Corvus Pharmaceuticals, Inc. 10-K

Item 8. Financial Statements and Supplementary Data CORVUS PHARMACEUTICALS, INC. ANNUAL REPORT ON FORM 10-K INDEX TO CONSOLIDATED FINANCIAL STATEMENTS ​ ​ Page Report of Independent Registered Public Accounting Firm (PCAOB ID 238 ) 90 Consolidated Financial Statements ​ Consolidated Balance Sheets 92 Consolidated Statements of Operations and Comprehensive Loss 93 Consolidated Statements of Stockholders’ Equity 94 Consolidated Statements of Cash Flows 95 Notes to C onsolidated Financial Statements 96 ​ ​ ​ 89 Table of Contents Report of Independent Registered Public Accounting Firm ​ To the Board of Directors and Stockholders of Corvus Pharmaceuticals, Inc. Opinion on the Financial Statements We have audited the accompanying consolidated balance sheets of Corvus Pharmaceuticals, Inc. and its subsidiaries (the “Company”) as of December 31, 2021 and 2020, and the related consolidated statements of operations and comprehensive loss, of changes in stockholders’ equity and of cash flows for each of the three years in the period ended December 31, 2021, including the related notes (collectively referred to as the “consolidated financial statements”). In our opinion, the consolidated financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021 in conformity with accounting principles generally accepted in the United States of America. ​ Basis for Opinion These consolidated financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s consolidated financial statements based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audits of these consolidated financial statements in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement, whether due to error or fraud. The Company is not required to have, nor were we engaged to perform, an audit of its internal control over financial reporting. As part of our audits, we are required to obtain an understanding of internal control over financial reporting but not for the purpose of expressing an opinion on the effectiveness of the Company's internal control over financial reporting. Accordingly, we express no such opinion. ​ Our audits included performing procedures to assess the risks of material misstatement of the consolidated financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that our audits provide a reasonable basis for our opinion. Emphasis of Matter As discussed in Note 1 to the consolidated financial statements, the Company will require additional financing to fund future operations. Management’s plans in regard to this matter are described in Note 1. Critical Audit Matters The critical audit matter communicated below is a matter arising from the current period audit of the consolidated financial statements that was communicated or required to be communicated to the audit committee and that (i) relates to accounts or disclosures that are material to the consolidated financial statements and (ii) involved our especially challenging, subjective, or complex judgments. The communication of critical audit matters does not alter in any way our opinion on the consolidated financial 90 Table of Contents statements, taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. Clinical Trial Accruals As described in Notes 2 and 7 to the consolidated financial statements, the Company recorded $4.0 million in clinical trial accruals as of December 31, 2021. Management applies significant judgment in developing estimates for clinical trial accruals based on assumptions related to the vendors’ progress towards completion. Management estimates the vendors’ progress towards completion using data such as clinical site activations, patient enrollment or information provided to the Company by its vendors regarding actual costs incurred. Management determines accrual estimates through reports from and discussions with applicable personnel and outside service providers as to the progress or stage of completion, or the services completed. The principal considerations for our determination that performing procedures relating to clinical trial accruals is a critical audit matter are (i) the significant judgment by management in estimating the clinical trial accruals and (ii) a high degree of auditor judgment, subjectivity, and effort in performing procedures and evaluating management’s significant assumption related to the vendors’ progress towards completion of clinical trials. Addressing the matter involved performing procedures and evaluating audit evidence in connection with forming our overall opinion on the consolidated financial statements. These procedures included, among others (i) testing management’s process for estimating the clinical trial accruals; (ii) evaluating the appropriateness of the method used by management to develop the estimate; (iii) testing the completeness and accuracy of data used to develop the estimate; and (iv) evaluating the reasonableness of the significant assumption related to the vendors’ progress towards completion of clinical trials. Evaluating management’s assumption related to the vendors’ progress towards completion of clinical trials involved (i) confirming patient visits on a test basis; (ii) obtaining and examining contract terms on a test basis to evaluate the completeness and consistency of the costs in the contract with the costs used in developing the estimate; and (iii) considering whether this assumption was consistent with evidence obtained in other areas of the audit. /s/ PricewaterhouseCoopers LLP San Jose, California March 10, 2022 We have served as the Company’s auditor since 2015 ​ 91 Table of Contents CORVUS PHARMACEUTICALS, INC. CONSOLIDATED BALANCE SHEETS (in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ 2021 2020 Assets ​ ​ Current assets: ​ ​ Cash and cash equivalents ​ $ 63,458 ​ $ 16,455 Marketable securities ​ 5,993 ​ 27,804 Accounts receivable - related party ​ 507 ​ — Prepaid and other current assets ​ 1,354 ​ 1,077 Total current assets ​ 71,312 ​ 45,336 Property and equipment, net ​ 451 ​ 906 Operating lease right-of-use asset ​ ​ 3,190 ​ ​ 1,648 Investment in Angel Pharmaceuticals ​ ​ 34,266 ​ ​ 37,225 Other assets ​ ​ 236 ​ ​ 414 Total assets ​ $ 109,455 ​ $ 85,529 ​ ​ ​ ​ ​ ​ ​ Liabilities and Stockholders’ Equity ​ ​ ​ Current liabilities: ​ ​ Accounts payable ​ $ 1,565 ​ $ 3,467 Operating lease liability ​ ​ 1,046 ​ ​ 1,078 Accrued and other liabilities ​ 7,081 ​ 7,604 Total current liabilities ​ 9,692 ​ 12,149 Operating lease liability ​ ​ 2,601 ​ ​ 1,232 Total liabilities ​ 12,293 ​ 13,381 Commitments and contingencies (Note 13) ​ ​ Stockholders’ equity: ​ ​ Preferred stock: $ 0.0001 par value; 10,000,000 shares authorized at December 31, 2021 and December 31, 2020; 0 shares issued and outstanding at December 31, 2021 and December 31, 2020 ​ ​ — ​ ​ — Common stock: $ 0.0001 par value; 290,000,000 shares authorized at December 31, 2021 and December 31, 2020; 46,553,511 and 28,372,634 shares issued and outstanding at December 31, 2021 and December 31, 2020, respectively ​ 5 ​ 3 Additional paid-in capital ​ 361,669 ​ 295,281 Accumulated other comprehensive (loss) income ​ 1,869 ​ 4 Accumulated deficit ​ ( 266,381 ) ​ ( 223,140 ) Total stockholders’ equity ​ 97,162 ​ 72,148 Total liabilities and stockholders’ equity ​ $ 109,455 ​ $ 85,529 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 92 Table of Contents CORVUS PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE LOSS (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 Operating expenses: ​ ​ ​ ​ Research and development ​ $ 29,115 ​ $ 31,830 ​ $ 37,975 General and administrative ​ 9,515 ​ 11,930 ​ 10,879 Total operating expenses ​ 38,630 ​ 43,760 ​ 48,854 Loss from operations ​ ( 38,630 ) ​ ( 43,760 ) ​ ( 48,854 ) Interest income and other expense, net ​ ( 15 ) ​ 540 ​ 2,182 Gain on deconsolidation of Angel Pharmaceuticals ​ ​ — ​ ​ 37,459 ​ ​ — Sublease income - related party ​ ​ 235 ​ ​ — ​ ​ — Loss from equity method investment ​ ​ ( 4,831 ) ​ ​ ( 234 ) ​ ​ — Net loss ​ $ ( 43,241 ) ​ $ ( 5,995 ) ​ $ ( 46,672 ) Net loss per share, basic and diluted ​ $ ( 1.03 ) ​ $ ( 0.20 ) ​ $ ( 1.59 ) Shares used to compute net loss per share, basic and diluted ​ 41,854,110 ​ 29,478,878 ​ 29,349,810 Other comprehensive loss: ​ ​ ​ ​ Unrealized gain (loss) on marketable securities ​ ( 7 ) ​ ( 25 ) ​ 63 Cumulative foreign currency translation adjustment ​ 1,872 ​ — ​ — Comprehensive loss ​ $ ( 41,376 ) ​ $ ( 6,020 ) ​ $ ( 46,609 ) ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 93 Table of Contents CORVUS PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF CHANGES IN STOCKHOLDERS’ EQUITY (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Comprehensive ​ Accumulated ​ Stockholders’ ​ Shares Amount Capital Income (Loss) Deficit Equity Balance at December 31, 2018 ​ 29,323,930 ​ $ 3 ​ $ 280,840 ​ $ ( 34 ) ​ $ ( 170,473 ) ​ $ 110,336 Retirement of common stock in exchange for common stock warrant ​ ( 1,458,000 ) ​ ​ — ​ ​ ( 5,030 ) ​ ​ — ​ ​ — ​ ​ ( 5,030 ) Issuance of common stock warrant in exchange for retirement of common stock ​ — ​ ​ — ​ ​ 5,030 ​ ​ — ​ ​ — ​ ​ 5,030 Common stock issued on exercise of stock options ​ 87,303 ​ ​ — ​ ​ 24 ​ ​ — ​ ​ — ​ ​ 24 Vesting of restricted stock issued upon early exercise of stock options ​ — ​ ​ — ​ ​ 12 ​ ​ — ​ ​ — ​ ​ 12 Stock-based compensation expense ​ — ​ ​ — ​ ​ 7,348 ​ ​ — ​ ​ — ​ ​ 7,348 Unrealized gain on marketable securities ​ — ​ ​ — ​ ​ — ​ ​ 63 ​ ​ — ​ ​ 63 Net loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 46,672 ) ​ ​ ( 46,672 ) Balance at December 31, 2019 ​ 27,953,233 ​ $ 3 ​ $ 288,224 ​ $ 29 ​ $ ( 217,145 ) ​ $ 71,111 Issuance of common stock in connection with at-the-market offering, net ​ 310,734 ​ ​ — ​ ​ 1,222 ​ ​ — ​ ​ — ​ ​ 1,222 Common stock issued on exercise of stock options ​ 108,667 ​ ​ — ​ ​ 88 ​ ​ — ​ ​ — ​ ​ 88 Stock-based compensation expense ​ — ​ ​ — ​ ​ 5,747 ​ ​ — ​ ​ — ​ ​ 5,747 Unrealized loss on marketable securities ​ — ​ ​ — ​ ​ — ​ ​ ( 25 ) ​ ​ — ​ ​ ( 25 ) Net loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 5,995 ) ​ ​ ( 5,995 ) Balance at December 31, 2020 ​ 28,372,634 ​ $ 3 ​ $ 295,281 ​ $ 4 ​ $ ( 223,140 ) ​ $ 72,148 Issuance of common stock upon exercise of Exchange Warrants ​ 1,457,947 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Issuance of common stock upon follow-on public offering, net ​ 9,783,660 ​ ​ 1 ​ ​ 31,988 ​ ​ — ​ ​ — ​ ​ 31,989 Issuance of common stock in connection with at-the-market offering, net ​ 6,609,605 ​ ​ 1 ​ ​ 28,953 ​ ​ — ​ ​ — ​ ​ 28,954 Common stock issued on exercise of stock options ​ 329,665 ​ ​ — ​ ​ 1,215 ​ ​ — ​ ​ — ​ ​ 1,215 Stock-based compensation expense ​ — ​ ​ — ​ ​ 4,232 ​ ​ — ​ ​ — ​ ​ 4,232 Unrealized loss on marketable securities ​ — ​ ​ — ​ ​ — ​ ​ ( 7 ) ​ ​ — ​ ​ ( 7 ) Foreign currency translation adjustment ​ — ​ ​ — ​ ​ — ​ ​ 1,872 ​ ​ — ​ ​ 1,872 Net loss ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 43,241 ) ​ ​ ( 43,241 ) Balance at December 31, 2021 ​ 46,553,511 ​ $ 5 ​ $ 361,669 ​ $ 1,869 ​ $ ( 266,381 ) ​ $ 97,162 ​ The accompanying notes are an integral part of these consolidated financial statements. ​ ​ 94 Table of Contents CORVUS PHARMACEUTICALS, INC. CONSOLIDATED STATEMENTS OF CASH FLOWS (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 Cash flows from operating activities ​ ​ ​ ​ Net loss ​ $ ( 43,241 ) ​ $ ( 5,995 ) ​ $ ( 46,672 ) Adjustments to reconcile net loss to net cash used in operating activities: ​ ​ ​ Depreciation and amortization ​ 460 ​ 632 ​ 743 Accretion related to marketable securities ​ 239 ​ 154 ​ ( 644 ) Stock-based compensation ​ 4,232 ​ 5,747 ​ 7,348 Gain on deconsolidation of Angel Pharmaceuticals ​ — ​ ( 37,459 ) ​ — Loss from equity method investment ​ 4,831 ​ 234 ​ — Changes in operating assets and liabilities: ​ ​ ​ ​ Accounts receivable - related party ​ ( 507 ) ​ – ​ – Prepaid and other current assets ​ ( 277 ) ​ 285 ​ ( 370 ) Operating lease right-of-use asset ​ ​ ( 1,542 ) ​ ​ 679 ​ ​ 599 Other assets ​ ​ 178 ​ ​ 99 ​ ​ ( 50 ) Accounts payable ​ ( 1,902 ) ​ 1,019 ​ 450 Accrued and other liabilities ​ ( 523 ) ​ 705 ​ 2,042 Operating lease liability ​ ​ 1,337 ​ ​ ( 878 ) ​ ​ ( 767 ) Net cash used in operating activities ​ ( 36,715 ) ​ ( 34,778 ) ​ ( 37,321 ) Cash flows from investing activities ​ ​ ​ Purchases of marketable securities ​ ( 9,357 ) ​ ( 42,540 ) ​ ( 138,586 ) Sales of marketable securities ​ ​ — ​ ​ 1,009 ​ ​ — Maturities of marketable securities ​ 30,922 ​ 86,376 ​ 141,866 Purchases of property and equipment ​ ( 5 ) ​ ( 76 ) ​ ( 25 ) Net cash provided by investing activities ​ 21,560 ​ 44,769 ​ 3,255 Cash flows from financing activities ​ ​ ​ Proceeds from issuance of common stock, net (includes $ 4,850 in aggregate gross proceeds from related parties for the year ended December 31, 2021) ​ 31,989 ​ — ​ – Proceeds from issuance of common stock in connection with at-the-market offering, net ​ ​ 28,954 ​ ​ 1,222 ​ ​ — Proceeds from exercise of common stock options ​ 1,215 ​ 88 ​ 24 Net cash provided by financing activities ​ 62,158 ​ 1,310 ​ 24 Net increase (decrease) in cash and cash equivalents ​ 47,003 ​ 11,301 ​ ( 34,042 ) Cash and cash equivalents at beginning of the period ​ 16,455 ​ 5,154 ​ 39,196 Cash and cash equivalents at end of the period ​ $ 63,458 ​ $ 16,455 ​ $ 5,154 Supplemental disclosures of cash flow information ​ ​ ​ Purchases of property and equipment incurred but not paid ​ $ 5 ​ $ — ​ $ – ​ The accompanying notes are an integral part of these consolidated financial statements. ​ 95 Table of Contents CORVUS PHARMACEUTICALS, INC. NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Organization Corvus Pharmaceuticals, Inc. (“Corvus” or the “Company”) was incorporated in Delaware on January 27, 2014 and commenced operations in November 2014. Corvus is a clinical-stage biopharmaceutical company. The Company’s operations are located in Burlingame, California. Presentation The consolidated financial statements include the accounts of the Company and its wholly-owned subsidiaries, Corvus Biopharmaceuticals, Ltd. and Corvus Hong Kong Limited. All significant intercompany accounts and transactions have been eliminated from the consolidated financial statements. Initial Public Offering On March 22, 2016, the Company’s registration statement on Form S-1 (File No. 333-208850) relating to its initial public offering (“IPO”) of its common stock was declared effective by the Securities and Exchange Commission (“SEC”) and the shares of its common stock began trading on the Nasdaq Global Market on March 23, 2016. The public offering price of the shares sold in the IPO was $ 15.00 per share. The IPO closed on March 29, 2016, pursuant to which the Company sold 4,700,000 shares of its common stock. On April 26, 2016, the Company sold an additional 502,618 shares of its common stock to the underwriters upon partial exercise of their over-allotment option, at the initial offering price of $ 15.00 per share. The Company 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 outstanding shares of convertible preferred stock were converted into common stock. Follow-on Public Offering In March 2018, the Company completed a follow-on public offering in which the Company sold 8,117,647 shares of 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. The aggregate net proceeds received by the Company from the offering were approximately $ 64.9 million, net of underwriting discounts and commissions and offering expenses payable by the Company. ​ In February 2021, the Company completed a follow-on public offering in which the Company sold 9,783,660 shares of common stock at a price of $ 3.50 per share, which included 1,212,231 shares issued pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock. The aggregate net proceeds received by the Company from the offering were approximately $ 32.0 million, net of underwriting discounts and commissions and offering expenses. ​ Liquidity The Company is subject to risks and uncertainties common to early-stage companies in the biotechnology industry, including, but not limited to, development by competitors of new technological innovations, protection of proprietary technology, dependence on key personnel, contract manufacturer and contract research organizations, compliance with government regulations and the need to obtain additional financing to fund operations. Since commencing operations in 2014, the majority of the Company’s efforts have been focused on the research and development of mupadolimab (formerly CPI-006), CPI-818 and ciforadenant. The Company believes that it will continue to expend substantial resources for the foreseeable future as it continues clinical development of, seek regulatory approval for and, if approved, prepare for the commercialization of mupadolimab, CPI-818 and ciforadenant, as well as product candidates under the Company’s other development programs. These expenditures will include costs associated with research and development, conducting preclinical studies and clinical trials, obtaining regulatory 96 Table of Contents approvals, manufacturing and supply, sales and marketing and general operations. In addition, other unanticipated costs may arise. Because the outcome of any clinical trial and/or regulatory approval process is highly uncertain, the Company may not be able to accurately estimate the actual amounts necessary to successfully complete the development, regulatory approval process and commercialization of mupadolimab, CPI-818, and ciforadenant or any other product candidates. The Company does not expect its existing capital resources to be sufficient to enable it to fund the completion of its clinical trials and remaining development program of mupadolimab, CPI-818 and ciforadenant through commercialization. In addition, its operating plan may change as a result of many factors. The Company has incurred significant losses and negative cash flows from operations in all periods since inception and had an accumulated deficit of $ 266.4 million as of December 31, 2021. The Company has historically financed its operations primarily through the sale of redeemable convertible preferred stock and common stock. While the Company has been able to raise multiple rounds of financing, there can be no assurance that in the event the Company requires additional financing, such financing will be available on terms which are favorable or at all. Failure to generate sufficient cash flows from operations, raise additional capital or reduce certain discretionary spending would have a material adverse effect on the Company’s ability to achieve its intended business objectives. As of December 31, 2021, the Company had cash, cash equivalents and short-term marketable securities of $ 69.5 million. Management believes that the Company’s current cash, cash equivalents and short-term marketable securities will be sufficient to fund its planned operations for at least 12 months from the date of the issuance of these financial statements. The current COVID-19 (coronavirus) pandemic, which is impacting worldwide economic activity, poses risks that the Company or its employees, contractors, suppliers, and other partners may be prevented from conducting business activities for an indefinite period of time, including due to shutdowns that may be requested or mandated by governmental authorities. The extent to which COVID-19 impacts the Company’s business, including its clinical trials and financial condition, will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the impact of variants of the COVID-19 virus, the duration of the pandemic, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease. As COVID-19 continues to spread around the globe, including the spread of more contagious and virulent variants, we will likely experience disruptions, including delays or difficulties in enrolling patients in our clinical trials, delays or difficulties in clinical site initiation, interruption of key clinical trial activities, delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials and delays in necessary interactions with local regulatory authorities. COVID-19 may also impact the Company’s ability to raise additional capital on a timely basis or at all, which could negatively impact short-term and long-term liquidity. Exchange Warrants ​ On November 8, 2019, the Company entered into an exchange agreement (the “Exchange Agreement”) with an investor and its affiliates (the “Exchanging Stockholders”), pursuant to which the Company exchanged an aggregate of 1,458,000 shares of the Company’s common stock, par value $ 0.0001 per share, owned by the Exchanging Stockholders for pre-funded warrants (the “Exchange Warrants”) to purchase an aggregate of 1,458,000 shares of common stock (subject to adjustment in the event of any stock dividends and splits, reverse stock split, recapitalization, reorganization or similar transaction, as described in the Exchange Warrants), with an exercise price of $ 0.0001 per share. The Exchange Warrants were exercisable at any time prior to expiration except that the Exchange Warrants could not be exercised by the Exchanging Stockholders if, after giving effect thereto, the Exchanging Stockholders would have beneficially owned more than 9.99 % of the Company’s common stock, subject to certain exceptions. In accordance with Accounting Standards Codification Topic 505, Equity, and Accounting Research Bulletin 43, the Company recorded the retirement of the common stock exchanged as a reduction of common shares outstanding and elected to record the excess over par value as a debit to additional paid-in-capital at the fair value of the Exchange Warrants on the issuance date. The Exchange Warrants were classified as equity in accordance with Accounting Standards Codification Topic 480, Distinguishing Liabilities from Equity, and Accounting Standards Codification Topic 815, Derivatives and Hedging, and the fair value of the Exchange Warrants was recorded as a credit to additional paid-in capital and is not subject to remeasurement. The Company determined that the fair value of the Exchange Warrants was substantially 97 Table of Contents similar to the fair value of the retired shares on the issuance date due to the negligible exercise price for the Exchange Warrants. During the year ended December 31, 2021, the Exchange Warrants were fully exercised, resulting in the issuance of 1,457,947 shares of common stock on a net exercise basis. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”). The Company’s functional and reporting currency is the U.S. dollar, except for its investment in its equity method investee which is the Chinese renminbi (RMB). The accompanying consolidated financial statements have been prepared on a going-concern basis, which contemplates the realization of assets and discharge of liabilities in the normal course of business. Since its inception, the Company has incurred significant losses and negative cash flows from operations. As of December 31, 2021, the Company had an accumulated deficit of $ 266.4 million and cash, cash equivalents and marketable securities of $ 69.5 million. The Company has financed its operations primarily with the proceeds from the sale of stock. The Company will need to raise additional capital to meet its business objectives. The Company believes that its current cash, cash equivalents and marketable securities will be sufficient to fund its planned expenditures and meet its obligations through at least the next twelve months from the issuance of these financial statements. Use of Estimates The preparation of the Company’s consolidated financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the consolidated financial statements and accompanying notes. Actual results could differ from such estimates. Foreign Currency Translation Angel Pharmaceuticals Co., Ltd.’s (“Angel Pharmaceuticals”) functional currency is the Chinese renminbi (RMB). Angel Pharmaceuticals’ consolidated financial statements are reported in RMB. Financial information is translated from RMB to the U.S. dollar (the reporting currency) for inclusion in our consolidated financial statements. Income, expenses and cash flows are translated at average exchange rates prevailing during the fiscal period, assets and liabilities are translated at fiscal period-end exchange rates, and stockholders’ equity is held at historical rates. Resulting translation adjustments are included as a component of accumulated other comprehensive income in stockholders' equity. Out of Period Adjustment In the three months ended June 30, 2021, the Company recorded a cumulative translation adjustment that affected the Company’s balance sheet at June 30, 2021 by increasing its investment in Angel Pharmaceuticals and accumulated other comprehensive income in the equity section of the balance sheet by $ 1.4 million. $ 0.9 million of this amount was an out of period adjustment related to the year ended December 31, 2020. The impact of the out of period adjustment in the quarter ended March 31, 2021 was to reduce the Company’s investment in Angel Pharmaceuticals and other comprehensive income by $ 83,000 . The Company has concluded that the out of period adjustment is not material to the consolidated financial statements for the fiscal year ended December 31, 2020 or the interim financial statements for the quarter ended March 31, 2021. Concentrations of Credit Risk and Other Risks and Uncertainties Substantially all of the Company’s cash and cash equivalents are deposited in accounts with two financial institutions that management believes are of high credit quality. Such deposits may, at times, exceed federally insured limits. The Company maintains its cash with an accredited financial institution and accordingly, such funds are subject to minimal credit risk. The Company’s marketable securities consist of investments in U.S. Treasury securities and U.S. 98 Table of Contents government agency securities, which can be subject to certain credit risks. However, the Company mitigates the risks by investing in high-grade instruments, limiting its exposure to any one issuer, and monitoring the ongoing creditworthiness of the financial institutions and issuers. The Company has not experienced any losses on its deposits of cash, cash equivalents or marketable securities. The Company is subject to a number of risks similar to other early stage biopharmaceutical companies, including, but not limited to, the need to obtain adequate additional funding, possible failure of preclinical testing or clinical trials, its reliance on third parties to conduct its clinical trials, the need to obtain marketing approval for its product candidates, competitors developing new technological innovations, the need to successfully commercialize and gain market acceptance of the Company’s product candidates, its right to develop and commercialize its product candidates pursuant to the terms and conditions of the licenses granted to the Company, and protection of proprietary technology. If the Company does not successfully commercialize or partner any of its product candidates, it will be unable to generate product revenue or achieve profitability. Segments Operating segments are identified as components of an enterprise about which separate discrete financial information is available for evaluation by the chief operating decision-maker in making decisions regarding resource allocation and assessing performance. The Company views its operations and manages its business in one operating segment, that of the development of and commercialization of precisely targeted oncology therapies. Cash, Cash Equivalents and Marketable Securities The Company considers 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 are 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. Interest and realized gains and losses are included in interest income. Realized gains and losses are recognized based on the specific identification model. Fair Value Measurements Fair value accounting is applied for all financial assets and liabilities and non-financial assets and liabilities that are recognized or disclosed at fair value in the consolidated financial statements on a recurring basis (at least annually). The carrying amount of the Company’s financial instruments, including cash equivalents, accounts payable and accrued liabilities, approximate fair value due to their short-term maturities. 99 Table of Contents Investments in Equity Securities Investments in equity securities over which the Company is able to exercise significant influence over the investee, but does not control the investee, and is not the primary beneficiary of the investee’s activities that are considered Variable Interest Entities (“VIEs”) are accounted for using the equity method. Adjustments are made to investments accounted for using the equity method for any earnings or losses incurred and are recorded in loss from operations. Investments in equity securities which do not have readily determinable fair values and for which the Company is not able to exercise significant influence over the investee are accounted for under the measurement alternative which is the cost minus impairment, if any, plus or minus changes resulting from observable price changes in orderly transactions for the identical or similar securities of the same investee and adjustments related to the basis differences, if any. Property and Equipment, Net Property and equipment are stated at cost and depreciated using the straight-line method over the estimated useful lives of the respective assets: ​ ​ ​ ​ ​ Laboratory equipment 5 years Computer equipment and purchased software ​ 3 years Leasehold improvements ​ Shorter of asset's useful life or remaining term of lease ​ Maintenance and repairs that do not extend the life or improve the asset are expensed when incurred. When assets are retired or otherwise disposed of, the cost and accumulated depreciation or amortization are removed from the balance sheet and any resulting gain or loss is reflected in operations. Impairment of Long-Lived Assets The Company regularly reviews the carrying value and estimated lives of all of its long-lived assets, including property and equipment, to determine whether indicators of impairment may exist which warrant adjustments to carrying values or estimated useful lives. The determinants used for this evaluation include management’s estimate of the asset’s ability to generate positive income from operations and positive cash flow in future periods as well as the strategic significance of the assets to the Company’s business objectives. Should impairment exist, the impairment loss to be recognized is measured by the amount by which the carrying amount of the asset exceeds the projected discounted future net cash flows arising from the asset. All long-lived assets are maintained in the United States of America. Research and Development Expenses The Company records research and development expenses as incurred. The Company accounts 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 the Company for the discovery and development of the Company’s 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; 100 Table of Contents ● license fees; and ● 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. The Company applies significant judgment in developing estimates for clinical trial accruals based on assumptions related to vendors’ progress towards completion. In developing these estimates, management estimates vendors’ progress towards completion using data such as clinical site activations, patient enrollment or information provided to the Company by its 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. The Company determines 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. The Company’s estimates of accrued expenses as of each balance sheet date are based on the facts and circumstances known at the time. Stock-Based Compensation The Company maintains incentive plans under which incentive stock options and nonqualified stock options may be granted to employees and non-employee service providers. The Company accounts for stock-based employee compensation arrangements in accordance with the provisions of ASC 718, “Compensation—Stock Compensation.” For stock options granted to employees, the Company recognizes