You should read the following management's discussion and analysis of financial
condition and results of operations in conjunction with our unaudited condensed
consolidated financial statements and notes thereto included in Part I, Item 1
of this Quarterly Report on Form 10-Q and with our audited financial statements
and related notes thereto and Management's Discussion and Analysis of Financial
Condition and Results of Operations for the year ended
This Quarterly Report on Form 10-Q contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the "safe harbor" created by those sections. In some cases you can identify these statements by forward-looking words such as "believe," "may," "will," "estimate," "continue," "anticipate," "intend," "could," "would," "project," "plan," "expect," or similar expressions, or the negative or plural of these words or expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other "forward-looking" information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. These forward-looking statements include, but are not limited to:
•our ability to identify, develop and commercialize additional products or product candidates; •our estimates regarding our expenses, revenues, anticipated capital requirements and our needs for additional financing; •our ability to obtain funding for our operations; •the implementation of our business model and strategic plans for our business and technology; •the timing of the commencement, progress and receipt of data from any of our preclinical and clinical trials; •the expected results of any preclinical or clinical trial and the impact on the likelihood or timing of any regulatory approval; •the scope of protection we are able to establish and maintain for intellectual property rights covering our technology and product candidates; •the anticipated impact of the COVID-19 pandemic on our business, research and clinical development plans and timelines and results of operations; •the timing or likelihood of regulatory filings and approvals; •the therapeutic benefits, effectiveness and safety of our product candidates; •the rate and degree of market acceptance and clinical utility of any future products; •our ability to maintain and establish collaborations; •our ability to achieve milestones in our current and any future collaborations; •our expectations regarding market risk, including interest rate changes; •our expectations regarding the sufficiency of our cash and cash equivalents to fund operations for at least the next 12 months; •developments relating to our competitors and our industry; and •our expectations regarding licensing, acquisitions and strategic operations.
These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A - Risk Factors , and elsewhere in this report. Forward-looking statements are based on our management's beliefs and assumptions and on information currently available to our management. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments, except as required by law.
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In addition, statements that "we believe" and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements. Overview We are a clinical-stage biopharmaceutical company dedicated to discovering and developing innovative, protein-based immunotherapies to treat cancer and autoimmune and inflammatory diseases. Our approach includes a proprietary scientific platform that converts native immune system proteins into differentiated, multi-targeted therapeutics. We believe our strategies are capable of meaningfully modulating the human immune system and significantly improving outcomes in patients with serious diseases. Autoimmune/Inflammatory Diseases InJune 2020 , we entered into an Option and License Agreement withAbbVie Ireland Unlimited Company , or AbbVie, which grants AbbVie an exclusive option to take an exclusive license to ALPN-101, or acazicolcept, a dual Inducible T cell Costimulator, or ICOS, and CD28 antagonist intended for the treatment of autoimmune and inflammatory diseases. ThroughSeptember 30, 2021 , we have received$105.0 million in upfront and pre-option exercise development milestones as part of the Option and License Agreement with AbbVie, or the AbbVie Agreement. Preclinical studies with acazicolcept have demonstrated efficacy in models of systemic lupus erythematosus, or SLE, Sjögren's syndrome, or SjS, arthritis, inflammatory bowel disease, multiple sclerosis, type 1 diabetes, uveitis, and graft versus host disease. We have evaluated acazicolcept in a Phase 1 healthy volunteer study and have initiated patient dosing in Synergy, a global, randomized, double-blind, placebo-controlled Phase 2 study of acazicolcept in adults with moderate-to-severe SLE. ALPN-303 is a dual B cell cytokine antagonist, being developed for the treatment of B cell mediated inflammatory and autoimmune diseases. Engineered using our proprietary directed evolution platform, ALPN-303 potently inhibits the pleiotropic B cell cytokines B cell activating factor (BAFF, BLyS) and a proliferation inducing ligand (APRIL), which play key roles in B cell development, differentiation, and survival, and together contribute to the pathogenesis of multiple autoimmune diseases like systemic lupus erythematosus (SLE) and many other autoantibody-related inflammatory diseases. Data presented at theAmerican College of Rheumatology (ACR) Convergence 2021 Annual Meeting demonstrated that ALPN-303 inhibits the activity of the B cell cytokines APRIL and BAFF more potently than wild-type TACI-Fc counterparts, as well as anti-BAFF and anti-APRIL monoclonal antibodies. In addition, ALPN-303 has been well tolerated in preclinical models and exhibited superior pharmacokinetics and pharmacodynamics than wild-type TACI-Fc counterparts, including