What changed in this filing

/stocks — the workspaceLOADING

Item 5. Market for Registrant’s Common Equity

2021-03-25 compared with 2020-03-09 · 17 added, 252 removed, 51 unchanged (84% of the section changed)

Market for Registrant’s Common Equity, Related Stockholder Matters, and Issuer Purchases of Equity Securities

Market Information for Common Stock

Our common stock has been listed on The Nasdaq Global Market under the symbol “CRVS”

since March 23, 2016.

Our common stock has been listed on The Nasdaq Global Market under the symbol “CRVS” since March 23, 2016.

Prior to that there was no public trading market for our common stock.

17 unchanged sentences

Stock Performance Graph

The following graph shows the total stockholder’s return on an investment of $100 in cash at market close on March 23, 2016 (the first day of trading of our common stock), through December 31, 2019 for (i) our common stock, (ii) the Nasdaq Composite Index and (iii) the Nasdaq Biotechnology Index.

The following graph shows the total stockholder’s return on an investment of $100 in cash at market close on March 23, 2016 (the first day of trading of our common stock), through December 31, 2020 for (i) our common stock, (ii) the Nasdaq Composite Index and (iii) the Nasdaq Biotechnology Index.

Pursuant to applicable Securities and Exchange Commission rules, all values assume reinvestment of the full amount of all dividends, however, no dividends have been declared on our common stock to date.

The stockholder return shown on the graph below is not necessarily indicative of future performance, and we do not make or endorse any predictions as to future stockholder return.

This graph and the table below it shall not be deemed “soliciting material”

or be deemed “filed”

for purposes of Section 18 of the Securities Exchange Act of 1934 as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any

of our filings under the Securities Act of 1933, as amended (the “Securities Act”), whether made before or after the date hereof and irrespective of any general incorporation language in any such filing.

This graph and the table below it shall not be deemed “soliciting material” or be deemed “filed” for purposes of Section 18 of the Securities Exchange Act of 1934 as amended (the “Exchange Act”), or otherwise subject to the liabilities under that Section, and shall not be deemed to be incorporated by reference into any

$100 investment in stock or index

6 unchanged sentences

Recent Sales of Unregistered Equity Securities

In November 2019, we entered into an exchange agreement (the “Exchange Agreement”) with entities affiliated with Biotechnology Value Fund, L.P.

(the “Exchanging Stockholders”), pursuant to which we exchanged an aggregate of 1,458,000 shares of our common stock owned by the Exchanging Stockholders for warrants (the “Exchange Warrants”) to purchase an aggregate of 1,458,000 shares of common stock (subject to adjustment in the event of stock splits, recapitalizations and other similar events affecting common stock), with an exercise price of $0.0001 per share.

The Exchange Warrants were issued without registration under the Securities Act of 1933, as amended (the “Securities Act”), in reliance on the exemption from registration contained in Section 3(a)(9) of the Securities Act.

In November 2019, we entered into an exchange agreement (the “Exchange Agreement”) with entities affiliated with Biotechnology Value Fund, L.P.

Issuer Purchases of Equity Securities by the Issuer and Affiliated Purchasers

Selected Financial Data

You should read the following selected financial data together with the information under “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations”

and our financial statements and related notes included in Part II, Item 8 of this Annual Report on Form 10 K.

The selected statement of operations data for each of the years ended December 31, 2019, 2018 and 2017 and the balance sheet data as of December 31, 2019 and 2018 are derived from our audited financial statements included elsewhere in this Annual Report on Form 10 K.

The statement of operations data for the years ended December 31, 2016 and 2015 and the balance sheet data as of December 31, 2017, 2016 and 2015 are derived from our audited financial statements which are not included in this Annual Report on Form 10 K.

You should read the following selected financial data together with the information under “Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our consolidated financial statements and related notes included in Part II, Item 8 of this Annual Report on Form 10 K.

The selected consolidated statement of operations data for each of the years ended December 31, 2020, 2019 and 2018 and the consolidated balance sheet data as of December 31, 2020 and 2019 are derived from our audited consolidated financial statements included elsewhere in this Annual Report on Form 10-K.

The consolidated statement of operations data for the years ended December 31, 2017 and 2016 and the consolidated balance sheet data as of December 31, 2018, 2017 and 2016 are derived from our audited consolidated financial statements which are not included in this Annual Report on Form 10-K.

