What changed in this filing

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Item 1. Legal Proceedings

2022-05-09 compared with 2021-11-08 · 165 added, 114 removed, 825 unchanged (25% of the section changed)

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The impact of the COVID-19 pandemic and related risks could have a material adverse impact on our research and development programs and financial condition.

The impact of the war resulting from the Russian invasion of Ukraine and related risks could have a material adverse impact on our development programs and our business prospects.

We are an early-stage immuno-oncology company with a limited operating history.

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Changes in healthcare law and implementing regulations, as well as changes in healthcare policy, may impact our business in ways that we cannot currently predict, and may have a significant adverse effect on our business and results of operations.

Risks Related to the Impact of COVID-19

Risks Related to the Impact of COVID-19 and the Russia-Ukraine War

The impact of the COVID-19 pandemic and related risks could have a material adverse impact on our research and development programs and financial condition.

The degree to which COVID-19 impacts our business operations, research and development programs and financial condition remains highly uncertain and will depend on future developments, including the ultimate duration and/or severity of the pandemic, the impact of any resurgences and new variants that emerge, actions by government authorities to contain the spread of the virus, the availability, adoption and effectiveness of any vaccines, and when and to what extent normal economic and operating conditions can resume.

The American Cancer Society has reported that the pandemic has led to declines in screening, diagnosis and treatment for patients , which will adversely impact the enrollment of patients in clinical trials targeting early stage cancers and retention of patients overall in our

The degree to which COVID-19 impacts our business operations, research and development programs and financial condition remains highly uncertain and will depend on future developments, including the ultimate duration and/or severity of the pandemic, the impact of any resurgences and new variants that emerge, actions by government authorities to contain the spread of the virus, the availability, adoption and effectiveness of vaccines and boosters, and when and to what extent normal economic and operating conditions can resume.

We conduct our clinical trials in the U.S.

and internationally in geographic regions that are impacted by COVID-19 to varying degrees, and disruptions caused by the COVID-19 pandemic, including the reinstitution of shelter-in-place measures, and the foregoing factors have adversely impacted and could continue to impact our ability to initiate, supply, enroll, conduct or complete our ongoing or planned clinical trials.

impact our ability to initiate, supply, enroll, conduct or complete our ongoing or planned clinical trials.

For example, in the first half of 2020, the pandemic led to a decline in screening, diagnosis and treatment for cancer patients.

While cancer screening rates have rebounded, resurgences due to new variants may cause patients to delay screening and treatment for fear of exposure to COVID-19, thereby adversely impacting the enrollment of patients in clinical trials targeting early-stage cancers and retention of patients overall in our trials.

Furthermore, the disruptions caused by the COVID-19 pandemic have led to missed study visits, missed data collections and other deviations from our protocols, which may negatively impact the integrity, reliability, or robustness of the data from our clinical trials.

Global shipping has also been challenged by the evolving pandemic and has led to delays in our receipt of materials and supplies, including investigational product, used in the conduct of our clinical trials.

Global shipping has also been challenged by the evolving pandemic and has led to delays in our receipt of materials and supplies, including our investigational product and other standard-of-care drugs used in the conduct of our clinical trials.

We are unable to predict the ultimate impact of this pandemic on our programs.

Due to the availability of vaccines and our mandatory vaccine policy, our laboratory operations are operating at or near normal levels and we have begun to resume periodic in-person meetings for our office-based employees, who primarily continue to work remotely.

However, the safety, health and well-being of our employees remains a primary concern.

Due to the availability of vaccines and our mandatory vaccine policy, our laboratory operations are operating at or near normal levels and we began returning office-based employees to our offices on a hybrid schedule.

The safety, health and well-being of our employees remains a primary concern.

We may restrict our business activities or modify our employee work arrangements in response to new developments in the COVID-19 pandemic in order to reduce the risk of exposure among our employees, which may adversely affect our productivity.

In addition, the impact of the COVID-19 pandemic, including governmental and other actions to combat it such as the imposition of shelter-in-place and other public health orders, may exacerbate the effects of the risks described below.

The impact of the COVID-19 pandemic, including governmental and other actions to combat it such as the imposition of shelter-in-place and other public health orders, may exacerbate the effects of the risks described below.

The impact of the war resulting from the Russian invasion of Ukraine and related risks could have a material adverse impact on our development programs and our business prospects.

While we did not have any clinical studies enrolling in Russia, Ukraine or Belarus, we conduct our clinical trials on a global basis and had planned to include those countries in our ongoing and future clinical trials.

We have suspended site activations in those countries until we believe it is safe to resume such activities and we can ensure uninterrupted supply of investigational products to patients who are ultimately enrolled in our studies in those countries.

We did not have other business activities ongoing or contemplated in the sanctioned countries and Ukrainian territories.

However, we do file patent applications in Russia and the Eurasian patent office, which is headquartered in Moscow.

Sanctions may make it difficult or impossible to file and maintain patents in these countries.

Additionally, Russia has begun taking actions against “unfriendly”

countries, including the U.S., which may adversely affect the scope of and/or our ability to enforce our intellectual property rights.

The degree to which the Russia-Ukraine war will impact our development programs will depend on future developments, including the ultimate duration of the war, whether the war spreads to additional countries, the severity of the harm on infrastructure and hospital services in the impacted countries and adverse actions taken by the sanctioned countries against the U.S.

and other unfriendly countries.

The impact of the Russia-Ukraine war may also exacerbate the effects of the risks described below.

Risks Related to our Limited Operating History, Financial Position and Capital Requirements

We are an early-stage immuno-oncology company with a limited operating history.

We have incurred annual net losses since our inception and anticipate that we will continue to incur significant losses for the foreseeable future.

We have never generated any revenue from product sales and may never be profitable.

We have never generated any revenue from product sales and anticipate that we will continue to incur significant losses for the foreseeable future.

We are an early-stage immuno-oncology company with a limited operating history that may make it difficult to evaluate the success of our business to date and to assess our future viability.

All of our investigational products are in development, and none have been approved for commercial sale.

We have never generated any revenue from product sales and have incurred net losses each year since we commenced operations.

For the nine months ended September 30, 2021 and the year ended December 31, 2020, our net losses were $226.5 million and $122.9 million, respectively.

As of September 30, 2021, we had an accumulated deficit of $554.7 million.

All of our investigational products are in development, and none have been approved for commercial sale nor have we ever generated any revenue from product sales.

In 2021, we recognized our first annual net income since commencing operations as a result of option payments totaling $725 million due to us from Gilead following its exercise of options to three of our programs.

For the three months ended March 31, 2022 and the year ended December 31, 2021 we had net losses of $68.0 million and net income of $52.8 million, respectively.

As of March 31, 2022, we had an accumulated deficit of $343.3 million.

