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Item 1A. Risk Factors

2021-05-05 compared with 2020-11-05 · 165 added, 160 removed, 739 unchanged (31% of the section changed)

Risk Factors.

You should consider carefully the following risk factors, together with all the other information in this report, including our condensed consolidated financial statements and notes thereto, and in our other public filings with the SEC, including our Annual Report on Form 10-K filed with the SEC on March 5, 2020.

The occurrence of any of the following risks could harm our business, financial condition, results of operations and/or growth prospects or cause our actual results to differ materially from those contained in forward-looking statements we have made in this report and those we may make from time to time.

You should consider all of the risk factors described when evaluating our business.

Risk Factor Summary

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.

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 may need to obtain additional funding to finance our operations and complete the development and any commercialization of our investigational products.

If we do not receive substantial opt-in, milestone or royalty payments from our existing collaboration agreements, or are unable to raise additional capital when needed, we may be forced to restrict our operations or delay, reduce or eliminate our product development programs.

We are early in our development efforts.

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.

Clinical drug development is a lengthy, expensive and uncertain process.

The results of preclinical studies and early clinical trials are not always predictive of future results.

Any investigational product that we advance into clinical trials may not achieve favorable results in later clinical trials, if any, or receive marketing approval.

Enrollment and retention of subjects in clinical trials is expensive and time consuming, can be made more difficult or rendered impossible by competing treatments, clinical trials of competing investigational products, and public health epidemics, each of which could result in significant delays and additional costs in our product development activities, or in the failure of such activities.

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.

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

If we are not successful in discovering, developing and commercializing investigational products that take advantage of different mechanisms of action to achieve superior outcomes relative to the use of single agents or other combination therapies, our ability to achieve our strategic objectives would be impaired.

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

Failure to successfully develop, validate and obtain regulatory clearance or approval for such tests could harm our product development strategy or prevent us from realizing the full commercial potential of our investigational products.

We have conducted, and continue to conduct, portions of our clinical trials outside the United States, and the FDA may not accept data from trials conducted in foreign locations.

We expect to depend on our collaboration with Gilead for the research, development, manufacture and commercialization of our investigational products.

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

We rely on third parties to conduct our clinical trials, to manufacture and supply us with sufficient quantities of our investigational products, and to perform some of our research and preclinical studies.

If these third parties do not satisfactorily carry out their contractual duties or fail to meet expected deadlines, our development programs may be delayed or subject to increased costs, each of which may have an adverse effect on our business and prospects.

Even if our investigational products are approved by the FDA, they may never be approved or commercialized outside the United States, which would limit our ability to realize their full market potential.

We are currently party to several in-license agreements under which we acquired rights to use, develop, manufacture and/or commercialize certain of our investigational products.

If we breach our obligations under these agreements, we may be required to pay damages, lose our rights to these investigational products or both, which would adversely affect our business and prospects.

Our operating activities may be restricted by certain covenants in our license and other strategic agreements, which could limit our development and commercial opportunities.

If we are unable to obtain and maintain sufficient intellectual property protection for our investigational products, or if the scope of the intellectual property protection is not sufficiently broad, our competitors could develop and commercialize products similar or identical to ours, and our ability to successfully commercialize our products may be adversely affected.

We may need to obtain additional licenses of third-party technology that may not be available to us or are available only on commercially unreasonable terms, and which may cause us to operate our business in a more costly or otherwise adverse manner that was not anticipated.

We may become involved in lawsuits alleging that we have infringed the intellectual property rights of third parties or to protect or enforce our patents or other intellectual property, which litigation could be expensive, time consuming and adversely affect our ability to develop or commercialize our investigational products.

We face substantial competition, which may result in others discovering, developing or commercializing products more quickly or marketing them more successfully than us.

If their investigational products are shown to be safer or more effective than ours, then our commercial opportunity will be reduced or eliminated.

The development and commercialization of zimberelimab may face strong competition from other anti-PD-1 antibodies that have already received marketing approval by larger companies with substantial resources and more experience developing, manufacturing and commercializing biologic compounds.

Our internal information technology systems, or those of our third-party CROs or other contractors or consultants, are subject to failure, security breaches, loss or leakage of data, and other disruptions, which could result in a material disruption of our investigational products’ development programs, compromise sensitive information related to our business or prevent us from accessing critical information, potentially exposing us to notification obligations, liability or reputational damage and otherwise adversely affecting our business.

Failure to comply with health and data protection laws and regulations could lead to government enforcement actions (which could include civil or criminal penalties), private litigation, and/or adverse publicity and could negatively affect our operating results and business.

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

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 will depend on future developments, including the ultimate duration and/or severity of the outbreak and any resurgences, actions by government authorities to contain the spread of the virus, the timing, availability and effectiveness of any vaccines, and when and to what extent normal economic and operating conditions can resume.

The degree to which COVID-19 impacts our business operations, research and development programs and financial condition will depend on future developments, including the ultimate duration and/or severity of the outbreak, the impact of any resurgences and new strains that emerge, actions by government authorities to contain the spread of the virus, the timing, availability 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 trials.

While we conduct our clinical trials in the U.S.

and internationally in geographic regions that are impacted by COVID-19 to varying degrees, due to the foregoing factors and the uncertainty on how the upcoming flu season may affect the COVID-19 pandemic, we are unable to predict the full impact of this pandemic on our clinical programs.

Our discovery programs were impacted by the suspension in our laboratory-based operations from mid-March to late June.