Our historical results of any prior periods are not necessary indicative of results to be expected in any future period.

Year Ended December 31,

Statements of Operations and Comprehensive Loss Data:

Consolidated Statements of Operations and Comprehensive Loss Data:

(In thousands, except share and per share amounts)

4 unchanged sentences

Loss from operations

Change in fair value of convertible preferred stock liability

Interest income and other expense, net.

Gain on deconsolidation of Angel Pharmaceuticals

Loss from equity method investment

Net loss per share, basic and diluted

4 unchanged sentences

Year Ended December 31,

Balance Sheet Data:

Consolidated Balance Sheet Data:

(In thousands)

2 unchanged sentences

Convertible preferred stock

Total stockholders’

equity (deficit)

Management’s Discussion and Analysis of Financial Condition and Results of Operations

The following discussion should be read in conjunction with the consolidated financial statements and notes thereto included elsewhere in this Annual report on Form 10‑K.

This Annual Report on Form 10‑K, including the following sections, contains forward‑looking statements within the meaning of the federal securities laws.

These statements are subject to risks and uncertainties that could cause actual results and events to differ materially from those expressed or implied by such forward‑looking statements.

For a detailed discussion of these risks and uncertainties, see the “Risk Factors”

section in Item 1A of this Annual Report on Form 10‑K.

We caution the reader not to place undue reliance on these forward‑looking statements, which reflect management’s analysis only as of the date of this Form 10‑K.

We undertake no obligation to update forward‑looking statements, which reflect events or circumstances occurring after the date of this Form 10‑K.

We are a clinical stage biopharmaceutical company focused on the development and commercialization of precisely targeted oncology therapies.

Our strategy is to identify and utilize novel biomarkers to enhance selection of patients we believe will be most likely to benefit from treatment with our product candidates.

We have utilized adaptive clinical protocol designs that enable us to evaluate our agents in multiple dosing regimens and for a range of cancer types.

Since we began operations in November 2014, we have built a pipeline of five oncology programs.

Three of these product candidates are now in international multicenter trials directed against a broad number of cancer indications.

To date, we have evaluated our product candidates in over 350 patients.

We are developing small molecules that are designed to selectively inhibit the binding of immunosuppressive adenosine to either A2A receptors or to A2B receptors.

Another small molecule inhibitor is designed to block the function of ITK, a kinase protein inside T cells that is crucial to T-cell activation and differentiation.

We also are developing injectable monoclonal antibodies.

One of these antibodies is designed to block the production of adenosine by tumors by inhibiting the cell surface enzyme CD73.

This antibody is designed to have dual properties;

in addition to blocking production of immunosuppressive adenosine, the antibody is designed to stimulate various immune cells.

Another antibody that is designed to bind to the chemokine receptor CXCR2 on myeloid cells to block the activity of immunosuppressive myeloid cells that infiltrate tumors is in preclinical development.

Our product candidates’

designed specificity has the potential to provide greater safety and facilitate their development either as monotherapies or in combination with other cancer therapies such as immune checkpoint inhibitors or chemotherapy.

Ciforadenant (formerly CPI-444), is an oral, small molecule antagonist of the A2A receptor for adenosine and is currently being studied under a Phase 2 expansion protocol in combination with Genentech, Inc.’s cancer immunotherapy, Tecentriq ®

(atezolizumab), for patients with either advanced, refractory renal cell cancer (“RCC”) or patients with refractory metastatic castration resistant prostate cancer (“mCRPC”).

Our second clinical product candidate, CPI-006, is an anti‑CD73 monoclonal antibody that is designed to both inhibit the production of adenosine and stimulate various immune cells.

CPI-006 is currently being studied in a Phase 1/1b clinical trial as a monotherapy and in combination with ciforadenant, in combination with pembrolizumab and in triplet combination with both ciforadenant and pembrolizumab.

Our third clinical product candidate, CPI-818, is a selective, covalent inhibitor of ITK and is in a multi-center Phase 1/1b clinical trial in patients with various malignant T-cell lymphomas.

CPI-818 is designed to be directly cytotoxic to certain malignant T-cells and we believe has the potential to regulate immune responses to tumors.

