties(4,431)(6,135)(13,125)(16,857)
Other income, net1 4  16 
Total other income (expense), net424 (3,869)868 (13,130)
Net loss(37,308)(33,502)(121,408)(102,311)
Unrealized gain (loss) on available for sale securities
1,261 (2,146)2,896 (5,585)
Comprehensive loss$(36,047)$(35,648)$(118,512)$(107,896)
Net loss per common share:
      Basic and diluted$(1.41)$(1.18)$(4.49)$(3.64)
Weighted-average number of shares outstanding:
      Basic and diluted26,546 28,289 27,038 28,071 
 See accompanying notes to unaudited consolidated financial statements.

2


AnaptysBio, Inc.
Consolidated Statement of Stockholders’ Equity
(in thousands)
(unaudited)
Common StockAdditional
Paid-in
Capital
Accumulated Other Comprehensive LossAccumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance, December 31, 202228,513 $29 $717,797 $(5,246)$(450,477)$262,103 
Issuance of common stock from exercises of options and employee stock purchase plan55 — 1,222 — — 1,222 
Issuance of common stock upon vesting of restricted stock units39 — — — — — 
Repurchases and retirements of common stock(1,589)(2)(38,814)— — (38,816)
Stock-based compensation— — 8,860 — — 8,860 
   Comprehensive gain, net— — — 1,979 — 1,979 
 Net loss— — — — (44,255)(44,255)
Balance, March 31, 202327,018 27 689,065 (3,267)(494,732)191,093 
Issuance of common stock from exercises of options and employee stock purchase plan48 — 775 — — 775 
Repurchases and retirements of common stock(535)— (11,656)— — (11,656)
Stock-based compensation— — 8,427 — — 8,427 
Comprehensive loss, net— — — (344)— (344)
Net loss— — — — (39,845)(39,845)
Balance, June 30, 202326,531 27 686,611 (3,611)(534,577)148,450 
Issuance of common stock from exercises of options and employee stock purchase plan14 — 160 — — 160 
Issuance of common stock upon vesting of restricted stock units30— — — — — 
Repurchases and retirements of common stock— — 13 — — 13 
Stock-based compensation— — 7,807 — — 7,807 
Comprehensive gain, net— — — 1,261 — 1,261 
Net loss— — — — (37,308)(37,308)
Balance, September 30, 202326,575 $27 $694,591 $(2,350)$(571,885)$120,383 
See accompanying notes to unaudited consolidated financial statements.
3

AnaptysBio, Inc.
Consolidated Statement of Stockholders’ Equity
(in thousands)
(unaudited)
Common StockAdditional
Paid-in
Capital
Accumulated Other Comprehensive LossAccumulated
Deficit
Total
Stockholders’
Equity
SharesAmount
Balance, December 31, 202127,647 $28 $678,575 $(422)$(321,753)$356,428 
Issuance of common stock from exercises of options and employee stock purchase plan531 — 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, 202228,178 28 691,161 (2,434)(358,008)330,747 
Issuance of common stock from exercises of options and employee stock purchase plan53 — 882 — — 882 
Stock-based compensation— — 6,658 — — 6,658 
Comprehensive loss, net— — — (1,427)— (1,427)
Net loss— — — — (32,554)(32,554)
Balance, June 30, 202228,231 28 698,701 (3,861)(390,562)304,306 
Issuance of common stock from exercises of options and employee stock purchase plan123 — 2,690 — — 2,690 
Stock-based compensation— — 6,271 — — 6,271 
Comprehensive loss, net— — — (2,146)— (2,146)
Net loss— — — — (33,502)(33,502)
Balance, September 30, 202228,354 $28 $707,662 $(6,007)$(424,064)$277,619 
See accompanying notes to unaudited consolidated financial statements.
4

AnaptysBio, Inc.
Consolidated Statements of Cash Flows
(in thousands)
(unaudited)
Nine Months Ended
September 30,
20232022
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss$(121,408)$(102,311)
Adjustments to reconcile net loss to net cash used in operating activities:
Depreciation and amortization487 491 
Stock-based compensation25,094 20,671 
Accretion/amortization of investments, net(7,367)(784)
Amortization of right-of-use assets – operating
1,285 1,238 
Non-cash interest expense13,125 16,857 
Changes in operating assets and liabilities:
Receivables from collaborative partners(1,850)(304)
Prepaid expenses and other assets(7,037)(2,518)
Accounts payable and other liabilities12,436 4,868 
Operating lease liabilities(1,216)(1,116)
Net cash used in operating activities(86,451)(62,908)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of investments(237,612)(674,925)
Sales and maturities of investments333,715 258,766 
Purchases of property and equipment(527)(183)
Net cash provided by (used in) investing activities95,576 (416,342)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of common stock2,208 8,408 
Repurchase and retirements of common stock(50,000) 
Proceeds from the sale of future royalties 35,000 
Repayment of liability for sale of future royalties(6,303)(1,050)
Payments for debt issuance costs(43)(290)
Net cash (used in) provided by financing activities(54,138)42,068 
Net decrease in cash and cash equivalents(45,013)(437,182)
Cash, cash equivalents and restricted cash, beginning of period71,308 495,729 
Cash, cash equivalents and restricted cash, end of period$26,295 $58,547 
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Non-cash investing and financing activities:
Amounts accrued for property and equipment$279 $28 
Amounts accrued for issuance costs related to the sale of future royalties$ $24 
Amounts accrued for repurchases of common stock$459 $ 
Receivable related to issuance of common stock, upon exercise of stock options$(51)$8 
See accompanying notes to unaudited consolidated financial statements.
5

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 focused on delivering innovative immunology therapeutics. We are developing immune cell modulating antibodies, including two wholly owned checkpoint agonists in clinical-stage development, for autoimmune and inflammatory disease: rosnilimab, our PD-1 agonist, previously referred to as ANB030, in a Phase 2b trial for the treatment of moderate-to-severe rheumatoid arthritis (“RA”) and a planned Phase 2 trial for the treatment of moderate-to-severe ulcerative colitis (“UC”); and ANB032, our BTLA agonist, in a Phase 2b trial for the treatment of moderate-to-severe atopic dermatitis (“AD”). We also have other preclinical immune cell modulator candidates in our portfolio, including ANB033, an anti-CD122 antagonist antibody for the treatment of autoimmune and inflammatory diseases. In addition, we have developed two cytokine antagonists that we are exploring options for out-licensing: imsidolimab, our anti-IL-36R antibody, in a Phase 3 trial for the treatment of generalized pustular psoriasis (“GPP”), and etokimab, our anti-IL-33 antagonist that is Phase 2/3 ready. We have also discovered multiple therapeutic antibodies licensed to GlaxoSmithKline, Inc. (“GSK”) in a financial collaboration for immuno-oncology, including an anti-PD-1 antagonist antibody (Jemperli (dostarlimab-gxly)) and an anti-TIM-3 antagonist antibody (cobolimab, GSK4069889). We currently recognize revenue from milestones and royalties achieved under our immuno-oncology collaboration with GSK.