Despite the return of our laboratory-based personnel back into our facilities, our laboratories are operating at reduced capacity due to employee safety measures, such as social distancing requirements and shift work.

This has delayed the advancement of one of two preclinical programs that we had expected would enter the clinic in the first quarter of 2021.

The first program continues in preclinical development, however, the pandemic has delayed the second program until the second half of 2021.

and internationally in geographic regions that are impacted by COVID-19 to varying degrees, due to the foregoing factors, we are unable to predict the ultimate impact of this pandemic on our ongoing and planned clinical programs.

Our discovery programs are impacted by reduced operating capacity in our laboratories due to employee safety measures, such as social distancing requirements and shift work.

This has slowed the pace of our discovery efforts, and our HIF-2 α program is now expected to enter clinical development in the second half of 2021.

The full impact of the COVID-19 outbreak remains highly uncertain and subject to change.

In connection with our resumption of laboratory operations, we instituted regular COVID-19 testing services in order to minimize the risk to our employees.

These additional operating costs, along with the absence of any furlough or measures to reduce personnel costs despite reduced laboratory capacity, will have an adverse impact on our financial condition.

The safety, health and well-being of our employees remains a primary concerns, and we instituted remote work arrangements for our office-based employees and regular COVID-19 testing services for our laboratory-based employees in order to reduce the risk of exposure to COVID-19 among our employees.

These actions have increased our operating costs, together with the absence of any furlough or measures to reduce personnel costs despite reduced laboratory capacity, will have an adverse impact on our financial condition.

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

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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 early development, and none have been approved for commercial sale.

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, 2020 and the year ended December 31, 2019, our net losses were $71.0 million and $84.7 million, respectively.

As of September 30, 2020, we had an accumulated deficit of $276.3 million.

For the three months ended March 31, 2021 and the year ended December 31, 2020, our net losses were $72.6 million and $122.9 million, respectively.

As of March 31, 2021, we had an accumulated deficit of $400.8 million.

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

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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, 2020, we had $785.1 million of cash, cash equivalents and investments, which includes the upfront payment of $175 million and equity investment of approximately $200 million that we received from Gilead Sciences, Inc.

(Gilead) upon closing of the option, license and collaboration agreement (Gilead Collaboration Agreement) and the Stock Purchase Agreement.

While we believe that our cash position will be sufficient to fund our planned level of operations through at least the next 12 months, our future capital requirements will depend on many factors, including:

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

As of March 31, 2021, we had $884.9 million of cash, cash equivalents and investments.

While we believe that our cash position will be sufficient to fund our anticipated level of operations at least through 2023, 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;

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

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We cannot guarantee that future financing will be available in sufficient amounts or on terms acceptable to us, if at all.

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our investigational product s.

Any additional fundraising efforts may divert our management from their day-to-day activities, which may adversely affect our ability to develop and commercialize our investigational products.

If we are unable to raise capital when needed or on attractive terms, we would be forced to delay, reduce or eliminate our research and development programs or future commercialization efforts.

Raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or investigational products.

Until such time, if ever, as we can generate substantial product revenue, we expect to finance our cash needs through a combination of equity offerings, debt financings, collaborations, strategic alliances and licensing arrangements.

To the extent that we raise additional capital through the sale of equity or convertible debt securities, our stockholders’ ownership interests will be diluted and the terms of these securities may include liquidation or other preferences that adversely affect their rights as common stockholders.

Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends.

If we raise funds through additional collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or investigational products or grant licenses on terms that may not be favorable to us.

If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market investigational products that we would otherwise prefer to develop and market ourselves.

In addition, if we are able to raise additional capital, raising additional capital may cause dilution to our stockholders, restrict our operations or require us to relinquish rights to our technologies or investigational products.

Risks Related to the Discovery and Development of our Investigational Products

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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 clinical-stage investigational products are in the early stages of clinical trials.

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

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).

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.

As we advance our clinical programs, we will need to expand our clinical operations, quality and regulatory capabilities to support these activities.

To support the advancement of our clinical programs, we need to expand our clinical operations, quality and regulatory capabilities.

In part because of our limited infrastructure, experience conducting clinical trials as a company and regulatory interactions, we cannot be certain that our clinical trials will be completed on time, that our planned clinical trials will be initiated on time, if at all, that our planned development programs would be acceptable to the FDA or other comparable foreign regulatory authorities, or that, if approval is obtained, such investigational products can be successfully commercialized.

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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, many of our clinical trials will test more than one investigational products in uncontrolled studies, such as the clinical trials in our Phase 1/1b program for etrumadenant (formerly referred to as AB928) in which we are evaluating 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 trials for etrumadenant in which we evaluated etrumadenant 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.

We currently have four investigational products in clinical development and their risk of failure is high.

We currently have five investigational products in clinical development and their risk of failure is high.

We are unable to predict if these investigational products or any of our future investigational products that advance into clinical trials will prove safe or effective in humans or will obtain marketing approval.

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Moreover, if we are not able to differentiate our product against other approved products within the same class of drugs, or if any of the other circumstances described above occur, our business would be materially harmed and our ability to generate revenue from that class of drugs would be severely impaired.

which could result in significant delays and additional costs in our product development activities, or in the failure of such activities.

We may encounter delays in enrolling, or be unable to enroll and maintain, a sufficient number of subjects to complete any of our clinical trials.

protocol, our ability to recruit clinical trial investigators with the appropriate competencies and experience, the existing body of safety and efficacy data with respect to the investigational product, the number and nature of competing products or investigational products and ongoing clinical trials of competing investigational products for the same indication, the proximity of subjects to clinical trial sites, the eligibility criteria for the clinical trial and our ability to obtain and maintain subject consents.

For example, enrollment of oncology subjects in our zimberelimab clinical trial may be hampered by nivolumab from Bristol-Myers Squibb and pembrolizumab from Merck, both of which are approved and on the market.

Patient enrollment and retention in clinical trials is a significant factor in the timing of clinical trials and depends on many factors, including the size of the patient population required for analysis of the trial’s primary endpoints, the nature of the trial protocol, our ability to recruit clinical trial investigators with the appropriate competencies and experience, the existing body of safety and efficacy data with respect to the investigational product, the number and nature of competing products or investigational products and ongoing clinical trials of competing investigational products for the same indication, the proximity of subjects to clinical trial sites, the eligibility criteria for the clinical trial and our ability to obtain and maintain subject consents.

For example, enrollment of oncology subjects in our clinical trials evaluating zimberelimab may be hampered by nivolumab from Bristol-Myers Squibb and pembrolizumab from Merck, both of which are approved and on the market.

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 our Phase 2 trial evaluating our own anti-TIGIT antibody, AB154.

Similarly, we are aware that AstraZeneca is conducting a broad clinical program with 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 and the timely completion of our Phase 1/1b trials evaluating etrumadenant (formerly AB928) in mCRPC.

Public health outbreaks, such as the COVID-19 (coronavirus) pandemic, are also expected to adversely impact our clinical trial operations.

We anticipate that 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.

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 conducting a broad clinical program with 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.

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

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.

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changes in regulatory requirements and policies, which may require us to amend clinical trial protocols to comply with these changes and resubmit our clinical trial protocols to IRBs for reexamination;

health crises and other epidemics, such as the recent COVID-19 outbreak, which has led to mandatory quarantines that has restricted the ability of trial sites to initiate new trials, screen patients for enrollment or treat enrolled patients, and has diverted clinical trial site resources away from the conduct of our clinical trials.

health crises and other epidemics, such as the COVID-19 pandemic, which has led to mandatory quarantines that has restricted the ability of trial sites to initiate new trials, screen patients for enrollment or treat enrolled patients, and has diverted clinical trial site resources away from the conduct of our clinical trials.

These and other factors may also lead to the suspension or termination of clinical trials, and ultimately the denial of regulatory approval of an investigational product.

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We may be required to report Gloria Biosciences’ 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 to our programs that Taiho has exercised its option to license development rights under the Taiho Agreement.

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.

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, it may be difficult to interpret the results of any uncontrolled trials we conduct with our intra-portfolio combinations, such as the clinical trials in our Phase 1/1b program for etrumadenant (formerly referred to as AB928) in which we are evaluating etrumadenant in combination with zimberelimab.

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.

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

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

Failure to successfully develop, validate and obtain regulatory clearance or approval for such tests could harm our product development strategy or prevent us

from realizing the full commercial potential of our investigational products .

Companion diagnostics are subject to regulation by the FDA and comparable foreign regulatory authorities as a medical device and may require separate regulatory authorization prior to commercialization.

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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 future Phase 3 clinical trials or registrational trials.

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.

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We have conducted, and we expect to continue to conduct, portions of our clinical trials outside the United States.

For example, ARC-10, our Phase 3 trial evaluating zimberelimab monotherapy and zimberelimab plus domvanalimab combination therapy versus chemotherapy, does not include any clinical sites in the United States.

Although the FDA may accept data from clinical trials conducted outside the United States, acceptance of these data is subject to certain conditions imposed by the FDA.

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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 have appointed one individual designated by Gilead to our board of directors pursuant to Gilead’s right to designate two individuals to be appointed to our board of directors, and will appoint another individual designated by Gilead to our board of directors in 2020 pursuant to this right, and Gilead owns approximately 13% 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;

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 19.5% 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;

Gilead could independently develop, or develop with third parties, products that compete directly or indirectly with our investigational products if Gilead believes that competitive products are more likely to be successfully developed or can be commercialized under terms that are more economically attractive than ours;

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If we or any of our CROs or clinical trial sites fail to comply with applicable GCP requirements, the data generated in our clinical trials may be deemed unreliable, and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications.

In addition, our clinical trials must be conducted with product produced under cGMP regulations.

Our failure to comply with these regulations may require us

to stop and/or repeat clinical trials, which would delay the marketing approval process.

In addition, our clinical trials must be conducted with product

produced under cGMP regulations.

Our failure to comply with these regulations may require us to stop and/or repeat clinical trials, which would delay the marketing approval process.

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.

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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, zimberelimab and AB154.

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

While we have not yet experienced any disruptions in the supply of our investigational products as a result of the COVID-19 health crisis, our reliance on limited manufacturing and supply 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.

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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.

If we are required to change

manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines.

The delays associated with the verification of a new manufacturer could negatively affect our ability to develop investigational products in a timely manner or within budget.

If we are required to change manufacturers for any reason, we will be required to verify that the new manufacturer maintains facilities and procedures that comply with quality standards and with all applicable regulations and guidelines.

The delays associated with the verification of a new

manufacturer could negatively affect our ability to develop investigational products in a timely manner or within budget.

Our or a third party’s failure to execute on our manufacturing requirements, to do so on commercially reasonable terms and comply with cGMP could adversely affect our business in a number of ways, including:

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The use of biologically derived ingredients can also lead to allegations of harm, including infections or allergic reactions, or closure of product facilities due to possible contamination.

In addition, there are risks associated with large scale manufacturing for clinical trials or commercial scale including, among others, cost overruns, potential problems with process scale-up, process reproducibility, stability issues, compliance with good manufacturing practices, lot consistency and timely availability of raw materials.

practices, lot consistency and timely availability of raw materials.

Even if we obtain marketing approval for any of our investigational products, there is no assurance that our manufacturers will be able to manufacture the approved product to specifications acceptable to the FDA or other comparable foreign regulatory authorities, to produce it in sufficient quantities to meet the requirements for the potential commercial launch of the product or to meet potential future demand.

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We have no sales, marketing or distribution capabilities or experience.

If any of our investigational products ultimately obtains regulatory approval, we, whether alone or in collaboration with Gilead for programs that we commercialize together, may not be able to effectively or successful market the product due to a number of factors, including:

If any of our investigational products ultimately obtains regulatory approval, we, whether alone or in collaboration with Gilead for programs that we commercialize together, may not be able to effectively or successfully market the product due to a number of factors, including:

the imposition by regulatory authorities of significant restrictions on a product’s indicated uses, marketing or distribution;

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our failure to establish sales and marketing capabilities;

the fa ilure of our products to achieve the degree of market acceptance by physicians, patients, hospitals, cancer treatment centers, healthcare payors and others in the medical community necessary for commercial success ;

the failure of our products to achieve the degree of market acceptance by physicians, patients, hospitals, cancer treatment centers, healthcare payors and others in the medical community necessary for commercial success;

unfavorable pricing regulations or third-party coverage and reimbursement policies;

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We may be unable to recruit and retain adequate numbers of effective sales and marketing personnel, and if we enter into arrangements with third parties to perform sales, marketing and distribution services our product revenue or the profitability of these product revenue to us are likely to be lower than if we were to market and sell any medicines that we develop ourselves.

Furthermore, our commercial success is dependent on obtaining coverage and reimbursement approval for a product from a government or other third-party payor, which is a time-consuming and costly process that could require us and any collaborators to provide supporting scientific, clinical and cost effectiveness data for the use of our products to the payor.

Our or our collaborators’ inability to successfully market and sell any of our investigational products, if approved, could have a material adverse effect on our business and our overall financial condition.

Even if we receive marketing approval for one or more of our investigational products, our commercial success is dependent on obtaining coverage and reimbursement approval for a product from a government or other third-party payor, which coverage may be delayed or may not be sufficient to cover our costs .

Our commercial success is dependent on obtaining coverage and reimbursement approval for a product from a government or other third-party payor, which is a time-consuming and costly process that could require us and any collaborators to provide supporting scientific, clinical and cost effectiveness data for the use of our products to the payor.

There may be significant delays in obtaining such coverage and reimbursement for newly approved products, and coverage may be more limited than the purposes for which the product is approved by the FDA or comparable foreign regulatory authorities.

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Obtaining reimbursement for our products may be particularly difficult because of the higher prices often associated with branded therapeutics and therapeutics administered under the supervision of a physician.

Additionally, our collaborators, will be required to obtain coverage and reimbursement for any related companion diagnostics tests they develop separate and apart from the coverage and reimbursement we seek for our product candidates, once approved.

Reimbursement may also impact the demand for, and the price of, any product for which we obtain marketing approval.

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Therefore, coverage and adequate reimbursement is critical to new product acceptance and we expect to experience pricing pressures in connection with the sale of any of our investigational products due to the trend toward managed healthcare, the increasing influence of health maintenance organizations, and additional legislative changes.

Our or our collaborators’ inability to successful market and sell any of our investigational products, if approved, could have a material adverse effect on our business and our overall financial condition.

Our ability to obtain coverage and reimbursement approval for any of our investigational products, if approved, could have a material adverse effect on the demand for that investigational product, and on our business and our overall financial condition.

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The law is complex and is still being interpreted and implemented by the FDA.

As a result, any such processes could

have a material adverse effect on the future commercial prospects for our biological products.

Zimberelimab and AB154 are biological products and we may develop additional biological products in the future.

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.

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.

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In the future, we may seek to enter into acquisitions or additional licensing arrangements with third parties to expand our pipeline or that we believe will complement or augment our development and commercialization efforts with respect to our investigational products and any future investigational products that we may develop.

These transactions can entail numerous operational and financial risks, including exposure to unknown liabilities, disruption of our business and diversion of our management’s time and attention in order to manage a collaboration or develop acquired products, investigational products or technologies, incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs, higher than expected collaboration, acquisition or integration costs, write-downs of assets or goodwill or impairment charges, increased amortization expenses, difficulty and cost in facilitating the collaboration or combining the operations and personnel of any acquired business, impairment of relationships with key suppliers, manufacturers or customers of any acquired business due to changes in management and ownership and the inability to retain key employees of any acquired business.

These transactions can entail numerous operational and financial risks, including exposure to unknown liabilities, disruption of our

business and diversion of our management’s time and attention in order to manage a collaboration or develop acquired products, investigational products or technologies, incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs, higher than expected collaboration, acquisition or integration costs, write-downs of assets or goodwill or impairment charges, increased amortization expenses, difficulty and cost in facilitating the collaboration or combining the operations and personnel of any acquired business, impairment of relationships with key suppliers, manufacturers or customers of any acquired business due to changes in management and ownership and the inability to retain key employees of any acquired business.

As a result, if we enter into in-license, acquisition or collaboration agreements, or strategic partnerships, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture, which could delay our timelines or otherwise adversely affect our business.

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 current clinical programs, and $150 million per program for all other programs that enter clinical development.

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 development costs, 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.

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.

Failure to realize the benefits of any collaborations or strategic alliances may further cause us to curtail the development of a n investigational product , reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any planned sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense.

Failure to realize the benefits of any collaborations or strategic alliances may further cause us to curtail the development of an investigational product, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any planned sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense.

If we elect to fund and undertake development or commercialization activities on our own, we will need to obtain additional expertise and additional capital, which may not be available to us on acceptable terms or at all.

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Collaborations are complex and time-consuming to negotiate and document.

In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators and changes to the strategies of the combined company.

In addition, there have been a significant number of

recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators and changes to the strategies of the combined company.

As a result, we may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all.

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If we do not have sufficient funds, we may not be able to further develop our investigational products or bring them to market and generate product revenue.

Our operating activities may be restricted by certain covenants in our license and other strategic agreements, which could limit our

development and commercial opportunities.

Our operating activities may be restricted by certain covenants in our license and other strategic agreements, which could limit our development and commercial opportunities.

In connection with certain of our acquisitions, in-license or other collaborations or strategic alliances, we may agree to and be bound by negative covenants which may limit our development and commercial opportunities.

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In the event of litigation or administrative proceedings, we cannot be certain that the claims in any of our issued patents will be considered valid by courts in the United States or foreign countries.

We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third party

patent which might adversely affect our ability to develop and market our products.

We may not identify relevant third-party patents or may incorrectly interpret the relevance, scope or expiration of a third party patent which might adversely affect our ability to develop and market our products.

We cannot guarantee that any of our patent searches or analyses, including the identification of relevant patents, the scope of patent claims or the expiration of relevant patents, are complete or thorough, nor can we be certain that we have identified each and every third party patent and pending application in the United States and abroad that is relevant to or necessary for the commercialization of our investigational products in any jurisdiction.

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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.

An adverse outcome in a litigation or proceeding involving our

patents could limit our ability to assert our patents against those parties or other competitors, and may curtail or preclude our ability to exclude third parties from making and selling similar or competitive products.

An adverse outcome in a litigation or proceeding involving our patents could limit our ability to assert our patents against those parties or other competitors, and may curtail or preclude our ability to exclude third parties from making and selling similar or competitive products.

Any of these occurrences could adversely affect our competitive business position, business prospects and financial condition.

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As such, we may not be able to prevent third parties from practicing our inventions in all countries outside the United States, or from selling or importing products made using our inventions in and into the United States or other jurisdictions.

Further, the legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents and other intellectual property protection, particularly those relating to pharmaceuticals or biologics, which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.

which could make it difficult for us to stop the infringement of our patents or marketing of competing products in violation of our proprietary rights generally.

In addition, certain developing countries, including China and India, have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties.

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As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents.

However, t he patent position of biopharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation, resulting in court decisions, including Supreme Court decisions, that have increased uncertainties as to the ability to obtain and enforce patent rights in the future.

However, the patent position of biopharmaceutical companies generally is highly uncertain, involves complex legal and factual questions and has in recent years been the subject of much litigation, resulting in court decisions, including Supreme Court decisions, that have increased uncertainties as to the ability to obtain and enforce patent rights in the future.

Changes in either the patent laws or interpretation of the patent laws in the United States and other countries could increase the uncertainties and costs.

For example, in September 2011 the Leahy-Smith America Invents Act (t he America Invents Act ) was signed into law and include d a number of significant changes to U.S.

For example, in September 2011 the Leahy-Smith America Invents Act (the America Invents Act) was signed into law and included a number of significant changes to U.S.

patent law as then existed.

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If we fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, such as exclusive ownership of, or right to use, valuable intellectual property.

Such an outcome

could have a material adverse effect on our business.

Such an outcome could have a material adverse effect on our business.

Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management and other employees.

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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 experience significant growth in our discovery and clinical development capabilities.

To support this growth, we will also 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 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.

To manage our anticipated future growth, we must:

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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 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.

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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 (formerly AB928), we are aware of several other clinical-stage selective adenosine A 2a R antagonists being developed by AstraZeneca, Corvus, CStone, iTeos Therapeutics and Novartis and a clinical-stage selective adenosine A 2b R antagonist being developed by Palobiofarma.

For our small-molecule CD73 inhibitor, AB680, we are aware of several pharmaceutical companies developing antibodies against this target, including AstraZeneca, Bristol-Myers Squibb, Corvus, Novartis and Tracon, all of whom have advanced their CD73 antibodies into clinical development.

Other pharmaceutical companies, such as Boehringer Ingelheim, Calithera, Eli Lilly, Merck and ORIC, have small-molecule programs against this target, of which only Eli Lilly has advanced its CD73 inhibitor into clinical 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, iTeos Therapeutics and Novartis, and a clinical-stage selective adenosine A 2b R antagonist being developed by Palobiofarma.

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

Other pharmaceutical companies, such as Boehringer Ingelheim, Calithera, Merck and ORIC, have 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 antibody, AB154, we are aware of several pharmaceutical companies developing antibodies against this target, including Agenus, Astellas, Beigene, Bristol-Myers Squibb, Compugen, Genentech, Innovent, iTeos Therapeutics, Merck KGaA, Mereo and Seattle Genetics.

To our knowledge, there are no approved anti-TIGIT antibodies.

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

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

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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Smaller and other early stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies.

These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and subject

enrollment for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

These third parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and subject enrollment for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

The key competitive factors affecting the success of all of our programs are likely to be their efficacy, safety, convenience, and availability of reimbursement.

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We have experienced at least one intrusion into our computer systems, and, although our investigation indicates that it did not have a material adverse effect on our operations, there can be no assurance of a similar result in the future.

The COVID-19 pandemic and our reliance on internet technology and the number of our employees who are working remotely may increase the opportunities for cybercriminals to exploit vulnerabilities.

We cannot assure you that our data protection efforts and our investment in information technology will prevent other breakdowns, data leakages, breaches in our systems or other cyber incidents that could have a material adverse effect upon our reputation, business, operations or financial condition.

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Furthermore, significant disruptions of our internal information technology systems or security breaches could result in the loss, misappropriation, and/or unauthorized access, use, or disclosure of, or the prevention of access to, confidential information (including trade secrets or other intellectual property, proprietary business information, and personal information), which could result in financial, legal, business, and reputational harm to us.

In particular, any such event that leads to unauthorized access, use, or disclosure of personal information, including personal information regarding our clinical trial subjects or employees, could

harm our reputation directly, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information, which could result in significant legal and financial exposure and reputational damages that could potentially have an adverse effect on our business.

In particular, any such event that leads to unauthorized access, use, or disclosure of personal information, including personal information regarding our clinical trial subjects or employees, could harm our reputation directly, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, and otherwise subject us to liability under laws and regulations that protect the privacy and security of personal information, which could result in significant legal and financial exposure and reputational damages that could potentially have an adverse effect on our business.

Unfavorable global economic and trade conditions could adversely affect our business, financial condition or results of operations.

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

For example, proposed tariffs by the Trump administration have included a 25% tariff on raw ingredients for pharmaceuticals, such as the active pharmaceutical ingredients for our investigational products.

Given our exclusive relationship with WuXi Biologics, located in China, for the manufacture of zimberelimab and AB154 and for biologics CMC development, these additional tariffs, if they were to be imposed, would have an adverse impact on our operating results and financial condition.

For example, we have an exclusive relationship with WuXi Biologics, located in China, for the manufacture of 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.

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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Our headquarters and main research facility are located in the San Francisco Bay Area, which in the past has experienced severe earthquakes and fires.

If these earthquakes, fires, other natural disasters, terrorism and similar unforeseen events beyond our control

prevented us from using all or a significant portion of our headquarters or research facility, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time.

If these earthquakes, fires, other natural disasters, terrorism and similar unforeseen events beyond our control prevented us from using all or a significant portion of our headquarters or research facility, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time.

We do not have a disaster recovery or business continuity plan in place and may incur substantial expenses as a result of the absence or limited nature of our internal or third party service provider disaster recovery and business continuity plans, which, particularly when taken together with our lack of earthquake insurance, could have a material adverse effect on our business.

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We have incurred substantial losses during our history and our ability to generate profits in the future is uncertain.

Unused losses 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 losses expire.

Unused losses generated after December 31, 2017, under current tax law will not expire and may be carried forward indefinitely, but the deductibility of such net operating losses 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 of 1986, as amended (IRC), 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.

We performed an analysis under IRC Section 382 through December 31, 2018 with respect to our net operating loss and credit carryforwards.

We concluded that, while an ownership change occurred in previous years as defined under IRC Section 382, we do not expect such ownership changes to result in the expiration of our net operating loss carryforwards prior to utilization.

However, recent and future equity issuances, including our May 2020 public offering and our equity issuances to Gilead, may result in an additional ownership change.

As a result, our ability to use all of our pre-change net operating loss carryforwards (NOLs) and other pre-change tax attributes (such as research tax credits) to offset our post-change income or taxes may be subject to limitations that could result in increased future tax liability to us.

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

We performed an analysis under IRC Section 382 and 383 through October 31, 2020 with respect to our net operating loss and credit carryforwards.

We concluded that an ownership change, as defined under IRC Section 382, occurred in previous years.

While we do not expect such ownership changes to result in the expiration of our net operating loss and credit carryforwards prior to utilization, we are subject to an annual limitation on the use of tax attributes.

The limitation on our ability to use our net operating loss and credit carryforwards could reduce our ability to use a portion of our tax attributes to offset future taxable income, which could result in us being required to make material cash tax payments.

In addition, our sale of 5,650,000 shares of our common stock to Gilead in February 2021, as well as future equity issuances, may result in additional ownership changes.

As a result, our ability to use all of our pre-change NOLs and other pre-change tax attributes (such as research tax credits) to offset our post-change income or taxes may be subject to limitations that could result in increased future tax liability to us.

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

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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.

Changes in tax laws or regulations that are applied adversely to us or our customers may have a material adverse effect on our business, cash flow, financial condition or results of operations.

New income, sales, use or other tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations and financial performance.

Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us.

For example, legislation enacted in 2017, informally titled the Tax Cuts and Jobs Act (Tax Act), enacted many significant changes to the U.S.

Future guidance from the Internal Revenue Service and other tax authorities with respect to the Tax Act may affect us, and certain aspects of the Tax Act could be repealed or modified in future legislation.

For example, the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) modified certain provisions of the Tax Act.

In addition, it is uncertain if and to what extent various states will conform to the Tax Act, the CARES Act, or any newly enacted federal tax legislation.

Changes in corporate tax rates, the realization of net deferred tax assets relating to our operations, the taxation of foreign earnings, and the deductibility of expenses under the Tax Act or future reform legislation could have a material impact on the value of any deferred tax assets, could result in significant one-time charges, and could increase our future U.S.

Risks Related to Our Industry

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In addition, we may obtain health information from third parties (including research institutions from which we obtain clinical trial data) that are subject to privacy and security requirements under federal Health Insurance Portability and Accountability Act of 1996 (HIPAA) as amended by the Health Information Technology for Economic and Clinical Health Act of 2009 (HITECH).

Depending on the facts and circumstances, we could be subject to criminal penalties if we knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA-covered entity in a manner that is not authorized or permitted by HIPAA.

Depending on the facts and circumstances, we could be subject to significant penalties if we violate HIPAA.

The legislative and regulatory landscape for privacy and data security continues to evolve, and we expect that there will continue to be new proposed laws, regulations and industry standards relating to privacy and data security in the United States, the EU and other jurisdictions.

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In addition, the General Data Protection Regulation only permits the transfer of personal data outside the European Economic Area (EEA) to countries that offer a level of data protection deemed adequate by the European Commission, unless an approved data transfer mechanism is in place.

Some of the approved data transfer mechanisms face legal challenges in the EU, which adds to the complexity of transferring personal data outside the EEA.

One such mechanism was invalidated by the European Court of Justice, adding to the complexity of transferring personal data outside the EEA.

The General Data Protection Regulation increases our responsibility and liability in relation to personal data that we process, and we must put in place additional mechanisms to ensure compliance with the new EU data protection rules.

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Claims that we have violated individuals’ privacy rights, failed to comply with data protection laws, or breached our contractual obligations, even if we are not found liable, could be expensive and time-consuming to defend and could result in adverse publicity that could harm our business.

We will be subject to applicable fraud and abuse, transparency, government price reporting, and other healthcare laws and regulations.

Our business operations expose us to broadly applicable fraud and abuse, transparency, government price reporting, and other healthcare laws and regulations.

If we are unable to comply, or have not fully complied, with such laws, we could face substantial penalties.

Although we do not currently have any marketed products, if we obtain FDA approval for any of investigational products and begin commercializing those products in the United States, our operations will be subject, either directly or indirectly through our customers and third party payors, to various U.S.

federal and state fraud and abuse, transparency and other healthcare laws and regulations, and similar laws in other jurisdictions in which we conduct our business.

O ur operations are subject, either directly or indirectly through our customers and third party payors, to various U.S.

federal and state health care laws, including fraud and abuse, transparency and other healthcare laws and regulations, and similar laws in other jurisdictions in which we conduct our business.

These laws may impact, among other things, our research and proposed sales, marketing and education programs and constrain the business of financial arrangements and relationships with healthcare providers, physicians and other parties through which we market, sell and distribute our products for which we obtain marketing approval.

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

Business” in our Annual Report on Form 10-K.

Business” of 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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In the United States, the pharmaceutical industry has been a particular focus of these efforts and has been significantly affected by major legislative initiatives.

For additional detail regarding health care reform activities that may impact our business, see “Business—Government Regulation—Healthcare Reform” in our Annual Report on Form 10-K.

For additional detail regarding health care reform activities that may impact our business, see “Item 1.

Business—Government Regulation—Healthcare Reform” in our Annual Report on Form 10-K.

We are subject to certain U.S.

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We can be held liable for the corrupt or other illegal activities of our personnel, agents, or partners, even if we do not explicitly authorize or have prior knowledge of such activities.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or

incur costs that could have a material adverse effect on the success of our business.

If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could have a material adverse effect on the success of our business.

We, and the third parties with whom we share our facilities, are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes.

Each of our operations involve the use of hazardous and flammable materials, including chemicals and biological and radioactive materials.

Each of our operations involve the use of hazardous and flammable materials, including chemicals and

biological and radioactive materials.

Each of our operations also produce hazardous waste products.

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Such a stock price decline could occur even when we have met any previously publicly stated guidance we may provide.

Sales of substantial amounts of our outstanding shares may cause the price of our common stock to decline.

The price of our common stock could decline if there are substantial sales of our common stock, particularly sales by our directors, executive officers and significant stockholders, or if there is a large number of shares of our common stock available for sale and the market perceives that sales will occur.

Certain of our stockholders have rights, subject to some conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or our stockholders, subject to market standoff and lockup agreements.

We have also registered shares of common stock that we have issued and may issue under our employee equity incentive plans.

These shares can be sold freely in the public market upon issuance, subject to vesting conditions and, in the case of our affiliates, volume limitations under Rule 144 under the Securities Act of 1933, as amended.

If we fail to maintain proper and effective internal controls, our ability to produce accurate and timely financial statements could be impaired, which could result in sanctions or other penalties that would harm our business.

We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the New York Stock Exchange.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting.

Commencing with our fiscal year ending December 31, 2019, our management was required to perform an evaluation of our internal control over financial reporting.

However, as of December 31, 2019, our independent registered public accounting firm was not required to perform an evaluation of our internal control over financial reporting.

Our internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements in accordance with generally accepted accounting principles.

Our internal control over financial reporting will not prevent or detect all errors and all fraud.

A control system, no matter how well

designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.

Because of the inherent limitations in all control systems, no evaluation of controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all control issues and instances of fraud will be detected.

Accordingly, we cannot assure you that we will not in the future identify one or more material weaknesses in our internal control over financial reporting, which may have a negative impact on our ability to timely and accurately produce financial statements , may result in a material misstatement of our consolidated financial statements or may negatively impact the confidence level of our stockholders and other market participants with respect to our reported financial information .

Ensuring that we have adequate internal controls over financial reporting is a costly and time-consuming effort that needs to be re-evaluated frequently.

To the extent necessary, implementing any changes to our internal controls may distract our officers and employees, entail substantial costs to modify our existing processes and take significant time to complete.

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.

Commencing with our fiscal year ending December 31, 2020, our independent registered public accounting firm will be required to perform an evaluation of our internal control over financial reporting.

Despite our efforts, there is a risk that our independent registered public accounting firm will not be able to conclude within the prescribed timeframe that our internal control over financial reporting is effective as required by the Sarbanes-Oxley Act.

Investors’ perceptions that our internal controls are inadequate or that we are unable to produce accurate financial statements on a timely basis may harm our stock price and we could be subject to sanctions or investigations by the SEC or other regulatory authorities.

Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.

We are subject to the periodic reporting requirements of the Exchange Act.

We designed our disclosure controls and procedures to reasonably assure that information we must disclose in reports we file or submit under the Exchange Act is accumulated and communicated to management, and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC.

We believe that any disclosure controls and procedures or internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are met.

These inherent limitations include the realities that judgments in decision-making can be faulty, and that breakdowns can occur because of simple error or mistake.

For example, our directors or executive officers could inadvertently fail to disclose a new relationship or arrangement causing us to fail to make any related party transaction disclosures.

Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls.

Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.

Our failure to meet the continued listing requirements of the New York Stock Exchange could result in a delisting of our common stock.

If we fail to satisfy the continued listing requirements of the New York Stock Exchange (NYSE), such as the corporate governance requirements or the minimum closing bid price requirement, NYSE may take steps to delist our common stock.

Such a delisting would likely have a negative effect on the price of our common stock and would impair your ability to sell or purchase our common stock when you wish to do so.

In the event of a delisting, we can provide no assurance that any action taken by us to restore compliance with listing requirements would allow our common stock to become listed again, stabilize the market price or improve the liquidity of our common stock, prevent our common stock from dropping below the NYSE minimum bid price requirement or prevent future non-compliance with NYSE’s listing requirements.

We do not intend to pay dividends for the foreseeable future.

We have never declared nor paid cash dividends on our capital stock.

We currently intend to retain any future earnings to finance the operation and expansion of our business, and we do not expect to declare or pay any dividends in the foreseeable future.

Consequently, stockholders must rely on sales of their common stock after price appreciation, which may never occur, as the only way to realize any future gains on their investment.

The concentration of our stock ownership will likely limit our stockholders’ 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 October 15, 2020, our executive officers, directors and the holders of more than 5% of our outstanding common stock, in the aggregate, beneficially owned approximately 31.5% of our common stock.

Gilead, which owns approximately 13% of our outstanding common stock, also has the right to designate two individuals to be appointed to our board of

directors, of which we have already appointed one of its designees.

Based upon shares outstanding as of March 31, 2021, our executive officers, directors and the holders of more than 5% of our outstanding common stock, in the aggregate, beneficially owned approximately 36.8% of our common stock.

In particular, Gilead owns approximately 19.5% 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.

As a result, these stockholders, acting together, will have significant influence over all matters that require approval by our stockholders, including the election of directors and approval of significant corporate transactions.

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Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our amended and restated certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws or any action asserting a claim against us that is governed by the internal affairs doctrine.

This choice of forum provision may limit a

stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees and may discourage these types of lawsuits.

Alternatively, if a court were to find the choice of forum provision contained in our amended and restated certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions .

Our amended and restated certificate of incorporation and our bylaws provide that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws or any action asserting a claim against us that is governed by the internal affairs doctrine.

In addition, to prevent having to litigate claims in multiple jurisdictions and the threat of inconsistent or contrary rulings by different courts, among other considerations, our bylaws provide that the federal district courts of the United States will be the exclusive forum for resolving any complaint asserting a cause of action arising under the Securities Act of 1933, as amended.

These choice of forum provisions may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees and may discourage these types of lawsuits.

While the Delaware courts have determined that these types of forum provisions are facially valid, a stockholder may nevertheless seek to bring a claim in a venue other than those designated in the exclusive forum provisions.

In such instance, we would expect to vigorously assert the validity and enforceability of these provisions, which may require significant additional costs associated with resolving such action in other jurisdictions, and there can be no assurance that the provisions will be enforced by a court in those other jurisdictions.

General Risk Factors

Sales of substantial amounts of our outstanding shares may cause the price of our common stock to decline.

We have also registered shares of common stock that we have issued and may issue under our employee equity incentive plans.

We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of the New York Stock Exchange.

The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal controls over financial reporting.

Our internal control over financial reporting will not prevent or detect all errors and all fraud.

A control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the control system’s objectives will be met.

Accordingly, we cannot assure you that we will not in the future identify one or more material weaknesses in our internal control over financial reporting, which may have a negative impact on our ability to timely and accurately produce financial statements, may result in a material misstatement of our consolidated financial statements or may negatively impact the confidence level of our stockholders and other market participants with respect to our reported financial information.

Ensuring that we have adequate internal controls over financial reporting is a costly and time-consuming effort that needs to be re-evaluated frequently.

Unregistered Sales of Equity Securities and Use of Proceeds.

Not applicable.

Defaults Upon Senior Securities.

Mine Safety 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 1A. Risk Factors