We believe the breadth and status of our pipeline demonstrates our management team’s expertise in understanding and developing oncology assets as well as in identifying product candidates that can be in‑licensed and further developed internally to treat many types of cancer.

We hold worldwide rights to all of our product candidates.

To date, the majority of our efforts have been focused on the research, development and advancement of ciforadenant, CPI-006 and CPI-818, and we have not generated any revenue from product sales and, as a result, we have incurred significant losses.

We expect to continue to incur significant research and development and general and administrative expenses related to our operations.

Our net loss for the years ended December 31, 2019 and 2018 was $46.7 million and $46.9 million, respectively.

As of December 31, 2019, we had an accumulated deficit of $217.1 million.

We expect to continue to incur losses for the foreseeable future, and we anticipate these losses will increase as we continue our development of, seek regulatory approval for and begin to commercialize ciforadenant, CPI-006 and CPI-818, and as we develop other product candidates.

Even if we achieve profitability in the future, we may not be able to sustain profitability in subsequent periods.

Since our inception and through December 31, 2019, we have funded our operations primarily through the sale and issuance of stock.

On March 22, 2016, our registration statement on Form S‑1 (File No.

333‑208850) relating to our initial public offering (“IPO”) of our common stock was declared effective by the SEC.

Shares of our common stock began trading on the Nasdaq Global Market on March 23, 2016.

The IPO closed on March 29, 2016, pursuant to which we sold 4,700,000 shares of our common stock at a public offering price of $15.00 per share.

In April 2016, we sold an additional 502,618 shares of our common stock to the underwriters upon partial exercise of their over‑allotment option, at the initial offering price of $15.00 per share.

We received aggregate net proceeds of approximately $70.6 million, after underwriting discounts, commissions and offering expenses.

Immediately prior to the consummation of the IPO, all of our outstanding shares of convertible preferred stock were converted into 14.3 million shares of our common stock.

In March 2018, in a follow-on offering, we sold 8,117,647 shares of our common stock at a price of $8.50 per share, which included 1,058,823 shares issued pursuant to the underwriters’

exercise of their option to purchase additional shares of common stock.

We received aggregate net proceeds of approximately $64.9 million, after underwriting discounts, commissions and offering expenses

In September 2017, we entered into a sales agreement (the “Sales Agreement”) with Cowen and Company, LLC (“Cowen”) to sell shares of the Company’s common stock, from time to time, with aggregate gross sales proceeds of up to $125,000,000, through an at‑the‑market equity offering program under which Cowen acted as our sales agent.

Cowen was entitled to compensation for its services equal to up to 3.0% of the gross proceeds of any shares of common stock sold through Cowen under the Sales Agreement.

As of December 31, 2019, we had sold 52,569 shares of our common stock for gross proceed of approximately $894,000 pursuant to the Sales Agreement.

We terminated the Sales Agreement in February 2020.

As of December 31, 2019, we had capital resources consisting of cash, cash equivalents and marketable securities of approximately $78.0 million.

We do not expect our existing capital resources to be sufficient to enable us to fund the completion of our clinical trials and remaining development program of any of ciforadenant, CPI-006 or CPI-818 through commercialization.

In addition, our operating plan may change as a result of many factors, including those described in the section of this report entitled “Risk Factors”

and others currently unknown to us, and we may need to seek additional funds sooner than planned, through public or private equity, debt financings or other sources, such as strategic collaborations.

Such financing would result in dilution to stockholders, imposition of debt covenants and repayment obligations or other restrictions that may affect our business.

If we raise additional capital through strategic collaboration agreements, we may have to relinquish valuable rights to our product candidates, including possible future revenue streams.

In addition, additional funding may not be available to us on acceptable terms or at all and any additional fundraising efforts may divert our management from its day-to-day activities, which may adversely affect our ability to develop and commercialize our product candidates.

Furthermore, even if we believe we have sufficient funds for our current or future operating plans, we may seek additional capital due to favorable market conditions or strategic considerations.

We currently have no manufacturing capabilities and do not intend to establish any such capabilities.

We have no commercial manufacturing facilities for our product candidates.

As such, we are dependent on third parties to supply our product candidates according to our specifications, in sufficient quantities, on time, in compliance with appropriate regulatory standards and at competitive prices.

Components of Results of Operations

To date, we have not generated any revenues.