We expect that it will be several years, if ever, before we have an investigational product ready for commercialization.

We expect to incur increasing levels of operating losses over the next several years and for the foreseeable future as we advance our investigational products.

Despite net income in 2021 of $52.8 million, we expect to incur substantial and increasing levels of operating losses over the next several years and for the foreseeable future as we advance our investigational products.

Our prior losses, combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’

equity (deficit) and working capital.

To become and remain profitable, we must develop and eventually commercialize a product with significant market potential.

equity and working capital.

To become and remain profitable on a sustained basis, we must develop and eventually commercialize a product with significant market potential.

This will require us to be successful in a range of challenging activities, including completing preclinical studies and clinical trials of our investigational products, obtaining marketing approval for these investigational products, manufacturing, marketing and selling those products for which we may obtain marketing approval and satisfying any post-marketing requirements.

We may never succeed in these activities and, even if we succeed in commercializing one or more of our investigational products, we may never generate revenues that are significant or large enough to achieve profitability.

In addition, as a young business, we may encounter unforeseen expenses, difficulties, complications, delays and other known and unknown challenges.

If we do achieve profitability, we may not be able to sustain or increase profitability on a quarterly or annual basis and we will continue to incur substantial research and development and other expenditures to develop and market additional investigational products.

Our failure to become and remain profitable would decrease the value of the company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations.

If we do achieve profitability from product sales, we may not be able to sustain or increase profitability on a quarterly or annual basis and we will continue to incur substantial research and development and other expenditures to develop and market additional investigational products.

Our failure to become and remain profitable on a sustained basis would decrease the value of the company and could impair our ability to raise capital, maintain our research and development efforts, expand our business or continue our operations.

A decline in the value of our company could also cause our stockholders to lose all or part of their investment.

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The development of biopharmaceutical investigational products is capital intensive.

Since our inception, we have used substantial amounts of cash to fund our operations and expect our expenses to increase substantially during the next few years as our investigational products enter and advance through preclinical studies and clinical trials and we expand our clinical, regulatory, quality and manufacturing capabilities.

Since our inception, we have used substantial amounts of cash to fund our operations and expect our expenses to increase substantially during the next few years as our investigational products enter and advance into and through large late-stage or registrational clinical trials and we expand our clinical, regulatory, quality and manufacturing capabilities.

In addition, if we obtain marketing approval for any of our investigational products, we expect to incur significant commercialization expenses related to marketing, sales, manufacturing and distribution.

As of September 30, 2021, we had $743.4 million of cash, cash equivalents and investments.

While we believe that our cash position will be sufficient to fund operations at least through 2023, our future capital requirements will depend on many factors, including:

As of March 31, 2022, we had $1,342.4 million of cash, cash equivalents and investments.

While we believe that our cash position will be sufficient to fund our anticipated level of operations into 2026, our future capital requirements will depend on many factors, including:

the scope, rate of progress and costs of clinical trials for our investigational products as well as drug discovery, preclinical development activities, and laboratory testing;

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the timing and number of programs Gilead exercises its option to obtain an exclusive license to our current and future clinical programs, subject to the rights of our existing partners, and the costs associated with our share of the global development plan for such optioned programs;

the timing and amount of milestone payments we receive from Taiho Pharmaceuticals Co., Ltd.

(Taiho) under our option and license agreement (the Taiho Agreement) and the Gilead Collaboration Agreement, and option fees under the Gilead Collaboration Agreement;

the timing and amount of milestone payments we receive from Gilead under our option, license and collaboration agreement (the Gilead Collaboration Agreement) and from Taiho Pharmaceuticals Co., Ltd.

(Taiho) under our option and license agreement (the Taiho Agreement) as well as option fees under the Gilead Collaboration Agreement;

the extent to which we acquire or in-license other investigational products and technologies;

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If we are unable to develop, obtain regulatory approval for and commercialize our investigational products, or experience significant delays in doing so, our business will be materially harmed.

We have no products approved for sale and our most advanced investigational products only recently advanced into our first registrational trial.

We have no products approved for sale and we only initiated our first registrational trial in 2021.

We may subsequently learn of certain information or data that the FDA may request, which may necessitate conducting additional preclinical studies or generating additional information at significant cost in terms of both time and expense, including under a clinical hold imposed on an investigational new drug application (IND).

For example, the FDA recently published guidance on "Project Optimus", an initiative to reform dose selection in oncology drug development.

If the FDA does not believe we have sufficiently demonstrated that the selected doses for our investigational products maximize not only the efficacy of the investigational product, but the safety and tolerability as

well, our ability to initiate new studies may be delayed.

Even if we conducted the additional studies or generated the additional information requested, the FDA could disagree that we have satisfied their requirements, all of which will cause significant delays and expense to our programs.

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Based upon negative or inconclusive results, we may decide, or regulators may require us, to conduct additional clinical trials or preclinical studies.

In addition, data obtained from clinical trials are susceptible to varying interpretations, and regulators may not interpret our data as favorably as we do, which may further delay, limit or prevent marketing approval.

In particular, results from uncontrolled trials, meaning trials in which there is no control group such as a placebo group, are inherently difficult to interpret.

Clinical trials evaluating two or more investigational products in combination that have not yet been approved can compound these difficulties.

As a key element of our strategy is the development of intra-portfolio combinations, our early clinical trials may test more than one investigational product in uncontrolled studies, such as our Phase 1/1b clinical trials for etrumadenant in which we evaluated etrumadenant in combination with zimberelimab.

As a key element of our strategy is the development of intra-portfolio combinations, our early clinical trials may test more than one investigational product in uncontrolled studies, such as our Phase 1/1b clinical trial for AB308 which is evaluating AB308 in combination with zimberelimab.

Furthermore, as more investigational products within a particular class of drugs proceed through clinical development to regulatory review and approval, the amount and type of clinical data that may be required by regulatory authorities may increase or change.

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If we are unable to complete preclinical or clinical trials of current or future investigational products, due to safety concerns, or if the results of these trials are not satisfactory to convince regulatory authorities of their safety or efficacy, we will not be able to obtain marketing approval for commercialization.

For example, since a key element of our strategy is the development of intra-portfolio combinations, regulatory authorities may disagree that we have sufficiently demonstrated the contribution of each investigational product or other agent in our combination trials and require further studies.

Even if we are able to obtain marketing approvals for any of our investigational products, those approvals may be for indications that are not as broad as desired or may contain other limitations that would adversely affect our ability to generate revenue from sales of those products.

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Subjects may opt to be treated with an approved product rather than our anti-PD-1 antibody investigational product.

In addition, Roche/Genentech have initiated Phase 3 trials with their anti-TIGIT antibody, which could reduce the number of clinical sites and subjects available for ARC-7, our Phase 2 trial evaluating combinations with domvanalimab (our anti-TIGIT antibody) and ARC-10, our Phase 3 trial evaluating zimberelimab monotherapy and zimberelimab plus domvanalimab combination therapy versus chemotherapy.