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 stock, royalty monetizations, 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. AnaptysBio 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. Operating results for the nine months ended September 30, 2023 are not necessarily indicative of the results that may be expected for the year ending December 31, 2023. The financial statements should be read in conjunction with our audited financial statements for the year ended December 31, 2022 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
6

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. Significant estimates relied upon in preparing these financial statements include estimates related to revenue recognition, accrued research and development expenses, stock-based compensation, and the liability related to the sale of future royalties. We evaluate our estimates and assumptions on an ongoing basis. 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
September 30,
Nine Months Ended
September 30,
(in thousands)2023202220232022
Options to purchase common stock4,043 3,772 4,308 3,888 
Restricted Stock Units557 99 468 65 
Total4,600 3,871 4,776 3,953 
3. Balance Sheet Accounts and Supplemental Disclosures
Property and Equipment, net
Property and equipment, net consist of the following:
(in thousands)September 30, 2023December 31, 2022
Laboratory equipment$6,470 $5,869 
Office furniture and equipment1,645 1,593 
Leasehold improvements202 203 
Property and equipment, gross8,317 7,665 
Less: accumulated depreciation and amortization(6,063)(5,576)
Total property and equipment, net$2,254 $2,089 
 
Accrued Expenses
Accrued expenses consist of the following:
(in thousands)September 30, 2023December 31, 2022
Accrued compensation and related expenses$5,427 $5,379 
Accrued professional fees1,021 607 
Accrued research, development and manufacturing expenses23,314 15,351 
Accrued for repurchases of common stock459  
Other695 296 
Total accrued expenses$30,916 $21,633 
7

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 additional antibody discovery program 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 for various solid tumor indications. In addition, GSK is developing dostarlimab in combination with additional therapies under the collaboration, including with another development program from the GSK Agreement: cobolimab, an anti-TIM-3 antibody, in 2L NSCLC. In October 2023, Amendment No. 5 to the GSK Agreement was agreed by both parties to terminate the anti-LAG-3 antagonist antibody development program under the GSK Agreement. In accordance with the GSK Agreement and the amendment, we have regained full global rights to the anti-LAG-3 antagonist antibody development program.
For each remaining development program under the GSK Agreement, we are eligible to receive, in total, 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 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 GSK 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.
8

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. 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. 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 September 30, 2023, 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 and royalties earned to date, which are allocated in their entirety to the single performance obligation.
We recognized $3.3 million and $8.2 million in royalty revenue during the three and nine months ended September 30, 2023 related to GSK’s net sales of Jemperli and Zejula during the period which we estimate based on either GSK’s prior sales experience or actuals. Of the royalty revenue recognized during the three and nine months ended September 30, 2023, $2.5 million and $5.8 million is Jemperli non-cash revenue related to the Jemperli Royalty Monetization Agreement and $0.8 million and $2.4 million is Zejula non-cash revenue related to the Zejula Royalty Monetization Agreement, each of such agreements as described in Note 5. We recognized $1.3 million and $3.5 million in royalty revenue during the three and nine months ended September 30, 2022, related to GSK’s net sales of Zejula and Jemperli during the period based on GSK’s prior sales experience. Of the royalty revenue recognized during the three and nine months ended September 30, 2022, $0.3 million and $1.2 million is Jemperli non-cash revenue related to the Jemperli Royalty Monetization Agreement. Of the royalty revenue recognized during both the three and nine months ended September 30, 2022, $0.7 million is Zejula non-cash revenue related to the Zejula Royalty Monetization Agreement. 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. All royalty revenue related to Zejula global net sales starting July 2022 are paid directly to a wholly owned subsidiary of DRI Healthcare Trust pursuant to the Zejula Royalty Monetization Agreement, as described in Note 5.
No clinical milestones were recognized during the three and nine months ended September 30, 2023 and 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.
9

Milestones under the GSK Agreement are as follows:
Anti-PD-1
(Jemperli/Dostarlimab)
Anti-TIM-3
(GSK4069889A/Cobolimab)
Milestone EventAmountQuarter RecognizedAmountQuarter Recognized
Initiated in vivo toxicology studies using good laboratory practices (GLPs)
$1.0MQ2'15$1.0MQ4'15
IND clearance from the FDA$4.0MQ1'16$4.0MQ2'16
Phase 2 clinical trial initiation$3.0MQ2'17$3.0MQ4'17
Phase 3 clinical trial initiation - first indication$5.0MQ3'18$5.0MQ4'22
Phase 3 clinical trial initiation - second indication$5.0MQ2'19$5.0M
Filing of the first BLA(1) - first indication
$10.0MQ1'20$10.0M
Filing of the first MAA(2) - first indication
$5.0MQ1'20$5.0M
Filing of the first BLA - second indication
$10.0MQ1'21$10.0M
First BLA approval - first indication$20.0MQ2'21$20.0M
First MAA approval - first indication
$10.0MQ2'21$10.0M
First BLA approval - second indication$20.0MQ3'21$20.0M
Filing of the first MAA - second indication(3)
$5.0M$5.0M
First MAA approval - second indication(3)
$10.0M$10.0M
First commercial sales milestone(3)
$15.0M$15.0M
Second commercial sales milestone(3)
$25.0M$25.0M
Third commercial sales milestone(3)
$50.0M$50.0M
Fourth commercial sales milestone$75.0M$75.0M
Milestones recognized through September 30, 2023$93.0M$13.0M
Milestones that may be recognized in the future$180.0M$260.0M
(1)Biologics License Application (“BLA”)
(2)Marketing Authorization Application (“MAA”)
(3)For Jemperli, the filing and approval of the first MAA for a second indication and first three commercial sales milestones are included as part of the royalty monetization agreement with Sagard, see Note 5
5. Sale of Future Royalties
Jemperli Royalty Monetization Agreement
In October 2021, we signed a royalty monetization agreement (“Jemperli Royalty Monetization Agreement”) with Sagard Healthcare Royalty Partners, LP (“Sagard”). Under the terms of the Jemperli Royalty Monetization Agreement, we received $250.0 million in exchange for royalties and milestones payable to us under our GSK collaboration on annual global net sales of Jemperli below $1.0 billion starting in October 2021 (not including any combination products that contain both Jemperli and another Development Antibody). The aggregate Jemperli royalties and milestones to be received by Sagard under the Jemperli 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 Jemperli Royalty Monetization Agreement will expire resulting in us regaining all subsequent Jemperli royalties and milestones. As of September 30, 2023, Sagard has received a total of $5.8 million in royalties and milestones.
