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Item 7. Management’s Discussion and Analysis

2023-03-01 compared with 2022-03-07 · 202 added, 180 removed, 200 unchanged (66% of the section changed)

5 unchanged sentences

You should also carefully read “Special Note Regarding Forward-Looking Statements”.

We are a clinical stage biotechnology company developing first-in-class immunology therapeutic product candidates 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, rosnilimab, previously referred to as 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 multiple dermatological inflammatory diseases.

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 by all subjects, no dose-limiting toxicities were observed, and no serious adverse events were reported among any subjects in the clinical trial.

In July 2020, the U.S.

Food and Drug Administration (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 on October 2, 2021.

In this trial, 6 of 8 (75%) patients treated with imsidolimab monotherapy achieved the primary endpoint of response on the clinical global impression (“CGI”) scale at week 4 and week 16, without requiring rescue medication.

Two of 8 (25%) patients were considered to have not met the primary endpoint because they dropped out of the trial prior to Day 29.

The Modified Japanese Dermatology Association severity index total score (“mJDA-SI”), which incorporates both dermatological and systemic aspects of GPP, decreased for patients on average by 29% at week 1, 54% at week 4 and 58% at week 16.

Erythema with pustules, which clinically defines GPP, decreased by 60% at week 1, 94% by week 4 and 98% by week 16.

Patients achieved a reduction in the Dermatology Life Quality Index (DLQI), which is a patient-reported measure, of 6 points at week 4 and 11 points by week 16, each of which exceeded the minimal clinically importance difference (MCID) of 4 points.

GPP Physician Global Assessment (GPPPGA) scale was implemented by protocol amendment during the course of the trial and was assessed in 4 of the 8 enrolled patients, where zero (clear) or 1 (almost clear) response was achieved in 2 (50%) patients at week 4 and 3 (75%) patients at week 16.

Genotypic testing indicated homozygous wild-type IL-36RN, CARD14 and AP1S3 alleles for all 8 patients.

Through week 16, anti-drug antibodies were only detected in one patient, which occurred at week 12 and did not impact imsidolimab pharmacokinetics or efficacy.

Imsidolimab was generally well-tolerated, and most treatment-emergent adverse events were mild to moderate in severity and resolved without sequelae.

No infusion or injection site reactions were observed.

One patient dropped out of the clinical trial due to a diagnosis of Staphylococcal aureus bacteremia in the first week, which was a serious adverse event deemed to be possibly drug-related.

Because the patient was symptomatic prior to dosing and had a prior medical history of bacteremia, a common comorbidity of GPP, we do not believe this event is likely attributable to imsidolimab.

Another patient dropped out of the study on Day 22 due to investigator reported inadequate efficacy.

One patient contracted COVID-19 during the course of the clinical trial, which was deemed a serious adverse event unrelated to imsidolimab, and did not lead to study discontinuation.

While initial GPP epidemiology studies suggested at least 3,000 GPP patients in the United States, medical claims analyses conducted by IQVIA indicate approximately 37,000 unique patients were diagnosed with GPP at least once, and approximately 15,000 unique patients were diagnosed with GPP at least twice, by a physician between 2017 and 2019 using the International Classification of Diseases 10th Revision (ICD-10) billing code pertaining to GPP (L40.1).

We met with the FDA during the second quarter of 2021 for an end-of-Phase 2 meeting to review an orphan disease registration plan for imsidolimab for the treatment of GPP.

We have initiated our first Phase 3 trial for imsidolimab for GPP, called GEMINI-1, during the third quarter of 2021.

GEMINI-1 will enroll approximately 45 moderate-to-severe GPP patients, each undergoing an active flare at baseline, which will be randomized equally to receive a single dose of 750mg intravenous

(IV) imsidolimab, 300mg IV imsidolimab, or placebo.

The primary endpoint of the Phase 3 program is the proportion of patients achieving clear or almost clear skin as determined by a Generalized Pustular Psoriasis Physician’s Global Assessment (GPPPGA) score of zero or 1 at week 4 of GEMINI-1.

Patients completing the GEMINI-1 trial will subsequently be 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.

The objective of GEMINI-2 is to assess the efficacy and safety of imsidolimab after 6 months of monthly dosing.

We are conducting a global registry of GPP patients, also referred to as the RADIANCE study, which we anticipate will improve understanding of the patient journey and assist in enrollment of future GPP clinical trials.

We are conducting clinical development of imsidolimab in moderate-to-severe acne.

Acne is the most common skin disorder in the United States, with approximately 3 million patients diagnosed with moderate-to-severe disease.

Moderate-to-severe acne typically presents with painful papules, pustules, nodules, cysts and scarring.

A key contributing factor to the pathogenesis of acne is the immune response to Propionibacterium acnes , or P.

acnes , which is associated with upregulated IL-36 cytokine activity, localized inflammation and neutrophil infiltration of the skin.

Existing therapies, including isotretinoin and systemic antibiotics, provide variable efficacy for moderate-to-severe acne patients and have practical limitations to their use given potential for clinically meaningful side effects.

We are conducting a Phase 2 clinical trial of imsidolimab, called ACORN, where 120 patients will be randomized equally between two dose levels of imsidolimab and placebo, for the treatment of moderate-to-severe acne, and we anticipate top-line data during the first half of 2022.

We are conducting clinical development of imsidolimab in hidradenitis suppurativa, also known as acne inversa, which is a chronic inflammatory skin disease characterized by painful nodules in intertriginous areas that can progress to abscesses, sinus tracks and scarring.

Current treatment options for hidradenitis suppurativa, including antibiotics, corticosteroids and anti-TNF therapy, have variable efficacy in moderate-to-severe patients, which often leads to surgery for removal of hidradenitis suppurativa nodules.

Human translational studies have demonstrated elevated IL-36 cytokine expression in hidradenitis suppurativa skin biopsies, and we believe treatment of moderate-to-severe hidradenitis suppurativa with imsidolimab may lead to therapeutic benefit for this patient population.

Moderate-to-severe hidradenitis suppurativa affects approximately 150,000 adults in the United States.

We are conducting a Phase 2 clinical trial of imsidolimab in moderate-to-severe hidradenitis suppurativa, called HARP, where 120 patients will be randomized equally between two dose levels of imsidolimab and placebo, and we anticipate top-line data during the second half of 2022.

Our second wholly-owned program, rosnilimab, previously referred to as ANB030, is an anti-PD-1 agonist antibody program designed to augment PD-1 signaling through rosnilimab 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 rosnilimab is applicable to diseases where PD-1 checkpoint receptor function may be under-represented.