compensation expense for all stock-based awards based on the grant-date estimated fair values. The value of the award is recognized as an expense ratably over the requisite service period. The fair value of stock options is determined using the Black-Scholes option pricing model. Forfeitures are accounted for when they occur. Stock-based compensation expense related to stock options granted to non-employees is recognized based on the fair value of the stock options, determined using the Black-Scholes option pricing model. The awards generally vest over the time period the Company expects to receive service from the non-employee. Income Taxes The Company accounts for income taxes under the asset and liability method. The Company estimates actual current tax exposure together with assessing temporary differences resulting from differences in accounting for reporting purposes and tax purposes for certain items, such as accruals and allowances not currently deductible for tax purposes. These temporary differences result in deferred tax assets and liabilities, which are included in the Company’s balance sheets. In general, deferred tax assets represent future tax benefits to be received when certain expenses previously recognized in the Company’s statements of operations and comprehensive loss become deductible expenses, under applicable income tax laws or when net operating loss or credit carryforwards are utilized. Accordingly, realization of the Company’s deferred tax assets is dependent on future taxable income against which these deductions, losses and credits can be utilized. The Company must assess the likelihood that the Company’s deferred tax assets will be recovered from future taxable income and a valuation allowance is recorded when it is more likely than not that the deferred tax asset will not be recovered. The Company applies judgment in the determination of the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. Based on the available evidence, the Company is unable, at this time, to support the determination that it is more likely than not that its deferred tax assets will be utilized in the future. Accordingly, the Company recorded a full valuation allowance for all periods presented. The Company intends to maintain a valuation allowance until sufficient evidence exists to support its reversal. The Company recognizes benefits of uncertain tax positions if it is more likely than not such positions will be sustained upon examination based solely on their technical merits as the largest amount of benefit that is more likely 101 Table of Contents than not to be realized upon the ultimate settlement. The Company recognizes any material interest and penalties related to unrecognized tax benefits in income tax expense. The Company is required to file income tax returns in the U.S. federal jurisdiction. The Company currently is not under examination by the Internal Revenue Service or other jurisdictions for any tax years. Comprehensive Loss Comprehensive loss includes net loss as well as other changes in stockholders’ equity that result from transactions and economic events other than those with stockholders. The Company’s only element of other comprehensive loss in any period presented was unrealized gains and losses on available-for-sale marketable securities. Net Loss per Share Basic net loss per share is calculated by dividing the net loss by the weighted average number of common shares outstanding and Exchange Warrants outstanding during the period, without consideration of potentially dilutive securities. In accordance with Accounting Standards Codification Topic 260, Earnings Per Share , the Exchange Warrants are included in the computation of basic net loss per share because the exercise price is negligible and they are fully vested and exercisable at any time after the original issuance date. Diluted net loss per share is computed by dividing the net loss by the weighted average number of common shares, Exchange Warrants, and potentially dilutive securities outstanding for the period. Diluted net loss per share is the same as basic net loss per share for all periods presented since the effect of potentially dilutive securities is anti-dilutive given the net loss of the Company. Recent Accounting Pronouncements In December 2019, the FASB issued ASU No. 2019-12, "Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes", which is intended to improve consistency and simplify several areas of existing guidance. ASU 2019-12 removes certain exceptions to the general principles related to the approach for intraperiod tax allocation, the methodology for calculating income taxes in an interim period and the recognition of deferred tax liabilities for outside basis differences. This new standard became effective for the Company for fiscal years beginning after December 15, 2020, including interim periods within those fiscal years. Early adoption is permitted. The Company adopted this standard effective January 1, 2021. Adoption of this standard in the first quarter of fiscal year 2021 did not have a material impact on the Company’s consolidated financial statements. ​ ​ 3. Net Loss per Share The following table shows the calculation of net loss per share (in thousands, except share and per share data): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 Numerator: ​ ​ ​ ​ Net loss - basic and diluted ​ $ ( 43,241 ) ​ $ ( 5,995 ) ​ $ ( 46,672 ) Denominator: ​ ​ ​ ​ Weighted average common shares outstanding ​ 41,854,110 ​ 29,478,878 ​ 29,364,535 Less: weighted average common shares subject to repurchase ​ — ​ — ​ ( 14,725 ) Weighted average common shares outstanding used to compute basic and diluted net loss per share ​ 41,854,110 ​ 29,478,878 ​ 29,349,810 Net loss per share, basic and diluted ​ $ ( 1.03 ) ​ $ ( 0.20 ) ​ $ ( 1.59 ) ​ 102 Table of Contents The amounts in the table below were excluded from the calculation of diluted net loss per share, due to their anti-dilutive effect: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 Outstanding options ​ 6,354,308 6,664,173 5,643,410 ​ ​ 4. Fair Value Measurements Financial assets and liabilities are measured and recorded at fair value. The Company is required to disclose information on all assets and liabilities reported at fair value that enables an assessment of the inputs used in determining the reported fair values. The fair value hierarchy prioritizes valuation inputs based on the observable nature of those inputs. The fair value hierarchy applies only to the valuation inputs used in determining the reported fair value of the investments and is not a measure of the investment credit quality. The hierarchy defines three levels of valuation inputs: ● Level 1—Quoted prices in active markets for identical assets or liabilities ● Level 2—Inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly ● Level 3—Unobservable inputs that reflect the Company’s own assumptions about the assumptions market participants would use in pricing the asset or liability There have been no transfers of assets and liabilities between levels of hierarchy. The Company’s Level 2 investments are valued using third-party pricing sources. The pricing services utilize industry standard valuation models, including both income and market-based approaches, for which all significant inputs are observable, either directly or indirectly, to estimate fair value. These inputs include reported trades of and broker/dealer quotes on the same or similar investments, issuer credit spreads, benchmark investments, prepayment/default projections based on historical data and other observable inputs. The following tables present information as of December 31, 2021 and 2020 about the Company’s assets that are measured at fair value on a recurring basis and indicate the level of the fair value hierarchy the Company utilized to determine such fair values (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ Fair Value Measured Using ​ Total ​ (Level 1) (Level 2) (Level 3) Balance Assets ​ ​ ​ ​ Cash equivalents ​ $ 61,992 ​ $ — ​ $ — ​ $ 61,992 Marketable securities ​ 1,011 ​ 4,982 ​ — ​ 5,993 ​ ​ $ 63,003 ​ $ 4,982 ​ $ — ​ $ 67,985 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ ​ Fair Value Measured Using ​ Total ​ (Level 1) (Level 2) (Level 3) Balance Assets ​ ​ ​ ​ Cash equivalents ​ $ 15,974 ​ $ — ​ $ — ​ $ 15,974 Marketable securities ​ ​ 6,074 ​ 21,730 ​ — ​ 27,804 ​ ​ $ 22,048 ​ $ 21,730 ​ $ — ​ $ 43,778 ​ As of December 31, 2021, marketable securities had a maximum remaining maturity of eleven months . 103 Table of Contents As of December 31, 2021 and 2020, the fair value of available for sale marketable securities by type of security were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ Gross Gross ​ ​ ​ ​ Amortized ​ Unrealized ​ Unrealized ​ Fair ​ ​ Cost ​ Gains ​ Losses ​ Value U.S. Treasury securities ​ $ 1,012 ​ $ — ​ $ ( 2 ) ​ $ 1,010 U.S. Government agency securities ​ ​ 4,984 ​ ​ — ​ ​ ( 1 ) ​ ​ 4,983 ​ ​ $ 5,996 ​ $ — ​ $ ( 3 ) ​ $ 5,993 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ ​ ​ Gross Gross ​ ​ ​ ​ Amortized ​ Unrealized ​ Unrealized ​ Fair ​ ​ Cost ​ Gains ​ Losses ​ Value U.S. Treasury securities ​ $ 6,074 ​ $ — ​ $ — ​ $ 6,074 U.S. Government agency securities ​ ​ 21,726 ​ ​ 5 ​ ​ ( 1 ) ​ ​ 21,730 ​ ​ $ 27,800 ​ $ 5 ​ $ ( 1 ) ​ $ 27,804 ​ ​ ​ ​ 5. Equity Method Investment In August 2020, the Company established Angel Pharmaceuticals Co. Ltd. (“Angel”), a wholly-owned corporate venture in the People’s Republic of China (“China”) designed to develop, manufacture, and commercialize CPI-006, CPI-444, and CPI-818 compounds for distribution within the countries of China, Taiwan, Macao, and Hong Kong (collectively, the “Territories”) based on intellectual property licenses to be contributed to Angel by the Company. In October 2020, Angel raised financing from third-party investors, the licenses were entered into and the Company’s ownership interest was reduced to 53.2 %. Under the license agreements, the Company is required to provide manufacturing supply services for future supply of drug products for use in clinical trials, research and development, operational support, and participate in the joint steering committee which oversees the development and commercialization of the compounds. Angel is not required to make any payments to the Company regarding the licensed compounds or the additional services outlined in the agreement. After a 7 year Exclusive Grant Back Period, Angel license grants to the company for sole or jointly owned IP will be non-exclusive, fully paid and sublicensable. During the Exclusive Grant Back Period, Angel license grants to the company for sole and joint IP are exclusive, fully paid and sublicensable. As a result of the financing, the Company reassessed its interest in Angel and determined that while Angel is a VIE, the Company is not considered the primary beneficiary of such VIE since Corvus does not have the power, through voting or similar rights and the license agreements, to direct the activities of Angel that most significantly impact Angel’s economic performance. Further, the Company determined that as it has a significant influence over Angel, and, therefore, it shall account for its investment in Angel using the equity method starting in October 2020, the date it lost control over Angel. At the date of loss of control, the Company derecognized all of Angel’s assets and liabilities from its balance sheet, recognized the retained equity interest at its fair value of $ 37.5 million, and recognized a gain of $ 37.5 million, which is included in gain on deconsolidation of Angel Pharmaceuticals on the consolidated statement of operations for the year ended December 31, 2020. As of December 31, 2021, the Company’s ownership interest in Angel was approximately 49.7 %, excluding 7 % of Angel’s equity reserved for issuance under the Angel ESOP. The Company recognized its share of losses in Angel for the total amount of $4.8 million and $ 0.2 million as loss from equity method investment on the consolidated statement of operations for the years ended December 31, 2021 and 2020, respectively. 