The Jemperli 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 as described in the Jemperli Royalty Monetization Agreement. The exercise of this call option is at our sole discretion, which we currently do not anticipate exercising.
10

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. The aggregate future estimated payments, less the $249.6 million, net of proceeds, will be recognized as non-cash interest expense over the life of the agreement. Royalty and milestone revenue will be recognized as earned on net sales of Jemperli, and these payments to Sagard will be recorded 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 Jemperli Royalty Monetization Agreement.
We estimate the effective interest rate used to record non-cash interest expense under the Jemperli Royalty Monetization Agreement based on the estimate of future royalty payments to be received by Sagard. As of September 30, 2023, the estimated effective rate under the agreement was 6.2%. 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 our 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 Jemperli non-cash royalty revenue of approximately $2.5 million and $5.8 million for the three and nine months ended September 30, 2023, respectively, and $0.3 million and $1.2 million for the three and nine months ended September 30, 2022, respectively, and non-cash interest expense of approximately $4.2 million and $12.4 million for the three and nine months ended September 30, 2023, and $5.9 million and $16.7 million for the three and nine months ended September 30, 2022, respectively. 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 nine months ended September 30, 2023:
(in thousands)September 30, 2023
Liability related to sale of future Jemperli royalties and milestones - balance at 12/31/2022
$269,540 
Issuance costs related to the sale of future royalties37 
Amortization of issuance costs28 
Royalty and milestone payments to Sagard(4,043)
Non-cash interest expense recognized12,332 
Liability related to sale of future royalties and milestones - ending balance$277,894 
Zejula Royalty Monetization Agreement
In October 2020, in connection with Amendment No. 3 to the GSK Agreement, GSK agreed, under the terms of a settlement agreement (the “GSK Settlement Agreement”), to pay us a royalty on all GSK net sales of Zejula starting January 1, 2021. Under the GSK Settlement Agreement, the royalty is paid at a rate of 1.0% but is subject to reduction due to royalties paid to third parties, with a minimum royalty payable under the GSK Settlement Agreement of 0.5% of global net sales of Zejula. The current effective royalty rate is 0.5%.
In September 2022, we signed a purchase and sale agreement (the “Zejula Royalty Monetization Agreement”) with a wholly owned subsidiary of DRI Healthcare Trust (“DRI”) to monetize all of our future royalties on global net sales of Zejula under the GSK Settlement Agreement. Under the terms of the Zejula Royalty Monetization Agreement, we received $35.0 million in exchange for all royalties payable by GSK to us under the GSK Settlement Agreement on global net sales of Zejula starting in July 2022 (the “Purchased Royalty Interest”). In addition, under the Zejula Royalty Monetization Agreement, we are entitled to receive an additional $10.0 million payment from DRI if Zejula is approved by the U.S. Food and Drug Administration for the treatment of endometrial cancer on or prior to December 31, 2025.
The proceeds received from DRI of $35.0 million were recorded as a liability, net of transaction costs of $0.2 million, which will be amortized over the estimated life of the arrangement using the effective interest rate method. Royalty revenue will be recognized as earned on net sales of Zejula, and these royalty payments to DRI will be recorded as a reduction of the liability when paid. The aggregate future estimated payments, less the $34.8 million, of net proceeds, will be recorded as non-cash interest expense over the life of the agreement. As such payments are made to DRI, the balance of the liability will be effectively repaid over the life of the Zejula Royalty Monetization Agreement.
11

We estimate the effective interest rate used to record non-cash interest expense under the Zejula Royalty Monetization Agreement based on the estimate of future royalty payments to be received by DRI. As of September 30, 2023, the estimated effective rate under the agreement was 2.3%. 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 DRI and the changes in our 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 Zejula non-cash royalty revenue of approximately $0.8 million and $2.4 million for the three and nine months ended September 30, 2023, respectively, and $0.7 million for both the three and nine months ended September 30, 2022, and non-cash interest expense of approximately $0.2 million and $0.7 million for the three and nine months ended September 30, 2023, respectively, and $0.2 million for both the three and nine months ended September 30, 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 nine months ended September 30, 2023:
(in thousands)September 30, 2023
Liability related to sale of future Zejula royalties and milestones - balance at 12/31/2022$34,873 
Amortization of issuance costs21 
Royalty and milestone payments to DRI(2,260)
Non-cash interest expense recognized744 
Liability related to sale of future royalties and milestones - ending balance$33,378 
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.
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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 September 30, 2023
Money market funds(1)
$15,229 $15,229 $ $ 
Mutual funds(1)
8,295 8,295   
U.S. Treasury securities(2)
350,739 350,739   
Certificates of deposit(2)
731  731  
Agency securities(2)
34,359  34,359  
Commercial and corporate obligations(2)
41,126  41,126  
At December 31, 2022
Money market funds(1)
$29,702 $29,702 $ $ 
Mutual funds(1)
41,812 41,812   
U.S. Treasury securities(2)
374,527 374,527   
Certificates of deposit(2)
2,856  2,856  
 Agency securities(2)
74,602  74,602  
Commercial and corporate obligations(2)
60,883  60,883  
(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.
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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 September 30, 2023 are as follows:
(in thousands)Amortized
Cost
Gross
Unrealized Gains
Gross
Unrealized Losses
Total
Fair Value
Agency securities(1)
$34,577 $ $(218)$34,359 
Certificates of deposit(2)
737  (6)731 
Commercial and corporate obligations(3)
41,370  (244)41,126 
U.S. Treasury securities(4)
352,414 1 (1,676)350,739 
     Total available for sale investments$429,098 $1 $(2,144)$426,955 
(1)    Of our outstanding agency securities, $31.9 million have maturity dates of less than one year and $2.5 million have maturity dates between one to two years as of September 30, 2023.
(2)    Of our outstanding certificates of deposit, $0.7 million have maturity dates of less than one year as of September 30, 2023.
(3)    Of our outstanding commercial and corporate obligations, $32.5 million have maturity dates of less than one year and $8.6 million have a maturity date of between one to two years as of September 30, 2023.
(4)    Of our outstanding U.S. Treasury securities, $321.6 million have maturity dates of less than one year and $29.1 million have a maturity date of between one to two years as of September 30, 2023.