We presented preclinical data for rosnilimab at the Festival of Biologics Annual Meeting in March 2020, including translational data demonstrating in vitro activity of rosnilimab in alopecia areata patient samples.

We announced positive top-line data from a healthy volunteer Phase 1 clinical 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 were administered single subcutaneous or intravenous doses of rosnilimab ranging between 0.02mg to 600mg or placebo, while multiple ascending dose (MAD) cohorts received four weekly subcutaneous doses of rosnilimab ranging between 60mg and 400mg or placebo.

Dose escalation was conducted subsequent to data safety monitoring board review of safety and tolerability parameters following each single and multiple ascending dose level.

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 planned Phase 2b trial for the treatment of moderate-to-severe rheumatoid arthritis (“RA”);

and ANB032, our BTLA agonist, in a planned 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 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 immune-oncology, including an anti-PD-1 antagonist antibody (JEMPERLI (dostarlimab-gxly)), an anti-TIM-3 antagonist antibody (cobolimab, GSK4069889) and an anti-LAG-3 antagonist antibody (GSK4074386).

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.

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 is designed to suppress aberrant T cell driven inflammation by augmenting signaling through PD-1 or targeted depletion of PD-1+ T cells.

Rosnilimab binds to PD-1 on a membrane proximal epitope that is on the opposite side of the receptor to that utilized by PD-L1 for binding, and thus preserves the ability of PD-L1 to agonize PD-1.

In the setting of T cell activation, rosnilimab binding has been shown to induce agonistic signaling and the recruitment of SHP2 to PD-1, in a manner similar to that by PD-L1.

In preclinical assays, rosnilimab prevented T cell expansion in antigen-specific response assays to numerous antigens, demonstrating prevention of T cell expansion and reduction in the secretion of inflammatory cytokines associated with multiple T cell types implicated in inflammatory pathology when dysregulated.

In addition to direct agonistic activity, rosnilimab is an IgG1k antibody with effector function that can drive targeted depletion of PD-1+ T cells via the induction of antibody-dependent cellular cytotoxicity (ADCC).

We believe this component of the mechanism of rosnilimab may provide more durable immune modulation by effectively eliminating the most pathogenic antigen-specific T cells in the setting of autoimmunity and inflammation.

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 were administered single subcutaneous or intravenous (“IV”) 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.

The most frequent adverse event reported among SAD cohorts was increased circulating C-reactive protein levels of mild severity in nine (10%) rosnilimab-dosed subjects occurring sporadically in a dose-independent manner and a severe occurrence in one (3.3%) placebo-dosed subject.

MAD cohorts reported headache as the most frequent adverse event with mild occurrences in three (12.5%) rosnilimab-dosed subjects and none in placebo subjects.

Mild injection site reactions were observed in two subjects (11.1%) administered with multiple subcutaneous rosnilimab doses.

Two serious adverse events 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 which was deemed unrelated to treatment.

The COVID-19 infection was deemed unrelated to treatment.

No serious adverse events were reported in subjects receiving multiple doses of rosnilimab or placebo.

Pharmacokinetic analyses demonstrated a favorable profile for rosnilimab with an estimated two-week half-life for subcutaneous and intravenous routes of administration and approximately 80% bioavailability.

Low-titer anti-drug antibodies were detected at low single dose levels in 19 (21%) rosnilimab-dosed subjects, but none were detected in high single dose or multiple dose subjects.

Full PD-1 receptor occupancy was observed rapidly during the first week following single subcutaneous rosnilimab doses at or above 60mg, and was maintained for at least 30 days at or above 200mg single subcutaneous doses.

These data support monthly subcutaneous dosing of rosnilimab for future patient trials.

Rosnilimab’s pharmacodynamic activity resulted in rapid and sustained reduction in the quantity and functional activity of PD-1+ T cells, which are known to be

pathogenic drivers of inflammatory diseases.

Conventional T (Tcon) cells (CD3+, CD25 low) expressing PD-1, which represented approximately 25% of peripheral T cells at baseline, were reduced by 50%, including in both CD4+ and CD8+ subsets, in a dose-dependent manner and in correlation with receptor occupancy.

This effect was maximized on high-PD-1 expressing Tcon cells, which represented approximately 5% of peripheral T cells, with 90% reduction relative to baseline.

Conversely, total T cells (CD3+), total Tcon cells (CD3+, CD25low) and total regulatory T (Treg) cells (CD3+, CD4+, CD25 bright, CD127-) were unchanged (<5% change from baseline), resulting in a favorable shift in the ratio of PD-1+ Tcon cells to total Treg cells post-treatment.

Rosnilimab demonstrated a favorable pharmacokinetic 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 at or above 200mg

following single subcutaneous rosnilimab doses.

Rosnilimab pharmacodynamic activity demonstrated rapid and sustained reduction in the quantity and functional activity of PD-1+ T cells, which are known to be pathogenic drivers of inflammatory diseases.

Conventional T (Tcon) cells (CD3+, CD25 low) PD-1+, which represented approximately 25% of peripheral T cells at baseline, were reduced by 50%, including in both CD4+ and CD8+ subsets, in a dose-dependent manner and in correlation with receptor occupancy.

This effect was maximized on high-PD-1+ Tcon cells, which represented approximately 5% of peripheral T cells, with 90% reduction relative to baseline.

Conversely, total T cells (CD3+), total Tcon cells (CD3+, CD25low) and total regulatory T (Treg) cells (CD3+, CD4+, CD25 bright, CD127-) were unchanged (<5% change from baseline), resulting in a consistent ratio of PD-1+ Tcon cells to total Treg cells post-treatment in healthy volunteers.

No effect (<5% reduction from baseline) was observed on any of the aforementioned cell types in placebo-dosed subjects.

In addition, an antigen-specific functional T cell recall response, measured as ex vivo interferon-gamma released in response to tetanus toxoid challenge, was inhibited in a receptor occupancy dependent manner and was consistent with the observed reduction of PD-1+ Tcon cells, to a maximum of approximately 90% relative to baseline within 30 days following single rosnilimab dose, while placebo administration had no effect.

Based upon these data, we believe rosnilimab’s in vivo mechanism has the potential to treat T-cell driven human inflammatory diseases.

During the fourth quarter of 2021, we initiated AZURE, a randomized placebo-controlled 45-patient Phase 2 trial of rosnilimab in moderate-to-severe alopecia areata patients with at least 50% scalp hair loss for at least 6 months prior to enrollment, where the primary endpoint is change in severity of alopecia tool (SALT) relative to baseline.

We continue to assess clinical development opportunities for rosnilimab in additional indications, including vitiligo and rheumatoid arthritis, and will make decisions pending additional data.

