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 six months ended June 30, 2020, 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, 2019,
included in the Company's 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 developing first-in-class
immunology therapeutic product candidates to patients. We are focused on
emerging immune control mechanisms applicable to inflammation and
immuno-oncology indications. We develop our product candidates using our
proprietary antibody discovery technology platform, which is based upon a
breakthrough understanding of the natural process of antibody generation, known
as somatic hypermutation ("SHM"), and replicates this natural process of
antibody generation in vitro. Our strategy is to advance the development of our
proprietary product candidates, and where applicable, establish partnerships
with leading biopharmaceutical companies where we retain certain development and
commercialization rights. Our most advanced wholly-owned antibody programs,
imsidolimab, etokimab, ANB030 and ANB032, are designed to modulate therapeutic
targets that are genetically associated with human inflammatory disorders.
Imsidolimab, our IL-36R antibody previously referred to as ANB019, inhibits the
interleukin-36 receptor ("IL-36R"), and is being developed for the treatment of
rare inflammatory diseases including generalized pustular psoriasis, ("GPP"),
and palmoplantar pustulosis, ("PPP"). We completed a Phase 1 clinical trial in
healthy volunteers, which was presented at EAACI 2018, where imsidolimab was
well-tolerated by all subjects, no dose-limiting toxicities were observed, and
no serious adverse events were reported among any subjects in the trial. We are
conducting an open-label, multi-dose, single-arm Phase 2 trial of imsidolimab in
up to 10 GPP patients, also referred to as the GALLOP trial, where an interim
analysis, announced in September 2019, was conducted after the first two
patients completed 16-weeks (Day 113) with imsidolimab monotherapy. Both
patients achieved the primary endpoint of disease improvement at Day 29 and Day
113 without requiring rescue therapy. Patients demonstrated rapid and sustained
modified Japanese Dermatology Association ("mJDA") improvement and complete
clearance of skin pustules from Day 8 through Day 113. C-reactive protein
("CRP"), levels decreased to nearly normal in both patients and genotypic
testing of these two patients indicated that imsidolimab may be broadly
applicable to pustular disease patients without a requirement for genetic
screening. We anticipate additional clinical data and a regulatory strategy
update for the development of imsidolimab in GPP during the fourth quarter of
2020. In July 2020, the U.S. Food and Drug Administration granted orphan drug
designation for imsidolimab for the treatment of patients with GPP. We are also
conducting a randomized, double-blind, placebo-controlled approximately
50-patient multi-dose trial of imsidolimab in PPP, also referred to as the
POPLAR trial, where top-line data are anticipated in the first quarter of 2021,
which has been impacted by COVID-19 related clinical site closures.
In addition to GPP and PPP, we anticipate initiation of Phase 2 trials of
imsidolimab in two new indications. Treatment of solid tumors with inhibitors of
epidermal growth factor (EGFRi) and MAPK/ERK kinase (MEKi) is frequently limited
by the occurrence of skin toxicities. Recent translational data has suggested
that these skin toxicities are mediated by excess IL-36 signaling, leading to
IL-8-mediated cutaneous neutrophilia and acneiform rash. Based on existing
claims data, approximately 60,000 patients are prescribed EGFRi and/or MEKi
treatments annually, and the vast majority of these patients experience
dermatological toxicity, which in some cases leads to dose reduction and/or
discontinuation of treatment. Current standard-of-care treatments are generally
ineffective in patients with the most severe grades of EGFRi and/or MEKi
mediated acneiform rash. During the fourth quarter of 2020, we anticipate
initiating a Phase 2 trial of imsidolimab, in combination with EGFRi/MEKi
inhibitors, to assess its efficacy in the treatment of this indication.

Ichthyosis is a family of rare, inherited, dermatological disorders
characterized by dry, scaling and thickened skin. Recent human translational
studies have suggested that the underlying skin inflammation responsible for
ichthyosis is mediated by dysregulated IL-36 signaling, and we believe that
imsidolimab treatment may be efficacious in treatment of this condition.