We do not expect to receive any revenues from any product candidates that we develop unless and until we obtain regulatory approval and commercialize our products or enter into revenue‑generating collaboration agreements with third parties.

Research and Development Expenses

Our research and development expenses consist primarily of costs incurred to conduct research and development of our product candidates.

We record research and development expenses as incurred.

Research and development expenses include:

employee-related expenses, including salaries, benefits, travel and non-cash stock-based compensation expense;

external research and development expenses incurred under arrangements with third parties, such as contract research organizations, preclinical testing organizations, contract manufacturing organizations, academic and non-profit institutions and consultants;

costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use;

license fees;

other expenses, which include direct and allocated expenses for laboratory, facilities and other costs.

We plan to increase our research and development expenses substantially as we continue the development and potential commercialization of our product candidates.

Our current planned research and development activities include the following:

enrollment and completion of our Phase 1/1b clinical trial and amended Phase 1b/2 clinical trial of ciforadenant;

enrollment of our ongoing Phase 1/1b clinical trial of CPI-006;

enrollment of our ongoing Phase 1/1b clinical trial of CPI-818;

process development and manufacturing of drug supply of ciforadenant, CPI-006 and CPI-818;

preclinical studies under our other programs in order to select development product candidates.

In addition to our product candidates that are in clinical development, we believe it is important to continue substantial investment in potential new product candidates to build the value of our product candidate pipeline and our business.

Our expenditures on current and future preclinical and clinical development programs are subject to numerous uncertainties related to timing and cost to completion.

The duration, costs and timing of clinical trials and development of product candidates will depend on a variety of factors, including many of which are beyond our control.

The process of conducting the necessary clinical research to obtain regulatory approval is costly and time consuming, and the successful development of our product candidates is uncertain.

The risks and uncertainties associated with our research and development projects are discussed more fully in “Part 1, Item 1A—Risk Factors.”

As a result of these risks and uncertainties, we are unable to determine with any degree of certainty the duration and completion costs of our research and development projects or if, when or to what extent we will generate revenues from the commercialization and sale of any of our product candidates that obtain regulatory approval.

We may never succeed in achieving regulatory approval for any of our product candidates.

General and Administrative Expenses

General and administrative expenses include personnel costs, expenses for outside professional services and allocated expenses.

Personnel costs consist of salaries, benefits and stock‑based compensation.

Outside professional services consist of legal, accounting and audit services and other consulting fees.

Allocated expenses consist of rent expense related to our office and research and development facility.

We expect that our general and administrative expenses will increase in the future as we increase our headcount to support our continued research and development and potential commercialization of one or more of our product candidates.

Results of Operations

Comparison of the periods below as indicated (in thousands):

Year ended December 31,

Operating expenses:

Research and development

General and administrative

Total operating expenses

Loss from operations

Interest income and other expense, net

Research and Development Expenses

Research and development expense for the years ended December 31, 2019 and 2018, consisted of the following costs by program (specific program costs consist solely of external costs):

Year ended December 31,

Ciforadenant (formerly CPI-444)

CPI‑006

Other programs

Unallocated employee and overhead costs

For the year ended December 31, 2019, the decrease in ciforadenant costs of $4.6 million as compared to the year ended December 31, 2018, primarily consisted of a decrease of $2.8 million in drug manufacturing costs, a decrease of $1.3 million in clinical trial expenses associated with lower enrollment in accordance with our protocol amendment focusing on RCC and mCRPC patients and a decrease of $0.5 million in other outside services.

For the year ended December 31, 2019, the increase in CPI-006 costs of $0.7 million as compared to the year ended December 31, 2018, primarily consisted of an increase of $1.2 million in clinical trial expenses, partially offset by a decrease of $0.3 million in drug manufacturing costs and a decrease of $0.2 million in other outside services.

For the year ended December 31, 2019, the increase in CPI-818 costs of $1.9 million as compared to the year ended December 31, 2018, primarily consisted of an increase of $2.2 million in clinical trial expenses, an increase of $0.6 million in drug manufacturing costs, and an increase of $0.2 million in other outside services, partially offset by a decrease of $1.1 million in IND-enabling study costs.

For the year ended December 31, 2019, the increase in costs related to other programs of $0.1 million as compared to the year ended December 31, 2018, primarily consisted of outside chemical synthesis and testing of research compounds.

For the year ended December 31, 2019, the increase in unallocated costs of $1.4 million as compared to the year ended December 31, 2018, primarily consisted of an increase in personnel and related costs.

For the year ended December 31, 2018, the decrease in ciforadenant costs of $12.8 million as compared to the year ended December 31, 2017, primarily consisted of a $3.0 million milestone payment to Vernalis in 2017, a decrease of $7.4 million in clinical trial expenses associated with lower enrollment in accordance with our protocol amendment focusing on RCC patients, a decrease of $1.8 million in contracted research costs, and a decrease of $0.6 million in drug manufacturing costs.

For the year ended December 31, 2018, the increase in CPI-006 costs of $0.1 million as compared to the year ended December 31, 2017, primarily consisted of a $2.5 million increase in clinical trial expenses, partially offset by a $1.6 million decrease in drug manufacturing costs and a $0.8 million decrease in IND-enabling study costs.

For the year ended December 31, 2018, the increase in CPI-818 costs of $2.9 million as compared to the year ended December 31, 2017, primarily consisted of a $1.9 million increase in drug manufacturing costs and a $1.0 million increase in IND-enabling study costs.

For the year ended December 31, 2018, the increase in costs related to other programs of $0.3 million as compared to the year ended December 31, 2017, primarily consisted of outside chemical synthesis and testing of research compounds.

For the year ended December 31, 2018, the increase in unallocated costs of $1.7 million as compared to the year ended December 31, 2017, primarily consisted of an increase of $1.2 million in personnel and related costs (including an increase in stock compensation expense of $0.2 million) and an increase of $0.5 million in contracted research costs.

General and Administrative Expenses

For the year ended December 31, 2019, the increase in general and administrative expenses of $0.2 million as compared to the year ended December 31, 2018, primarily consisted of an increase in personnel and related costs.

For the year ended December 31, 2018, the increase in general and administrative expenses of $0.4 million as compared to the year ended December 31, 2017, primarily consisted of an increase of $0.7 million in stock compensation expense, partially offset by a decrease of $0.3 million in professional services costs.

Interest Income and Other Expense, net

For the year ended December 31, 2019, the decrease in interest income and other expense, net of $0.1 million as compared to the year ended December 31, 2018, primarily consisted of a decrease in interest income earned due to a decrease in cash equivalents and marketable securities.

For the year ended December 31, 2018, the increase in interest income and other expense, net of $1.4 million as compared to the year ended December 31, 2017, primarily consisted of additional interest income earned due to a higher rate of return on investments.

Liquidity and Capital Resources

Sources of Liquidity

As of December 31, 2019, we had cash, cash equivalents and marketable securities of $78.0 million and an accumulated deficit of $217.1 million, compared to cash, cash equivalents and marketable securities of $114.6 million and an accumulated deficit of $170.5 million as of December 31, 2018.

We have financed our operations primarily through sales of our common stock and convertible preferred stock.

In March 2016, we consummated our IPO and sold 4,700,000 shares of our common stock at a price of $15.00 per share, and in April 2016, sold 502,618 shares at a price of $15.00 per share pursuant to the partial exercise of the underwriters’

option to purchase additional shares of common stock.

We received net proceeds of approximately $70.6 million, after deducting underwriting discounts, commissions and offering expenses.

Immediately prior to the consummation of our IPO, all outstanding shares of the convertible preferred stock were converted into common stock on a one‑for‑one basis.

In March 2018, in a follow-on offering, we sold 8,117,647 shares of our common stock at a price of $8.50 per share, which included 1,058,823 shares issued pursuant to the underwriters’

exercise of their option to purchase additional shares of common stock.

We received aggregate net proceeds of approximately $64.9 million, after underwriting discounts, commissions and offering expenses.

We believe our current cash, cash equivalents and marketable securities will be sufficient to fund our planned expenditures and meet our obligations through at least the next twelve months from the issuance of our financial statements as of and for year ended December 31, 2019.

The amounts and timing of our actual expenditures depend on numerous factors, including:

the progress, timing, costs and results of clinical trials for ciforadenant, CPI-006 and CPI-818;

the timing, progress, costs and results of preclinical and clinical development activities for our other product candidates;

the number and scope of preclinical and clinical programs we decide to pursue;

the costs involved in prosecuting, maintaining and enforcing patent and other intellectual property rights;

the cost and timing of regulatory approvals;

our efforts to enhance operational systems and hire additional personnel, including personnel to support development of our product candidates and satisfy our obligations as a public company;

other factors described in the section of this report entitled “Risk Factors.”

We expect to increase our spending in connection with the development and commercialization of our product candidates.

Until such time, if ever, as we can generate substantial revenue from product sales, we expect to fund our operations and capital funding needs through equity and/or debt financings.

We may also enter into additional collaboration arrangements or selectively partner for clinical development and commercialization.

The sale of additional equity would result in dilution to our stockholders.

The incurrence of debt financing would result in debt service obligations and the governing documents would likely include operating and financing covenants that would restrict our operations.

In addition, sufficient additional funding may not be available on acceptable terms, or at all.

If we are not able to secure adequate additional funding, we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible and/or suspend or curtail planned programs.

Any of these actions could have a material effect on our business, financial condition and results of operations.

Summary of Statement of Cash Flows

The following table summarizes our cash flows for the periods indicated (in thousands):

Year ended December 31,

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

Net increase (decrease) in cash and cash equivalents

Cash Flows from Operating Activities

Cash used in operating activities during the year ended December 31, 2019 was $37.3 million, which primarily consisted of a net loss of $46.7 million, adjusted by non‑cash charges of $7.4 million, primarily consisting of $7.3 million of stock compensation expense, an increase of $2.5 million in accounts payable and accrued and other liabilities and an increase of $0.4 million in prepaid and other current assets, primarily associated with the timing of payments to vendors.

Cash used in operating activities during the year ended December 31, 2018 was $41.0 million, which primarily consisted of a net loss of $46.9 million, adjusted by non‑cash charges of $7.4 million, primarily consisting of $7.1 million of stock compensation expense, a decrease of $2.0 million in accounts payable and accrued and other liabilities and a decrease of $0.6 million in current and other assets, primarily associated with the timing of payments to vendors.

Cash used in operating activities during the year ended December 31, 2017 was $46.2 million, which primarily consisted of a net loss of $55.7 million, adjusted by non‑cash charges of $6.9 million, primarily consisting of $6.2 million of stock compensation expense and $0.8 million of depreciation expense, an increase of $3.1 million in accounts payable and accrued and other liabilities, primarily associated with our increased research and development activities.

Cash Flows from Investing Activities

Cash provided by investing activities during the year ended December 31, 2019 was $3.3 million, which consisted of proceeds from maturities of marketable securities of $141.9 million, which were partially offset by purchases of marketable securities of $138.6 million.

Cash used in investing activities during the year ended December 31, 2018 was $30.2 million, which consisted of purchases of marketable securities of $161.9 million and purchases of property and equipment of $0.4 million, which were partially offset by proceeds from maturities of marketable securities of $132.0 million.

Cash provided by investing activities during the year ended December 31, 2017 was $84.8 million, which consisted of proceeds from maturities of marketable securities of $173.4 million, which was partially offset by purchases of marketable securities of $88.3 million and purchases of property and equipment of $0.3 million.

Cash Flows from Financing Activities

Cash provided by financing activities during the year ended December 31, 2019 was negligible.

Cash provided by financing activities during the year ended December 31, 2018 was $65.3 million, consisting of $64.9 million of net proceeds from our follow-on offering and $0.4 million of proceeds from the exercise of stock options.

Cash provided by financing activities during the year ended December 31, 2017 was $1.4 million, consisting of $0.7 million of stock sales and $0.7 million of proceeds from the exercise of stock options.

Off‑Balance Sheet Arrangements

We have not entered into any off‑balance sheet arrangements and do not have any holdings in variable interest entities.

Contractual Obligations

We lease our facilities under a non‑cancelable operating lease that expires in 2023.

As of December 31, 2019, contractual obligations were as follows (in thousands):

Payment Due by Period

Contractual obligations:

Operating lease obligations

Total contractual obligations

In August 2015 we entered into an agreement for a line of credit of $0.1 million for the purpose of issuing our landlord a letter of credit of $0.1 million as a security deposit under our facility lease.

We pledged money market funds and marketable securities as collateral for the line of credit.

Pursuant to our license agreements with each of Vernalis and Scripps, we have obligations to make future milestone and royalty payments to these parties.

However, because these amounts are contingent, they have not been included on our balance sheet.

Critical Accounting Policies

Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which have been prepared in accordance with United States generally accepted accounting principles (“U.S.

GAAP”).

The preparation of these financial statements requires our management to make judgments and estimates that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods.

Our estimates are based on our 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.

Actual results may differ from these judgments and estimates under different assumptions or conditions and any such differences may be material.

We believe that the accounting policies discussed below are critical to understanding our historical and future performance, as these policies relate to the more significant areas involving management’s judgments and estimates.

Our significant accounting policies are more fully described in Note 2 of Notes to Financial Statements in Part II, Item 8 of this Annual Report on Form 10‑K.

Cash, Cash Equivalents and Marketable Securities

We consider all highly liquid investment securities with remaining maturities at the date of purchase of three months or less to be cash equivalents.

Investments with remaining maturities, at the date of purchase, greater than three months, but less than one year are considered short‑term.

We determined the appropriate classification of marketable securities at the time of purchase and evaluates such designation as of each balance sheet date.

To date, all marketable securities have been classified as available‑for‑sale and are carried at fair value with unrealized gains and losses, if any, included as a component of accumulated other comprehensive income (loss) in stockholders’

equity (deficit).

Interest and realized gains and losses are included in interest income.

Realized gains and losses are recognized based on the specific identification method.

Research and Development Expenses

We record research and development expenses as incurred.

We account for nonrefundable advance payments for goods and services that will be used in future research and development activities as expenses when the goods have been received or when the service has been performed rather than when the payment is made.

Research and development expenses consist of costs incurred by us for the discovery and development of our product candidates and include:

employee‑related expenses, including salaries, benefits, travel and non‑cash stock‑based compensation expense;

external research and development expenses incurred under arrangements with third parties, such as contract research organizations, contract manufacturing organizations, academic and non‑profit institutions and consultants;

costs to acquire technologies to be used in research and development that have not reached technological feasibility and have no alternative future use;

license fees;

other expenses, which include direct and allocated expenses for laboratory, facilities and other costs.

Clinical Trial Accruals

Costs for preclinical studies and clinical trial activities are recognized based on an evaluation of the vendors’

progress towards completion of specific tasks, using data such as clinical site activations, patient enrollment or information provided to us by our vendors regarding their actual costs incurred.

Payments for these activities are based on the terms of individual contracts and payment timing may differ significantly from the period in which the services are performed.

We determine accrual estimates through reports from and discussions with applicable personnel and outside service providers as to the progress or state of completion, or the services completed.

Our estimates of accrued expenses as of each balance sheet date are based on the facts and circumstances known at the time

Recent Accounting Pronouncements

See Note 2 in Item 8 “Financial Statements and Supplementary Data.”

Segment Information

We have one primary business activity and operate as one reportable segment.

JOBS Act Accounting Election

We are an emerging growth company, as defined in the JOBS Act.

Under the JOBS Act, emerging growth companies can delay adopting new or revised accounting standards issued subsequent to the enactment of the JOBS Act until such time as those standards apply to private companies.

We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subject to the same new or revised accounting standards as other public companies that are not emerging growth companies.

We also intend to rely on other exemptions provided by the JOBS Act, including, without limitation, providing an auditor’s attestation report on our system of internal controls over financial reporting pursuant to Section 404(b) of the Sarbanes‑Oxley Act.

We will remain an emerging growth company until the earlier of (1) December 31, 2021, (2) the last day of the fiscal year in which we have total annual gross revenue of at least $1.07 billion, (3) the last day of the fiscal year in which we are deemed to be a “large accelerated filer”

as defined in Rule 12b‑2 under the Exchange Act, which would occur if the market value of our common stock held by non‑affiliates exceeded $700.0 million as of the last business day of the

second fiscal quarter of such fiscal year, or (4) the date on which we have issued more than $1.0 billion in non‑convertible debt securities during the prior three‑year period.

Total stockholders’ equity (deficit)

Compared sentence by sentence after normalising whitespace, quotation marks, case and digits, so re-formatting and restated figures do not read as changed language. Wording changes appear as one removal and one addition. The current filing and the prior one are authoritative.

What changed 10-K

Item 5. Market for Registrant’s Common Equity