superior serum exposure, suppression of T-dependent antibody production, and/or serum immunoglobulins in mice and/or cynomolgus monkeys. Enrollment in a first-in-human, phase 1 study of ALPN-303 in healthy volunteers is expected to begin in the fourth quarter of 2021, with topline results targeted in the first half of 2022. This randomized, placebo-controlled study is designed to evaluate the safety, tolerability, pharmacokinetics, and pharmacodynamics of ALPN-303 administered intravenously and subcutaneously. We are planning to initiate patient-based studies in the second half of 2022 including systemic lupus erythematosus, and possibly autoantibody-related renal, dermatology, neurology, and hematology indications.Immuno -oncology Our lead oncology program is ALPN-202, a conditional CD28 costimulator and dual checkpoint inhibitor intended for the treatment of cancer. Preclinical in vivo data have demonstrated monotherapy efficacy in tumor models superior to approved therapies. InJune 2020 , we initiated NEON-1, a Phase 1 dose escalation and expansion study in patients with advanced malignancies. Initial data from NEON-1 were presented at the 2021 ASCO Virtual Meeting demonstrating that ALPN-202 was well-tolerated as of the cutoff date (April 22, 2021 ) with evidence of peripheral T cell modulation consistent with CD28 agonism. In addition, although most enrolled participants had tumors considered classically non-responsive to immunotherapies, 61% (14 of 23 evaluable) derived clinical benefit as defined as a best outcome of stable disease or better. Completion of dose escalation for NEON-1 is anticipated in the fourth quarter of 2021. Further updates are anticipated in the first half of 2022. InJune 2021 , we announced a collaboration and supply agreement with Merck to evaluate the safety and efficacy of ALPN-202 in combination with Merck's anti-PD-1 therapy KEYTRUDA (pembrolizumab) in a Phase 1 dose escalation and expansion study. The clinical trial, NEON-2, was initiated inJune 2021 . Our scientific platform has also generated immune modulatory proteins with the potential of improving engineered cellular therapies such as chimeric antigen receptor T cells, T cell receptor-engineered T cells, and tumor infiltrating lymphocytes. InMay 2019 , we signed a collaboration and license agreement withAdaptimmune Therapeutics plc , orAdaptimmune , to develop next-generation SPEAR™ T cell products which incorporate our secreted and transmembrane 15
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immunomodulatory protein (termed SIP™ and TIP™) technology. We intend to continue to leverage our existing pipeline and platform to actively explore and evaluate potential value-creating partnering opportunities. Our goal is to discover and develop modern therapies to treat patients with serious conditions such as cancer and autoimmune/inflammatory diseases. To achieve our goals, we intend to: •aggressively move our lead autoimmune/inflammatory program acazicolcept through clinical development as part of our Option and License Agreement with AbbVie, or the AbbVie Agreement, including conducting our Phase 2 study for the treatment of SLE; •aggressively move our second autoimmune/inflammatory program ALPN-303 through preclinical development and into clinical studies for the treatment of B cell mediated autoimmune/inflammatory diseases; •aggressively move our lead oncology program ALPN-202 through clinical development for the treatment of cancer, and; •maximize the value of our pipeline and platform via potential partnering activities. Our operations to date have been limited to business planning, raising capital, developing our platform technology, identifying potential immunotherapy candidates, clinical studies, and other research and development activities. To date, we have financed operations primarily through private placements of common stock and convertible preferred stock, funds received from license and research agreements, debt financing and assets acquired upon the close of our merger withNivalis Therapeutics Inc. , or Nivalis. We do not have any products approved for sale and have not generated any product sales. Since inception and throughSeptember 30, 2021 , excluding amounts borrowed through debt financing, we have raised an aggregate of$378.2 million to fund operations, of which$170.7 million was from the sale of common stock and warrants,$49.2 million was from the sale of convertible preferred stock,$114.2 million was through our license and collaboration agreements, and$44.1 million in cash, cash equivalents, and marketable securities acquired through the merger with Nivalis. As ofSeptember 30, 2021 , we had cash, cash equivalents, restricted cash, and investments totaling$219.9 million . Our net loss was$13.5 million and$6.1 million for the three months endedSeptember 30, 2021 and 2020, respectively, and$35.2 million and$21.6 million for the nine months endedSeptember 30, 2021 and 2020, respectively. We expect to continue incurring significant expenses and operating losses for at least the next several years as we: •initiate and complete nonclinical studies and clinical trials for our product candidates, including acazicolcept, a dual ICOS/CD28 antagonist program targeting autoimmune/inflammatory disorders, ALPN-202, a conditional CD28 costimulator and dual checkpoint inhibitor intended for the treatment of cancer, and ALPN-303, a dual B cell cytokine antagonist for B cell-mediated autoimmune/inflammatory diseases; •contract to manufacture and perform additional process development for our product candidates; •continue research and development efforts to build our pipeline beyond the current product candidates; •maintain, expand, and protect our intellectual property portfolio; •hire additional clinical, quality control, scientific, and management personnel; and •add operational and financial personnel to support our product development efforts and operational capabilities applicable to operating as a public company. We do not expect to generate product revenue unless and until we successfully complete development of, obtain marketing approval for and commercialize our product candidates, either alone or in collaboration with third parties. We expect these activities will take a number of years and our success in these efforts is subject to significant uncertainty. Accordingly, we will need to raise additional capital prior to the regulatory approval and commercialization of any of our product candidates. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our operating activities through equity or debt financings, collaborations or licenses, capital lease transactions, or other available financing transactions. However, additional capital may not be available on reasonable terms, if at all, and if we raise additional funds through the issuance of additional equity or debt securities, it could result in dilution to our existing stockholders and increased fixed payment obligations. 16
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Financial Overview Collaboration Revenue We derive our collaboration revenue primarily from our collaboration and licensing agreements. We may generate revenue in the future from milestone payments received pursuant to our collaboration and licensing agreement withAdaptimmune , or the Adaptimmune Agreement, or from the AbbVie Agreement, or from payments from future license or collaboration agreements, product sales, or government contracts and grants. We expect revenue we generate, if any, will fluctuate from quarter to quarter.AbbVie Ireland Unlimited Company InJune 2020 , we entered into the AbbVie Agreement for the development of acazicolcept. The AbbVie Agreement grants AbbVie the exclusive option to purchase an exclusive worldwide license to acazicolcept, or the License Option. The License Option is exercisable by AbbVie at any time and will expire 90 days from the achievement of certain development milestones. If AbbVie exercises the License Option, AbbVie will take over the future development and commercialization. Prior to the exercise of the License Option, we will perform research and development services, including conducting our Phase 2 study in SLE, based on an agreed-upon development plan, or the Development Plan. We will be fully responsible for all costs incurred to conduct the activities under the Development Plan, provided that, AbbVie may be responsible for increased costs under the Development Plan in connection with certain material amendments proposed by AbbVie. We will also be solely responsible, at our sole cost and expense, for manufacturing and regulatory filings for acazicolcept necessary to complete activities under the Development Plan. InJune 2020 , in connection with the execution of the AbbVie Agreement, AbbVie paid us a nonrefundable upfront payment of$60.0 million . Prior to the exercise of the License Option, AbbVie has agreed to make cash payments upon our achievement of certain predefined pre-option development milestones, or the Alpine Development Milestones, up to an aggregate amount of$75.0 million . In the third quarter of 2021, we received$45.0 million of theAlpine Development Milestones, which was achieved inJune 2021 . If AbbVie exercises the License Option, they will pay a one-time cash payment of$75.0 million . Following the exercise of the License Option, AbbVie has also agreed to make aggregate cash payments of up to$205.0 million upon AbbVie's achievement of certain development and commercial milestones and additional aggregate cash payments of up to$450.0 million upon AbbVie's achievement of certain sales-based cash milestones, collectively referred to as the AbbVie Milestones. Subsequent to commercialization, we are also eligible to receive high single-digit to low double-digit percentage royalties on worldwide net sales of licensed products. For revenue recognition purposes, we determined that our contractual promises in the AbbVie Agreement are not distinct and are interdependent with our performance obligation to provide research and development services under the Development Plan. Thus, all contractual promises related to the upfront payment and Alpine's Development Milestones were combined into a single performance obligation. We determined the Alpine Development Milestone payments are probable of significant revenue reversal as the achievement is highly dependent on factors outside our control. Therefore, these milestone payments were fully constrained and were not initially included in the transaction price. InJune 2021 , we re-evaluated and updated the transaction price to include the achieved portion of the Alpine Development Milestones. We will continue to re-evaluate the transaction price each reporting period and update as uncertain events are resolved or other changes in circumstances occur. The License Option and the AbbVie Milestones were not determined to be performance obligations at the inception of the contract as they did not represent material rights. If exercised, the License Option and AbbVie Milestones will be accounted for as a separate contract and will be recognized as revenue if and when triggered. Any consideration related to sales-based royalties and profit-sharing payments will be recognized when the related sales occur. We use a cost-based input method to measure progress toward completion of the performance obligation and to calculate the corresponding revenue to recognize each period. In applying the cost-based input, we use actual costs incurred relative to budgeted costs for the combined performance obligation. These costs consist primarily of internal personnel efforts and third-party contract costs relative to the level of patient enrollment in the study. Revenue will be recognized based on the level of costs incurred relative to the total budgeted costs for the performance obligation. A cost-based input method of revenue recognition requires management to make estimates of costs to complete our performance obligation. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete our performance obligation will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods. We recognized revenue from the AbbVie Agreement of$8.5 million and$1.6 million for the three months endedSeptember 30, 2021 and 2020, respectively, and$18.9 million and$1.6 million for the nine months endedSeptember 30, 2021 17