Approximately 6,000 patients in the United States are affected with
moderate-to-severe levels of ichthyosis and no approved
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therapies are available for this disease. We anticipate initiating a Phase 2
trial of imsidolimab in this indication during the fourth quarter of 2020.
Etokimab, our anti-IL-33 antibody previously referred to as ANB020, inhibits the
activity of the interleukin-33 cytokine ("IL-33"), which we believe may be
applicable to the treatment of respiratory disorders. We are conducting a
randomized, placebo-controlled Phase 2 trial of etokimab in approximately 100
adult patients with CRSwNP, also referred to as the ECLIPSE trial, which is a
debilitating atopic disorder associated with elevated IL-33 pathway signaling.
We recently reported top-line data from a week 8 interim analysis of the ECLIPSE
trial. Patients dosed with etokimab every four (q4w) or eight weeks (q8w) failed
to achieve statistically significant improvement in their bilateral nasal polyps
score (NPS), an endoscopic measure of nasal occlusion, and in their sino-nasal
outcome test (SNOT-22), a patient reported quality-of-life assessment, versus
placebo at the week 8 timepoint. Both endpoints demonstrated statistically
significant improvement over baseline levels of NPS and SNOT-22. Blood
eosinophil levels, which are a biomarker of etokimab's mechanism, demonstrated
statistically significant reduction relative to baseline in both etokimab
treatment arms. We intend to determine next steps for the etokimab program after
reviewing week 16 primary endpoint by year-end 2020.
Our third wholly-owned program, ANB030, is an anti-PD-1 agonist antibody program
designed to augment PD-1 signaling through ANB030 treatment to suppress T-cell
driven human inflammatory diseases. Genetic mutations in the PD-1 pathway are
known to be associated with increased susceptibility to human inflammatory
diseases, and hence we believe that ANB030 is applicable to diseases where PD-1
checkpoint receptor function may be under-represented. We presented preclinical
data for ANB030 at the Festival of Biologics Annual Meeting in March 2020. Our
Investigational New Drug Application ("IND") for ANB030 has been cleared, and in
the first half of 2020 we initiated a Phase 1 healthy volunteer clinical trial,
which is designed to assess the safety, pharmacokinetics and pharmacodynamics of
ANB030 in single and multiple ascending dose cohorts. We anticipate top-line
data from this Phase 1 trial in mid-2021.
Our fourth wholly-owned program is an anti-BTLA modulator antibody, known as
ANB032, which is broadly applicable to human inflammatory diseases associated
with lymphoid and myeloid immune cell dysregulation. Mutations in the BTLA
signaling pathway are associated with human inflammatory disease and we believe
ANB032 silences pro-inflammatory signaling by modulating BTLA binding to HVEM.
We anticipate filing an IND for ANB032 during the fourth quarter of 2020.
In addition to our wholly-owned antibody programs, multiple Company-developed
antibody programs have been advanced to preclinical and clinical milestones
under our collaborations. We have received to date approximately $105.0 million
in cash receipts from collaborations. Our collaborations include an
immuno-oncology-focused collaboration with GSK, Inc. and an inflammation-focused
collaboration with BMS Corporation. A Biologics License Application ("BLA") for
our most advanced partnered program, which is an anti-PD-1 antagonist antibody
called dostarlimab, was submitted by GSK and accepted by the FDA for the
treatment of advanced or recurrent deficient mismatch repair endometrial cancer
("dMMREC"). In addition, the European Medicines Agency ("EMA") recently accepted
GSK's Marketing Authorization Application ("MAA") for dostarlimab in the EU for
(dMMREC). We received a $10.0 million cash milestone payment upon the FDA
acceptance and anticipate an additional $20.0 million cash milestone payment
upon first FDA approval of dostarlimab during the second half of 2020. This FDA
approval is dependent on a pre-approval inspection of the dostarlimab
manufacturing site by the FDA and the approval is therefore contingent on easing
of COVID-19 travel restrictions. We also received a $5.0 million milestone
payment for the EMA acceptance and anticipate an additional $10.0 million cash
milestone payment upon EMA approval. In addition, GSK anticipates submitting a
regulatory filing for potential approval of dostarlimab in a second indication,
the treatment of pan-deficient mismatch repair tumors, during the first half of
2021.We anticipate receiving additional milestones from GSK, of equal magnitude
to the milestone payments outlined above, upon acceptance and approval of BLA
and EMA filings of dostarlimab for this second indication. Dostarlimab is also
under development at GSK for a number of additional oncological indications. For
more information about these collaborations, see Part I-Note 4, Collaborative
Research and Development Agreements, above.