104 Table of Contents Summary Financial Information Summary financial information for Angel Pharmaceuticals is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ As of ​ ​ As of ​ Balance Sheet Data (unaudited) December 31, 2021 ​ December 31, 2020 ​ ​ (In thousands) ​ Current assets ​ $ 38,407 ​ $ 38,883 ​ Non-current assets ​ 1,710 ​ — ​ Current liabilities ​ 1,741 ​ 97 ​ Non-current liabilities ​ 276 ​ — ​ Stockholders' equity ​ ​ 38,100 ​ ​ 38,786 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ Statement of Operations Data (unaudited) 2021 ​ 2020 (1) ​ ​ (In thousands) ​ Net loss ​ $ ( 5,697 ) ​ $ ( 274 ) ​ Share of loss from investments accounted for using the equity method ​ ( 4,831 ) ​ ( 234 ) ​ ​ (1) The Company’s share of loss is based on net loss beginning October 2020 upon the deconsolidation of Angel Pharmaceuticals . ​ 6. License and Collaboration Agreements Scripps Licensing Agreement In December 2014, the Company entered into a license agreement with The Scripps Research Institute (“Scripps”), pursuant to which it was granted a non-exclusive, world-wide license for all fields of use under Scripps’ rights in certain know-how and technology related to a mouse hybridoma clone expressing an anti-human CD73 antibody, and to progeny, mutants or unmodified derivatives of such hybridoma and any antibodies expressed by such hybridoma, from which we developed CPI-006. Scripps also granted the Company the right to grant sublicenses in conjunction with other proprietary rights the Company holds, or to others collaborating with or performing services for the Company. Under this license agreement, Scripps has agreed not to grant any additional commercial licenses with respect to such materials, other than march-in rights granted to the U.S. government. Upon execution of the agreement, the Company made a one-time cash payment to Scripps of $ 10,000 in 2015 and is also obligated to pay a minimum annual fee to Scripps of $ 25,000 . The one-time cash payment was recorded as research and development expense as technological feasibility of the asset had not been established and there was no alternative future use. A minimum annual fee payment is due on each anniversary of the effective date of the agreement for the term of the agreement. The Company is also required to make performance-based cash payments upon successful completion of clinical and sales milestones. The aggregate potential milestone payments are $ 2.5 million. The Company is also required to pay royalties on net sales of licensed products (including CPI-006) sold by it, its affiliates and its sublicensees at a rate in the low-single digits. In addition, should the Company sublicense the rights licensed under the agreement, it has agreed to pay a percentage of sublicense revenue received at specified rates that start at double digit percentages and decrease to single digit percentages based on the elapsed time from the effective date of the agreement and the time of entry into such sublicense. To date, no milestone payments have been made. The Company’s license agreement with Scripps will terminate upon expiration of its obligation to pay royalties to Scripps under the license agreement. The Company’s license agreement with Scripps is terminable by the consent of the parties, at will by the Company upon providing 90 days written notice to Scripps, or by Scripps for certain material 105 Table of Contents breaches, or if the Company undergoes a bankruptcy event. In addition, Scripps may terminate the license on a product-by-product basis, or the entire agreement, if the Company fails to meet specified diligence obligations related to the development and commercialization of licensed products. Scripps may also terminate the agreement after the third anniversary of the effective date of the agreement if it reasonably believes, based on reports the Company provides to Scripps, that the Company has not used commercially reasonable efforts as required under the agreement, subject to a specified notice and cure period. Vernalis Licensing Agreement In February 2015, the Company entered into a license agreement with Vernalis (R&D) Limited (“Vernalis”), which was subsequently amended as of November 5, 2015, and, pursuant to which the Company was granted an exclusive, worldwide license under certain patent rights and know-how, including a limited right to grant sublicenses, for all fields of use to develop, manufacture and commercialize products containing certain adenosine receptor antagonists, including ciforadenant. Pursuant to this agreement, the Company made a one-time cash payment to Vernalis in the amount of $ 1.0 million, which was recorded as research and development expense as technological feasibility of the asset had not been established and there was no alternative future use. The Company is also required to make cash milestone payments to Vernalis upon the successful completion of clinical and regulatory milestones for licensed products depending on the indications for which such licensed products are developed and upon achievement of certain sales milestones. In February 2017, the Company made a milestone payment of $ 3.0 million to Vernalis following the expansion of a cohort of patients with renal cell cancer treated with single agent ciforadenant in the Company’s Phase 1/1b clinical trial. The aggregate potential milestone payments are approximately $ 220 million for all The Company has also agreed to pay Vernalis tiered incremental royalties based on the annual net sales of licensed products containing ciforadenant on a product-by-product and country-by-country basis, subject to certain offsets and reductions. The tiered royalty rates for products containing ciforadenant range from the mid-single digits up to the low-double digits on a country-by-country net sales basis. The royalties on other licensed products that do not include ciforadenant also increase with the amount of net sales on a product-by-product and country-by-country basis and range from the low-single digits up to the mid-single digits on a country-by-country net sales basis. The Company is also obligated to pay to Vernalis certain sales milestones as indicated above when worldwide net sales reach specified levels over an agreed upon time period. The agreement will expire on a product-by-product and country-by-country basis upon the expiration of the Company’s payment obligations to Vernalis in respect of a particular product and country. Both parties have the right to terminate the agreement for an uncured material breach by the other party. The Company may also terminate the agreement at its convenience by providing 90 days written notice, provided that the Company has not received notice of its own default under the agreement at the time the Company exercises such termination right. Vernalis may also terminate the agreement if the Company challenges a licensed patent or undergoes a bankruptcy event. Genentech Collaboration Agreement In October 2015, the Company entered into a clinical trial collaboration agreement with Genentech to evaluate the safety, tolerability and preliminary efficacy of ciforadenant combined with Genentech’s investigational cancer immunotherapy, Tecentriq, a fully humanized monoclonal antibody targeting PD-L1, in a variety of solid tumors in our Phase 1/1b clinical trial. Pursuant to this agreement, the Company will be responsible for the conduct and cost of the relevant studies, under the supervision of a joint development committee made up of the Company’s representatives and representatives of Genentech. Genentech will supply Tecentriq. At this time, no further patients are being enrolled in this trial. As part of the agreement, the Company granted Genentech certain rights of first negotiation to participate in future clinical trials that the Company may conduct evaluating the administration of ciforadenant in combination with an anti-PD-1 or anti-PD-L1 antibody. If both parties do not reach agreement on the terms of any such participation by Genentech within a specified time period, the Company retains the right to collaborate with third parties in such activities. The Company also granted Genentech certain rights of first negotiation should the Company decide to license development and commercialization rights to ciforadenant. Should both parties not reach agreement on the terms of such a license within a specified time of period, the Company retains the right to enter into a license with another third party. This agreement will expire after a set period of time following the provision by the Company of the final clinical study report to Genentech, which has not yet been finalized. 