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, 2022 are as follows:
(in thousands)Amortized
Cost
Gross
Unrealized Gains
Gross
Unrealized Losses
Total
Fair Value
Agency securities(1)
$75,504 $11 $(913)$74,602 
Certificates of deposit(2)
2,915  (59)2,856 
Commercial and corporate obligations(3)
61,791 8 (916)60,883 
US Treasury securities(4)
377,697 19 (3,189)374,527 
     Total available for sale investments$517,907 $38 $(5,077)$512,868 
(1)    Of our outstanding agency securities, $57.1 million have maturity dates of less than one year and $17.5 million have a maturity date of between one to two years as of December 31, 2022.
(2)     Of our outstanding certificates of deposit, $2.6 million have a maturity date of less than one year and $0.3 million have a maturity date of between one to two years as of December 31, 2022.
(3)     Of our outstanding commercial and corporate obligations, $44.0 million have maturity dates of less than one year and $16.9 million have a maturity date of between one to two years as of December 31, 2022.
(4)     Of our outstanding U.S. Treasury securities, $266.2 million have maturity dates of less than one year and $108.3 million have a maturity date of between one to two years as of December 31, 2022.
The following tables present gross unrealized losses and fair values for those investments that were in an unrealized loss position as of September 30, 2023 and December 31, 2022, aggregated by investment category and the length of time that individual securities have been in a continuous loss position:
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September 30, 2023
Less than 12 Months12 Months or GreaterTotal
(in thousands)
Fair Value
Gross
Unrealized Losses
Fair Value
Gross
Unrealized Losses
Fair Value
Gross
Unrealized Losses
Agency securities$20,125 $(65)$14,234 $(154)$34,359 $(219)
Commercial and corporate obligations13,274 (45)23,401 (199)36,675 (244)
Certificates of deposit  731 (6)731 (6)
US Treasury Securities237,400 (625)103,467 (1,050)340,867 (1,675)
Total
$270,799 $(735)$141,833 $(1,409)$412,632 $(2,144)
December 31, 2022
Less than 12 Months12 Months or GreaterTotal
(in thousands)
Fair Value
Gross
Unrealized Losses
Fair Value
Gross
Unrealized Losses
Fair Value
Gross
Unrealized Losses
Agency securities$61,117 $(843)$3,437 $(70)$64,554 $(913)
Certificates of Deposit481 (10)2,375 (49)2,856 (59)
Commercial and corporate obligations44,213 (624)14,778 (292)58,991 (916)
US Treasury Securities298,575 (2,667)41,937 (522)340,513 (3,189)
Total
$404,386 $(4,144)$62,527 $(933)$466,914 $(5,077)
As of September 30, 2023 and December 31, 2022, unrealized losses on available-for-sale investments were $2.1 million and $5.1 million, respectively, with unrealized losses of $1.4 million, on available for sale investments that were in an unrealized loss position for greater than 12 months as of September 30, 2023. 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 was recorded.
7. Stockholders’ Equity
Common Stock
Of the 500,000,000 shares of common stock authorized, 26,575,178 shares were issued and outstanding as of September 30, 2023.
Stock Repurchase Program
In January 2023, our Board of Directors authorized a stock repurchase program (the “Repurchase Program”) to repurchase up to $50.0 million of our outstanding common stock, par value $0.001 per share. The Repurchase Program was completed in May 2023.
The following table presents the Repurchase Program activity through May 5, 2023, the end date of the Repurchase Program:
Total number of shares purchasedAverage price paid per shareApproximate dollar value of shares purchased
(in thousands)
First Quarter 20231,589,424 $24.19 $38,456 
Second Quarter 2023534,790 21.59 11,544 
Total2,124,214 $50,000 
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The repurchased common stock was subsequently retired after the repurchase and the par value of the shares was charged to common stock. The excess of the repurchase price over the par value was applied against additional paid in capital.
Open Market Sales Agreement
In November 2022, we entered into the Cowen Sales Agreement with Cowen and Company, LLC, through which we may offer and sell shares of our common stock, having an aggregate offering of up to $150.0 million through Cowen and Company, LLC as our sales agent. As of September 30, 2023, we had sold no shares under this agreement.
8. Equity Incentive Plans
2017 Equity Incentive Plan
In January 2017, our Board of Directors and stockholders approved and adopted the 2017 Equity Incentive Plan (the “2017 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 1,140,527 shares as of January 1, 2023. As of September 30, 2023, 2,457,312 shares were available for future issuance.
Employee Stock Purchase Plan
In January 2017, our Board of Directors and stockholders approved and adopted the 2017 Employee Stock Purchase Plan or the ESPP. 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 285,131 shares as of January 1, 2023. As of September 30, 2023, 76,413 shares have been issued under the ESPP. As of September 30, 2023, 1,756,427 shares were available for future issuance under the ESPP.
Stock Options
Stock options granted to employees and non-employees generally vest over a four-year period while stock options granted to directors generally 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 nine months ended September 30, 2023 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, 20233,673,208 $32.04 6.28$18,686 
Granted1,426,831 $22.39 
Exercised(90,883)$18.95 
Forfeitures and cancellations(912,703)$37.71 
Outstanding at September 30, 20234,096,453 $27.71 7.76$2,603 
Exercisable at September 30, 20232,007,556 $31.07 6.52$2,499 
Total cash received from the exercise of stock options was approximately $1.8 million during the nine months ended September 30, 2023.
Time-based Restricted Stock Units
Each Restricted Stock Unit (“RSU”) represents one equivalent share of our common stock to be issued after satisfying the applicable continued service-based vesting criteria over a specified period. 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
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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 Restricted Stock UnitsWeighted-Average Grant Date Fair Value
Weighted-Average
Remaining
Contractual
Term
(in years)
Aggregate
Intrinsic
Value (in
thousands)
Outstanding at January 1, 20231,028,843 $26.14 1.17$31,884 
Granted513,274 $22.40 
Released(68,900)$23.89 
Forfeitures and cancellations(46,945)$21.87 
Outstanding at September 30, 20231,426,272 $25.04 0.92$25,616 
RSU expected to vest at September 30, 20231,426,272 $25.04 0.92$25,616 
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 were determined on the date of grant using the Black-Scholes option valuation model with the following weighted-average assumptions:
Nine Months Ended
September 30,
20232022
Risk-free interest rate3.7 %2.2 %
Expected volatility85.9 %88.2 %
Expected dividend yield % %
Expected term (in years)5.786.15
Weighted-average grant date fair value per share$16.31 $21.89 
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 historical option term for 2023 and the simplified life method for 2022, 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 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.
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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
September 30,
Nine Months Ended
September 30,
(in thousands)2023202220232022
Research and development$2,222 $1,547 $7,675 $4,997 
General and administrative5,585 4,724 17,419 15,674 
Total$7,807 $6,271 $25,094 $20,671 
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 and nine months ended September 30, 2023, we recognized $3.0 million and $8.8 million, respectively, and $3.0 million and $6.2 million during the three and nine months ended September 30, 2022, respectively, of non-cash stock-based compensation cost related to the award.
At September 30, 2023, there was $33.8 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 2.73 years and $15.3 million of unrecognized cost related to unvested RSU awards, which is expected to be recognized over a period of 1.38 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 was initially $4.20 per rentable square foot and is 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 September 30, 2023, 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 the lease commencement date 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 7.9 years.
The following non-cancellable office lease costs are included in our consolidated statements of cash flow (in thousands):
Nine Months Ended
September 30,
LeasesClassification on the Cash Flow20232022
Operating lease costOperating$1,858 $1,858 
Cash paid for amounts included in the measurement of lease liabilitiesOperating1,783 1,732 
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At September 30, 2023, the future minimum annual obligations for the Company’s operating lease liabilities are as follows (in thousands):
Years Ending December 31,
2023$602 
20242,457 
20252,531 
20262,607 
20272,685 
Thereafter10,554 
Total minimum payments required21,436 
Less imputed interest(3,202)
Total$18,234 
10. Subsequent Events
Collaborative Research and Development Agreements
GSK
In October 2023, GSK terminated the anti-LAG-3 antagonist antibody development program under the GSK Agreement and, as a result, we have regained full global rights to the anti-LAG-3 antagonist antibody development program.
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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 two checkpoint agonists in clinical-stage development: rosnilimab and ANB032;
the impact of political, economic or public health events, such as 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 find a licensing partner for imsidolimab and etokimab;
our ability to obtain funding for our operations on favorable terms or at all, including funding necessary to complete further development and commercialization of our product candidates;
general macro-economic factors, including volatility in equity markets, and fluctuations in interest rates and foreign exchange rates;
the timing of and the ability to obtain and maintain regulatory approvals for our product candidates, partnered product candidates and/or product candidates for which we may receive royalties;
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. and 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; 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 risks, nor can we assess the impact of all factors on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements we may make. In light of these risks, uncertainties, and assumptions, the forward-looking events and circumstances discussed in this Quarterly Report
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may not occur, and actual results could differ materially and adversely from those anticipated or implied in the forward-looking statements.
You should not rely upon forward-looking statements as predictions of future events. Although we believe that the expectations reflected in the forward-looking statements are reasonable, we cannot guarantee that the future results, levels of activity, performance, or events and circumstances reflected in the forward-looking statements will be achieved or occur. We undertake no obligation to update publicly any forward-looking statements to conform these statements to actual results or to changes in our expectations, except as required by law.
You should read this Quarterly Report with the understanding that our actual future results, levels of activity, performance, and events and circumstances may be materially different from what we expect.
Unless the context indicates otherwise, as used in this Quarterly Report, the terms “AnaptysBio,” “company,” “we,” “us” and “our” refer to AnaptysBio, Inc., a Delaware corporation, and its subsidiaries taken as a whole, unless otherwise noted. AnaptysBio is our common law trademark. This Quarterly Report contains additional trade names, trademarks, and service marks of other companies, which are the property of their respective owners. We do not intend our use or display of other companies’ trade names, trademarks, or service marks to imply a relationship with, or endorsement or sponsorship of us by, these other companies.
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Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations
You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited consolidated financial statements and related notes for the nine months ended September 30, 2023, included in Part I, Item 1 of this report and with our audited consolidated financial statements and related notes thereto for the year ended December 31, 2022 included in our Annual Report on Form 10-K. This discussion and other sections of this Quarterly Report contain forward-looking statements that involve risks and uncertainties, such as our plans, objectives, expectations, intentions, and beliefs. Our actual results could differ materially from those discussed in these forward-looking statements. Factors that could cause or contribute to such differences include, but are not limited to, those identified below and those discussed in the section entitled “Risk Factors” included in Part II, Item 1A of this Quarterly Report. You should also carefully read “Special Note Regarding Forward-Looking Statements.”
Overview
We are a clinical-stage biotechnology company focused on delivering innovative immunology therapeutics. We are developing immune cell modulating antibodies, including two wholly owned checkpoint agonists in clinical-stage development, for autoimmune and inflammatory disease: rosnilimab, our PD-1 agonist, previously referred to as ANB030, in a Phase 2b trial for the treatment of moderate-to-severe rheumatoid arthritis (“RA”) and a planned Phase 2 trial for the treatment of moderate-to-severe ulcerative colitis (“UC”); and ANB032, our BTLA agonist, in a Phase 2b trial for the treatment of moderate-to-severe atopic dermatitis (“AD”). We also have other preclinical immune cell modulator candidates in our portfolio, including ANB033, an anti-CD122 antagonist antibody for the treatment of autoimmune and inflammatory diseases. In addition, we have developed two cytokine antagonists that we are exploring options for out-licensing: imsidolimab, our anti-IL-36R antibody, in a Phase 3 trial for the treatment of generalized pustular psoriasis (“GPP”), and etokimab, our anti-IL-33 antagonist that is Phase 2/3 ready. We have also discovered multiple therapeutic antibodies licensed to GlaxoSmithKline, Inc. (“GSK”) in a financial collaboration for immuno-oncology, including an anti-PD-1 antagonist antibody (Jemperli (dostarlimab-gxly)) and an anti-TIM-3 antagonist antibody (cobolimab, GSK4069889). We currently recognize revenue from milestones and royalties achieved under our immuno-oncology collaboration with GSK.
Our Wholly Owned Product Candidate Pipeline
Our immune cell modulating antibodies, including anti-inflammatory checkpoint agonists for PD-1 and BTLA, treat inflammatory disorders by down regulating immune responses mediated by multiple immune cell types including T cells, B cells, and dendritic cells. T cells require both antigen presentation to the T cell receptor and co-stimulation to be activated. When these interactions are inhibited, T cells can’t be effectively primed to expand and differentiate into inflammatory T cells. Inhibition of these signals is the basis of checkpoint agonism.
We believe these molecules have potential applicability across a broad range of autoimmune and inflammatory disorders including dermatology, rheumatology, gastroenterology, respiratory, and neurology therapeutic areas.
Rosnilimab
PD-1, or programmed cell death protein 1, is an inhibitory checkpoint receptor that regulates T cells. It is expressed preferentially on activated T cells, reducing potential off-target activity by rosnilimab. Genetic mutations in the PD-1 pathway are known to be associated with increased susceptibility to human inflammatory diseases, and hence we believe that rosnilimab is applicable to diseases where PD-1 checkpoint receptor function may be insufficient to maintain immune homeostasis.