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The following table summarizes certain key information about our wholly-owned and partnered product candidates:


                    [[Image Removed: anab-20200630_g1.jpg]]

In addition, in December 2019, a strain of coronavirus was reported in Wuhan,
China, and began to spread globally, including to the United States and Europe,
in the following months. The World Health Organization has declared COVID-19 to
be a pandemic and a public health emergency of international concern. The full
impact of the COVID-19 outbreak is inherently uncertain at the time of this
report. The COVID-19 outbreak has resulted in travel restrictions and in some
cases, prohibitions of non-essential activities, disruption and shutdown of
businesses and greater uncertainty in global financial markets. As COVID-19 has
spread, it has significantly impacted the health and economic environment around
the world and many governments have closed most public establishments, including
restaurants, workplaces and schools. Our ongoing clinical trials have been, and
may continue to be, affected by the closure of offices, or country borders,
among other measures being put in place around the world. The inability to
travel and conduct face-to-face meetings can also make it more difficult to
enroll new patients in ongoing or planned clinical trials. Any of these
circumstances will potentially have a negative impact on our financial results
and the timing of our clinical trials.
The COVID-19 pandemic has caused us to modify our business practices (including
but not limited to curtailing or modifying employee travel, moving to full
remote work, and cancelling physical participation in meetings, events and
conferences), and we may take further actions as may be required by government
authorities or that we determine are in the best interests of our employees,
patients and business partners.
The extent of the impact of the COVID-19 on our future liquidity and operational
performance will depend on certain developments, including the duration and
spread of the outbreak, the impact on our trials, patients and collaboration
partners, and the effect on our suppliers.
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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 and milestone payments under collaboration and license agreements with
our collaborators. From inception through June 30, 2020, we have received $104.6
million in cash in non-dilutive funding 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 have completed Phase 1 and 2a trials for etokimab and Phase 1 trials for
imsidolimab and have ongoing Phase 2 clinical trials as well.
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.
Interest Expense
Interest expense consists of floating interest payments and amortization of
discounts on our outstanding notes payable relating to our Loan and Security
Agreement with Oxford Finance LLC and Silicon Valley Bank, as amended, which we
refer to as the Loan Agreement. On January 1, 2020, the Loan Agreement was paid
in full, without penalty or premium.
Interest Income
Interest income consists primarily of interest earned on our short-term and
long-term investments, and is recognized when earned.
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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 SEC on March 2, 2020.
Results of Operations - Comparison of the Three and Six Months Ended June 30,
2020 and 2019
Collaboration Revenue
We recognized $0 million and $15.0 million in collaboration revenue for the
three and six months ended June 30, 2020, respectively, related to two milestone
payments associated with dostarlimab, the anti-PD-1 antagonist antibody
partnered with GSK. The first milestone payment was for $10.0 million for
successful filing of the first NDA in a first indication and the second
milestone payment was for $5.0 million for successful filing of the first MAA in
a first indication. We recognized $5.0 million for both the three and six months
ended June 30, 2019 related to a milestone payments for the initiation of a
Phase 3 trial in a second indication for dostarlimab, the anti-PD-1 antagonist
antibody. 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.