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and 2020, respectively. As ofSeptember 30, 2021 , the remaining balance of the transaction price is$79.1 million and is recorded as current and noncurrent deferred revenue on our accompanying Condensed Consolidated Balance Sheets . We expect to recognize the remaining deferred revenue over the remainder of our Development Plan, which began inJune 2020 and ends upon the later of the exercise or expiration of the option.Adaptimmune Therapeutics plc InMay 2019 , we entered into the Adaptimmune Agreement withAdaptimmune , a clinical-stage biopharmaceutical company primarily focused on providing novel cell therapies to patients, particularly for the treatment of solid tumors, to develop next-generation SPEAR T cell products which incorporate our secreted and transmembrane immunomodulatory protein (termed SIP™ and TIP™) technology. Under the Adaptimmune Agreement, we are to perform certain research services and grantAdaptimmune an exclusive license to programs from our SIP and TIP technologies. InJune 2019 , under the terms of the Adaptimmune Agreement, we received an upfront license payment of$2.0 million and throughSeptember 30, 2021 we have received an additional$1.6 million in research support payments to fund ongoing programs. These payments were recorded to deferred revenue upon receipt and were recognized as revenue based on employee hours contributed to each performance obligation. In the fourth quarter of 2020, based on the completion of our initial research and development efforts in connection with our performance obligations, we recognized the remaining balance in deferred revenue associated withAdaptimmune on our accompanying Condensed Consolidated Balance Sheets . Under the Adaptimmune Agreement we recognized revenue of$356,000 and$2.0 million for the three and nine months endedSeptember 30, 2020 , respectively. In addition, we are eligible for additional research support payments, one-time payments and downstream development and commercialization milestones of up to$288.0 million , if all pre-specified milestones for each program are achieved. We are also eligible to receive low-single digit percentage royalties on worldwide net sales of the applicable products. Research and Development Expenses We focus our resources on research and development activities, including the conduct of preclinical and clinical studies and product development and expense such costs as they are incurred. Our research and development expenses consist of: •employee-related expenses, including salaries, benefits, taxes, travel, and stock-based compensation expense for personnel in research and development functions; •expenses related to process development and production of product candidates paid to contract manufacturing organizations; •costs associated with preclinical activities and regulatory operations, including the cost of acquiring, developing, and manufacturing research material; •clinical trials and activities related to regulatory filings for our product candidates; and •allocation of facilities, overhead, depreciation, and amortization of laboratory equipment and other expenses. We incurred$18.3 million and$6.2 million in research and development expenses for three months endedSeptember 30, 2021 and 2020, respectively and$43.4 million and$18.1 million for the nine months endedSeptember 30, 2021 and 2020, respectively. We expect our research and development expenses to increase for the foreseeable future as we continue to develop our platform and product candidates. The successful development of our platform and product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing, or costs of the efforts necessary to finish developing any of our product candidates or the period in which material net cash, if any, from these product candidates may commence. This is due to the numerous risks and uncertainties associated with developing therapeutics, including the uncertainty of: •the scope, rate of progress, expense, and results of clinical trials; •the scope, rate of progress, and expense of process development and manufacturing; •preclinical and other research activities; and •the timing of regulatory approvals. 18