Rosnilimab is an IgG1 antibody that targets PD-1+ T cells broadly impacting pathogenic drivers of autoimmune and inflammatory diseases. Rosnilimab is optimized to enable a tight immune synapse formation by binding to the PD-1 checkpoint receptor on a membrane-proximal epitope, and simultaneously anchoring to an FC receptor, on an opposing cell, supporting crosslinking. Rosnilimab is anticipated to specifically reduce PD-1+ T cell activity via three distinct mechanisms of action: to deplete PD-1high effector T cells, to deplete PD-1high Tfh and Tph cells, and to agonize PD-1 intermediate T cells. This drives specific immunological outcomes in both inflamed tissue and the periphery, such as reduction in T cell migration, proliferation and cytokine secretion, and reduction of plasma cell generation & autoantibody levels.
In in vitro studies, when PD-1+ T cells were cocultured in the presence of NK cells, rosnilimab demonstrated potent depletion of PD-1+ T cells. In separate in vitro studies, activating T cells in the presence of only dendritic cells (in the absence of any cells capable of mediating depletion), rosnilimab demonstrated promising agonism properties such as reduction of PD-1+T cell proliferation with a deep level of inhibition.
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We announced positive top-line data from a healthy volunteer Phase 1 trial of rosnilimab in November 2021. A total of 144 subjects were enrolled in the randomized, double-blind, placebo-controlled healthy volunteer Phase 1 trial, where single ascending dose (“SAD”) cohorts received subcutaneous or intravenous (“IV”) single doses of rosnilimab up to 600mg or placebo, while multiple ascending dose (“MAD”) cohorts received four weekly subcutaneous doses of rosnilimab ranging up to 400mg or placebo. Rosnilimab was generally well-tolerated and no dose limiting toxicities were observed. Two serious adverse events (“SAEs”) were reported in single dose cohorts, including obstructive pancreatitis in a placebo-dosed subject and COVID-19 infection in a rosnilimab-dosed subject leading to discontinuation. The COVID-19 infection was deemed unrelated to treatment. No SAEs were reported in subjects receiving multiple doses of rosnilimab or placebo.
Rosnilimab demonstrated a favorable pharmacokinetic (“PK”) profile with an estimated two-week half-life for subcutaneous and IV routes of administration. Full PD-1 receptor occupancy was observed rapidly and was maintained for at least 30 days. Potent and sustained reduction was observed in peripheral PD-1+ T cells for >30 days, including >90% reduction of PD-1high T cells and a >50% reduction of PD-1+ T cells while bringing the overall T cell composition to a less activated state.
We executed a randomized placebo-controlled 45-patient Phase 2 trial assessing a single 400mg monthly dose of rosnilimab in moderate-to-severe alopecia areata patients. In January 2023, we reported interim results of blinded data which suggested that target improvement in severity of alopecia tool was not achieved. In October 2023, we reported rosnilimab was generally well tolerated; no dose limiting toxicities were observed and no SAEs were reported. Potent and sustained reduction was observed in peripheral PD-1+ T cells for greater than 30 days, including >90% reduction of PD-1high T cells and a >50% reduction of PD-1+ T cells while bringing the overall T cell composition to a less activated state. Further development in alopecia areata will not be pursued.
We are conducting a randomized placebo-controlled 420-patient global Phase 2b trial assessing three dose levels of subcutaneously administrated rosnilimab in moderate-to-severe RA for up to 28 weeks on well-established endpoints including ACR20/50/70 and DAS28. We anticipate reporting top-line data on the primary endpoint in the RA trial by mid 2025. In the fourth quarter of 2023, we plan to initiate a randomized placebo-controlled 130-patient, global Phase 2 trial assessing two dose levels of subcutaneously administered rosnilimab in moderate-to-severe UC for up to 24 weeks on well established endpoints including clinical remission on the modified Mayo score (“mMS”), clinical response on the mMS and endoscopic remission. We anticipate reporting top-line data on the primary endpoint in the UC trial in the first half of 2026.
ANB032
BTLA, or B and T lymphocyte attenuator, is an inhibitory checkpoint receptor that regulates T cells, B cells, and dendritic cell (DC) function. It’s expressed only on immune cells and preferentially on activated immune cells, avoiding off-target activity by ANB032.
BTLA signaling has proven to be a highly potent modality in preclinical models for reducing inflammatory disease, by reducing T cell expansion, inflammatory cytokine secretion and migration into tissues. 
ANB032 is a non-depleting antibody that binds to the BTLA checkpoint receptor and inhibits activated T cell proliferation, reduces inflammatory cytokine secretion and modulates dendritic cell (DC) function, including inducing Tregs, both in inflamed tissue and the periphery. In addition, by acting in the periphery, ANB032 prevents further migration of pathogenic T cells into the inflamed tissue.
ANB032 is anticipated to down-modulate the activity of T cells, B cells and dendritic cells via several potential mechanisms: BTLA agonistic activity (resulting in inhibition of T cell expansion, broad reduction of inflammatory Th1, Th2, Th17 and Th22 cytokines, inhibition of dendritic cell maturation, reduction in costimulatory molecule expression, and enhanced generation of Tregs), stabilization of the interaction of BTLA and HVEM in cis which prevents pro-inflammatory signaling mediated by HVEM ligands, and abrogation of pro-inflammatory HVEM signaling mediated by BTLA in trans.
In in vitro studies, ANB032 demonstrated inhibition of T cell proliferation and reduction of inflammatory cytokine secretion (Th1, Th2, Th17 and Th22). While Th2 targeted therapies provide benefit to patients with chronic moderate-to-severe atopic dermatitis (AD), there is compelling evidence that AD is broader than a Th2 driven disease, as Th1, Th17, Th22 and other cell types, including dendritic cells, contribute significantly to the pathogenesis. ANB032 inhibition of inflammatory Th1, Th2, Th17 and Th22 activity, and modulation of additional cell types such as B cells and dendritic cells, creates the potential for broader, deeper and more durable responses than more narrowly targeted interventions.
We announced positive top-line data from a healthy volunteer Phase 1 trial of ANB032, under a CTN, in April 2022. A total of 96 subjects were enrolled in the randomized, double-blind, placebo-controlled healthy volunteer Phase 1 trial, where
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SAD cohorts received subcutaneous or IV single doses of ANB032 or placebo, while MAD cohorts received four weekly subcutaneous doses of ANB032 or placebo. ANB032 was generally well-tolerated and no dose limiting toxicities were observed. No SAEs were reported. ANB032 demonstrated a favorable PK profile with an estimated two-week half-life for subcutaneous and IV routes of administration. Full BTLA receptor occupancy was observed rapidly and was maintained for at least 30 days.
We are conducting a randomized placebo-controlled 160 patient global Phase 2b trial assessing three dose levels of subcutaneously administrated ANB032 in moderate-to-severe AD for 12 weeks on well-established endpoints including EASI75 and IGA 0/1 at week 14. Patients will then be followed for an additional 24 weeks after treatment to understand longer term safety as well as the potential for prolonged and sustained efficacy. We anticipate reporting top-line data on the primary endpoint from this trial by the end of 2024.
ANB033
ANB033 targets CD122, the common beta subunit shared by the IL-15 and IL-2 receptors. IL-15 and IL-2 signaling mediate the proliferation and survival of NK cells and subsets of T cells, including tissue resident memory T cells (TRM), as well as inflammatory cytokine secretion (IFNγ) during T cell activation. ANB033 is designed with an affinity to CD122 that inhibits IL-15 and IL-2 signaling through the low affinity IL-2 receptor (comprised of CD122 and the common gamma subunit, CD132) while sparing IL-2 signaling through the high affinity IL-2 receptor (comprised of CD122, CD132 and the alpha receptor subunit for IL-2, CD25) expressed by regulatory T cells. This leads to reduced pathogenic TRM cell numbers in diseased tissue, as well as reduced numbers of cell types that are particularly dependent on IL-15 and/or IL-2 signaling, such as NK cells and certain CD8 T cell subsets, with the potential to achieve and maintain remission of inflammation through the elimination of these disease-causing cells, while sparing regulatory T cells. By preventing the consumption of IL-2 by pathogenic cells that express the low affinity IL-2 receptor, circulating levels of IL-2 may increase, potentially enhancing regulatory T cell numbers that express the high affinity IL-2 receptor in the setting of inflammation. We anticipate submitting an IND for a Phase 1 clinical trial with ANB033 during the first half of 2024.
Imsidolimab
Imsidolimab is an IgG4 antibody that inhibits the function of the interleukin-36-receptor, or IL-36R, that is being developed for the treatment of GPP. We completed a Phase 1 clinical trial in healthy volunteers, which was presented at the European Academy of Allergy and Clinical Immunology in 2018, where imsidolimab was well-tolerated, no dose-limiting toxicities were observed, and no SAEs were reported. In July 2020, the FDA granted Orphan Drug Designation for imsidolimab for the treatment of patients with GPP. We completed an open-label, multi-dose, single-arm Phase 2 clinical trial of imsidolimab in 8 GPP patients, also referred to as the GALLOP clinical trial, where top-line data through week 16 was presented at the European Academy of Dermatology and Venerology (EADV) Congress in October 2021.
We initiated two Phase 3 clinical trials for imsidolimab in GPP. We completed the first randomized placebo-controlled trial, called GEMINI-1, in 45 patients, assessing two, single dose levels of IV-administered imsidolimab. As of October 2023, of the patients who received a single dose of 750mg IV imsidolimab, 53.3% achieved Generalized Pustular Psoriasis Physician Global Assessment (GPPPGA) 0/1 (clear or almost clear) at Week 4, our primary endpoint, compared to 13.3% of patients on placebo (p=0.0131). The GPPPGA assessment, representing a stringent and comprehensive characterization of disease severity, required satisfying an overall clinical response score of 0/1 (clear or almost clear) collectively across each GPP disease attribute, including pustulation, erythema and scaling. Imsidolimab demonstrated favorable safety and tolerability with no serious adverse effects.
Patients completing the GEMINI-1 trial were eligible to be subsequently enrolled in GEMINI-2, our second Phase 3 trial for imsidolimab in GPP, where they will receive monthly doses of 200mg subcutaneous imsidolimab or placebo depending upon whether they are responders, partial responders or non-responders to treatment under GEMINI-1. Additionally, 66.7% (10/15) of placebo patients exited GEMINI-1 early, crossed-over to GEMINI-2 and were eligible to receive rescue therapy with a single dose of 750mg IV imsidolimab. The objective of GEMINI-2 is to assess the efficacy and safety of imsidolimab after 3 years of monthly dosing.
We intend to out-license imsidolimab in 2024 prior to potential FDA approval.
Etokimab
Etokimab inhibits IL-33 function and acts upstream of key cell types involved in atopy and the subsequent release of Th2 cytokines. IL-33 is a pro-inflammatory cytokine that signals through the ST2 receptor, which multiple studies suggest serves as
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a central mediator of various immune responses leading to Th2-type inflammatory disorders, including asthma, COPD, atopic and epithelial diseases. Individuals with asthma symptoms express higher levels of IL-33 than healthy control subjects. IL-33 initiates a diverse array of cellular immune responses, including the activation of mast cells, basophils and eosinophils, leading to production of downstream cytokines, such as IL-4, IL-5 and IL-13, which are associated with atopic diseases. IL-33 also acts on Th2 effector cells and Innate Lymphoid Cell Type 2 (ILC2), two types of white blood cells that initiate and orchestrate atopic responses. We have no ongoing clinical trials of etokimab and etokimab is available to out-license.
The following table summarizes certain key information about our wholly owned product candidates:

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Collaborative Programs
Multiple Company-discovered antibody programs have been advanced to preclinical and clinical milestones under our collaborations. Our collaborations include an immuno-oncology-focused collaboration with GSK.
Under the GSK Agreement, a BLA for our most advanced partnered program, which is an anti-PD-1 antagonist antibody called Jemperli (dostarlimab), was approved by the FDA in April 2021 for the treatment of advanced or recurrent deficient mismatch repair endometrial cancer (dMMREC). In February 2023, the FDA granted full approval for this indication (from an accelerated approval). In addition, in April 2021 the European Medicines Agency (“EMA”) granted conditional marketing authorization in the European Union (EU) for Jemperli for use in women with mismatch repair deficient (dMMR)/microsatellite instability-high (MSI-H) recurrent or advanced endometrial cancer who have progressed on or following prior treatment with a platinum containing regimen. A second FDA approval was received in August 2021 for Jemperli in pan-deficient mismatch repair tumors (PdMMRT). In July 2023, the FDA approved Jemperli in combination with chemotherapy for the treatment of adult patients with mismatch repair deficient (dMMR)/microsatellite instability-high (MSI-H) primary advanced or recurrent endometrial cancer. A marketing authorization application is also under review by the European Medicines Agency.
Jemperli is currently in Phase 3 trials for various solid tumor indications, including a Phase 3 trial in first-line ovarian cancer with top-line results expected in the first half of 2024.
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In addition, under the collaboration, GSK is developing dostarlimab in combination with another development program from the GSK Agreement: cobolimab, an anti-TIM-3 antibody. GSK is conducting a Phase 3 trial, COSTAR Lung, which is a randomized, open label 3-arm trial comparing cobolimab plus dostarlimab plus docetaxel to dostarlimab plus docetaxel to docetaxel alone in patients with advanced non-small-cell lung cancer (“NSCLC”) who have progressed on prior anti-PD-(L)1 therapy and chemotherapy with top-line results expected in the second half of 2024.
For more information about these collaborations, see Note 4 — Collaborative Research and Development Agreements in the accompanying notes to the consolidated financial statements.
Components of Operating Results
Collaboration Revenue
We have not generated any revenue from product sales. Our revenue has been derived from amortization of upfront license payments, research and development funding, milestone and royalty payments under collaboration and license agreements with our collaborators. From inception through September 30, 2023, we have recognized $246.2 million in revenue from our collaborators.
Research and Development Expense
Research and development expenses consist of costs associated with our research and development activities, including drug discovery efforts, preclinical and clinical development of our programs, and manufacturing. Our research and development expenses include:
External research and development expenses incurred under arrangements with third parties, such as contract research organizations (“CROs”), consultants, members of our scientific and therapeutic advisory boards, and contract manufacturing organizations (“CMOs”);
Employee-related expenses, including salaries, benefits, travel, and stock-based compensation;
Facilities, depreciation and other allocated expenses, which include direct and allocated expenses for rent and maintenance of facilities, depreciation of leasehold improvements and equipment, and laboratory supplies; and
License and sub-license fees.
We expense research and development costs as incurred. We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expense when the service has been performed or when the goods have been received.
We are conducting research and development activities primarily on inflammation programs. We have a research and development team that conducts antibody discovery, characterization, translational studies, IND-enabling preclinical studies, and clinical development. We conduct some of our early research and preclinical activities internally and plan to rely on third parties, such as CROs and CMOs, for the execution of certain of our research and development activities, such as in vivo toxicology and pharmacology studies, drug product manufacturing, and clinical trials.
We expect our research and development expenses to be higher for the foreseeable future as we continue to advance our product candidates.
General and Administrative Expense
General and administrative expenses consist primarily of salaries and related benefits, including stock-based compensation for our executive, finance, legal, business development, human resource, and support functions. Other general and administrative expenses include allocated facility-related costs not otherwise included in research and development expenses, travel expenses, and professional fees for auditing, tax, and legal services.
Non-cash Interest Expense for the Sale of Future Royalties
Non-cash interest expense for the sale of future royalties consists of interest related to the liability for the sale of future royalties, as well as the amortization of debt issuance costs. We impute interest on the unamortized portion of the liability for the sale of future royalties using the effective interest method and record interest expense based on timing of the payments over
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the term of the Royalty Monetization Agreements. Our estimate of the interest rate under the arrangements is based on forecasted royalty and milestone payments expected to be made over the life of the agreements.
Interest Income
Interest income consists primarily of interest earned on our short-term and long-term investments and is recognized when earned.
Critical Accounting Policies and Use of Estimates
Our management’s discussion and analysis of our financial condition and results of operations are based on our financial statements, which have been prepared in accordance with U.S. generally accepted accounting principles (“U.S. GAAP”). The preparation of these financial statements requires us to make judgments and estimates that affect the reported amounts of assets, liabilities, revenues, and expenses and the disclosure of contingent assets and liabilities in our financial statements. We base our estimates on historical experience, known trends and events, and various other factors that are believed to be reasonable under the circumstances. Actual results may differ from these estimates under different assumptions or conditions. On an ongoing basis, we evaluate our judgments and estimates in light of changes in circumstances, facts, and experience. We believe there have been no significant changes in our critical accounting policies as discussed in our Annual Report on Form 10-K filed with the Securities and Exchange Commission (the “SEC”) on March 1, 2023.
Results of Operations - Comparison of the Three and Nine Months Ended September 30, 2023 and 2022
Collaboration Revenue
Collaboration revenue consists of both milestone payments under the collaborations, and royalty payments. We recognized $0 in milestone revenue during each of the three and nine months ended September 30, 2023 and 2022. We expect that any collaboration revenue we generate will continue to fluctuate from period to period as a result of the timing and amount of milestones from our existing collaborations.
Royalty revenue is a function of our partners' product sales and the applicable royalty rate. During the three months ended September 30, 2023 and 2022, we recognized $3.3 million and $1.3 million, respectively, related to the net sales of GSK’s Jemperli and Zejula, which we estimate based on either GSK’s prior sales experience or actuals. During the nine months ended September 30, 2023 and 2022, we recognized $8.2 million and $3.5 million, respectively, of royalty revenue related to the net sales of GSK’s Jemperli and Zejula. All royalty revenue related to Zejula global net sales starting July 2022 are paid directly to a wholly owned subsidiary of DRI Healthcare Trust pursuant to the Zejula Royalty Monetization Agreement. For more information see Note 5 — Sale of Future Royalties in the accompanying notes to the consolidated financial statements.
Research and Development Expenses
Research and development expenses were $30.9 million during the three months ended September 30, 2023 compared to $22.1 million during the three months ended September 30, 2022 for an increase of $8.8 million, primarily due to a $4.0 million increase in outside services for manufacturing expenses, $2.7 million increase in clinical expenses, $1.5 million increase in salaries and related expenses, including stock-based compensation expense, and $0.6 million increase in other research and development expenses.
Research and development expenses were $98.8 million during the nine months ended September 30, 2023 compared to $65.4 million during the nine months ended September 30, 2022 for an increase of $33.4 million, primarily due to a $21.2 million increase in outside services for manufacturing expenses, $5.3 million increase in clinical expenses, $5.5 million increase in salaries and related expenses, including stock-based compensation expense, and $1.4 million increase in other research and development expenses.
We do not track fully burdened research and development costs separately for each of our product candidates. We review our research and development expenses by focusing on external development and internal development costs. External development expenses consist of costs associated with our external preclinical and clinical trials, including pharmaceutical development and manufacturing. Included in preclinical and other unallocated costs are external corporate overhead costs that are not specific to any one program. Internal costs consist of salaries and wages, share-based compensation and benefits, which
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are not tracked by product candidate as several of our departments support multiple product candidate research and development programs. The following table summarizes the external costs attributable to each program and internal costs:
Three Months Ended
September 30,
Nine Months Ended
September 30,
(in thousands)20232022Increase/(Decrease)20232022Increase/(Decrease)
External Costs
Rosnilimab$8,071 $1,733 $6,338 $16,456 $5,425 $11,031 
ANB0325,024 1,083 3,941 11,583 2,223 9,360 
Imsidolimab3,219 9,946 (6,727)