Research and Development Expenses
Research and development expenses were $17.9 million during the three months
ended June 30, 2020 compared to $27.4 million during the three months ended June
30, 2019 for a decrease of $9.5 million, primarily due to a $7.6
million decrease in outside services for manufacturing expenses, $0.9 million
decrease in salaries and related expenses, including stock compensation expense,
$0.9 million decrease in clinical expenses, and a $0.1 million decrease in other
research and development expenses.
Research and development expenses were $38.9 million during the six months ended
June 30, 2020 compared to $48.0 million during the six months ended June 30,
2019 for a decrease of $9.1 million, primarily due to a $7.6 million decrease in
outside services for manufacturing expenses, $1.0 million decrease in salaries
and related expenses, including stock compensation expense, $0.4 million
decrease in clinical expenses, and a $0.1 million decrease in other research and
development expenses.
We do not track fully burdened research and development costs separately for
each of our drug 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 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:
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                                          Three Months Ended                                                                      Six Months Ended
                                               June 30,                                                                               June 30,
                                        2020              2019            Increase/(Decrease)           2020              2019            Increase/(Decrease)
External Costs
Etokimab                             $  3,969          $ 11,667          $           (7,698)         $ 11,891          $ 19,163          $           (7,272)
Imsidolimab                             3,625             5,108                      (1,483)            8,816            10,165                      (1,349)
ANB030                                    973             3,494                      (2,521)            1,639             4,977                      (3,338)
Preclinical and other unallocated
costs                                   5,392             2,201                       3,191             7,997             4,147                       3,850
Total External Costs                   13,959            22,470                      (8,511)           30,343            38,452                      (8,109)
Internal Costs                          3,989             4,880                        (891)            8,573             9,529                        (956)
Total Costs                          $ 17,948          $ 27,350          $           (9,402)         $ 38,916          $ 47,981          $           (9,065)


General and Administrative Expenses
General and administrative expenses were $4.7 million during the three months
ended June 30, 2020 compared to $4.3 million during the three months ended June
30, 2019 for an increase of $0.4 million, primarily due to a $0.6 million
increase in legal expenses and $0.2 million increase in insurance expense,
offset by a $0.2 million decrease in personnel costs including stock
compensation expense, $0.1 million decrease in professional fees, and $0.1
million decrease in travel expenses.
General and administrative expenses were $9.0 million during the six months
ended June 30, 2020 compared to $8.4 million during the six months ended June
30, 2019 for an increase of $0.6 million, primarily due to a $0.6 million
increase in legal expenses and $0.4 million increase in insurance expense,
offset by a $0.3 million decrease in professional fees, $0.1 million decrease in
personnel costs including stock compensation expense, and $0.1 million decrease
in travel expenses.
We expect that our general and administrative expenses will increase for the
foreseeable future as we incur additional costs associated with being a publicly
traded company, including legal, auditing and filing fees, additional insurance
premiums, investor relations expenses and general compliance and consulting
expenses. We also expect our intellectual property related legal expenses,
including those related to preparing, filing, prosecuting and maintaining patent
applications, to increase as our intellectual property portfolio expands.
Interest Expense
Interest expense was $0 for both the three and six months ended June 30, 2020,
and $0.3 million and $0.6 million during the three and six months ended June 30,
2019, respectively. The decrease in interest expense during the periods is due
to the final payment made on our Term Loans on January 1, 2020.
Interest Income
Interest income was $1.1 million and $3.0 million during the three and six
months ended June 30, 2020, respectively, and was $3.0 million and $5.9 million
during the three and six months ended June 30, 2019, respectively, which
primarily related to our short-term and long-term investments, the balance of
which decreased during the periods as a result of funding our clinical trial
programs. The decrease in interest income is also attributable to lower interest
rates during the six months ended June 30, 2020.