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General and Administrative Expenses General and administrative expenses consist primarily of salaries and related costs for employees in executive, business development, finance, and administrative functions. Other significant general and administrative expenses include professional fees for accounting and legal services, expenses associated with obtaining and maintaining patents and other intellectual property, and allocation of facility and overhead costs. We expect general and administrative expenses to increase as we expand infrastructure and headcount, and continue to prosecute our patents and other intellectual property. Other increases could potentially include increased costs for director and officer liability insurance, costs related to the hiring of additional personnel, and increased fees for directors, outside consultants, lawyers, and accountants. We expect to incur significant costs to comply with corporate governance, internal controls, and similar requirements applicable to public companies. Interest Expense Interest expense consists primarily of interest associated with our term loan withSilicon Valley Bank , or SVB, and the amortization of the related debt discount. Interest Income Interest income consists of interest earned on our cash, cash equivalents, and investments. Income Tax (Expense) Benefit Income tax (expense) benefit for the 2021 period relates to the removal of the valuation allowance against our foreign deferred tax assets as we have generated sufficient foreign taxable income to utilize all historical operating losses. Other Income Other income consists primarily of a research and development tax credit received by our wholly-owned Australian subsidiary. JOBS Act We ceased to be an "emerging growth company" under the JOBS Act effectiveDecember 31, 2020 . However, for so long as we are not classified as an "accelerated filer" or "large accelerated filer" pursuant toSEC rules, we will continue to be exempt from the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley. Critical Accounting Policies and Estimates Our management's discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with generally accepted accounting principles inthe United States , or GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Our actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are more fully described in Note 2 of the accompanying unaudited condensed consolidated financial statements and in Note 2 to the audited financial statements contained in our Annual Report on Form 10-K . There have been no significant or material changes in our significant accounting policies during the nine months endedSeptember 30, 2021 , as compared to those disclosed in our Annual Report except the following: Recently Adopted Accounting Pronouncements InDecember 2019 , theFinancial Accounting Standards Board , or FASB, issued Accounting Standards Update, or ASU, No. 2019-12, Income Taxes, or Topic 740,: Simplifying the Accounting for Income Taxes. This ASU simplifies the accounting for income taxes by removing certain exceptions to the general principles in Topic 740 and also improves consistent 19
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application by clarifying and amending existing guidance. The standard is
effective for fiscal years and interim periods within those fiscal years,
beginning after
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Results of Operations
Comparison of Three Months Ended
Three Months Ended September 30, Increase/ 2021 2020 Decrease (unaudited) Collaboration revenue$ 8,516 $ 1,913 $ 6,603 Operating expenses: Research and development 18,309 6,156 12,153 General and administrative 3,470 2,728 742 Total operating expenses 21,779 8,884 12,895 Loss from operations (13,263) (6,971) (6,292) Other income (expense): Interest expense (203) (214) 11 Interest income 52 11 41 Other income - 1,037 (1,037) Loss before taxes (13,414) (6,137) (7,277) Income tax (expense) benefit (80) - (80) Net loss$ (13,494) $ (6,137) $ (7,357) Collaboration Revenue Revenue for the three months endedSeptember 30, 2021 , consists of$8.5 million related to the AbbVie Agreement. Revenue for the three months endedSeptember 30, 2020 , consists of$0.4 million related to theAdaptimmune Agreement and$1.6 million related to the AbbVie Agreement. Research and Development Expenses The$12.2 million increase in research and development expenses was primarily attributable to increases of$6.1 million in clinical trial activities,$2.2 million in direct research activities,$2.1 million in contract manufacturing and process development of our product candidates,$1.4 million in personnel-related expenses, and$0.5 million in stock-based compensation. These increases were partially offset by a$0.1 million decrease in allocated overhead and facilities. General and Administrative Expenses The$0.7 million increase in general and administrative expenses was primarily attributable to increases of$0.3 million in personnel-related expenses,$0.2 million in stock-based compensation, and$0.2 million in legal and professional services and allocated overhead and facilities. Other Income The$1.0 million decrease in other income is attributable to a research and development tax credit received by our wholly-owned Australian subsidiary during the 2020 period. 21
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Comparison of Nine Months Ended
Nine Months Ended September 30, 2021 2020 Increase/Decrease (unaudited) Collaboration revenue$ 18,913 $ 3,692 $ 15,221 Operating expenses: Research and development 43,380 18,130 25,250 General and administrative 10,016 7,850 2,166 Total operating expenses 53,396 25,980 27,416 Loss from operations (34,483) (22,288) (12,195) Other income (expense): Interest expense (638) (560) (78) Interest income 166 202 (36) Other income - 1,042 (1,042) Loss before taxes (34,955) (21,604) (13,351) Income tax (expense) benefit (211) 6 (217) Net loss$ (35,166) $ (21,598) $ (13,568) Collaboration Revenue Revenue for the nine months endedSeptember 30, 2021 consists of$18.9 million related to the AbbVie Agreement. Revenue for the nine months endedSeptember 30, 2020 consists of$2.0 million related to the Adaptimmune Agreement and$1.6 million related to the AbbVie Agreement. Research and Development Expenses The$25.3 million increase in research and development expenses was primarily attributable to increases of$8.3 million in clinical trial activity,$7.9 million in contract manufacturing and process development of our product candidates,$4.7 million in direct research activities,$3.1 million in personnel-related expenses,$0.9 million in stock-based compensation, and$0.4 million in allocated overhead and facilities. General and Administrative Expenses The$2.2 million increase in general and administrative expenses was primarily attributable to increases of$1.3 million in personnel-related expenses and$0.7 million in non-cash stock-based compensation, and$0.2 million in legal and professional services. Other Income The$1.0 million decrease in other income is attributable to a research and development tax credit received by our wholly-owned Australian subsidiary during the 2020 period. Income Tax (Expense) Benefit The$0.2 million increase in income tax expense relates to the removal of the valuation allowance against our foreign deferred tax assets as we have generated sufficient foreign taxable income to utilize all historical operating losses. 22
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Liquidity and Capital Resources As ofSeptember 30, 2021 , we had cash, cash equivalents, restricted cash, and investments totaling$219.9 million . Excluding amounts borrowed through debt financing, as ofSeptember 30, 2021 , we have raised an aggregate of$378.2 million to fund operations, of which$170.7 million was from the sale of common stock and warrants,$49.2 million was from the sale of convertible preferred stock,$114.2 million was through our license and collaboration agreements, and$44.1 million in cash, cash equivalents, and marketable securities acquired through the merger with Nivalis. InJune 2017 ,August 2019 , andMarch 2020 , we drew down term loans from SVB, as discussed below. In addition to our existing cash, cash equivalents, and investments, we are eligible to receive research and development funding and to earn milestone and other contingent payments for the achievement of defined collaboration objectives and certain development and regulatory milestones and royalty payments under our collaborations withAdaptimmune and AbbVie; however, our ability to earn these milestone and contingent payments and the timing of achieving these milestones is uncertain. We have incurred operating losses since inception. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we continue our research and preclinical and clinical development of our product candidates; expand the scope of our current studies for our product candidates; initiate additional preclinical, clinical or other studies for our product candidates, including under any collaboration agreements; change or add additional manufacturers or suppliers; seek regulatory and marketing approvals for any of our product candidates that successfully complete clinical studies; seek to identify, evaluate and validate additional product candidates; acquire or in-license other product candidates and technologies; maintain, protect and expand our intellectual property portfolio; attract and retain skilled personnel; and experience any delays or encounter issues with any of the above. Until such time as we can generate substantial product revenue, if ever, we expect to finance our cash needs through a combination of equity or debt financings and collaboration agreements. Except for any obligations of our collaborators to make milestone payments under our agreements with them, we do not have any committed external sources of capital. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we raise additional funds through collaboration agreements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves. Our future capital requirements are difficult to forecast and will depend on many factors, including: •the number and characteristics of the future product candidates we pursue either from our internal research efforts or through acquiring or in-licensing other product candidates or technologies; •the scope, progress, results and costs of independently researching and developing any of our future product candidates, including conducting preclinical research and clinical trials; •whether our existing collaborations generate substantial milestone payments and, ultimately, royalties on future approved products for us; •the timing of, and the costs involved in, obtaining regulatory approvals for any future product candidates we develop independently; •the cost of future commercialization activities, if any; •the cost of manufacturing our future product candidates and products, if any; •our ability to maintain our existing collaborations and to establish new collaborations, licensing or other arrangements and the financial terms of such arrangements; •the costs of preparing, filing, prosecuting, maintaining, defending and enforcing patents, including litigation costs and the outcome of such litigation; and •the timing, receipt and amount of sales of, or royalties on, our current or future collaborators' product candidates, and our future products, if any. We have considered that our long-term operations anticipate continuing net losses and the need for potential equity or debt financing. We have also considered that new collaborations or selectively partnering our technology or programs may provide other sources of capital. However, there can be no assurances that additional funding or other sources of capital will be available on terms acceptable to us, or at all. Based on our current operating plan, we believe our available cash and cash equivalents and investments, will be sufficient to fund our planned level of operations for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect. 23
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Additionally, the process of testing drug candidates in preclinical and clinical studies is costly, and the timing of progress in these studies remains uncertain.
Financing Agreements InSeptember 2021 , we entered into a securities purchase agreement, or the 2021 Securities Purchase Agreement, for a private placement with a select group of institutional investors, pursuant to which we sold 6,489,357 shares of our common stock, or the Shares, and prefunded warrants to purchase 3,191,487 Shares, or the Prefunded Warrants. The purchase price for each Share and for each Prefunded Warrant was$9.40 per share, for an aggregate purchase price of approximately$91.0 million . The Prefunded Warrants became fully exercisable upon the closing date and have an exercise price of$0.001 per share. In connection with the 2021 Securities Purchase Agreement approximately 3.7 million of the Shares issued and approximately 2.3 million of the Prefunded Warrants issued, for gross proceeds of approximately$57.0 million , were issued to certain stockholders whose beneficial ownership exceeded 5% prior to completion of the 2021 Securities Purchases Agreement. InSeptember 2021 , we entered into an exchange agreement, or the Exchange Agreement, withFrazier Life Sciences VIII, L.P. , or the Exchanging Stockholder, which Exchanging Stockholder is affiliated with a member of our board of directors, pursuant to which we exchanged an aggregate of 1,200,000 shares of common stock held by the Exchanging Stockholder for Prefunded Warrants, or the Exchange Warrants, to purchase an aggregate of 1,200,000 shares of common stock. Upon the closing of the exchange, we reclassified 1,200,000 shares of common stock into treasury stock on our accompanying Condensed Consolidated Balance Sheets . InJuly 2021 , we entered into a sales agreement, or the Sales Agreement, withCowen and Company, LLC , or Cowen, pursuant to which we may sell shares of our common stock from time to time through an "at the market" equity offering for up to$75.0 million in gross cash proceeds. Cowen will act as the sales agent and will be entitled to compensation for services of up to 3.0% of the gross sales price per share of all shares sold through Cowen under the Sales Agreement. The shares would be issued pursuant to our effective shelf registration statement on Form S-3 (File No. 333-256107), declared effective by theSEC onMay 20, 2021 . We filed a prospectus supplement, datedJuly 2, 2021 , with theSEC in connection with the offer and sale of the shares pursuant to the Sales Agreement. As of the date of this report, we have made no such sales under the Sales Agreement. InJuly 2020 , we entered into a securities purchase agreement, or the 2020 Securities Purchase Agreement, for a private placement with a select group of institutional investors, pursuant to which we sold 5,139,610 units, or the Common Units, and 790,710 units, or the Prefunded Warrant Units, for an aggregate purchase price of$60.0 million . Each Common Unit consists of one share of our common stock plus a warrant to purchase 0.3 shares of common stock, or the Common Stock Warrants, and each Prefunded Warrant Unit consists of one prefunded warrant to purchase one share of common stock, or the Prefunded Warrants, plus one Common Stock Warrant to purchase 0.3 shares of common stock. The Prefunded Warrant Units and the Common Units are collectively referred to as the Units and each Unit has a purchase price of$10.1175 . The Common Stock Warrants have an exercise price of$12.74 and a term of 3.5 years. The Prefunded Warrants became fully exercisable upon the closing date and have an exercise price of$0.001 per share. InJanuary 2019 , we entered into a securities purchase agreement, or the 2019 Purchase Agreement, with a limited number of accredited investors, pursuant to which we sold approximately 4.7 million units, or the 2019 Units, for an aggregate purchase price of$25.3 million in a private placement, which we refer to as the Private Placement. Each 2019 Unit has a purchase price of$5.37 and consists of one share of our common stock and a warrant to purchase 0.39 shares of common stock. Pursuant to the terms of the 2019 Purchase Agreement, we issued approximately 4.7 million shares of common stock and warrants to purchase an aggregate of approximately 1.8 million shares of common stock. The warrants have an exercise price of$12.74 and have a term of five years. Long-Term Financing InDecember 2016 , we entered into a Loan and Security Agreement, or the Original Agreement, with SVB under which we borrowed$5.0 million . The Original Agreement accrued interest at a floating per annum rate equal to the lender's prime rate minus 1.75%. The Original Agreement had an interest-only period throughJuly 2018 . InAugust 2019 , we entered into an Amended and Restated Loan and Security Agreement, or the Loan Agreement, with SVB, pursuant to which SVB agreed to extend term loans to us with an aggregate principal amount of up to$15.0 million , or the Term Loans. Borrowings under the Loan Agreement consisted of up to three separate tranches. The initial tranche of$5.0 million was funded inAugust 2019 ,$3.0 million of which was used to repay amounts owing under our Original Agreement. InMarch 2020 , the second tranche of$5.0 million was funded to us. We did not draw down the final tranche of$5.0 million , which expired onJuly 31, 2020 . We intend to use the debt proceeds for working capital and other general corporate purposes, including the advancement of our development programs. 24
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The Term Loans accrue interest at a floating per annum rate of 0.25% above the prime rate, subject to a floor of 5.75%, which interest is payable monthly commencing inSeptember 2019 . Upon the occurrence and during the continuance of an event of default, a default interest rate will apply that is 4.0% above the otherwise applicable interest rate. The Term Loans were interest only untilSeptember 30, 2020 , however, under the Loan Agreement our interest only period automatically extended toJune 30, 2021 if we received aggregate new capital of at least$40.0 million no later thanJune 30, 2020 . We met this milestone inJune 2020 in conjunction with the execution of the AbbVie agreement, discussed in detail in Note 9 . As a result of the interest only extension, the Term Loans will be payable in 25 equal monthly installments of principal plus interest, with the final installment due and payable onJuly 1, 2023 . We may prepay all, but not less than all, of the Term Loans subject to a prepayment fee equal to$75,000 , which represents the deferred portion of the final payment due under the Original Agreement, plus the outstanding principal balance under the Term Loans at the time of such prepayment multiplied by a prepayment fee of 2.0% in the first year, 1.0% in the second year, and 0.0% in the third year and thereafter. Additionally a final payment in the amount of 5.5% of the funded Term Loans is payable to SVB on the date on which the Term Loans are prepaid, paid or become due and payable in full. The final payment fees are recorded in long-term debt with an offsetting reduction to debt discount on our accompanying Condensed Consolidated Balance Sheets . The Loan Agreement contains customary representations and warranties, events of default and affirmative and negative covenants, including, among others, covenants that limit or restrict our ability to, among other things, incur additional indebtedness, grant liens, merge or consolidate, make acquisitions, pay dividends or other distributions or repurchase equity, make investments, dispose of assets, engage in any new lines of business, and enter into certain transactions with affiliates, in each case subject to certain exceptions. Among other events, a failure to make a required loan payment, an uncured covenant breach or a material adverse change in our business, operations or condition (financial or otherwise) could lead to an event of default, and in such case, all amounts then outstanding may become due and payable immediately. We were in compliance with our covenants as ofSeptember 30, 2021 . As security for its obligations under the Loan Agreement, we granted SVB a first priority security interest on substantially all of our assets, except intellectual property, and subject to certain other exceptions. As ofSeptember 30, 2021 , we had$9.4 million in outstanding principal and final fees due under our term loan agreement. See Note 7 for further discussion of our Term Loans. Operating Lease InMarch 2019 , we entered into a lease with ARE-Seattle No. 28, LLC, or the Landlord, for 27,164 square feet of office and laboratory space located at188 East Blaine Street ,Seattle, Washington . The term of the lease is 10.8 years with one option to extend the term by 5 years. The lease term commenced inJune 2019 . The "Rent Commencement Date" began inMarch 2020 , nine months after the commencement date. We were not required to pay base rent from the Rent Commencement Date throughNovember 2020 , the last day of the ninth month following the Rent Commencement Date. The annual base rent under the lease is$1.7 million for the first year and will increase by 3.0% each year thereafter. We received a tenant improvement allowance of$5.4 million , which is included in our base rent, and a maximum additional tenant improvement allowance of$1.8 million , which will result in additional rent amortized over the term of the lease at an annual rate of 8.0%. The lease also requires us to pay additional amounts for operating and maintenance expenses. InMarch 2019 , in connection with the lease, we provided a$254,000 letter of credit as a security deposit, which is recorded as restricted cash in our accompanying Condensed Consolidated Balance Sheets . Contingencies Certain credits received related to our research and development expenditures and recorded within other income in our accompanying Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) are subject to review by foreign taxing authorities. It is reasonably possible we may incur losses upon the completion of these reviews of up to approximately$1.8 million , which we would be required to repay to certain tax authorities. 25
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