Similarly, we are aware that AstraZeneca is evaluating its A 2a R antagonist in metastatic castration-resistant prostate cancer (mCRPC), and we may compete for clinical sites and enrollment in this patient population, which may adversely impact the rate of enrollment of the different cohorts of our Phase 2 platform trial evaluating combinations with etrumadenant in mCRPC.

In addition, Roche/Genentech, Merck and Beigene have initiated numerous Phase 3 trials with their respective anti-TIGIT antibodies, which could reduce the number of clinical sites and subjects available for our registrational program for domvanalimab (our anti-TIGIT antibody), including ARC-10, our Phase 3 trial in PD-L1 high non-small cell lung cancer, and our planned Phase 3 trials with Gilead in lung and gastrointestinal cancers.

Public health outbreaks, such as the COVID-19 pandemic, will also have an adverse impact our clinical trial operations.

Regulatory authorities and ethics committees may have their resources diverted, which will prolong the time needed to review new studies and any protocol or other amendments for ongoing studies.

The limited resources available at investigational sites will limit their ability to initiate new studies, screen and enroll subjects, conduct and report all patient assessments and hinder their ability to collect all patients samples, which may impact our ability to assess the activity of our investigational products in a timely manner.

Furthermore, any negative results that we may report in clinical trials of our investigational products may make it difficult or impossible to recruit and retain subjects in other clinical trials of that same investigational product.

Regulatory authorities and ethics committees may divert resources, prolonging the time for review of new studies and any protocol or other amendments for ongoing studies.

Investigational sites have intermittently diverted resources in order to respond to the ongoing health crisis, causing delays and limiting their ability to initiate new studies.

The limited resources at investigational sites further hinders their ability to screen and enroll subjects, conduct and report all patient assessments and collect all patients samples, thereby impacting our ability to assess the activity of our investigational products in a timely manner.

Furthermore, supply chain challenges during the COVID-19 pandemic has made it more difficult to procure standard-of-care chemotherapy drugs utilized in our trials and timely ship materials to investigational sites, which has and may continue to delay or limit their screening and enrollment of patients.

In addition, recruiting and retaining subjects in our clinical trials may be adversely impacted by negative results that we report in our other clinical trials using the same investigational products or by negative results reported by others using investigational products with the same mechanism of action as our investigational products.

Delays in patient enrollment may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these trials and adversely affect our ability to advance the development of our investigational products.

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Material adverse changes in the final data could significantly harm our business prospects.

Serious adverse events, undesirable side effects or other unexpected properties of our investigational products may be identified during development or after approval, which could lead to the discontinuation of our clinical development programs, refusal by regulatory authorities to approve our investigational products or limitations on the use of our investigational products or, if discovered following marketing approval, revocation of marketing authorizations or subsequent limitations on the use of our investigational products.

discovered following marketing approval, revocation of marketing authorizations or subsequent limitations on the use of our investigational products.

To date, we have only tested our clinical-stage investigational products in a relatively small number of oncology subjects.

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adverse events or unexpected side effects to the FDA or comparable foreign regulatory authorities, which could, among other things, order us to cease further development of zimberelimab.

We may face similar risks from any independent development conducted with our investigational products by Taiho and Gilead, following any exercise of their respective options to our programs.

We may face similar risks from any independent development conducted with our investigational products by Gilead and Taiho, following any exercise of their respective options to our programs.

A key element of our strategy is the development of intra-portfolio combinations.

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However, these combinations have not been tested before and may fail to demonstrate synergistic activity against immunological targets, may fail to achieve superior outcomes relative to the use of single agents or other combination therapies, may exacerbate adverse events associated with one of the investigational products when used as monotherapy, or may fail to demonstrate sufficient safety or efficacy traits in clinical trials to enable us to complete those clinical trials or obtain marketing approval for the combination therapy.

In addition, our early clinical trials may test more than one investigational product in uncontrolled studies, and it may be difficult to interpret the results of those uncontrolled trials.

In addition, our early clinical

trials may test more than one investigational product in uncontrolled studies, and it may be difficult to interpret the results of those uncontrolled trials or evaluate the contribution of each investigational agent in such combination.

We expect that our anti-PD-1 antibody, zimberelimab, will form the backbone of many of our intra-portfolio combinations.

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In addition, any small molecules we discover and design may, on further study, be shown to have harmful side effects or other characteristics that indicate that they are unlikely to be medicines that will receive marketing approval and achieve market acceptance.

If we are unable to identify suitable compounds with ideal pharmacological properties and which are differentiated from other

investigational products in development for preclinical and clinical development, our business and prospects would be materially harmed.

If we are unable to identify suitable compounds with ideal pharmacological properties and which are differentiated from other investigational products in development for preclinical and clinical development, our business and prospects would be materially harmed.

Certain of our investigational products may require companion diagnostics in certain indications.

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The design or execution of a clinical trial can determine whether its results will support marketing approval, and flaws in the design or execution of a clinical trial may not become apparent until the clinical trial is well advanced.

In some instances, there can be significant variability in safety or efficacy results between different trials with the same investigational product due to numerous factors, including differences in trial protocols, size and type of the patient populations, variable adherence to the dosing regimen or other protocol requirements and the rate of dropout among clinical trial participants.

In some instances, there can be significant variability in safety or efficacy results between different trials with the same investigational product due to numerous

factors, including differences in trial protocols, size and type of the patient populations, variable adherence to the dosing regimen or other protocol requirements and the rate of dropout among clinical trial participants.

The FDA or comparable foreign regulatory authorities may disagree with our trial designs and our interpretation of data from preclinical studies or clinical trials.

The FDA and comparable foreign regulatory authorities have substantial discretion in the approval process and in determining when or whether marketing approval will be obtained for any of our investigational products.

Our investigational products may not be approved even if they achieve their primary endpoints in any Phase 3 clinical trials or registrational trials we or our collaborators conduct.

The FDA or comparable foreign regulatory authorities may disagree with our trial designs and our interpretation of data from preclinical studies or clinical trials.

In addition, any of these regulatory authorities may change requirements for the approval of an investigational product even after reviewing and providing comments or advice on a protocol for a pivotal Phase 3 or registrational clinical trial that has the potential to result in FDA or other comparable foreign regulatory authorities’

The FDA’s Oncology Center of Excellence has recently announced several initiatives to disrupt long-standing practices, including Project Optimus and Project FrontRunner.

These initiatives may impose additional requirements on our overall product development programs, resulting in longer development timelines and increased cost.

Any of these regulatory authorities may also approve an investigational product for fewer or more limited indications than we request or may grant approval contingent on the performance of costly post-marketing clinical trials.