Other Income (Expense), Net
Other income (expense), net was income of less than $0.1 million and expense of
less than $0.1 million for the three and six months ended June 30, 2020,
respectively, and income of $0.1 million and expense of less than $0.1 million
for the three and six months ended June 30, 2019, respectively, and primarily
related to foreign exchange transactions through our Australian subsidiary and
with our foreign CROs and CMOs.
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Liquidity and Capital Resources
From our inception through June 30, 2020, we have received an aggregate of
$743.6 million to fund our operations which included $619.9 million from the
sale of equity securities, $104.6 million from our collaboration agreements and
$19.1 million from venture debt. As of June 30, 2020, we had $392.2 million in
cash, cash equivalents and investments.
In addition to our existing cash, cash equivalents and investments, we are
eligible to earn milestone and other contingent payments for the achievement of
defined collaboration objectives and certain nonclinical, clinical, regulatory
and sales-based events, and royalty payments under our collaboration agreements.
Our ability to earn these milestone and contingent payments and the timing of
achieving these milestones is primarily dependent upon the outcome of our
collaborators' research and development activities and is uncertain at this
time. Our rights to payments under our collaboration agreements are our only
committed external source of funds.
We may seek to obtain additional financing in the future through equity or debt
financings or through collaborations or partnerships with other companies. If we
are unable to obtain additional financing on commercially reasonable terms, our
business, financial condition and results of operations will be materially
adversely affected.
Funding Requirements
Our primary uses of capital are, and we expect will continue to be, third-party
clinical and preclinical research and development services, including
manufacturing, laboratory and related supplies, compensation and related
expenses, legal, patent and other regulatory expenses and general overhead
costs. We have entered into agreements with certain vendors for the provision of
services, including services related to commercial manufacturing, that we are
unable to terminate for convenience. Under such agreements, we are contractually
obligated to make certain minimum payments to the vendors, with the amounts to
be based on the timing of the termination and the specific terms of the
agreement.
As a publicly traded company, we incur significant legal, accounting and other
expenses that were not required as a private company. In addition, the
Sarbanes-Oxley Act of 2002, as well as rules adopted by the SEC and The Nasdaq
Global Stock Market, requires public companies to implement specified corporate
governance practices that were inapplicable to us as a private company. These
rules and regulations have increased our legal and financial compliance costs,
have made and will continue to make certain activities more time-consuming and
costly.
Cash, cash equivalents and investments totaled $392.2 million as of June 30,
2020, compared to $428.5 million as of December 31, 2019. We believe that our
existing cash, cash equivalents and investments will fund our current operating
plan at least into 2023. We have based this estimate on assumptions that may
prove to be wrong, and we could use our capital resources sooner than we expect.
Additionally, the process of testing drug candidates in clinical trials is
costly, and the timing of progress and expenses in these trials is uncertain.
Cash Flows
The following table summarizes our cash flows for the six months ended June 30,
2020 and 2019:
                                                                         Six Months Ended
                                                                             June 30,
(in thousands)                                                       2020                2019
Net cash (used in) provided by:
Operating activities                                             $  (34,722)         $  (31,616)
Investing activities                                                 86,145              67,533
Financing activities                                                 (1,268)             (2,961)

Net increase in cash, cash equivalents, and restricted cash $ 50,155

$ 32,956




Operating Activities
Net cash used in operating activities during the six months ended June 30, 2020
of $34.7 million was primarily due to our net loss of $29.8 million, adjusted
for addbacks for non-cash expenses of $6.1 million which includes stock-based
compensation and net decreases in working capital of $11.0 million. Net cash
used in operating activities during the six months
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ended June 30, 2019 of $31.6 million was primarily due to our net loss of $46.0
million, adjusted for non-cash expenses of $5.2 million which includes
stock-based compensation and net increases in working capital of $9.3 million.
Investing Activities
Net cash provided by investing activities during the six months ended June 30,
2020 and 2019 of $86.1 million and $67.5 million, respectively, primarily
relates to the timing of our investment maturity, which was used to fund our
operating expenses.
Financing Activities
The net cash used in financing activities during the six months ended June 30,
2020 of $1.3 million primarily related to principal and final payments of $1.4
million made on our Term Loans, offset by $0.1 million in proceeds from the
issuance of common stock upon the exercise of stock options. The net cash used
in financing activities during the six months ended June 30, 2019 of $3.0
million primarily related to principal payments of $3.8 million made on our Term
Loans, offset by $0.8 million in proceeds from the issuance of common stock upon
the exercise of stock options.
Contractual Obligations
Operating Leases
We have two non-cancellable office leases ("Office Leases") with remaining lease
terms of approximately 1.25 years, each of which are classified as operating
leases. Both leases expire in 2021. Only one of our leases has remaining renewal
options, which includes three options to renew for one additional year. The
exercise of lease renewal options is at our sole discretion, which we currently
do not anticipate exercising and as such were not recognized as part of our ROU
asset and lease liabilities. Our lease payments are fixed, and we recognize
lease expense for these 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 leases do 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 8.59%.
At June 30, 2020, the future minimum annual obligations under the Office Leases
are $0.5 million and $0.7 million for the remainder of fiscal years ending 2020
and 2021, respectively.
On May 4, 2020, we entered into a lease agreement ("Lease Agreement") with
Wateridge Property Owner, LP, with respect to facilities in the building at
10770 Wateridge Circle, San Diego, California 92121. Under the Lease Agreement,
we agreed to lease approximately 45,000 square feet of space in the 10770
Wateridge Circle Building for a term of 124 months, beginning on March 1, 2021
(or on such later date as described in the Lease Agreement). 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 we have to terminate the
lease after seven years with the payment of a termination fee. The monthly base
rent will be $4.20 per rentable square foot, and will be increased by 3%
annually. We are also responsible for our pro rata share of real estate taxes,
building insurance, maintenance, direct expenses and utilities under the Lease
Agreement.
Other Commitments and Contingencies
We have entered into agreements with certain vendors for the provision of goods
and services, which includes manufacturing services with contract manufacturing
organizations and development services with contract research organizations.
These agreements may include certain provisions for purchase obligations and
termination obligations that could require payments for the cancellation of
committed purchase obligations or for early termination of the agreements. The
amount of the cancellation or termination payments vary and are based on the
timing of the cancellation or termination and the specific terms of the
agreement.
Guarantees and Indemnifications
We enter into standard indemnification arrangements in the ordinary course of
business. Pursuant to certain of these arrangements, we indemnify, hold
harmless, and agree to reimburse the indemnified parties for losses suffered or
incurred by the indemnified party for third-party claims in connection with our
breach of the agreement, our negligence or willful
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misconduct in connection with the agreement, or any trade secret, copyright,
patent or other intellectual property infringement claim with respect to our
technology. The term of these indemnification arrangements is generally
perpetual. The maximum potential amount of future payments we could be required
to make under these agreements is not determinable because it involves claims
that may be made against us in the future, but have not yet been made.
We also entered into indemnification agreements with our officers and directors
for certain events or occurrences, subject to certain limits, while the officer
or director is or was serving in such capacity, as permitted under Delaware law,
in accordance with our certificate of incorporation and bylaws, and pursuant to
agreements providing for indemnification entered into with our officers and
directors. The term of the indemnification period lasts as long as an officer or
director may be subject to any proceeding arising out of acts or omissions of
such officer or director in such capacity.
The maximum amount of potential future indemnification of directors and officers
is unlimited; however, we currently hold director and officer liability
insurance. This insurance allows the transfer of risk associated with our
exposure and may enable us to recover a portion of any future amounts paid.
We believe that the fair value of these indemnification obligations is minimal.
Accordingly, we have not recognized any liabilities relating to these
obligations for any period presented.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any
off-balance sheet arrangements, as defined in the rules and regulations of the
SEC.
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