106 Table of Contents In May 2017, the Company entered into a second clinical trial collaboration agreement with Genentech. Under the new agreement, ciforadenant administered in combination with Tecentriq will be evaluated in a Phase 1b/2 randomized, controlled clinical study as second-line therapy in patients with NSCLC who are resistant and/or refractory to prior therapy with an anti-PD-(L)1 antibody. This study has completed patient enrollment of 16 patients. Genentech was responsible for the conduct of the study and the Company will share the cost of the Phase 1b/2 trial, which began enrolling patients in the fourth quarter of 2017. The Company is responsible for supplying ciforadenant and retains global development and commercialization rights to ciforadenant. This agreement will expire after a set period of time following the provision by Genentech of a final study report to the Company. Monash License Agreement In April 2017, the Company entered into a license agreement with Monash University (“Monash”), pursuant to which the Company was granted an exclusive, sublicensable worldwide license under certain know-how, patent rights and other intellectual property rights controlled by Monash to research, develop, and commercialize certain antibodies directed to CXCR2 for the treatment of human diseases. Upon execution of the agreement, the Company made a one-time cash payment to Monash of $ 275,000 and reimbursed Monash for certain patent prosecution costs incurred prior to execution of the agreement. The Company is also obligated to pay an annual license maintenance fee to Monash of $ 25,000 until a certain development milestone is met with respect to the licensed product, after which no further maintenance fee will be due. The Company is also required to make development and sales milestone payments to Monash with respect to the licensed products in the aggregate of up to $ 45.1 million. The Company is also required to pay to Monash tiered royalties on net sales of licensed products sold by it, its affiliates and its sublicensees at a rate ranging in the low-single digits. In addition, should the Company sublicense its rights under the agreement, the Company has agreed to pay a percentage of sublicense revenue received at specified rates that are currently at low double digit percentages and decrease to single digit percentages based on the achievement of development milestones. The term of the Company’s agreement with Monash continues until the expiration of its obligation to pay royalties to Monash thereunder. The license agreement is terminable at will by the Company upon providing 30 days written notice to Monash, or by either party for material breaches by the other party. In addition, Monash may terminate the entire agreement or convert the license to a non-exclusive license if the Company has materially breached our obligation to use commercially reasonable efforts to develop and commercialize a licensed product, subject to a specified notice and cure mechanism. ​ 107 Table of Contents 7. Balance Sheet Components (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ December 31, ​ ​ 2021 2020 Prepaid and Other Current Assets ​ ​ ​ ​ ​ ​ ​ Interest receivable ​ $ 32 ​ $ 86 ​ Prepaid research and development manufacturing expenses ​ ​ 740 ​ ​ 181 ​ Prepaid facility expenses ​ ​ 174 ​ ​ 160 ​ Prepaid insurance ​ ​ 280 ​ ​ 244 ​ Other ​ 128 ​ 406 ​ ​ ​ $ 1,354 ​ $ 1,077 ​ Property and Equipment ​ ​ ​ ​ ​ ​ ​ Laboratory equipment ​ $ 2,477 ​ $ 2,472 ​ Computer equipment and purchased software ​ 142 ​ 142 ​ Leasehold improvements ​ 2,084 ​ 2,084 ​ ​ ​ 4,703 ​ 4,698 ​ Less: accumulated depreciation and amortization ​ ( 4,252 ) ​ ( 3,792 ) ​ ​ ​ $ 451 ​ $ 906 ​ Accrued and Other Liabilities ​ ​ ​ ​ ​ ​ ​ Accrued clinical trial expense ​ $ 4,010 ​ $ 4,681 ​ Accrued manufacturing expense ​ 839 ​ 321 ​ Personnel related ​ 1,846 ​ 2,225 ​ Accrued legal and accounting ​ ​ 265 ​ ​ 197 ​ Other ​ 121 ​ 180 ​ ​ ​ $ 7,081 ​ $ 7,604 ​ ​ ​ ​ ​ ​ ​ ​ ​ 8. Common Stock As of December 31, 2021, the amended and restated certificate of incorporation authorizes the Company to issue 290 million shares of common stock and 10 million shares of preferred stock. Each share of common stock is entitled to one vote. Common stockholders are entitled to dividends if and when declared by the board of directors. As of December 31, 2021, no dividends on common stock had been declared. In March 2020, the Company entered into an open market sale agreement (the “2020 Sales Agreement”) with Jefferies LLC (“Jefferies”) to sell shares of the Company’s common stock, from time-to-time, with aggregate gross sales proceeds of up to $ 50,000,000 , through an at-the-market equity offering program under which Jefferies will act as its sales agent. In November 2021, the Company entered into another Sale Agreement (“2021 Sales Agreement”) with Jefferies to sell shares of our common stock from time-to-time, with aggregate gross sales proceeds of up to $ 40,000,000 . The issuance and sale of shares of common stock by the Company pursuant to the Sales Agreements are deemed an “at-the-market” offering under the Securities Act of 1933, as amended. Jefferies is entitled to compensation for its services equal to up to 3.0 % of the gross proceeds of any shares of common stock sold through Jefferies under the Sales Agreements. During the year ended December 31, 2021, the Company sold 6,609,605 shares under its at-the-market offering program resulting in net proceeds of $ 29.0 million. As of December 31, 2021, $ 18.9 million remained for sale under the 2020 Sales Agreement and $ 40.0 million remained for sale under the 2021 Sales Agreement. 108 Table of Contents The Company has reserved shares of common stock, for issuance as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 2019 Exchange warrants — ​ 1,458,000 ​ 1,458,000 Shares available for future option grants ​ 2,806,953 ​ 1,692,753 ​ 1,704,183 Outstanding options 6,354,308 ​ 6,664,173 ​ 5,643,410 Shares reserved for employee stock purchase plan 400,000 ​ 400,000 ​ 400,000 Total 9,561,261 ​ 10,214,926 ​ 9,205,593 ​ ​ 9. Stock Option Plans In February 2014, the Company adopted the 2014 Equity Incentive Plan (the “2014 Plan”), which was subsequently amended in November 2014, July 2015 and September 2015, under which it granted incentive stock options (“ISOs”) or non-qualified stock options (“NSOs”). Terms of stock agreements, including vesting requirements, are determined by the board of directors or a committee authorized by the board of directors, subject to the provisions of the 2014 Plan. In general, awards granted by the Company vest over four years and have maximum exercise term of 10 years . The 2014 Plan provides that grants must be at an exercise price of 100 % of fair market value of the Company’s common stock as determined by the board of directors on the date of the grant. In connection with the consummation of the IPO in March 2016, the 2016 Equity Incentive Award Plan (the “2016 Plan”), became effective. Under the 2016 Plan, incentive stock options, non-statutory stock options, stock purchase rights and other stock-based awards may be granted. Terms of stock agreements, including vesting requirements, are determined by the board of directors or a committee authorized by the board of directors, subject to the provisions of the 2016 Plan. In general, awards granted by the Company vest over four years and have a maximum exercise term of 10 years . The 2016 Plan provides that grants must be at an exercise price of 100 % of fair market value of the Company’s common stock as determined by the board of directors on the date of the grant. In conjunction with adopting the 2016 Plan, the 2014 Plan was terminated and no further awards will be granted under the 2014 Plan. Options outstanding under the 2014 Plan as of the effective date of the 2016 Plan that are forfeited or lapse unexercised may be re-issued under the 2016 Plan, up to a maximum of 1,136,229 shares. Activity under the Company’s stock option plans is set forth below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options Outstanding ​ ​ ​ Weighted ‑ ​ ​ Shares ​ ​ ​ Average ​ ​ Available ​ Number of ​ Exercise ​ for Grant Options Price Balance at December 31, 2020 1,692,753 6,664,173 ​ $ 7.26 Additional shares authorized 1,134,000 — ​ — Options granted ( 1,645,000 ) 1,645,000 ​ 2.68 Options exercised — ( 329,665 ) ​ 3.69 Options forfeited 1,625,200 ( 1,625,200 ) ​ 5.14 Balance at December 31, 2021 2,806,953 6,354,308 ​ $ 6.80 ​ 109 Table of Contents The following tables summarize information about stock options outstanding at December 31, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options Outstanding ​ Options Vested ​ ​ ​ ​ at December 31, 2021 ​ at December 31, 2021 ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ Average ​ Weighted ​ ​ ​ ​ ​ ​ Remaining ​ Weighted ​ ​ ​ Remaining ​ Average ​ ​ ​ ​ ​ ​ Contractual ​ Average ​ ​ ​ Contractual ​ Exercise Exercise Price Number Life (in Years) Exercise Price Number Life (in Years) Price $ 0.28 - $ 2.00 110,000 6.65 ​ $ 1.45 110,000 6.65 ​ $ 1.45 $ 2.56 - $ 3.84 2,483,169 8.47 ​ $ 3.06 785,426 6.77 ​ $ 3.44 $ 3.88 ​ $ 5.82 999,064 8.64 ​ $ 4.02 288,670 ​ 7.94 ​ $ 4.03 $ 5.94 - $ 8.91 ​ 765,439 ​ 5.31 ​ $ 5.98 ​ 619,649 ​ 4.92 ​ $ 5.98 $ 9.52 - $ 14.28 ​ 846,636 ​ 3.83 ​ $ 10.74 ​ 829,640 ​ 3.77 ​ $ 10.72 $ 14.43 - $ 21.64 ​ 1,150,000 ​ 3.94 ​ $ 15.45 ​ 1,150,000 ​ 3.94 ​ $ 15.45 ​ ​ ​ ​ 6,354,308 ​ 6.65 ​ $ 6.80 ​ 3,783,385 ​ 5.03 ​ $ 9.09 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options Outstanding ​ Options Vested ​ ​ ​ ​ at December 31, 2020 ​ at December 31, 2020 ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ Average ​ Weighted ​ ​ ​ ​ ​ ​ Remaining ​ Weighted ​ ​ ​ Remaining ​ Average ​ ​ ​ ​ ​ ​ Contractual ​ Average ​ ​ ​ Contractual ​ Exercise Exercise Price Number Life (in Years) Exercise Price Number Life (in Years) Price $ 0.28 - $ 2.00 190,500 5.56 ​ $ 1.09 100,500 2.28 ​ $ 0.28 $ 2.56 - $ 3.84 1,628,459 8.85 ​ $ 3.53 468,939 8.53 ​ $ 3.56 $ 3.88 ​ $ 5.82 1,707,500 9.65 ​ $ 4.00 130,106 ​ 8.08 ​ $ 3.99 $ 5.94 - $ 8.91 ​ 899,959 ​ 7.42 ​ $ 5.98 ​ 482,065 ​ 6.97 ​ $ 5.98 $ 9.52 - $ 14.28 ​ 955,947 ​ 6.47 ​ $ 10.77 ​ 762,488 ​ 6.31 ​ $ 10.76 $ 14.43 - $ 21.64 ​ 1,281,808 ​ 5.17 ​ $ 15.44 ​ 1,265,434 ​ 5.15 ​ $ 15.42 ​ ​ ​ ​ 6,664,173 ​ 7.72 ​ $ 7.26 ​ 3,209,532 ​ 6.22 ​ $ 10.23 ​ The weighted average grant date fair value of options granted for the years ended December 31, 2021, 2020 and 2019, was $ 1.93 , $ 2.66 and $ 2.53 , respectively. Options outstanding and exercisable that had vested or were expected to vest at December 31, 2021 were as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ Aggregate ​ ​ ​ ​ Weighted ​ Remaining ​ Intrinsic ​ ​ Number ​ Average ​ Contractual ​ Value ​ ​ of shares ​ Exercise Price ​ Life (years) ​ (in thousands) Vested 3,783,385 ​ $ 9.09 5.03 ​ $ 105 Expected to vest 2,570,923 ​ $ 3.43 9.03 ​ $ — ​ In the table above, aggregate intrinsic value represents the difference between the exercise price of the options to purchase common stock and the fair value of the Company’s common stock of $ 2.41 per share as of December 31, 2021. The aggregate intrinsic value of stock options exercised in the years ended December 31, 2021, 2020 and 2019, was $ 1.0 million, $ 0.3 million and $ 0.4 million, respectively. The total fair value of options that vested in the year ended December 31, 2021, 2020 and 2019, was $ 4.5 million, $ 6.0 million, and $ 7.8 million, respectively. 