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laws and regulations.

We cannot assure you that the FDA will

accept data from trials conducted outside the United States.

We cannot assure you that the FDA will accept data from trials conducted outside the United States.

If the FDA does not accept the data from such clinical trials, we would likely need to conduct additional trials, which would be costly and time-consuming and delay or permanently halt our development of our investigational products.

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If this collaboration is not successful, our business could be adversely affected.

In May 2020, we entered into an option, license and collaboration agreement (the Gilead Collaboration Agreement) with Gilead Sciences, Inc.

(Gilead) pursuant to which Gilead obtained an exclusive option to all of our current and future programs during the 10-year collaboration term contingent upon Gilead’s payment of up to $400.0 million.

Upon Gilead’s exercise of its option to a program, the companies will co-develop and equally share global co-development costs for the joint development program, subject to certain opt-out rights for us, and expense caps on our spending and related subsequent adjustments.

For each optioned program, provided we have not exercised our opt-out rights, we have an option to co-promote in the United States and share equally all associated profits and losses.

Gilead has the right to exclusively commercialize any optioned programs outside of the U.S., subject to the rights of our existing partners to any territories, and will pay us tiered royalties as a percentage of revenues ranging from the high teens to the low twenties.

In connection with the entering into of the Gilead Collaboration Agreement, we and Gilead also entered into a common stock purchase agreement and an investor rights agreement.

In May 2020, we entered into the Gilead Collaboration Agreement whereby Gilead obtained an exclusive license to zimberelimab and time-limited exclusive options to all of our then current and future programs during the 10-year collaboration term.

In November 2021, we amended the Gilead Collaboration Agreement, and in connection with such amendment, Gilead exercised its option to three programs to obtain exclusive licenses to domvanalimab, AB308, etrumadenant and quemliclustat, and the parties added a research collaboration.

Upon closing of Gilead’s exercise of its option to a program, the companies will co-develop and equally share global development costs for the joint development program, subject to opt-out rights applicable to certain programs, and expense caps on our spending and true-up adjustments.

For each optioned program, provided we have not exercised our opt-out rights (if applicable), we have an option to co-promote in the United States with equal sharing of related profits and losses.

In connection with the entry into the Gilead Collaboration Agreement in May 2020, we and Gilead also entered into a common stock purchase agreement and an investor rights agreement.

Our agreements with Gilead pose a number of risks including, but not limited to, the following:

we may not be successful in this collaboration due to various factors, including our ability to demonstrate proof of concept in one or more clinical studies so that Gilead will exercise its option to these programs;

if our collaborations on research and development candidates do not result in the successful development and commercialization of products or if Gilead terminates the collaboration agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration.

If we do not receive the funding we expect under these agreements, our development of our investigational products could be delayed and we may need additional resources to develop our investigational products;

conflicts may arise between us and Gilead, such as conflicts regarding the combinations or indications to pursue or concerning the interpretation of clinical data, the commercial potential of any optioned investigational products, the interpretation of financial provisions or the ownership of intellectual property developed during the collaboration.

Any such conflicts could slow or prevent the development or commercialization of our investigational products;

if our joint development program does not result in the successful development and commercialization of products or if Gilead terminates the collaboration agreement with us, we may not receive any future research funding or milestone or royalty payments under the collaboration.

we will be heavily dependent on Gilead for its further development and commercialization of the investigational products from the programs that it opts into;

we may not be successful in this collaboration due to various other factors, including our ability to demonstrate proof of concept in one or more clinical studies so that Gilead will exercise its option to these programs;

we have appointed two individuals designated by Gilead to our board of directors pursuant to the terms of the investor rights agreement, and Gilead owns approximately 19.3% of our outstanding common stock and will have the right (but not the obligation) to acquire additional shares from us up to an amount resulting in Gilead owning a total of 35% of our outstanding common stock and, as a result, may be able to exert significant influence over our company;

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There is no guarantee that any such CROs, clinical trial investigators or other third parties on which we rely will devote adequate time and resources to our development activities or perform as contractually required.

Many of these third parties have suffered from personnel constraints during the COVID-19 pandemic.

If any of these third parties fail to meet expected deadlines, adhere to our clinical protocols or meet regulatory requirements, otherwise performs in a substandard manner, or terminates its engagement with us, the timelines for our development programs may be extended or delayed or our development activities may be suspended or terminated.

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We produce in our laboratory relatively small quantities of compounds for evaluation in our research programs.

We rely, and expect to continue to rely, on third parties for the manufacture of our investigational products for preclinical and clinical testing, as well as for commercial manufacture if any of our investigational products are approved.

We rely, and expect to continue to rely, on third parties for the manufacture of our investigational products for

preclinical and clinical testing, as well as for commercial manufacture if any of our investigational products are approved.

We currently have limited manufacturing arrangements and expect that each of our investigational products will only be covered by single source suppliers for the foreseeable future.

In particular, we have an exclusive relationship with WuXi Biologics, located in China, for the manufacture of our investigational biologics, including zimberelimab and domvanalimab.

We maintain a significant inventory for each of our investigational products in order to minimize the impact of potential disruptions, and have not yet experienced any disruptions in our ability to manufacture our investigational products as a result of the COVID-19 health crisis.

However, we also utilize a single global distributor, which operates in an industry severely challenged by the COVID-19 pandemic.

Our reliance on limited manufacturing and distribution relationships increases the risk that we will not have sufficient quantities of our investigational products or products, if approved, or such quantities at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.

In particular, we have an exclusive relationship with WuXi Biologics, located in China, for the manufacture of our investigational biologics, including zimberelimab, domvanalimab and AB308.

Our contract manufacturers are subject to import and export rules and restrictions, which may impact their ability to acquire materials used in the manufacturing of our investigational product or export our manufactured investigational products to the countries where our clinical trials are conducted.

We closely monitor the inventory for each of our investigational products in order to prevent or minimize the impact of potential disruptions, and have not yet experienced any disruptions in our ability to manufacture our investigational products as a result of the COVID-19 health crisis.

However, the pandemic has prevented the U.S.

Commerce Department from conducting an inspection of WuXi Biologics in connection with purchases of hardware that are subject to U.S.

export controls.

As a result, WuXi Biologics has been placed on the U.S.'s "Unverified List".

At this time, we do not anticipate any impact to our manufacturing plans with WuXi Biologics.

Furthermore, the pandemic has severely challenged supply chains, increasing the lead time for us and our contract manufacturers to obtain raw materials used in the manufacturing of our investigational products.

Our reliance on limited manufacturing and use of a single global distributor increases the risk that we will not have sufficient quantities of our investigational products for use in our clinical trials or, if approved, quantities of product at an acceptable cost or quality, which could delay, prevent or impair our development or commercialization efforts.

Furthermore, all entities involved in the preparation of therapeutics for clinical trials or commercial sale, including our existing contract manufacturers for our investigational products, are subject to extensive regulation.

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In particular, any replacement of our manufacturers could require significant effort and expertise because there may be a limited number of qualified replacements.

In some cases, the technical skills or technology required to manufacture our investigational products may be unique or

proprietary to the original manufacturer and we may have difficulty transferring such skills or technology to another third party and a feasible alternative may not exist.

In some cases, the technical skills or technology required to manufacture our investigational products may be unique or proprietary to the original manufacturer and we may have difficulty transferring such skills or technology to another third party and a feasible alternative may not exist.

These factors would increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to have another third party manufacture our investigational products.

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delay in submitting regulatory applications, or receiving marketing approvals, for our investigational products;

loss of the cooperation of an existing or future collaborator, including option exercises by Taiho or Gilead under the Taiho Agreement or Gilead Collaboration Agreement, respectively;

loss of the cooperation of an existing or future collaborator, including option exercises by Gilead or Taiho under the Gilead Collaboration Agreement or Taiho Agreement, respectively;

subjecting third-party manufacturing facilities or our manufacturing facilities to additional inspections by regulatory authorities;

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With respect to investigational products from optioned programs, we, or our third-party manufacturers, may need to produce additional quantities to support the scope of our joint clinical development program with Gilead, Gilead’s additional evaluations with its own proprietary products or Taiho’s independent clinical development plans.

Furthermore, we are a party to various collaboration and supply arrangements, such as our clinical trial collaboration with AstraZeneca to evaluate domvanalimab in combination with durvalumab in patients with unresectable Stage 3 non-small cell lung cancer and our clinical trial collaboration with Genentech to evaluate etrumadenant and atezolizumab utilizing the MORPHEUS platform.

We, or our manufacturing partners, may be unable to successfully increase the manufacturing capacity for any of our investigational products in a timely or cost-effective manner, or at all, to support these collective needs.

We are also a party to various collaboration and supply arrangements, such as our clinical trial collaboration with AstraZeneca to evaluate domvanalimab in combination with durvalumab in patients with unresectable Stage 3 non-small cell lung cancer and our clinical trial collaboration with Genentech to evaluate etrumadenant and atezolizumab utilizing the MORPHEUS platform.

Furthermore, the COVID-19 pandemic has increased the lead time to obtain raw materials used in the manufacturing of our investigational products.

Accordingly, we, or our manufacturing partners, may be unable to successfully increase the manufacturing capacity for any of our investigational products in a timely or cost-effective manner, or at all, to support these collective needs.

In addition, quality issues may arise during scale-up activities.

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Slight deviations anywhere in the manufacturing process, including filling, labeling, packaging, storage and shipping and quality control and testing, may result in lot failures, product recalls or spoilage.

When changes are made to the manufacturing process, we may be required to provide preclinical and clinical data showing the comparable identity,

strength, quality, purity or potency of the products before and after such changes.

When changes are made to the manufacturing process, we may be required to provide preclinical and clinical data showing the comparable identity, strength, quality, purity or potency of the products before and after such changes.

If microbial, viral or other contaminations are discovered at the facilities of our manufacturer, such facilities may need to be closed for an extended period of time to investigate and remedy the contamination, which could delay clinical trials and adversely harm our business.

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We seek to protect our proprietary technology in part by entering into confidentiality agreements and, if applicable, material transfer agreements, consulting agreements or other similar agreements with our advisors, employees, third-party contractors and consultants prior to beginning research or disclosing proprietary information.

These agreements typically limit the rights of the third parties to use or disclose our confidential information, including our trade secrets.

These agreements typically limit the rights of the

third parties to use or disclose our confidential information, including our trade secrets.

Despite the contractual provisions employed when working with third parties, the need to share trade secrets and other confidential information increases the risk that such trade secrets become known by our competitors, are inadvertently incorporated into the technology of others, or are disclosed or used in violation of these agreements.

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In order to market any products outside the United States, we or our collaborators must establish and comply with numerous and varying regulatory requirements of other countries regarding safety and efficacy.

Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean that regulatory approval

will be obtained in any other country.

Clinical trials conducted in one country may not be accepted by regulatory authorities in other countries, and regulatory approval in one country does not mean that regulatory approval will be obtained in any other country.

Approval procedures vary among countries and can involve additional product testing and validation and additional administrative review periods.

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As a result, any such processes could have a material adverse effect on the future commercial prospects for our biological products.

Zimberelimab and domvanalimab are biological products and we may develop additional biological products in the future.

Zimberelimab, domvanalimab and AB308 are biological products and we may develop additional biological products in the future.

We believe that any of our current and future investigational products approved as a biological product under a BLA should qualify for the twelve-year period of exclusivity.

However, there is a risk that this exclusivity could be shortened due to Congressional action or otherwise, or that the FDA will not consider our investigational products to be reference products for competing products, potentially creating the opportunity for biosimilar competition sooner than anticipated.

However, there is a risk that this exclusivity could be shortened due to Congressional action

or otherwise, or that the FDA will not consider our investigational products to be reference products for competing products, potentially creating the opportunity for biosimilar competition sooner than anticipated.

Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation.

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Such an occurrence could materially adversely affect the value of the investigational product being developed under any such agreement and any other investigational products being developed or tested in combination.

For example, we intend to test many of our small-molecule investigational products with zimberelimab, which we in-licensed from WuXi Biologics.

In the event we breach our license agreement with WuXi Biologics, and WuXi Biologics terminates our license agreement, we would be unable to test those combinations, or we would have to negotiate a new or reinstated agreement, which may not be available to us on equally favorable terms, or at all.

For example, zimberelimab, which we in-licensed from WuXi Biologics, is intended to be used as the cornerstone of our combination strategy.

Domvanalimab, which we in-licensed from Abmuno Therapeutics, is already being evaluated in ARC-7, a Phase 2 study, and ARC-10, a Phase 3 study, and we are planning at least two additional Phase 3 studies with Gilead to evaluate domvanalimab in additional settings.

In the event we breach our license agreement with WuXi Biologics and/or Abmuno Therapeutics, and our license agreements are terminated, we would be unable to pursue our intra-portfolio combination strategy, or we would have to negotiate a new or reinstated agreement, which may not be available to us on equally favorable terms, or at all.

In addition, the agreements under which we license intellectual property or technology to or from third parties are complex, and certain provisions in such agreements may be susceptible to multiple interpretations.

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We also cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction or such other benefits that led us to enter into the arrangement.

For example, under the Gilead Collaboration Agreement, for each program Gilead exercises its option to, it will pay an option fee that ranges from $200 million to $275 million for our clinical programs in existence when we entered into the Gilead Collaboration Agreement, and $150 million per program for all other programs that enter clinical development.

Furthermore, we and Gilead will equally share global co-development costs for the joint development program, as well as profits and losses for the United States, subject to certain opt-out rights for us, and expense caps on our spending and related subsequent adjustments.

For example, under the Gilead Collaboration Agreement, for each additional clinical program that Gilead exercises its option to, it will pay an option fee of $150 million per

program, and for each research program that Gilead exercises its option to at the IND-enabling stage, it will pay an option fee of $60 million per program.

Furthermore, we and Gilead will equally share global co-development costs for the joint development program, as well as profits and losses for the United States, subject to opt-out rights applicable to certain programs, and expense caps on our spending and true-up adjustments.

If Gilead does not exercise its option to develop a program, our capital requirements relating to that development program will significantly increase and we may need to seek a new partner in order to develop and commercialize our investigational products from that program.

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The development and potential commercialization of our investigational products may require substantial additional capital to fund expenses.

Pursuant to the Gilead Collaboration Agreement, Gilead has an exclusive option to acquire an exclusive license to all of our current and future clinical programs during the 10-year collaboration term.

Pursuant to the Gilead Collaboration Agreement, Gilead has an exclusive option to acquire an exclusive license to all of our then current and future clinical programs during the 10-year collaboration term.

Given the breadth of the collaboration, our ability to form new collaborations in the future will be limited.

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Obtaining and enforcing patents is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications, or maintain and/or enforce patents that may issue based on our patent applications, at a reasonable cost or in a timely manner.

It is also possible that we will fail to identify patentable aspects of our research and development results before

it is too late to obtain patent protection.

It is also possible that we will fail to identify patentable aspects of our research and development results before it is too late to obtain patent protection.

Although we enter into non-disclosure and confidentiality agreements with parties who have access to patentable aspects of our research and development output, such as our employees, corporate collaborators, outside scientific collaborators, contract research organizations, contract manufacturers, consultants, advisors and other third parties, any of these parties may breach these agreements and disclose such results before a patent application is filed, thereby jeopardizing our ability to seek patent protection.

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Third parties may assert infringement claims against us based on existing or future intellectual property rights.

For example, we are aware of certain patents owned or exclusively licensed by Bristol-Myers Squibb (BMS) having claims directed broadly to treating cancer with anti-PD-1 antibodies (the BMS Patents), which expire in 2023 and 2024.

For example, we are aware of certain patents owned or licensed by Bristol-Myers Squibb having claims directed broadly to treating cancer with anti-PD-1 antibodies (the BMS Patents), which expire in 2023 and 2024.

The BMS Patents have been and may in the future be the subject of litigation.

If the validity of the BMS Patents is upheld following all such challenges, and if we receive regulatory approval for zimberelimab prior to expiration of the BMS Patents, then we may need to delay our commercialization of zimberelimab or we may need to obtain a license from BMS, which license may not be available on commercially reasonable terms, or at all.

In addition, we are aware of certain patents held by Genentech relating to methods of using an anti-PD-1 or anti-PD-L1 antibody in combination with an anti-TIGIT antibody for the treatment of cancer (the Genentech Patents), which expire in 2034.

Merck has challenged the Genentech Patents in proceedings before the USPTO.

If the validity of the BMS Patents and Genentech Patents are upheld following all challenges, and if we receive regulatory approval for zimberelimab prior to expiration of the BMS Patents or domvanalimab or AB308 in combination with zimberelimab prior to expiration of the Genentech Patents, then we may need to delay commercialization or we may need to obtain a license, which license may not be available on commercially reasonable terms, or at all.

If we were sued for patent infringement, we would need to demonstrate that our investigational products, products or methods either do not infringe the patent claims of the relevant patent or that the patent claims are invalid or unenforceable, and we may not be able to do this.

Proving invalidity may be difficult.

For example, in the United States,

proving invalidity in court requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents.

For example, in the United States, proving invalidity in court requires a showing of clear and convincing evidence to overcome the presumption of validity enjoyed by issued patents.

If we are found to infringe a third party’s intellectual property rights, we could be forced, including by court order, to cease developing, manufacturing or commercializing the infringing investigational product or product.

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Any claims we assert against perceived infringers could provoke these parties to assert counterclaims against us alleging that we infringe their patents, in addition to counterclaims asserting that our patents are invalid or unenforceable, or both.

In any patent infringement proceeding, there is a risk that a court will decide that a patent of ours is invalid or unenforceable, in whole or in part, and that we do not have the right to stop the other party from using the invention at issue.

invention at issue.

There is also a risk that, even if the validity of such patents is upheld, the court will construe the patent’s claims narrowly or decide that we do not have the right to stop the other party from using the invention at issue on the grounds that our patent claims do not cover the invention.

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If our defenses to these claims fail, in addition to requiring us to pay monetary damages, a court could prohibit us from using technologies or features that are essential to our investigational products, if such technologies or features are found to incorporate or be derived from the trade secrets or other proprietary information of the former employers.

Moreover, any such litigation or the threat thereof may adversely affect our reputation, our ability to form strategic alliances or

sublicense our rights to collaborators, engage with scientific advisors or hire employees or consultants, each of which would have an adverse effect on our business, results of operations and financial condition.

Moreover, any such litigation or the threat thereof may adversely affect our reputation, our ability to form strategic alliances or sublicense our rights to collaborators, engage with scientific advisors or hire employees or consultants, each of which would have an adverse effect on our business, results of operations and financial condition.

We may not be able to protect our intellectual property rights throughout the world.

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This could limit our potential revenue opportunities.

Accordingly, our efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Accordingly, our efforts to enforce

our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we develop or license.

Changes in patent law in the United States and other jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our investigational products.

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We and any third parties with whom we share facilities enter into written agreements that include confidentiality and intellectual property obligations to protect each party’s property, potential trade secrets, proprietary know-how, and information.

We further seek to protect our potential trade secrets, proprietary know-how, and information in part, by entering into non-disclosure and

confidentiality agreements with parties who are given access to them, such as our corporate collaborators, outside scientific collaborators, contract research organizations, contract manufacturers, consultants, advisors and other third parties.

We further seek to protect our potential trade secrets, proprietary know-how, and information in part, by entering into non-disclosure and confidentiality agreements with parties who are given access to them, such as our corporate collaborators, outside scientific collaborators, contract research organizations, contract manufacturers, consultants, advisors and other third parties.

With our consultants, contractors, and outside scientific collaborators, these agreements typically include invention assignment obligations.

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We may be subject to claims that former employees, collaborators or other third parties have an interest in our patents or other intellectual property as an inventor or co-inventor.

The failure to name the proper inventors on a patent application can result in the patents issuing thereon being unenforceable.

The failure to name the proper inventors on a patent application can result in the

patents issuing thereon being unenforceable.

Inventorship disputes may arise from conflicting views regarding the contributions of different individuals named as inventors, the effects of foreign laws where foreign nationals are involved in the development of the subject matter of the patent, conflicting obligations of third parties involved in developing our investigational products or as a result of questions regarding co-ownership of potential joint inventions.

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We expect to expand our research and development capabilities and, as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

In order to maximize the potential of our Gilead Collaboration Agreement, we expect to significantly grow our discovery and clinical development capabilities.

To support this growth, we will need to increase the number of employees in clinical operations, biostatistics and data management, quality, regulatory affairs and, if any of our investigational products receives marketing approval, sales, marketing and distribution.

In order to maximize the potential of our Gilead Collaboration Agreement, we expect to significantly grow our clinical development capabilities, including increasing the number of employees in clinical operations, biostatistics and data management, quality, and regulatory affairs, as well as expanding our overall infrastructure.

If any of our investigational products receives marketing approval, we will also need to add sales, marketing and distribution capabilities.

To manage our anticipated future growth, we must:

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Our future success depends on our ability to retain key employees, consultants and advisors and to attract, retain and motivate qualified personnel.

Our industry has experienced a high rate of turnover in recent years.

Our ability to compete in the highly competitive biopharmaceuticals industry depends upon our ability to attract, retain and motivate highly skilled and experienced personnel with scientific, medical, regulatory, manufacturing and management skills and experience.

We conduct our operations in the San Francisco Bay Area, a region that is home to many other biopharmaceutical companies as well as many academic and research institutions, resulting in fierce competition for qualified personnel.

We may not be able to attract or retain qualified personnel in the future due to the intense competition for a limited number of qualified personnel among biopharmaceutical companies.

Our industry also has experienced a high rate of turnover in recent years, which has worsened during the COVID-19 pandemic.

While we have expanded a number of our in-office roles to permit remote work arrangements, allowing us to seek talent from outside the San Francisco Bay Area, we still may not be able to attract or retain qualified personnel in the future due to the intense competition for a

limited number of qualified personnel among biopharmaceutical companies.

Many of the other biopharmaceutical companies against which we compete have greater financial and other resources, different risk profiles and a longer history in the industry than we do.

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Some of the other products in the same class as our investigational products have already been approved or are further along in development.

With respect to our dual adenosine receptor antagonist, etrumadenant, we are aware that Incyte has initiated clinical development of a dual adenosine receptor antagonist and we are aware of clinical-stage selective adenosine A 2a R antagonists being developed by other companies, including AstraZeneca, Corvus, CStone, Exscientia, iTeos, Novartis and Tarus, and clinical-stage selective adenosine A 2b R antagonists being developed by Palobiofarma, Tarus and Teon.

For our small-molecule CD73 inhibitor, quemliclustat (formerly referred to as AB680), we are aware of several pharmaceutical companies developing antibodies against this target, including Akeso, AstraZeneca, Bristol-Myers Squibb, Corvus, Incyte, Novartis, Shanghai Henlius Biotech, Symphogen/Servier and Tracon/I-Mab, all of whom have advanced their CD73 antibodies into clinical development.

Other pharmaceutical companies, such as Eli Lilly and ORIC, have clinical-stage small-molecule programs against this target.

Regarding our anti-PD-1 antibody, zimberelimab, multiple large pharmaceutical companies have already received regulatory approvals for their anti-PD-1/PD-L1 antibodies, including AstraZeneca, Bristol-Myers Squibb, Merck, Pfizer in partnership with Merck KGaA, Regeneron in partnership with Sanofi Genzyme and Roche/Genentech, and there are also many other anti-PD-1 and anti-PD-L1 antibodies in clinical development.

With respect to our anti-TIGIT antibodies, domvanalimab and AB308, we are aware of several pharmaceutical companies developing antibodies against this target, including Agenus, Beigene, Biothera, Bristol-Myers Squibb, Compugen, Roche/Genentech, Innovent, iTeos/GSK, Junshi, Merck KGaA, Mereo and SeaGen.

AstraZeneca and Innovent have TIGIT bispecific

antibodies in the clinic.

AstraZeneca and Innovent are developing TIGIT-PD-1 bispecific antibodies.

To our knowledge, there are no approved anti-TIGIT antibodies and the most advanced agents are in Phase 3 development.

With respect to our dual adenosine receptor antagonist, etrumadenant, we are aware that Incyte and Merck KGaA have initiated clinical development of dual adenosine receptor antagonists and we are aware of clinical-stage selective adenosine A 2a R antagonists being developed by other companies, including AstraZeneca, Corvus, CStone, Exscientia, Incyte, iTeos, Novartis and Tarus, and clinical-stage selective adenosine A 2b R antagonists being developed by Palobiofarma, Tarus and Teon.

For our small-molecule CD73 inhibitor, quemliclustat, we are aware of several pharmaceutical companies developing antibodies against this target, including Akeso, AstraZeneca, Bristol-Myers Squibb, Corvus, Incyte, Innate, Innovent, Jacobio, Novartis, Shanghai Henlius Biotech, Symphogen/Servier and Tracon/I-Mab, all of whom have advanced their CD73 antibodies into clinical development.

Other pharmaceutical companies have small-molecule programs against this target, of which only Antengene and ORIC are believed to be in clinical development.

For our HIF-2α

inhibitor, AB521, we are aware that Merck received approval for belzutifan in 2021.

Other pharmaceutical companies, including Novartis and NiKang Therapeutics have small-molecule HIF-2α

inhibitors in development.

Arrowhead Pharmaceuticals has advanced an RNA-based anti-HIF-2α

agent into the clinic.

As more investigational products within a particular class of drugs proceed through clinical development to regulatory review and approval, the amount and type of clinical data that may be required by regulatory authorities may increase or change.

Consequently, the results of our clinical trials for investigational products in that class will likely need to show a risk benefit profile that is competitive with or more favorable than those products and investigational products in order to obtain marketing approval or, if approved, a product label that is favorable for commercialization.

If the risk benefit profile is not competitive with those products or investigational products, or if the approval of other agents for an indication or patient population significantly alters the standard of care with which we tested our investigational products, we may have developed a product that is not commercially viable, that we are not able to sell profitably or that is unable to achieve favorable pricing or reimbursement.

not able to sell profitably or that is unable to achieve favorable pricing or reimbursement.

In such circumstances, our future product revenue and financial condition would be materially and adversely affected.

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We also have outsourced elements of our operations to third parties, and as a result we manage a number of third-party contractors who have access to our confidential information.

Despite the implementation of security measures, given their size and complexity and the increasing amounts of confidential information that they maintain, our internal information technology systems and those of our third-party CROs and other third parties upon which we rely are vulnerable to breakdown or other damage or interruption from service interruptions, system malfunction, natural disasters, terrorism, war and telecommunication and electrical failures, as well as security breaches from inadvertent or intentional actions by our employees, contractors, consultants, business partners, and/or other third parties, or from cyberattacks by malicious third parties (including the deployment of harmful malware, ransomware, denial-of-service attacks, social engineering and other means to affect service reliability and threaten the confidentiality, integrity and availability of information and other assets),

which may compromise our system infrastructure, lead to data leakage, impair key business processes or other critical business operations, delay our development programs, or result in the loss of assets or other liability.

We have monitoring systems in place and have detected at least one intrusion into our computer systems and attempts to exfiltrate our data.

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A weak or declining economy could also strain our suppliers, possibly resulting in supply disruption.

Adverse trade conditions may further impact our operating results or financial condition by increasing the cost of our operations.

For example, we have an exclusive relationship with WuXi Biologics, located in China, for the manufacture of our investigational biologics, including zimberelimab and domvanalimab, and for biologics CMC development and if tariffs are imposed on the investigational products they manufacture for us, such tariffs would have an adverse impact on our operating results and financial condition.

Adverse trade relations may further impact our operations and/or financial condition by limiting or preventing the activities of third parties that we engage or increasing the cost of our operations.

For example, we have an exclusive relationship with WuXi Biologics, located in China, for the manufacture of our investigational biologics, including zimberelimab, domvanalimab and AB308, and for biologics CMC development.

Commerce Department recently added thirty-three entities from China to its "Unverified List" , including WuXi Biologics, which may impact WuXi Biologics' ability to purchase certain hardware used in the manufacturing of our antibodies.

In addition, if tariffs were to be imposed on the investigational products they manufacture for us, such tariffs would have an adverse impact on our operating results and financial condition.

Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.

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We are not permitted to market or promote any of our investigational products before we receive marketing approval from the applicable regulatory authority in that foreign market, and we may never receive such marketing approval for any of our investigational products.

To obtain marketing approval in many foreign countries, we must comply with numerous and varying regulatory requirements of such countries regarding safety and efficacy and governing, among other things, clinical trials and commercial sales, pricing and distribution of our investigational products, and we cannot predict success in

these jurisdictions.

If we obtain approval of our investigational products and ultimately commercialize our investigational products in foreign markets, we would be subject to additional risks and uncertainties, including:

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Unused net operating loss carryforwards (NOLs) for the tax year ended December 31, 2017 and prior tax years will carry forward to offset future taxable income, if any, until such unused NOLs expire.

Unused NOLs generated after December 31, 2017, under current tax law will not expire and may be carried forward indefinitely, but the deductibility of such NOLs in tax years beginning after December 31, 2020 will be limited to 80% of current year taxable income in any given year.

In addition, both our current and our future unused losses may be subject to limitation under Sections 382 and 383 of the Internal Revenue Code (IRC) of 1986, as amended, if we undergo an “ownership change,”

Unused NOLs generated after December 31, 2017, under current tax law will not expire and may be carried forward indefinitely, but the future deductibility of such NOLs will be limited to 80% of current year taxable income in any given year.

In addition, both our current and our future unused losses and tax credit carryforwards may be subject to limitation under Sections 382 and 383 of the Internal Revenue Code (IRC) of 1986, as amended, if we undergo an “ownership change,”

generally defined as a greater than 50 percentage point change (by value) in its equity ownership by certain stockholders over a three-year period.

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Similar provisions of state tax law may also apply to limit our use of accumulated state tax attributes.

In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited, including a California franchise tax law limiting the usability of California state NOLs to offset taxable income in taxable years beginning on or after January 1, 2020 and before January 1, 2023, which could accelerate or permanently increase state taxes owed.

Therefore, even if

we attain profitability, we may be unable to use all or a material portion of our NOLs and other tax attributes, which could adversely affect our future cash flows.

In addition, at the state level, there may be periods during which the use of NOLs is suspended or otherwise limited.

For example, while California recently enacted a franchise tax law restoring the usability of California state NOLs to offset taxable income for tax years beginning on January 1, 2022, previous law significantly limited the use of California state NOLs for taxable years 2020 and 2021.

Similar laws in the future could accelerate or permanently increase state taxes owed.

Therefore, even if we attain sustained profitability, we may be unable to use all or a material portion of our NOLs and other tax attributes, which could adversely affect our future cash flows.

Changes in tax laws and regulations or exposure to additional tax liabilities could adversely affect our financial results.

Beginning in 2022, the Tax Cuts and Jobs Act of 2017 eliminates the option to currently deduct research and development expenditures and requires taxpayers to capitalize and amortize U.S.

based and non-U.S.

based research and development expenditures over five and fifteen years, respectively, pursuant to IRC Section 174.

Although Congress is considering legislation that would defer

the amortization requirement to later years, we have no assurance that the provision will be repealed or otherwise modified.

If the requirement is not modified, it may materially reduce our cash flows beginning in 2023.

Risks Related to Our Industry

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Many of these laws are discussed in detail in “Item 1.

Business”

of our Annual Report on Form 10-K.

Business—Government Regulation—Other U.S.

Healthcare Laws and Compliance Requirements”

in our Annual Report on Form 10-K.

The scope and enforcement of each of these laws is uncertain and subject to rapid change in the current environment of healthcare reform.

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the timing and cost of, and level of investment in, research and development activities relating to our investigational products, which may change from time to time;

option fees received by us in connection with option exercises by Taiho and/or Gilead pursuant to their respective option agreements;

option fees received by us in connection with option exercises by Gilead and/or Taiho pursuant to their respective option agreements;

amounts payable by us in connection with the achievement of development, regulatory and commercial milestones under our in-license and other strategic agreements;

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ability to influence corporate matters, including the ability to influence the outcome of director elections and other matters requiring stockholder approval.

Based upon shares outstanding as of September 30, 2021, our executive officers, directors and the holders of more than 5% of our outstanding common stock, in the aggregate, beneficially owned approximately 43.8% of our common stock.

Based upon shares outstanding as of March 31, 2022, our executive officers, directors and the holders of more than 5% of our outstanding common stock, in the aggregate, beneficially owned approximately 48.0% of our common stock.

In particular, Gilead owns approximately 19.3% of our outstanding common stock, and we have appointed its two designees to our board of directors pursuant to the terms of our investor rights agreement.

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These changes may not, however, be effective in maintaining the adequacy of our internal controls, and any failure to maintain that adequacy, or consequent inability to produce accurate financial statements on a timely basis, could increase our operating costs and harm our business.

Unregistered Sales of Equi ty Securities and Use of Proceeds.

Defaults Upo n Senior Securities.

Mine Saf ety Disclosures.

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-Q

Item 1. Legal Proceedings