Our third 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 are conducting a healthy volunteer Phase 1 trial of ANB032, under an Australian Clinical Trial Notification (“CTN”) and anticipate top-line data from this trial during the first half of 2022.

We presented preclinical data regarding ANB032 at the 2020 Federation of Clinical Immunology Societies (FOCIS) Virtual Annual Meeting in October 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 $226.9 million in cash receipts from collaborations.

Our collaborations include an immuno-oncology-focused collaboration with GlaxoSmithKline, Inc.

(“GSK”) and an inflammation-focused collaboration with Bristol-Myers Squibb (“BMS”).

A Biologics License Application (“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”).

This is the first AnaptysBio-generated antibody, of eight currently under clinical development, to obtain FDA approval.

We earned a $20.0 million milestone payment as a result of this FDA 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, which approval makes JEMPERLI the first anti-PD-1 therapy available for endometrial cancer in Europe.

We earned a $10.0 million milestone payment as a result of this approval.

A second BLA submitted by GSK was accepted by the FDA during the first quarter of 2021 for JEMPERLI in pan-deficient mismatch repair tumors (“PdMMRT”).

We received a $10.0 million cash milestone payment upon the FDA acceptance of GSK’s second FDA BLA for JEMPERLI and received $20.0 million cash milestone payment in September 2021, upon FDA approval of this second FDA BLA of JEMPERLI in August.

JEMPERLI is currently in clinical development for various solid tumor indications, including dMMREC, PdMMRT, colorectal cancer, ovarian cancer, non-small cell lung cancer, cervical cancer, rectal cancer, clear cell sarcoma and head-and-neck squamous cell carcinoma.

GSK is conducting combination trials of dostarlimab with Zejula, belantamab mafodotin (BCMA ADC), GSK6097608 (anti-CD96) and GSK3745417 (STING agonist).

In addition, under GSK’s collaboration with iTeos Therapeutics, dostarlimab is being developed in combination with EOS-448 (anti-TIGIT) and inupadenant (A2A receptor antagonist) in various solid tumor indications, including registration-directed trials combining dostarlimab and EOS-448 for first-line PD-L1 high non-small cell lung cancer (NSCLC) patients, head and neck squamous cell cancer (HNSCC) and a third undisclosed indication.

In June 2021, GSK estimated potential peak annual global JEMPERLI sales on a non-risk adjusted basis of £1-£2 billion, which is currently equal to approximately $1.4 to $2.7 billion based on the GBP to USD exchange rate as of December 31, 2021, for currently approved indications and first-line use in endometrial and ovarian cancer only.

In October 2020, we amended our GSK collaboration to increase royalties on global net sales of JEMPERLI to 8% on annual global net sales below $1.0 billion and 12-25% of annual global net sales above $1.0 billion, add a 1% royalty rate on GSK’s global net sales of Zejula and received a one-time cash payment of $60.0 million.

In October 2021, we signed a royalty monetization agreement (“Royalty Monetization Agreement”) with Sagard Healthcare Royalty Partners (“Sagard”).

Pursuant to this transaction, we received a $250.0 million payment upon closing in December 2021, in exchange for JEMPERLI royalties due to us on annual commercial sales below $1.0 billion and certain future milestones starting in October 2021.

The aggregate JEMPERLI royalties and milestones to be received by Sagard under the Royalty Monetization Agreement is capped at certain

fixed multiples of the upfront payment based upon time.

We plan to conduct a randomized placebo-controlled multi-hundred patient global Phase 2b trial assessing three dose levels of subcutaneously administrated rosnilimab in moderate-to-severe RA for approximately six months on well-established endpoints including ACR 20/50/70 and DAS28.

We expect to initiate this trial in the third quarter of 2023 with top-line interim data anticipated by mid-year 2025.

We also plan to conduct a second global Phase 2 trial, in an indication to be announced, with trial initiation anticipated by the end of 2023.

During the fourth quarter of 2021, we initiated AZURE, a randomized placebo-controlled 45-patient Phase 2 trial of rosnilimab in moderate-to-severe alopecia areata patients.

We conducted an interim review of blinded data in December 2022 which demonstrated robust reductions in peripheral PD-1+ T cells, including PD-1 high T cells reduction of >80%, across blinded pooled rosnilimab patients and placebo patients, which is consistent with observations in the healthy volunteer Phase 1 trial of >90% in rosnilimab treated patients.

The blinded data suggests rosnilimab administration was generally safe and well tolerated.

Interim results suggest that target improvement in severity of alopecia tool (SALT) was not achieved potentially due to an inadequate tested dose level, limited duration of treatment, and/or complexity of disease biology including the hair growth cycle.

Further development in alopecia areata will not be pursued.

The unblinded final results will be available in second half of 2023.

ANB032 is designed to augment BTLA signaling, which is broadly applicable to human inflammatory diseases associated with lymphoid and myeloid immune cell dysregulation.

Genetic studies have demonstrated that BTLA pathway mutations increase human susceptibility to multiple autoimmune diseases and insufficient BTLA signaling can lead to dysregulated T or B cell responses and changes in the function of dendritic cells.

BTLA modulates signaling of HVEM, governing HVEM’s interaction with its natural ligands, including LIGHT.

Polymorphisms in BTLA or molecules in the BTLA pathway such as HVEM are associated with inflammatory diseases, including aberrant T cell activity, B cell activity and dysregulation of downstream humoral immune responses (IgE, IgG secretion).

Similarly, BTLA knockout animals have spontaneous or enhanced severity of inflammatory disease, demonstrating aberrant T cell activity, B cell activity and dysregulation of pathogenic antibody responses upon immunization.

ANB032 is anticipated to down-modulate the activity of T cells, B cells and dendritic cells via several potential mechanisms:

BTLA agonistic activity, stabilization of the interaction of BTLA and HVEM in cis which prevents pro-inflammatory signaling mediated by HVEM ligands such as LIGHT, and abrogation of pro-inflammatory HVEM signaling mediated by BTLA in trans.

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 single ascending dose (SAD) cohorts received subcutaneous or IV single doses of ANB032 or placebo, while multiple ascending dose (MAD) cohorts received four weekly subcutaneous doses of ANB032 or placebo.

ANB032 was generally well-tolerated and no dose limiting toxicities were observed.

No serious adverse events were reported.

ANB032 demonstrated a favorable pharmacokinetic 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.

In in vitro studies, ANB032 pharmacodynamic activity demonstrated inhibition of T cell proliferation and reduction in inflammatory cytokine secretion (Th1, Th2, Th17).

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 and other cell types, including dendritic cells contribute significantly to the pathogenesis.

ANB032 inhibition of inflammatory Th1, Th2 and Th17 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 plan to conduct a randomized placebo-controlled 160 patient Phase 2 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.

We expect to initiate this clinical trial in the second quarter of 2023 with top-line interim data anticipated by the end of 2024.

ANB033 targets CD122, the common beta subunit shared by the IL-15 and IL-2 receptors.

IL-15 signaling mediates the survival and maintenance of tissue resident memory T cells (T RM ).

The presence of long-lived and persistent T RM has been shown to drive tissue-specific immune-mediated inflammation.

T RM are present in the skin in dermatologic diseases, where defined borders of inflammation often recur.

T RM are also observed in other tissue-specific inflammatory disorders including gastroenterology, rheumatology and respiratory.

ANB033 is designed with an affinity to CD122 that inhibits IL-15 signaling, leading to death of pathogenic T RM cells in diseased tissue, with the potential to achieve and maintain remission of inflammation through the elimination of these disease-causing cells.

In addition, ANB033 inhibits IL-2 signaling through the low affinity IL-2 receptor (comprised of CD122 and the common gamma subunit, CD132) expressed on T cells, while sparing regulatory T cells which express the high affinity IL-2 receptor (comprised of CD122, CD132 and the alpha receptor subunit for IL-2, CD25).

This drives reduction of pathogenic T cell numbers while sparing or potentially enhancing regulatory T cell numbers.

We anticipate submitting an IND for a Phase 1 clinical trial with ANB033 during the first half of 2024.

Imsidolimab inhibits the interleukin-36 receptor (IL-36R), and 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 serious adverse events were reported.

In July 2020, the FDA granted Orphan Drug Designation for imsidolimab for the treatment of patients with GPP.

We have initiated two Phase 3 trials for imsidolimab for GPP.

The first, called GEMINI-1, will enroll approximately 45 moderate-to-severe GPP patients, each undergoing an active flare at baseline, which will be randomized equally to receive a single dose of 750mg IV imsidolimab, 300mg IV imsidolimab, or placebo.

The primary endpoint of the Phase 3 program is the proportion of patients achieving clear or almost clear skin as determined by a GPPPGA score of zero or 1 at week 4 of GEMINI-1.

The objective of GEMINI-2 is to assess the efficacy and safety of imsidolimab after 3 years of monthly dosing.

Top-line data from an interim analysis of GEMINI-1 is anticipated in the fourth quarter of 2023.

We announced in August 2022 that we intend to complete execution of our Phase 3 program in GPP and outl-icense imsidolimab prior to potential FDA approval.

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 a central mediator of various immune responses leading to Th2-type inflammatory disorders, including asthma, COPD and atopic 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 announced in January 2023 that etokimab is available to out-license.

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 Biologics License Application (“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).

A second FDA approval was received in August 2021 for JEMPERLI in pan-deficient mismatch repair tumors (PdMMRT).

JEMPERLI is currently in Phase 3 trials for various solid tumor indications, including first-line advanced/recurrent endometrial cancer and first-line ovarian cancer.

In addition, under the collaboration, GSK is developing dostarlimab in combination with two other development programs from the GSK Agreement:

cobolimab, an anti-TIM-3 antibody, and GSK40974386, an anti-LAG-3 antibody for multiple solid tumor indications.

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 NSCLC who have progressed on prior anti-PD-(L)1 therapy and chemotherapy.

In June 2021, GSK estimated potential peak annual global JEMPERLI sales on a non-risk adjusted basis of £1-£2 billion for currently approved indications and first-line use in endometrial and ovarian cancer only.

For more information about these collaborations, see “— Collaborations” included in Part I, Item 1 of this Annual Report.

Following the closing of the Sagard royalty monetization transaction, we ended 2021 with $615.2 million in cash, cash equivalents and investments and intend to continue to operate in a capital-efficient manner.

As of December 31, 2022, we had an accumulated deficit of $450.5 million, primarily as a result of losses incurred since our inception in 2005.

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For our discussion related to the results of our operations and liquidity and capital resources for fiscal year ended December 31, 2021 compared to the year ended December 31, 2020, please refer to Part II, Item 7, "Management’s Discussion and Analysis of Financial Condition and Results of Operations" in our Annual Report on Form 10-K for the year ended December 31, 2021.

We are continuing to proactively monitor and assess the COVID-19 global pandemic.

The full impact of the COVID-19 pandemic is inherently uncertain.

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 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).

While we have begun to re-open our offices, we continue to allow remote work, we continue to monitor developments of the COVID-19 pandemic 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.

We have implemented appropriate safety measures, following guidance from the Center for Disease Control and the Occupational Safety and Health Administration.

The extent of the impact of the COVID-19 pandemic on our future liquidity and operational performance will depend on certain developments, including the duration and spread of the outbreak, including its variants, the availability and effectiveness of vaccines, the impact on our clinical trials, patients, and collaboration partners, and the effect on our suppliers.

Financial Overview

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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 December 31, 2021, we have received $226.9 million in cash in non-dilutive funding from our collaborators.

From inception through December 31, 2022, we have recognized $234.2 million in revenue from our collaborators.

Collaboration and Exclusive License Agreement with GSK

In March 2014, we entered into a Collaboration and Exclusive License Agreement GSK (the “GSK Agreement”) for the development and commercialization of therapeutic monospecific and bispecific antibodies that antagonize PD-1, TIM-3, LAG-3 and/or a fourth undisclosed checkpoint receptor.

In March 2014, we entered into a Collaboration and Exclusive License Agreement with GSK (the “GSK Agreement”) for the development and commercialization of therapeutic monospecific and bispecific antibodies that antagonize PD-1, TIM-3, LAG-3 and/or a fourth undisclosed checkpoint receptor.

We received $17.0 million in upfront fees from GSK in March 2014, and in November 2014, we amended the agreement with GSK to include the development and commercialization of bispecific antibodies to another undisclosed target, for an additional upfront fee of $2.0 million.

Both upfront fees were recognized over the same period that our research and development services for which we were reimbursed were performed, which was extended through December 31, 2016 by amendment of the GSK Agreement in February 2016.

For each of the four targets under the GSK agreement, we are eligible to receive up to $273.0 million in milestone payments, which are comprised of $18.0 million for preclinical and clinical development milestone payments, $90.0 million upon certain regulatory events and $165.0 million upon worldwide commercial sales thresholds.

In addition, GSK is obligated to pay us tiered royalties, ranging from 4% to 8%, for each product developed under the agreement, except in the case of JEMPERLI where the royalties payable will be 8% to 25% as amended below, on annualized net sales of each antibody commercialized from the collaboration.

For each of the targets under the GSK agreement, we are eligible to receive up to $273.0 million in milestone payments, which are comprised of $18.0 million for preclinical and clinical development milestone payments, $90.0 million upon certain regulatory events and $165.0 million upon worldwide commercial sales thresholds.

In addition, GSK is obligated to pay us tiered royalties, ranging from 4% to 8%, for each product developed under the agreement, except in the case of JEMPERLI where the royalties payable will be 8% to 25% as described below, on annualized net sales of each antibody commercialized from the collaboration.

On October 23, 2020, we amended the GSK Agreement (the “2020 Amendment”).

Under the Amendment, we agreed to permit GSK to conduct development and commercialization of Zejula, an oral, once-daily poly (ADP-ribose) polymerase (PARP) inhibitor, which has received US approval for the maintenance treatment of adult patients with advanced epithelial

ovarian, fallopian tube, or primary peritoneal cancer who are in a complete or partial response to first-line platinum-based chemotherapy and is under development for additional cancer indications.

In addition, under the Amendment, we were granted increased royalties upon sales of JEMPERLI, an anti-PD-1 antagonist antibody under development by GSK for multiple oncological disorders, including endometrial cancer, non-small cell lung cancer, ovarian cancer, colorectal cancer, and mismatch repair deficient solid tumors, 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.

Under the 2020 Amendment, we were granted increased royalties upon sales of JEMPERLI (dostarlimab), an anti-PD-1 antagonist antibody under development by GSK for multiple oncological disorders, 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 2020 Amendment also provided for a one-time non-refundable cash payment of $60.0 million that we received in the fourth quarter of 2020.

GSK also agreed, starting January 1, 2021, to pay us a 1% royalty less third-party royalty deduction on all GSK Net Sales of Zejula.

The $1.1 billion in cash milestone payments due under the GSK Agreement remain unchanged.

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From inception of the agreement through December 31, 2022, we have recognized $215.8 million in total revenue from GSK.

In October 2021, we entered into the Royalty Monetization Agreement with Sagard.

Under the terms of the Royalty Monetization Agreement, we received $250.0 million, upon closing in December 2021, in exchange for royalties payable to us under the GSK collaboration on annual global net sales of JEMPERLI below $1.0 billion, as well as certain milestone payments, starting in October 2021.

The aggregate JEMPERLI royalties and certain future milestones to be received by Sagard under the Royalty Monetization Agreement are capped at certain fixed multiples of the upfront payment based on time.

Milestones achieved through December 31, 2021 under the GSK Agreement are as follows:

In October 2021, we entered into the JEMPERLI Royalty Monetization Agreement (the “JEMPERLI Royalty Monetization Agreement”) with Sagard.

Under the terms of the JEMPERLI Royalty Monetization Agreement, we received $250.0 million, upon closing in December 2021, in exchange for royalties payable to us under the GSK collaboration on annual global net sales of JEMPERLI below $1.0 billion, as well as certain milestone payments, starting in October 2021.

The aggregate JEMPERLI royalties and certain future milestones to be received by Sagard under the JEMPERLI Royalty Monetization Agreement are capped at certain fixed multiples of the upfront payment based on time.

Milestones under the GSK Agreement are as follows:

(JEMPERLI/Dostarlimab) Anti-TIM-3

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Milestone Event Amount Quarter Recognized Amount Quarter Recognized Amount Quarter Recognized

Initiated in vivo toxicology studies using good laboratory practices (GLPs) $1.0M Q2'15 $1.0M Q4'15 $1.0M Q3'16

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

$1.0M Q2'15 $1.0M Q4'15 $1.0M Q3'16

IND clearance from the FDA $4.0M Q1'16 $4.0M Q2'16 $4.0M Q2'17

Phase 2 clinical trial initiation $3.0M Q2'17 $3.0M Q4'17 $3.0M Q4'19

Phase 3 clinical trial initiation - first indication $5.0M Q3'18 — — — —

Phase 3 clinical trial initiation - second indication $5.0M Q2'19 — — — —

Phase 3 clinical trial initiation - first indication $5.0M Q3'18 $5.0M Q4'22 $5.0M —

Phase 3 clinical trial initiation - second indication $5.0M Q2'19 $5.0M — $5.0M —

Filing of the first BLA (1) - first indication

$10.0M Q1'20 — — — —

$10.0M Q1'20 $10.0M — $10.0M —

Filing of the first MAA (2) - first indication

$5.0M Q1'20 — — — —

$5.0M Q1'20 $5.0M — $5.0M —

Filing of the first BLA - second indication

$10.0M Q1'21 — — — —

First BLA approval - first indication $20.0M Q2'21 — — — —

$10.0M Q1'21 $10.0M — $10.0M —

First BLA approval - first indication $20.0M Q2'21 $20.0M — $20.0M —

First MAA approval - first indication

$10.0M Q2'21 — — — —

First BLA approval - second indication $20.0M Q3'21 — — — —

$10.0M Q2'21 $10.0M — $10.0M —

First BLA approval - second indication $20.0M Q3'21 $20.0M — $20.0M —

Filing of the first MAA - second indication (3)

$5.0M — $5.0M — $5.0M —

First MAA approval - second indication (3)

$10.0M — $10.0M — $10.0M —

First commercial sales milestone (3)

$15.0M — $15.0M — $15.0M —

Second commercial sales milestone (3)

$25.0M — $25.0M — $25.0M —

Third commercial sales milestone (3)

$50.0M — $50.0M — $50.0M —

Fourth commercial sales milestone $75.0M — $75.0M — $75.0M —

Milestones recognized through December 31, 2022 $93.0M — $13.0M — $8.0M —

Milestones that may be recognized in the future $180.0M — $260.0M — $265.0M —

(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

Milestones achieved during the discovery period were recognized as revenue pro-rata through December 31, 2016.

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Cash is generally received within 30 days of milestone achievement.

In connection with the 2020 Amendment, in October 2020 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.

Zejula is an oral, once-daily poly (ADP-ribose) polymerase (PARP) inhibitor, which has received U.S.

and European approval for the maintenance treatment of adult patients with advanced epithelial ovarian, fallopian tube, or primary peritoneal cancer who are in a complete or partial response to first-line platinum-based chemotherapy, has been approved for certain other indications, and is under development for additional cancer indications as well.

Under the GSK Settlement Agreement, the royalty is paid at a rate of 1% 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 royalty monetization 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.

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 FDA for the treatment of endometrial cancer on or prior to December 31, 2025.

Antibody Generation Agreement with Bristol-Myers Squibb

In December 2011, we entered into a license and collaboration agreement (the “BMS Agreement”) with Celgene, now a part of Bristol-Myers Squibb (Celgene and Bristol-Myers Squibb are hereinafter referred to, collectively, as “BMS”), to develop therapeutic antibodies against multiple targets.

We granted BMS the option to obtain worldwide commercial rights to antibodies generated against each of the targets under the agreement, which option was triggered on a target-by-target basis by our delivery of antibodies meeting certain pre-specified parameters pertaining to each target under the agreement.

We granted BMS the option to obtain worldwide commercial rights to

antibodies generated against each of the targets under the agreement, which option was triggered on a target-by-target basis by our delivery of antibodies meeting certain pre-specified parameters pertaining to each target under the agreement.

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

From inception of the agreement through December 31, 2022, we have recognized $10.0 million in total revenue from BMS.

Milestone Event Amount Quarter Recognized

Completion of first in vivo toxicology studies using GLPs

Phase 1 clinical trial initiation $1.0M Q4'16

Milestones were recognized as revenue in the period earned.

There was no revenue recognized under this agreement during the years ended December 31, 2022 or 2021.

Revenue was last recognized under this agreement in 2016.

Research and Development Expense

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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 Phase 2 clinical trials and have ongoing Phase 2 and 3 clinical trials for imsidolimab, completed a Phase 1 clinical trial and have an ongoing Phase 2 clinical trial in rosnilimab, and an ongoing Phase 1 trial in ANB032.

We expect our research and development expenses to be higher for the foreseeable future as we continue to advance our product candidates into larger 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

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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 the term of the Royalty Monetization Agreement.

Our estimate of the interest rate under the arrangement is based on forecasted royalty and milestone payments expected to be made to Sagard over the life of the agreement.

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

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Net Operating Loss and Research and Development Tax Credit Carryforwards

Since inception, we have accumulated net operating losses (“NOLs”) in all years except December 31, 2015 and 2014, in which we generated taxable income as a result of our collaboration agreement with GSK as well as expenses incurred by our Australian subsidiary which are not deductible for U.S.

income tax purposes.

While we utilized NOLs in 2015 and 2014, we have since incurred losses and therefore continue to have a valuation allowance against our net deferred tax assets due to the uncertainty of the realization of such assets.

At December 31, 2021, we had federal and state NOL carryforwards of $293.4 million and $65.6 million, respectively.

The federal and state NOLs generated prior to 2018 will both begin to expire in 2028, unless previously utilized.

Since inception, we have accumulated net operating losses (“NOLs”) in all years except December 31, 2022, 2015 and 2014, in which we generated taxable income primarily attributable to our collaboration agreement with GSK in 2014 and 2015,

and our Zejula Royalty Monetization Agreement and the requirement to capitalize and amortize R&D expenditure for tax purposes in 2022.

While we utilized NOLs in 2022, 2015 and 2014, we continue to incur losses and therefore continue to have a valuation allowance against our net deferred tax assets due to the uncertainty of the realization of such assets.

As of December 31, 2022, we had federal and state NOL carryforwards of $287.4 million and $69.6 million, respectively.

The federal and state NOLs generated prior to 2018 will begin to expire in 2029 and 2028, respectively, unless previously utilized.

The federal NOL includes $234.3 million of net operating losses generated in 2018 and after.

Federal net operating losses generated in 2018 and after carryover indefinitely and may generally be used to offset up to 80% of future taxable income.

At December 31, 2021, we had federal and California research tax credit carryforwards of approximately $3.2 million and $10.6 million, respectively.

As of December 31, 2022, we had federal and California research tax credit carryforwards of approximately $6.1 million and $12.2 million, respectively.

The federal research tax credit carryforwards will begin to expire in 2041 and the California research tax credits carryforward indefinitely.

We also have foreign tax losses of $3.3 million, which will carry forward indefinitely, subject to a continuity of ownership test.

The NOL carryforward and the research tax credit carryforwards may be subject to an annual limitation under Section 382 and 383 of the Internal Revenue Code of 1986, as amended, or the Code, and similar state provisions if we experience one or more ownership changes which would limit the amount of NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax, respectively.

In general, an ownership change, as defined by Section 382 and 383 of the Code, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period.

In September 2015, we completed a Section 382 and 383 of the Code ownership change analysis through December 31, 2014 and determined that there was an ownership change in 2007 that may limit the utilization of approximately $5.3 million and $5.4 million in Federal and state NOLs, respectively, and $0.2 million in both Federal and state research tax credits.

We extended the analysis period of the study through September 30, 2021, noting ownership changes on January 31, 2017 and March 8, 2021, which limits the annual utilization of the Company’s NOLs and causes the expiration of approximately $15.0 million of federal research credits as they will not be utilized within the carryover period due to the Section 382 limitation.

Our use of federal and state NOLs and research credits could be limited further by the provisions of Section 382 of the U.S.

Internal Revenue Code of 1986, as amended, depending upon the timing and amount of additional equity securities that we have issued or will issue.

The above NOL carryforward and the federal and state research tax credit carryforwards may be subject to an annual limitation under section 382 and 383 of the Internal Revenue Code of 1986, as amended (the “Code”), and similar state provisions if we experience one or more ownership changes which would limit the amount of NOL and tax credit carryforwards that can be utilized to offset future taxable income and tax, respectively.

In general, an ownership change as defined by Section 382 and 383, results from transactions increasing ownership of certain stockholders or public groups in the stock of the corporation by more than 50 percentage points over a three-year period.

In September 2015, we completed a Section 382 analysis through December 31, 2014 and determined that there was an ownership change in 2007 that may limit the utilization of approximately $5.3 million and $5.4 million in federal and state NOLs, respectively, and $0.2 million in both federal and state research tax credits.

We subsequently extended the analysis period of the study through December 31, 2022, noting ownership changes on January 31, 2017 and March 8, 2021.

To reflect the impact of the January 31, 2017 and March 8, 2021 ownership changes, we reduced federal research credit carryforwards by approximately $15.0 million.

Our use of federal and state NOLs and research credits could be limited further by the provisions of Section 382 of the Code of 1986, as amended, depending upon the timing and amount of additional equity securities that we have issued or will issue.

State NOL carryforwards may be similarly limited.

Limitations on our ability to use NOL carryforwards and research and development tax credits to offset future taxable income could require us to pay U.S.

federal income tax earlier than would be required if such limitations were not in effect.

Similar rules and limitations may apply for state income tax purposes.

If a change in ownership were to have occurred, NOL and tax credits carryforwards could be eliminated or restricted.

If eliminated, the related asset would be removed from the deferred tax asset schedule with a corresponding reduction in the valuation allowance.

Due to the existence of the valuation allowance, limitations created by ownership changes, if any, will not impact our effective tax rate.

Critical Accounting Policies and Use of Estimates

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Sale of Future Royalties

We treated the sale of future revenue from the Royalty Monetization Agreement with Sagard as debt, which will be amortized under the effective interest rate method over the estimated life of the related expected royalty stream.

We recorded the upfront proceeds, net of transaction costs, as a liability related to the sale of future revenue.

We treated the sale of future revenue from the JEMPERLI Royalty Monetization Agreement with Sagard and the Zejula Royalty Monetization Agreement with DRI LLP as a liability related to the sale of future royalties on the balance sheet.

The recorded the upfront proceeds, net of transaction costs, will be amortized under the effective interest rate method over the estimated life of the related expected royalty stream.

The liability and the related interest expense are based on our current estimates of future royalties and certain milestones expected to be paid over the life of the agreement.

We will periodically assess the expected royalty and milestone payments and to the extent our future estimates or timing of such payments are materially different than our previous estimates, we will prospectively recognize related interest expense.

Royalty revenue will be recognized as earned on net sales of JEMPERLI, and we will record the royalty payments to Sagard as a reduction of the liability when paid.

As such payments are made to Sagard, the balance of the liability will be effectively repaid over the life of the Royalty Monetization Agreement.

Royalty revenue will be recognized as earned on net sales of JEMPERLI and Zejula, and we will record the royalty payments made as a reduction of the liability when paid.

As such payments are made, the balance of the liability will be effectively repaid over the life of the JEMPERLI Royalty Monetization Agreement and the Zejula Royalty Monetization Agreement.

For further discussion of the sale of future revenue, refer to Note 5 — Sale of Future Royalties in the accompanying notes to the consolidated financial statements included in Part II, Item 8, “Consolidated Financial Statements and Supplementary Data” of this Annual Report on Form 10-K.

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GSK Royalty Revenue 5,287 3,175 2,112

GSK Amendment No.

3 Payment $ — $ 60,000 $ (60,000)

Total collaboration revenue

$ 10,287 $ 63,175 $ (52,888)

Collaboration revenue during the year ended December 31, 2021 decreased $11.8 million compared to the year ended December 31, 2020 primarily due to the payment received related to an amendment to the GSK Agreement during 2020, royalty revenue recognized during 2021 and the timing of milestones achieved.

Collaboration revenue during the year ended December 31, 2022 decreased $52.9 million compared to the year ended December 31, 2021 primarily due to one milestone earned and recognized in 2022 as compared to four milestones earned and recognized in 2021, partially offset by an increase of $2.1 million in royalty revenue.

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 $98.5 million during the year ended December 31, 2021 compared to $80.0 million during the year ended December 31, 2020, for an increase of approximately $18.5 million.

The increase is primarily attributable to a $10.7 million increase in clinical expenses, a $5.2 million increase in salaries and related expenses, including stock compensation expense, a $3.1 million increase in other research and development expenses, offset by a $0.5 million decrease in outside services for preclinical and manufacturing expenses.

Research and development expenses were $88.8 million during the year ended December 31, 2022 compared to $98.5 million during the year ended December 31, 2021, for a decrease of approximately $9.7 million.

The decrease is primarily attributable to a $6.8 million decrease in outside services for preclinical and manufacturing expenses, a $4.7 million decrease in clinical expenses, partially offset by a $1.7 million increase in salaries and related expenses, including stock compensation expense, and a $0.1 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.

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General and administrative expenses were $36.6 million during the year ended December 31, 2022 compared to $21.5 million during the year ended December 31, 2021, for an increase of approximately $15.1 million.

The increase is primarily due to a $2.8 million increase in personnel costs, including stock compensation expense, a $0.6 million increase in insurance expense, and a $0.2 million increase in other general and administrative expense, offset by a $1.0 million decrease in legal expense.

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.

The increase is primarily due to a $13.5 million increase in personnel costs, including $11.1 million in stock compensation expense, a $0.9 million increase in market research cost, and a $0.8 million increase in other general and administrative expense, partially offset by a $0.1 million decrease in insurance and legal expense.

We expect that our general and administrative expenses will increase for the foreseeable future as we incur costs associated with being a publicly traded company, including stock compensation expense, 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.

Non-cash Interest Expense for the Sale of Future Royalties

Interest expense was $1.5 million during the year ended December 31, 2021 compared to $0 during the year ended December 31, 2020.

The increase in interest expense during the periods is directly related to the non-cash interest expense on the liability related to the sale of future royalties.

Interest expense was $21.1 million during the year ended December 31, 2022 compared to $1.5 million during the year ended December 31, 2021.

The increase in interest expense during the period is directly related to the non-cash interest expense accrued on the liability related to the sale of future royalties, of which we had a full year of expense during 2022 as compared to one month of expense during 2021.

We also had an additional sale of future royalties in 2022 compared to 2021.

Interest Income

Interest income was $7.6 million during the year ended December 31, 2022 compared to $0.4 million during the year ended December 31, 2021.

The decrease in interest income was 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 year ended December 31, 2021.

The increase in interest income was primarily related to our short-term and long-term investments, the balance of which increased during the periods.

The increase in interest income is also attributable to higher interest rates during the year ended December 31, 2022.

Liquidity and Capital Resources

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As of December 31, 2022, we had $584.2 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.

Our rights to payments under our collaboration agreements are our only committed external source of funds.

Specific to our collaboration agreement with GSK, JEMPERLI is currently in clinical development for various solid tumor indications.

Earlier in 2021, we received additional milestones from GSK, as outlined above, following acceptance and approval of BLA and EMA filings of JEMPERLI for the PdMMRT indication.

Our amended GSK Agreement also includes a 1% royalty less third-party royalty deduction on GSK’s global net sales of Zejula that began in 2021.

In October 2021, we signed the Royalty Monetization Agreement with Sagard.

Pursuant to this transaction we received a $250.0 million payment upon closing in December 2021, in exchange for JEMPERLI royalties due to us on annual

commercial sales below $1.0 billion and certain future milestones starting in October 2021.

We recorded the upfront proceeds of $250.0 million, net of $0.4 million of transaction costs, as a liability related to the sale of future revenue.

In October 2021, we signed the JEMPERLI Royalty Monetization Agreement with Sagard.

Pursuant to this transaction we received a $250.0 million payment upon closing in December 2021, in exchange for JEMPERLI royalties due to us on annual commercial sales below $1.0 billion and certain future milestones starting in October 2021.

We treated the sale of future revenue from the JEMPERLI Royalty Monetization Agreement with Sagard as debt, which will be amortized under the effective interest rate method over the estimated life of the related expected royalty stream.

We recorded the upfront proceeds

of $250.0 million, net of $0.4 million of transaction costs, as a liability related to the sale of future revenue.

The liability and the related interest expense are based on our current estimates of future royalties and certain milestones expected to be paid over the life of the agreement.

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Royalty revenue will be recognized as earned on net sales of JEMPERLI, and we will record the royalty payments to Sagard as a reduction of the liability when paid.

As such payments are made to Sagard, the balance of the liability will be effectively repaid over the life of the Royalty Monetization Agreement.

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.

In September 2022, we signed the Zejula Royalty Monetization Agreement with DRI.

Pursuant to this transaction we received a $35.0 million payment 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.

We treated the sale of future revenue from the Zejula Royalty Monetization Agreement with DRI as debt, which will be amortized under the effective interest rate method over the estimated life of the related expected royalty stream.

We recorded the upfront proceeds of $35.0 million, net of $0.2 million of transaction costs, as a liability related to the sale of future revenue.

The liability and the related interest expense are based on our current estimates of future royalties expected to be paid over the life of the agreement.

Royalty Monetization Agreement.

Royalty revenue will be recognized as earned on net sales of Zejula, and we will record the royalty payments to DRI as a reduction of the liability when paid.

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.

In December 2021, we entered into an Open Market Sales Agreement with Jefferies LLC, through which we may offer and sell shares of our common stock having an aggregate offering of up to $150.0 million through Jefferies LLC as our sales agent.

We will pay the sales agent a commission of up to 3% of the gross proceeds of sales made through the at-the-market offering program.

During the year ended December 31, 2021, we did not sell any shares under the at-the-market offering program and all $150.0 million remains available for sale.

This agreement was terminated effective November 8, 2022.

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.

Funding Requirements

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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.

Additionally, on January 13, 2023, our board of directors authorized a stock repurchase program, whereby we may purchase up to $50.0 million in shares of our common stock, or the Repurchase Program.

The Repurchase Program may be carried out at the discretion of our board of directors through open market purchases, one or more Rule 10b5-1 trading plans, or other means in accordance with Rule 10b5-1 of the Exchange Act and Rule 10b-18 of the Exchange Act.

The Repurchase Program may be suspended, modified or discontinued at any time, and we have no obligation to repurchase any amount of our common stock under the Repurchase Program.

Cash, cash equivalents and investments totaled $584.2 million as of December 31, 2022, compared to $615.2 million as of December 31, 2021.

We believe that our existing cash, cash equivalents and investments will fund our current operating plan for at least the next twelve months from the issuance of our consolidated financial statements.

We believe that our existing cash, cash equivalents and investments will fund our current operating plan, including the Repurchase Program, for at least the next twelve months from the issuance of our consolidated financial statements.

We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect.

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Financing activities 44,017 252,298

Net increase in cash, cash equivalents and restricted cash

Net (decrease) increase in cash and cash equivalents

$ (424,421) $ 245,213

Operating Activities

Net cash used in operating activities during the year ended December 31, 2021 of $45.9 million was primarily due to our net loss of $57.8 million, adjusted for addbacks for non-cash items of $19.3 million which includes stock-based compensation, amortization of operating right-of-use assets and liabilities, non-cash interest expense, and income from marketable securities and decreases in working capital of $7.4 million.

Net cash used in operating activities during the year ended December 31, 2020 of $14.2 million was primarily due to our net loss of $19.9 million, adjusted for addbacks for non-cash items of $12.5 million which includes stock-based compensation, amortization of operating right-of-use assets and liabilities, and income from marketable securities and decreases in working capital of $6.8 million.

Net cash used in operating activities during the year ended December 31, 2022 was $73.6 million, primarily due to our net loss of $128.7 million, adjusted for addbacks for non-cash items of $46.8 million which includes stock-based compensation, amortization of operating right-of-use assets and liabilities, non-cash interest expense, and income from marketable securities and increases in working capital of $8.3 million.

Net cash used in operating activities during the year ended December 31, 2021 was $45.9 million, primarily due to our net loss of $57.8 million, adjusted for addbacks for non-cash items of $19.3 million which includes stock-based compensation, amortization of operating right-of-use assets and liabilities, non-cash interest expense, and income from marketable securities and decreases in working capital of $7.4 million.

Investing Activities

Cash provided by investing activities during the year ended December 31, 2021 of $38.8 million was primarily due to the sale and maturities of investments of $158.8 million, offset by the acquisition of investments of $118.7 million and the purchases of property and equipment of approximately $1.3 million.

Cash provided by investing activities during the year ended December 31, 2020 of $94.5 million was primarily due to the sale and maturities of investments of $290.0 million, offset by the acquisition of investments of $194.9 million and the purchases of property and equipment of $0.6 million.

Cash used in investing activities during the year ended December 31, 2022 was $394.8 million, primarily due to the sale and maturities of investments of $408.0 million, offset by the acquisition of investments of $802.5 million and the purchases of property and equipment of approximately $0.3 million.

Cash provided by investing activities during the year ended December 31, 2021 was $38.8 million, primarily due to the sale and maturities of investments of $158.8 million, offset by the acquisition of investments of $118.7 million and the purchases of property and equipment of $1.3 million.

Financing Activities

Cash provided by financing activities during the year ended December 31, 2021 of $252.3 million was primarily related to $250.0 million received for the sale of future royalties, and $2.6 million proceeds received from the issuance of common stock as a result of option exercises, offset by $0.3 million for payments of issuance costs related to the sale of future royalties.

Cash used in financing activities during the year ended December 31, 2020 of $0.9 million was primarily related to $1.4 million in repayments on our outstanding Term Loan, offset by proceeds of $0.5 million from the issuance of common stock as a result of option exercises.

Cash provided by financing activities during the year ended December 31, 2022 was $44.0 million, primarily related to $35.0 million received for the sale of future royalties, $11.8 million proceeds received from the issuance of common stock, offset by $2.5 million for repayments of the liability for the sale of future royalties and $0.3 million for payments of issuance costs related to the sale of future royalties.

Cash provided by financing activities during the year ended December 31, 2021 was $252.3 million, primarily related to $250.0 million received for the sale of future royalties, and $2.6 million proceeds received from the issuance of common stock, offset by $0.3 million for payments of issuance costs related to the sale of future royalties.

Contractual Obligations

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What changed 10-K

Item 7. Management’s Discussion and Analysis