110 Table of Contents 10. Stock-Based Compensation The Company’s results of operations include expenses relating to stock-based awards as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ 2021 2020 2019 Research and development ​ $ 2,161 ​ $ 2,791 ​ $ 3,103 General and administrative ​ 2,071 ​ 2,956 ​ 4,245 Total ​ $ 4,232 ​ $ 5,747 ​ $ 7,348 ​ Valuation Assumptions The Company estimated the fair value of employee stock options using the Black-Scholes valuation model. The fair value of employee stock options is being amortized on a straight-line basis over the requisite service period of the awards. The fair value of employee stock options were estimated using the following assumptions for the years ended December 31, 2021, 2020 and 2019: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended December 31, ​ ​ 2021 2020 2019 ​ Risk-free interest rate ​ 0.9 % 0.5 % 1.9 % Expected volatility ​ 86.7 % 82.7 % 82.1 % Expected term (in years) ​ 6.0 ​ 6.0 ​ 6.0 Expected dividend yield ​ 0 % 0 % 0 % ​ Risk-free Interest Rate: The Company based the risk-free interest rate over the expected term of the options based on the constant maturity rate of U.S. Treasury securities with similar maturities as of the date of the grant. Volatility : The Company uses an average historical stock price volatility of a peer group of publicly traded companies to be representative of its expected future stock price volatility, as the Company does not have sufficient trading history for its common stock. For purposes of identifying these peer companies, the Company considers the industry, stage of development, size and financial leverage of potential comparable companies. For each grant, the Company measures historical volatility over a period equivalent to the expected term. The Company will continue to apply this process until a sufficient amount of historical information regarding the volatility of its own stock price becomes available. Expected Term: The Company uses the simplified method prescribed in the ASC 718, Compensation—Stock Compensation, to calculate the expected term of options granted to employees and directors. Expected Dividends: The Company has not paid and does not anticipate paying any dividends in the near future. At December 31, 2021, 2020 and 2019, the unrecognized compensation expense associated with respect to options granted to employees was $ 5.9 million, $ 10.4 million and $ 13.4 million, respectively, and is expected to be recognized on a straight-line basis over 2.69 , 2.78 , and 2.71 years, respectively. ​ ​ 111 Table of Contents 11. Income Taxes The components of loss before income tax is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 2019 Domestic ​ $ ( 43,241 ) ​ $ ( 5,995 ) ​ $ ( 46,672 ) Foreign ​ — ​ — ​ — ​ ​ $ ( 43,241 ) ​ $ ( 5,995 ) ​ $ ( 46,672 ) ​ During the years ended December 31, 2021, 2020 and 2019, the Company recorded no income tax benefits for the net operating losses (NOLs) incurred due to the uncertainty of realizing a benefit from those items. A reconciliation of the Company’s effective tax rate to the U.S. Federal statutory rate is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 2019 Federal tax benefit at statutory rate ​ 21 % 21 % 21 % State tax, net of Federal benefit ​ 9 % 14 % 6 % Change in valuation allowance ​ ( 26 ) % ( 24 ) % ( 28 ) % Research and development tax credits ​ 3 % 19 % 4 % Share based Compensation ​ ( 1 ) % ( 10 ) % ( 1 ) % 162(m) covered employees compensation limitation ​ — % ( 6 ) % — ​ FIN48 Reserve ​ ( 1 ) % ( 161 ) % ( 1 ) % Deconsolidation gain ​ ( 3 ) % 174 % — ​ Gain on transfer of intellectual property ​ — ​ ( 20 ) % ​ ​ Prior year federal true-up ​ ( 1 ) % ( 7 ) % — % Other ​ ( 1 ) % — ​ ( 1 ) ​ Effective income tax rate ​ 0 % 0 % 0 % ​ The effective tax rate is different from the federal statutory tax rate primarily due to a foreign rate differential and a valuation allowance against deferred tax assets as a result of the Company’s history of losses. The significant components of the Company’s net deferred tax assets are as follows (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 2019 Deferred tax assets ​ ​ ​ ​ ​ ​ ​ ​ ​ Net operating loss carryforwards ​ $ 52,539 ​ $ 42,344 ​ $ 42,486 Tax credit carryforwards ​ 9,181 ​ 7,894 ​ 6,990 Capitalized tax assets ​ 125 ​ 63 ​ ( 3 ) Accruals ​ 137 ​ 207 ​ 152 Stock compensation ​ ​ 5,006 ​ ​ 4,942 ​ ​ 4,317 Operating lease liability ​ ​ 1,021 ​ ​ 646 ​ ​ 892 Other ​ 12 ​ 47 ​ 40 Total deferred tax assets ​ $ 68,021 ​ $ 56,143 ​ $ 54,874 Deferred tax liabilities ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating lease right-of-use asset ​ $ ( 893 ) ​ $ ( 461 ) ​ $ ( 651 ) Valuation allowance ​ ( 67,128 ) ​ ( 55,682 ) ​ ( 54,223 ) Net deferred tax assets ​ $ — ​ $ — ​ $ — ​ The Company recorded a valuation allowance against its deferred tax assets at December 31, 2021 and 2020 because Company management believed that it was more likely than not that these assets would not be fully realized in the future. The valuation allowance increased by approximately $ 11.4 million and $ 1.5 million for the years ended 112 Table of Contents December 31, 2021 and 2020, respectively. Changes in the valuation allowance for deferred tax assets relate primarily to the increase in the Company’s net operating loss carryforward. As of December 31, 2021, the Company had federal NOL carryforwards of approximately $ 212.6 million and state NOL carryforwards of approximately $ 246.3 million which are available to reduce future taxable income. The NOLs will begin to expire in 2034, if not utilized. Utilization of the net operating loss carryforwards are subject to various limitations due to the ownership change limitations provided by Internal Revenue Code (IRC) Section 382 and similar state provisions. On March 27, 2020, the President signed into law the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, an economic stimulus package in response to the COVID-19 global pandemic and the Families First Coronavirus Response Act, or FFCR Act, which permits employees of certain organizations paid sick time stemming from COVID-19-related issues. The CARES Act contains several corporate income tax provisions, including making remaining alternative minimum tax credits immediately refundable; providing a 5-year carryback of NOLs generated in tax years 2018, 2019, and 2020, and removing the 80% taxable income limitation on utilization of those NOLs if carried back to prior tax years or utilized in tax years beginning before 2021; temporarily liberalizing the interest deductibility rules under Section 163(j) of the CARES Act, by raising the adjusted taxable income limitation from 30% to 50% for tax years 2019 and 2020 and giving taxpayers the election of using 2019 adjusted taxable income for purposes of computing 2020 interest deductibility. The CARES Act did not have a material impact on the Company’s tax provision for the years ended December 31, 2020 or 2021. The Consolidated Appropriations Act, 2021, which was enacted on December 27, 2020, has expanded, extended, and clarified selected CARES Act provisions, specifically on Paycheck Protection Program loans and Employee Retention Tax Credits, 100% deductibility of business meals as well as other tax extenders. The Consolidated Appropriations Act did not have a material impact on the Company’s tax provision for the years ended December 31, 2020 or 2021. On June 29, 2020, Assembly Bill 85 (“A.B. 85”) was signed into California law. A.B. 85 provides for a three-year suspension of the use of net operating losses for medium and large businesses and a three-year cap on the use of business incentive tax credits to offset no more than $5.0 million of tax per year. A.B. 85 suspends the use of net operating losses for taxable years 2020, 2021 and 2022 for certain taxpayers with taxable income of $1.0 million or more. The carryover period for any net operating losses that are suspended under this provision will be extended. A.B. 85 also requires that business incentive tax credits including carryovers may not reduce the applicable tax by more than $5.0 million for taxable years 2020, 2021 and 2022. The Company does not expect the impact of this standard on its consolidated financial statements to be material. California Senate Bill 113 (SB 113), was signed into law by Governor Newsom on February 9, 2022. The legislation contains important California tax law changes, including reinstatement of business tax credits and net NOL deductions limited by AB 85 mentioned above. The new tax law should be accounted for under ASC 740 in the period of enactment (2022) but is not expected to have a material impact on the Company’s tax provision due to its taxable loss position. As of December 31, 2021, the Company also had $ 7.9 million of federal and $ 4.5 million of state research and development tax credit carryforwards available to reduce future income taxes. The federal research and development tax credits will begin to expire 2035, if not utilized. The state research and development tax credits have no expiration date. U.S. income and foreign withholding taxes have not been recognized on the excess of the amount for financial reporting over the tax basis of investments in foreign subsidiaries that are essentially permanent in duration. This excess totaled approximately $ 35.0 million as of December 31, 2021, which will be indefinitely reinvested; deferred income taxes have not been provided on such foreign earnings. 113 Table of Contents As of December 31, 2021, the Company had unrecognized tax benefits (“UTBs”) of approximately $ 12.5 million. All of the deferred tax assets associated with these UTBs are fully offset by a valuation allowance. The following table summarizes the activity related to UTBs: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ 2021 2020 2019 Unrecognized tax benefits beginning of the period ​ $ 12,157 ​ $ 1,885 ​ $ 1,804 Decrease related to the prior year ​ — ​ — ​ ( 365 ) Increased related to the current year ​ 347 ​ 10,272 ​ 446 Unrecognized tax benefits, end of the period ​ $ 12,504 ​ $ 12,157 ​ $ 1,885 ​ The Company follows the provisions of ASC 740, Accounting for Income Taxes, and the accounting guidance related to accounting for uncertainty in income taxes. The Company determines its uncertain tax positions based on a determination of whether and how much of a tax benefit taken by the Company in its tax filings or positions is more likely than not to be sustained upon examination by the relevant income tax authorities. None of the Company’s unrecognized tax benefits that, if recognized, would affect its effective tax rate. The Company does not anticipate the total amounts of unrecognized tax benefits will significantly increase or decrease in the next 12 months. The Company will recognize both accrued interest and penalties related to unrecognized benefits in income tax expense. Management determined that no accrual for interest or penalties was required as of December 31, 2021, 2020 and 2019. The Company currently has no federal or state tax examinations in progress nor has it had any federal or state examinations since inception. As a result of the Company’s net operating loss carryforwards, all of its tax years are subject to federal, state and foreign tax examinations. ​ ​ ​ ​ 12. Facility Lease In January 2015, the Company signed an initial operating lease, effective February 1, 2015 for 8,138 square feet of office and laboratory space with a one year term. Between January 2015 and September 2021, the Company entered into a series of lease amendments to increase the amount of leased space to 27,280 square feet and extend the expiration of the lease to February 2025. The lease agreement includes annual rent escalations. Under the lease and subsequent amendments, the landlord provided approximately $ 1.9 million in free rent and lease incentives. The Company records rent expense on a straight-line basis over the effective term of the lease, including any free rent periods and incentives. As the interest rate implicit in lease arrangements is typically not readily available, in calculating the present value of the lease payments, the Company has utilized its incremental borrowing rate, which is determined based on the prevailing market rates for collateralized debt with maturity dates commensurate with the term of its lease . The Company’s facility lease is a net lease, as the non-lease components (i.e. common area maintenance) are paid separately from rent based on actual costs incurred. Therefore, the non-lease components were not included in the right-of-use asset and liability and are reflected as an expense in the period incurred. In September 2021, the Company entered into a lease amendment to extend the expiration of its operating lease by two years , from February 2023 to February 2025. As a result of this lease extension, the Company recorded a $ 2.4 million increase in the operating lease right-of-use asset and a corresponding increase in the operating lease liability As of December 31, 2021 and 2020, the right-of-use asset under operating lease was $ 3.2 million and $ 1.6 million, respectively. The elements of lease expense were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ Statements of operations and ​ December 31, ​ ​ comprehensive loss location ​ 2021 2020 2019 ​ Costs of operating lease ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating lease costs ​ Research and development, General and administrative ​ $ 1,046 ​ $ 957 ​ $ 960 ​ Costs of non-lease components (previously common area maintenance) ​ Research and development, General and administrative ​ ​ 396 ​ ​ 351 ​ ​ 324 ​ 114 Table of Contents Total operating lease cost ​ ​ ​ $ 1,442 ​ $ 1,308 ​ $ 1,284 ​ Other Information ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating cash flows used for operating lease ​ ​ ​ $ 1,645 ​ $ 1,506 ​ $ 1,449 ​ Remaining lease term ​ ​ ​ 3.1 years ​ 2.1 years ​ 3.1 years ​ Discount rate ​ ​ ​ 8.0 % ​ 10.0 % ​ 10.0 % ​ ​ As of December 31, 2021, minimum rental commitments under this lease were as follows (in thousands) ​ ​ ​ ​ Year Ended December 31 (in thousands) ​ ​ 2022 ​ $ 1,300 2023 ​ ​ 1,391 2024 ​ ​ 1,434 Total lease payments ​ 4,125 Less: imputed interest ​ ​ ( 478 ) Total $ 3,647 ​ As of December 31, 2020, minimum rental commitments under this lease were as follows (in thousands) ​ ​ ​ ​ Year Ended December 31 (in thousands) ​ ​ 2021 ​ $ 1,260 2022 ​ 1,299 Total lease payments ​ 2,559 Less: imputed interest ​ ​ ( 249 ) Total $ 2,310 ​ In August 2021, the Company entered into an agreement to sublease 7,585 square feet of its office and laboratory space in Burlingame, California to Angel Pharmaceuticals. Pursuant to the sublease, rent is due monthly and is subject to scheduled annual increases and Angel Pharmaceuticals is responsible for certain operating expenses and taxes throughout the life of the sublease. The sublease will expire in February 2023 and Angel Pharmaceuticals has no option to extend the sublease term. Sublease income is recognized on a straight-line basis as other income in our consolidated statements of operations. For the year ended December 31, 2021, the Company recognized $ 0.2 million of sublease income. ​ 13. Commitments and Contingencies Commitments As of December 31, 2021, the Company had total non-cancellable purchase commitments of $ 9.3 million for the purchase of drug substance in 2022. Contingencies In August 2015, the Company entered into an agreement for a line of credit of $ 0.1 million for the purpose of issuing its landlord a letter of credit of $ 0.1 million as a security deposit under its facility lease. The Company pledged money market funds and marketable securities as collateral for the line of credit. For further discussion of the Company’s facility lease agreement, see Note 12. Pursuant to the Company’s license agreements with each of Vernalis and Scripps, it has obligations to make future milestone and royalty payments to these parties, respectively. However, because these amounts are contingent, 115 Table of Contents they have not been included on the Company’s balance sheet. For further discussion of the Vernalis and Scripps licensing agreements, see Note 6. Indemnifications In the ordinary course of business, the Company enters into agreements that may include indemnification provisions. Pursuant to such agreements, the Company may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third-party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments the Company could be required to make under these provisions is not determinable. The Company has never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. The Company has also entered into indemnification agreements with its directors and officers that may require the Company to indemnify its directors and officers against liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by Delaware corporate law. There have been no claims to date and the Company has a directors and officers insurance policy that may enable it to recover a portion of any amounts paid for future claims. Legal Proceedings The Company is not a party to any material legal proceedings. 14. Related Party Transactions In February 2021, the Company completed a follow-on public offering in which the Company sold 9,783,660 shares of common stock at a price of $ 3.50 per share, which included 1,212,231 shares issued pursuant to the underwriters’ exercise of their option to purchase additional shares of common stock. The aggregate net proceeds received by the Company from the offering were approximately $ 32.0 million, net of underwriting discounts and commissions and offering expenses. The following aggregate number of shares of common stock were sold to the Company’s owners of more than 5% of our common stock, directors, or executive officers during the February 2021 underwritten public offering: ​ ​ ​ ​ ​ ​ ​ ​ ​ Number of ​ Aggregate ​ ​ ​ Shares of ​ Purchase ​ Common Stock Price Owners of More Than 5% of Our Common Stock ​ ​ ​ ​ ​ ​ OrbiMed Advisors LLC (1) ​ ​ 1,285,714 ​ $ 4,499,999 Board of Directors ​ ​ ​ ​ ​ ​ Richard A. Miller, M.D. ​ ​ 100,000 ​ ​ 350,000 ​ (1) Peter Thompson, M.D., a member of our Board of Directors since November 2014, is a Private Equity Partner at OrbiMed Advisors, LLC. ​ As more fully described in Note 5, the Company holds a 49.7 % ownership in Angel Pharmaceuticals and, in connection with intellectual property licensing agreements between the Company and Angel Pharmaceuticals, the Company provides operational support and clinical drug supplies to Angel Pharmaceuticals. Third-party and internal personnel costs incurred by the Company are billed to Angel Pharmaceuticals in the period incurred and recorded as an offset to expenses. During the year ended December 31, 2021, the Company billed Angel for approximately $ 0.2 million in internal personnel costs and $ 1.6 million in third-party costs. Of the third-party costs, approximately $ 0.6 million were associated with clinical drug supply manufactured and expensed in prior years. The remaining $ 1.0 million in third-party costs were primarily associated with clinical drug supply passthrough costs incurred during the year ended December 31, 2021 and did not have an impact on the Company’s consolidated statements of operations. ​ 116 Table of Contents In August 2021, the Company entered into an agreement to sublease 7,585 square feet of its office and laboratory space in Burlingame, California to Angel Pharmaceuticals. Pursuant to the sublease, rent is due monthly and is subject to scheduled annual increases and Angel Pharmaceuticals is responsible for certain operating expenses and taxes throughout the life of the sublease. The sublease will expire in February 2023 and Angel Pharmaceuticals has no option to extend the sublease term. Sublease income is recognized on a straight-line basis as other income in our consolidated statements of operations. For the year ended December 31, 2021, the Company recognized $ 0.2 million of sublease income. ​ In July 2021, Linda S. Grais, M.D., J.D., a member of the Company’s Board of Directors, was appointed as a non-executive member of the Board of Directors of ICON plc (“ICON”), effective upon completion of ICON’s acquisition of PRA Health Sciences, Inc. ICON is a clinical research organization and provides services to support the Company’s clinical trials. During the year ended December 31, 2021, the Company recorded approximately $ 246,000 in clinical trial expenses under its agreements with ICON. ​ ​ 15. Quarterly Selected Financial Data (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quarter Ended ​ ​ December 31, ​ September 30, ​ June 30, ​ March 31, (in thousands, except per share amounts) 2021 2021 2021 2021 Operating expenses ​ $ 6,810 ​ $ 9,047 ​ $ 11,290 ​ $ 11,483 Net loss ​ ​ ( 9,236 ) ​ ​ ( 10,673 ) ​ ​ ( 11,752 ) ​ ​ ( 11,580 ) Net loss per share, basic and diluted ​ $ ( 0.20 ) ​ $ ( 0.24 ) ​ $ ( 0.28 ) ​ $ ( 0.34 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Quarter Ended ​ ​ December 31, ​ September 30, ​ June 30, ​ March 31, (in thousands, except per share amounts) 2020 2020 2020 2020 Operating expenses ​ $ 9,879 ​ $ 9,845 ​ $ 10,767 ​ $ 13,269 Net income (loss) ​ ​ 27,347 ​ ​ ( 9,796 ) ​ ​ ( 10,611 ) ​ ​ ( 12,935 ) Net income (loss) per share, basic and diluted ​ $ 0.92 ​ $ ( 0.33 ) ​ $ ( 0.36 ) ​ $ ( 0.44 ) ​ ​ ​ ​ 16. Subsequent Event ​ None ​ Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure None