What changed in this filing

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Item 1. Financial Statements

2020-08-04 compared with 2020-05-05 · 171 added, 741 removed, 489 unchanged (65% of the section changed)

11 unchanged sentences

Operating lease right-of-use asset

Liabilities and stockholders’

Liabilities and stockholders’ equity

Current liabilities:

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Other long-term liabilities

Stockholders’

Stockholders’ equity:

Preferred stock

2 unchanged sentences

Accumulated deficit

Total stockholders’

The balance sheet at December 31, 2019 has been derived from the audited financial statements included in Rigel’s Annual Report on Form 10-K for the year ended December 31, 2019.

( 1,272,561 )

( 1,276,228 )

Total stockholders’ equity

(1) The balance sheet at December 31, 2019 has been derived from the audited financial statements included in Rigel’s Annual Report on Form 10-K for the year ended December 31, 2019 .

See Accompanying Notes.

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(In thousands, except per share amounts)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Product sales, net

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RIGEL PHARMACEUTICALS, INC.

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME

CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (LOSS)

(In thousands)

Three Months Ended March 31,

Three Months Ended June 30,

Six Months Ended June 30,

Net income (loss)

Other comprehensive income:

Net unrealized gain on short-term investments

Other comprehensive income (loss):

Net unrealized gain (loss) on short-term investments

Comprehensive income (loss)

1 unchanged sentence

RIGEL PHARMACEUTICALS, INC.

CONDENSED STATEMENTS OF STOCKHOLDERS’

CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY

(In thousands, except share amounts)

Comprehensive

Stockholders’

Balance at December 31, 2019

( 1,276,228 )

Net unrealized gain on short-term investments

2 unchanged sentences

Balance at March 31, 2020

( 1,254,985 )

Net unrealized loss on short-term investments

Issuance of common stock upon participation in Purchase Plan

Stock compensation expense

Balance at June 30, 2020

( 1,272,561 )

Comprehensive

Stockholders’

Income (Loss)

Balance at December 31, 2018

( 1,209,334 )

Net unrealized gain on short-term investments

2 unchanged sentences

Balance at March 31, 2019

( 1,226,932 )

Net unrealized gain on short-term investments

Issuance of common stock upon exercise of options and participation in Purchase Plan

Stock compensation expense

Balance at June 30, 2019

( 1,247,538 )

RIGEL PHARMACEUTICALS, INC.

1 unchanged sentence

(In thousands)

Three Months Ended March 31,

Six Months Ended June 30,

Operating activities

14 unchanged sentences

Deferred revenue

Deferred rent and other long-term liabilities

Net cash used in operating activities

5 unchanged sentences

Financing activities

Net proceeds from term loan financing

Net proceeds from issuances of common stock upon exercise of options and participation in Purchase Plan

8 unchanged sentences

Notes to Condensed Financial Statements

In this report, “Rigel,”

“we,”

“us”

and “our”

refer to Rigel Pharmaceuticals, Inc.

In this report, “Rigel,” “we,” “us” and “our” refer to Rigel Pharmaceuticals, Inc.

Nature of Operations

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Our first U.S.

Food and Drug Administration (FDA) approved product is TAVALISSE ®

(fostamatinib disodium hexahydrate), the only oral spleen tyrosine kinase (SYK) inhibitor, for the treatment of adult patients with chronic immune thrombocytopenia (ITP) who have had an insufficient response to a previous treatment.

The marketing authorization application (MAA) for fostamatinib was approved by the European Commission (EC) in Europe in January 2020 for the treatment of chronic ITP in adult patients who are refractory to other treatments, and will be marketed in Europe under the name TAVLESSE ®

(fostamatinib).

Food and Drug Administration (FDA) approved product is TAVALISSE ® (fostamatinib disodium hexahydrate), the only oral spleen tyrosine kinase (SYK) inhibitor, for the treatment of adult patients with chronic immune thrombocytopenia (ITP) who have had an insufficient response to a previous treatment.

The marketing authorization application (MAA) for fostamatinib was approved by the European Commission (EC) in Europe in January 2020 for the treatment of chronic ITP in adult patients who are refractory to other treatments and is marketed in Europe under the name TAVLESSE ® (fostamatinib).

Our clinical programs include a Phase 3 study of fostamatinib in warm autoimmune hemolytic anemia (AIHA);

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Recent Accounting Pronouncements

In June 2016, the FASB issued ASU 2016-13—

Financial Instruments –

Credit Losses (Topic 326):

In June 2016, the FASB issued ASU 2016-13— Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments , which represents a new credit loss standard that will change the impairment model for most financial assets and certain other financial instruments.

Specifically, this guidance will require entities to utilize a new “expected loss”

model as it relates to trade and other receivables.

Specifically, this guidance will require entities to utilize a new “expected loss” model as it relates to trade and other receivables.

In addition, entities will be required to recognize an allowance for estimated credit losses on available-for-sale debt securities, regardless of the length of time that a security has been in an unrealized loss position.

This guidance will be effective for annual

reporting periods beginning after December 15, 2019, including interim periods within those annual reporting periods.

This guidance is effective for annual reporting

periods beginning after December 15, 2019, including interim periods within those annual reporting periods.

We adopted this new standard on January 1, 2020 with no material impact on our financial statements and related disclosures.

In August 2018, the FASB issued ASU 2018-13 —Fair Value Measurement (Topic 820):

Disclosure Framework-Changes to the Disclosure Requirements for Fair Value Measurement (ASU 2018-13) , which modifies the disclosure requirements on fair value measurements.

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We adopted this new standard on January 1, 2020 with no material impact on our financial statements and related disclosures.

In November 2018, the FASB issued ASU 2018-18—

Collaborative Arrangements (Topic 808):

In November 2018, the FASB issued ASU 2018-18— Collaborative Arrangements (Topic 808):

Clarifying the Interaction between Topic 808 and Topic 606 .

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Inventories consist primarily of third-party manufacturing costs and allocated internal overhead costs.

We began capitalizing inventory costs associated with our product upon regulatory approval when, based on management’s judgment, future commercialization was considered probable and the future economic benefit was expected to be realized.

Prior to FDA approval of TAVALISSE, all manufacturing costs were charged to research and development expense in the period incurred.

At March 31, 2020 and December 31, 2019, our physical inventory included active pharmaceutical product of which costs have been previously charged to research and development expense.

At June 30, 2020 and December 31, 2019, our physical inventory included active pharmaceutical product of which costs have been previously charged to research and development expense.

However, manufacturing of drug product, finished bottling and other labeling activities that occurred post FDA approval are included in the inventory value at each balance sheet date.

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Cost of product sales consists of third-party manufacturing costs, transportation and freight, and indirect overhead costs associated with the manufacture and distribution of TAVALISSE.

A portion of the cost of producing the product sold to date was expensed as research and development prior to the Company’s New Drug Application (NDA) approval for TAVALISSE and therefore is not included in the cost of product sales during this period.

Accounts Receivable

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Revenue Recognition

We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (ASC 606) , when our customer obtains control of promised goods or services, in an amount that reflects the consideration

which we expect to receive in exchange for those goods or services.

To determine whether arrangements are within the scope of ASC 606, we perform the following five steps:

To determine whether arrangements are within the

scope of ASC 606, we perform the following five steps:

(i) identify the contract(s) with a customer;

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Product Returns.

We offer our SDs a right to return product purchased directly from us, which is principally based upon the product’s expiration date.

Product return allowances are estimated and recorded at the time of sale.

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Chargebacks for fees and discounts represent the estimated obligations resulting from contractual commitments to sell products to certain specialty pharmacy providers, in-office dispensing providers, group purchasing organizations, and government entities at prices lower than the list prices charged to our SDs who directly purchase the product from us.

These SDs charge us for the difference between what they pay for the product and our contracted selling price to these specialty pharmacy providers, in-office dispensing providers, group purchasing

organizations, and government entities.

These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue.

These SDs charge us for the difference between what they pay for the product and our contracted selling price to these specialty pharmacy providers, in-office dispensing providers, group purchasing organizations, and government entities.

These reserves are established in the same period that the related revenue is

recognized, resulting in a reduction of product revenue.

Actual chargeback amounts are generally determined at the time of resale to the specialty pharmacy providers, in-office dispensing providers, group purchasing organizations, and government entities by our SDs.

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If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price.

Milestone payments that are not within our or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until uncertainty associated with the approvals has been resolved.

The transaction price is then allocated to each performance obligation, on a relative standalone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied.

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Product Supply Services:

Arrangements that include a promise for future supply of drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options.

We assess if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations.

3 unchanged sentences

In December 2014, we entered into a sublease agreement with an unrelated third party to occupy a portion of our research and office space through January 2023.

All of our leases outstanding as of March 31, 2020 continued to be classified as operating leases.

All of our leases outstanding as of June 30, 2020 continued to be classified as operating leases.

We recorded an operating lease right-of-use asset and an operating lease liability on our balance sheet.

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We account for uncertain tax positions consistent with authoritative guidance.

The guidance prescribes a “more likely than not”

recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

The guidance prescribes a “more likely than not” recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return.

We do not expect any material change in our unrecognized tax benefits over the next twelve months.

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While we continue to evaluate the impact of the CARES Act, we do not currently believe it will have a material impact on our financial statements or related disclosures.

On June 29, 2020, Assembly Bill 85 (A.B.

85) was signed into California law.

85 provides for a three-year suspension of the use of net operating losses for medium and large businesses and a three-year cap on the use of business incentive tax credits to offset no more than $ 5.0 million of California state tax per year.

85 suspends the use of net operating losses for taxable years 2020, 2021 and 2022 for certain taxpayers with taxable income of $ 1.0 million or more.

The carryover period for any net operating losses that are suspended under this provision will be extended.

85 also requires that business incentive tax credits including carryovers may not reduce the applicable tax by more than $ 5.0 million for taxable years 2020, 2021 and 2022.

We are currently evaluating the impact of A.B.

85 on our financial statements and related disclosures.

Stock Award Plans

On May 16, 2018, our stockholders approved the adoption of the Company’s 2018 Equity Incentive Plan (2018 Plan).

The 2018 Plan is the successor plan to the 2011 Equity Incentive Plan, the 2000 Equity Incentive Plan, and the 2000 Non-Employee Directors' Stock Option Plan.

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Diluted earnings (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period and the number of additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued.

Potentially dilutive securities include warrant and stock options and shares issuable under our Purchase Plan.

The dilutive effect of these potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method.

Potentially dilutive securities include stock options and shares issuable under our Purchase Plan.

The dilutive effect of

these potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method.

Under the treasury stock method, an increase in the fair market value of our common stock can result in a greater dilutive effect from potentially dilutive securities.

The following table sets forth the computation of basic and diluted earnings per share (in thousands except per share amounts):

The following table sets forth the computation of basic and diluted earnings per share for the three and six months ended June 30, 2020 and 2019 (in thousands except per share amounts):

Three Months Ended

Six Months Ended

EPS Numerator:

Net income (loss)

EPS Denominator—Basic:

Weighted-average common shares outstanding

EPS Denominator—Diluted:

Weighted-average common shares outstanding

Dilutive effect of stock options, shares under ESPP and warrant

Dilutive effect of stock options and shares under ESPP

Weighted-average shares outstanding and common stock equivalents

Net income (loss) per common share:

Net income (loss) per common share, basic and diluted

We had securities which could potentially dilute basic earnings per share, but were excluded from the computation of diluted earnings (loss) per share for all periods presented, as their effect would have been antidilutive.

1 unchanged sentence

Three Months Ended

Six Months Ended

Outstanding stock options

1 unchanged sentence

Stock-Based Compensation

Total stock-based compensation related to all of our share-based payments that we recognized for the three months ended March 31, 2020 and 2019 were as follows (in thousands):

Total stock-based compensation related to all of our share-based payments that we recognized for the three and six months ended June 30, 2020 and 2019 were as follows (in thousands):

Three Months Ended

Six Months Ended

Selling, general and administrative

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We determined weighted-average valuation assumptions separately for each of these groups as follows:

Volatility—We estimated volatility using our historical share price performance over the expected life of the option.

● Volatility—We estimated volatility using our historical share price performance over the expected life of the option.

We also considered other factors, such as implied volatility, our current clinical trials and other company activities that may affect the volatility of our stock in the future.

We determined that at this time historical volatility is more indicative of our expected future stock performance than implied volatility.

Expected term—For options granted to consultants, we use the contractual term of the option, which is generally ten years, for the initial valuation of the option and the remaining contractual term of the

option for the succeeding periods.

● Expected term—For options granted to consultants, we use the contractual term of the option, which is generally ten years , for the initial valuation of the option and the remaining contractual term of the option for the succeeding periods.

We analyzed various historical data to determine the applicable expected term for each of the other option groups.

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In addition, we considered the optionee type (i.e., officers and directors or all other employees) and other factors that may affect the expected term of the options.

Risk-free interest rate—The risk-free interest rate is based on U.S.

● Risk-free interest rate—The risk-free interest rate is based on U.S.

Treasury constant maturity rates with similar terms to the expected term of the options for each option group.

Dividend yield—The expected dividend yield is 0% as we have not paid and do not expect to pay dividends in the future.

The following table summarizes the weighted-average assumptions relating to options granted pursuant to our equity incentive plans for the three months ended March 31, 2020 and 2019:

● Dividend yield—The expected dividend yield is 0 % as we have not paid and do not expect to pay dividends in the future.

The following table summarizes the weighted-average assumptions relating to options granted pursuant to our equity incentive plans for the three and six months ended June 30, 2020 and 2019:

Three Months Ended

Six Months Ended

Risk-free interest rate

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Options become exercisable at varying dates and generally expire 10 years from the date of grant.

We granted options to purchase 6,147,290 shares of common stock during the three months ended March 31, 2020 with a grant-date weighted-average fair value of $1.45 per share.

As of March 31, 2020, we had 776,250 shares of outstanding performance-based stock options wherein the achievement of the corresponding corporate-based milestones was not considered as probable.

Accordingly, none of the stock-based compensation expense of $1.2 million has been recognized as expense as of March 31, 2020.

As of March 31, 2020, there were approximately $14.8 million of unrecognized stock-based compensation cost related to time-based stock options and performance-based stock options, wherein achievement of the corresponding corporate-based milestones was considered as probable.

At March 31, 2020, there were 11,291,451 shares of common stock available for future grant under our equity incentive plans and 581,675 options to purchase shares were exercised during the three months ended March 31, 2020.

We granted options to purchase 7,374,090 shares of common stock during the six months ended June 30, 2020 with a grant-date weighted-average fair value of $ 1.39 per share.

As of June 30, 2020, we had 776,250 shares of outstanding performance-based stock options wherein the achievement of the corresponding corporate-based milestones was not considered as probable.

Accordingly, none of the stock-based compensation expense of $ 1.2 million has been recognized as expense as of June 30, 2020.

As of June 30, 2020, there were approximately $ 14.3 million of unrecognized stock-based compensation cost related to time-based stock options and performance-based stock options, wherein achievement of the corresponding corporate-based milestones was considered as probable.

At June 30, 2020, there were 11,013,055 shares of common stock available for future grant under our equity incentive plans and 581,675 options to purchase shares were exercised during the six months ended June 30, 2020.

Employee Stock Purchase Plan

Our Purchase Plan permits eligible employees to purchase common stock at a discount through payroll deductions during defined offering periods.

The price at which the stock is purchased is equal to the lesser of 85% of the

fair market value of our common stock on the first day of the offering or 85% of the fair market value of our common stock on the purchase date.

The price at which the stock is purchased is equal to the lesser of 85 % of the fair market value of our common stock on the first day of the offering or 85 % of the fair market value of our common stock on the purchase date.

The initial offering period commenced on the effective date of our initial public offering.

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Our Purchase Plan also includes a feature that provides for a new offering period to begin when the fair market value of our common stock on any purchase date during an offering period falls below the fair market value of our common stock on the first day of such offering period.

This feature is called a “reset.”

Participants are automatically enrolled in the new offering period.

We had a “reset”

on January 2, 2020 because the fair market value of our stock on December 31, 2019 was lower than the fair market value of our stock on January 1, 2019, the first day of the offering period.

This feature is called a “reset.” Participants are automatically enrolled in the new offering period.

We had a “reset” on January 2, 2020 because the fair market value of our stock on December 31, 2019 was lower than the fair market value of our stock on January 1, 2019, the first day of the offering period.

We applied modification accounting in accordance with the relevant accounting guidance.

The total incremental fair value associated with this Purchase Plan “reset”

was approximately $753,000 and is being recognized as expense from January 1, 2020 to December 31, 2021.

As of March 31, 2020, there were 583,893 shares reserved for future issuance under the Purchase Plan and there was $926,000 of unrecognized stock-based compensation cost related to our Purchase Plan.

The following table summarizes the weighted-average assumptions related to our Purchase Plan for the three months ended March 31, 2020 and 2019.

The total incremental fair value associated with this Purchase Plan “reset” was approximately $ 753,000 and is being recognized as expense from January 1, 2020 to December 31, 2021.

We also had another “reset” on July 1, 2020 because the fair market value of our stock on June 30, 2020 was lower than the fair market value of our stock on January 1, 2020, the first day of the offering period.

We applied modification accounting in accordance with the relevant accounting guidance.

The total incremental fair value associated with this Purchase Plan “reset” was approximately $ 535,000 and is being amortized to expenses from July 1, 2020 to June 30, 2022.

As of June 30, 2020, there were 235,795 shares reserved for future issuance under the Purchase Plan and there was $ 1.2 million of unrecognized stock-based compensation cost related to our Purchase Plan.

The following table summarizes the weighted-average assumptions related to our Purchase Plan for the six months ended June 30, 2020 and 2019.

Expected volatilities for our Purchase Plan are based on the historical volatility of our stock.

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Treasury constant maturity rates.

Three Months Ended

Six Months Ended

Risk-free interest rate

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Three Months Ended

Six Months Ended

Product sales:

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Three Months Ended

Six Months Ended

ASD Healthcare and Oncology Supply

McKesson Specialty Care Distribution Corporation

Cardinal Healthcare

We commenced commercial sale of TAVALISSE in the U.S.

1 unchanged sentence

Our MAA for fostamatinib for the treatment of chronic ITP in adult patients who are refractory to other treatments was approved by the EC in January 2020.

In addition to the distribution agreements with our customers, the SDs, we also enter into arrangements with specialty pharmacy providers, in-office dispensing providers, group purchasing organizations, and government entities that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of our products which reduced our gross product sales.

Also refer to Revenue Recognition policy discussion in Note 3.

The following table summarizes activity in each of the product revenue allowance and reserve categories for the three months ended March 31, 2020 and 2019 (in thousands):

In addition to the distribution agreements with our customers and SDs, we also enter into arrangements with specialty pharmacy providers, in-office dispensing providers, group purchasing organizations, and government entities that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of our products which reduced our gross product sales.

Also refer to Revenue Recognition policy discussion in “Note 3” above.

The following table summarizes activity in each of the product revenue allowance and reserve categories for the six months ended June 30, 2020 and 2019 (in thousands):

Discounts and

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Provision related to current period sales

Adjustment related to prior period sales

Credit or payments made during the period

Balance at March 31, 2020

Balance at June 30, 2020

Discounts and

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Credit or payments made during the period

Balance at March 31, 2019

The discounts and allowances from gross product sales for the three months ended March 31, 2020 of $2.7 million in the first table above includes the provision for current period sales of $2.2 million which formed part of Other Accrued Liabilities in the balance sheet of which $3.5 million remained outstanding as of March 31, 2020.

Balance at June 30, 2019

The discounts and allowances from gross product sales for the six months ended June 30, 2020 of $ 6.1 million in the first table above includes the provision for current period sales of $ 5.3 million which formed part of Other Accrued Liabilities in the balance sheet of which $ 4.3 million remained outstanding as of June 30, 2020.

Of the $ 6.1 million discounts and allowances from gross sales, $ 796,000 is recorded as reduction in accounts receivable and prepaid and other current assets in the balance sheet.

As of March 31, 2020, we have accounts receivable from Aclaris of $1.0 million, relative to the first amendment to the license and collaboration agreement with Aclaris.

We determined that no allowance for doubtful accounts was necessary for our accounts receivable as of March 31, 2020.

Sponsored Research and License Agreements

We conduct research and development programs independently and in connection with our corporate collaborators.

As of March 31, 2020, we are a party to collaboration agreements with ongoing performance obligations with Kissei Pharmaceutical Co., Ltd.

As of June 30, 2020, we are a party to collaboration agreements with ongoing performance obligations with Kissei Pharmaceutical Co., Ltd.

(Kissei) for the development and commercialization of fostamatinib in Japan, China, Taiwan and the Republic of Korea and with Grifols, S.A.

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(Medison) to commercialize fostamatinib in all indications, including chronic ITP and AIHA, in Canada and Israel.

As of March 31, 2020, we are also a party to collaboration agreements, but do not have ongoing performance obligations, with Aclaris for the development and commercialization of JAK inhibitors for the treatment of alopecia areata and other dermatological conditions, AZ for the development and commercialization of R256, an inhaled JAK inhibitor, BerGenBio for the development and commercialization of AXL inhibitors in oncology, and Daiichi to pursue research related to MDM2 inhibitors, a novel class of drug targets called ligases.

As of June 30, 2020, we are also a party to collaboration agreements, but do not have ongoing performance obligations, with Aclaris for the development and commercialization of JAK inhibitors for the treatment of alopecia areata and other dermatological conditions, AZ for the development and commercialization of R256, an inhaled JAK inhibitor, BerGenBio for the development and commercialization of AXL inhibitors in oncology, and Daiichi to pursue research related to MDM2 inhibitors, a novel class of drug targets called ligases.

Under these agreements, which we entered into in the ordinary course of business, we received or may be entitled to receive upfront cash payments, payments contingent upon specified events achieved by such partners and royalties on any net sales of products sold by such partners under the agreements.

Total future contingent payments to us under all of these agreements could exceed $ 610.7 million if all potential product candidates achieved all of the payment triggering events under all of our current agreements (based on a single product candidate under each agreement).

Of this amount, up to $70.5 million relates to the achievement of development events, up to $165.2 million relates to the achievement of regulatory events and up to $376.0 million relates to the achievement of certain commercial or launch events.

Of this amount, $ 70.5 million relates to the achievement of development events, $ 164.2 million relates to the achievement of regulatory events and $ 376.0 million relates to the achievement of certain commercial or launch events.

This estimated future contingent amount does not include any estimated royalties that could be due to us if the partners successfully commercialize any of the licensed products.

Future events that may trigger payments to us under the agreements are based solely on our partners’

future efforts and achievements of specified development, regulatory and/or commercial events.

Future events that may trigger payments to us under the agreements are based solely on our partners’ future efforts and achievements of specified development, regulatory and/or commercial events.

Grifols License Agreement

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In return, Grifols will receive exclusive rights to fostamatinib in human diseases, including chronic ITP and AIHA, in Europe and Turkey.

The agreement also requires us to conduct the Phase 3 trial in AIHA in the U.S.

In January 2020, we received EC’s approval of our MAA for fostamatinib for the treatment of chronic ITP in adult patients who are refractory to other treatments.

With this approval, we received a $20.0 million non-refundable payment in February 2020, which is comprised of a $17.5 million for EMA approval of fostamatinib for the first indication and a $2.5 million creditable advance royalty payment, based on the terms of the collaboration agreement.

The agreement also requires us to conduct the Phase 3 trial in AIHA.

In January 2020, we received EC’s approval of our MAA for fostamatinib for the treatment of chronic ITP in adult patients who are refractory to other treatments.

With this approval, we received a $ 20.0 million non-refundable

payment in February 2020, which is comprised of a $ 17.5 million for EMA approval of fostamatinib for the first indication and a $ 2.5 million creditable advance royalty payment, based on the terms of the collaboration agreement.

The $ 20.0 million payment will be allocated to the distinct performance obligation in the collaboration agreement with Grifols.

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Upon execution of our agreement with Grifols, we determined that the upfront fee of $ 5.0 million, which is the non-refundable portion of the $ 30.0 million upfront fee, represented the transaction price.

the first quarter of 2020, we revised the transaction price to include the $25.0 million of the upfront payment that is no longer refundable under our agreement and the $20.0 million payment received that is no longer constrained.

In the first quarter of 2020, we revised the transaction price to include the $ 25.0 million of the upfront payment that is no longer refundable under our agreement and the $ 20.0 million payment received that is no longer constrained.

We allocated the updated transaction price to the distinct performance obligations in our collaboration agreement based on our best estimate of the relative standalone selling price as follows:

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We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

During the three months ended March 31, 2020, we recognized $39.9 million in revenues related to the licensed rights in intellectual property and $3.2 million in revenues related to the research services performed.

Deferred revenues as of March 31, 2020 was $2.2 million.

During the three months ended June 30, 2020, we recognized no revenues related to the licensed rights in intellectual property and $ 396,000 in revenues related to the research services performed.

During the six months ended June 30, 2020, we recognized $ 39.9 million in revenues related to the licensed rights in intellectual property and $ 3.6 million in revenues related to the research services performed.

Deferred revenues as of June 30, 2020 was $ 1.8 million.

During the three and six months ended June 30, 2020, we also recognized $ 651,000 in revenues for a one-time delivery of drug supply to Grifols for commercialization.

Kissei License Agreement

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For sales-based milestones and royalties, we determined that the license is the predominant item to which the royalties or sales-based milestones relate to.

Accordingly, we will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of

the royalty has been allocated has been satisfied (or partially satisfied).

Accordingly, we will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied).

We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

We did not recognize any revenues during the three months ended March 31, 2020.

At March 31, 2020, deferred revenues related to the unsatisfied performance obligations related to the supply of fostamatinib and material right associated with discounted fostamatinib supply was $1.4 million.

We did no t recognize any revenues during the three and six months ended June 30, 2020.

At June 30, 2020, deferred revenues related to the unsatisfied performance obligations related to the supply of fostamatinib and material right associated with discounted fostamatinib supply was $ 1.4 million.

Other license agreements

As of March 31, 2020, we have accounts receivable of $1.0 million relative to the first amendment to the license and collaboration agreement with Aclaris executed in the fourth quarter of 2019, of which $500,000 was received in April 2020.

In October 2019, we entered into two exclusive commercial and license agreements with Medison for the commercialization of fostamatinib for chronic ITP in Israel and in Canada pursuant to which we received a $ 5.0 million upfront payment with respect to the agreement in Canada.

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As such this arrangement is accounted for as a financing arrangement.

Accrued interest expense related to this financing arrangement as of March 31, 2020 is immaterial.

As of March 31, 2020 and December 31, 2019, we have the following inventories (in thousands):

Accrued interest expense related to this financing arrangement as of June 30, 2020 is immaterial.

As of June 30, 2020 and December 31, 2019, we have the following inventories (in thousands):

Work in process

Finished goods

As of March 31, 2020, we have $3.0 million in advance payments to our manufacturer of our raw materials, which is included as part of “Prepaid and other current assets”

in our condensed balance sheet.

As of June 30, 2020, we have $ 3.0 million in advance payments to our manufacturer of our raw materials, which is included as part of “Prepaid and other current assets” in our condensed balance sheet.

We take ownership of such raw materials when they are completed and delivered to us.

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Cash equivalents and short-term investments include the following securities with gross unrealized gains and losses (in thousands):

March 31, 2020

June 30, 2020

treasury bills

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Corporate bonds and commercial paper

As of March 31, 2020, our cash equivalents and short-term investments, which have contractual maturities within one year, had a weighted-average time to maturity of approximately 87 days.

As of June 30, 2020, our cash equivalents and short-term investments, which have contractual maturities within one year, had a weighted-average time to maturity of approximately 74 days .

We view our short-term investments portfolio as available for use in current operations.

We have the ability to hold all investments as of March 31, 2020 through their respective maturity dates.

At March 31, 2020, we had no investments that had been in a continuous unrealized loss position for more than 12 months.

As of March 31, 2020, a total of 10 individual securities had been in an unrealized loss position for 12 months or less, and the losses were determined to be temporary.

The gross unrealized losses above were caused by interest rate increases.

We have the ability to hold all investments as of June 30, 2020 through their respective maturity dates.

At June 30, 2020 , we had no investments that had been in a continuous unrealized loss position for more than 12 months.

As of June 30, 2020 , a total of 10 individual securities had been in an unrealized loss position for 12 months or less, and the losses were determined to be temporary.

The gross unrealized losses above were caused by interest rate fluctuations.

No significant facts or circumstances have arisen to indicate that there has been any significant deterioration in the creditworthiness of the issuers of the securities held by us.

Based on our review of these securities, including the assessment of the duration and severity of the unrealized losses and our ability and intent to hold the investments until maturity, there were no other-than-temporary impairments for these securities at March 31, 2020.

The following table shows the fair value and gross unrealized losses of our investments in individual securities that are in an unrealized loss position, aggregated by investment category (in thousands):

March 31, 2020

June 30, 2020

Unrealized Losses

Corporate bonds and commercial paper

Government-sponsored enterprise securities

Under FASB ASC 820, Fair Value Measurements and Disclosures , fair value is defined as the price at which an asset could be exchanged, or a liability transferred in a transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability.

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Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows:

Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets at the reporting date.

Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis.

The fair valued assets we hold that are generally included under this Level 1 are money market securities where fair value is based on publicly quoted prices.

Level 2—Inputs, other than quoted prices included in Level 1, that are either directly or indirectly observable for the asset or liability through correlation with market data at the reporting date and for the duration of the instrument’s anticipated life.

The fair valued assets we hold that are generally assessed under Level 2 included government-sponsored enterprise securities, U.S.

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We use quotes from external pricing service providers and other on-line quotation systems to verify the fair value of investments provided by our third-party pricing service providers.

We review independent auditor’s reports from our third-party pricing service providers particularly regarding the controls over pricing and valuation of financial instruments and ensure that our internal controls address certain control deficiencies, if any, and complementary user entity controls are in place.

Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities and which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the reporting date.

Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model.

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Financial assets measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations (in thousands):

Assets at Fair Value as of March 31, 2020

Assets at Fair Value as of June 30, 2020

Money market funds

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Because the future sublease income under the extended sublease agreement is the same as the amount we will pay our landlord, we did not recognize any loss on sublease relative to this amendment.

We expect to receive approximately $12.9 million in future sublease income (excluding our subtenant’s share of facilities operating expenses) through January 2023.

We adopted Topic 842 on January 1, 2019 using a modified retrospective approach and elected the transition method and the package of practical expedients permitted under the transition guidance, which allowed us to carryforward our historical lease classification and our assessment on whether a contract is or contains a lease.

We expect to receive approximately $ 11.8 million in future sublease income (excluding our subtenant’s share of facilities operating expenses) through January 2023.

We adopted ASU No.

2016-02 – Leases , and related amendments (Topic 842) on January 1, 2019 using a modified retrospective approach and elected the transition method and the package of practical expedients permitted under the transition guidance, which allowed us to carryforward our historical lease classification and our assessment on whether a contract is or contains a lease.

We also elected to combine lease and non-lease components, such as common area maintenance charges, as single lease, and elected to use the short-term lease exception permitted by the standard.

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There was no cumulative-effect adjustment on our accumulated deficit as of January 1, 2019.

As of March 31, 2020, we had operating lease right-of-use asset of $23.8 million and lease liability of $25.1 million in the balance sheet.

The weighted average remaining term of our lease as of March 31, 2020 was 2.83 years.

During the quarter, we received reimbursements from our landlord for their partial share in the generator and boiler leasehold improvements.

We record these leasehold improvement incentives as additional operating lease right-of-use asset and lease liability until the lease ends and the asset is transferred.

As of March 31, 2020, our leasehold improvement incentives amounted to $346,000.

For the three months ended March 31, 2020, the components of our operating lease expense were as follows (in thousands):

As of June 30, 2020, we had operating lease right-of-use asset of $ 21.9 million and lease liability of $ 23.3 million in the balance sheet.

The weighted average remaining term of our lease as of June 30, 2020 was 2.58 years.

As of June 30, 2020, we received from our landlord leasehold improvement incentives amounting to $ 563,000 related to leasehold improvements.

We record these leasehold improvement incentives as a reduction to operating lease right-of-use asset and lease liability until the lease ends and the asset is transferred.

For the three and six months ended June 30, 2020, the components of our operating lease expense were as follows (in thousands):

Three Months Ended

March 31, 2020

Six Months Ended

Fixed operating lease expense

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Total operating lease expense

Supplemental information related to the Company’s operating lease for the three months ended March 31, 2020 were as follow (in thousands):

Supplemental information related to the Company’s operating lease for the three and six months ended June 30, 2020 were as follow (in thousands):

Three Months Ended

Six Months Ended

Cash payments included in the measurement of operating lease liabilities

Right-of-use asset obtained in exchange for operating lease obligations

The following table presents the future lease payments of our operating lease liabilities as of March 31, 2020 (in thousands):

The following table presents the future lease payments of our operating lease liabilities as of June 30, 2020 (in thousands):

Remainder of 2020

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Total operating lease liabilities

For the three months ended March 31, 2020, we have the following operating sublease information (in thousands):

For the three and six months ended June 30, 2020, we have the following operating sublease information (in thousands):

Three Months Ended

March 31, 2020

Six Months Ended

Fixed sublease expense

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Sublease income

The following table presents the future lease payments we expect to receive under our sublease as of March 31, 2020 (in thousands):

The following table presents the future lease payments we expect to receive under our sublease as of June 30, 2020 (in thousands):

Remainder of 2020

Total operating lease liabilities

On September 27, 2019, we entered into a Credit and Security Agreement (Credit Agreement), dated as of September 27, 2019 (the Closing Date) with MidCap Financial Trust (MidCap).

On September 27, 2019, we entered into a Credit and Security Agreement (Credit Agreement), dated as of September 27, 2019 (Closing Date) with MidCap Financial Trust (MidCap).

The Credit Agreement provides for a $ 60.0 million term loan credit facility with the following tranches:

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The outstanding principal balance of the loan bears interest at an annual rate of one-month LIBOR plus 5.65 % , subject to a LIBOR floor of 1.50 % and is payable monthly in arrears.

Commencing on October 1, 2019, we initially will make interest-only payments for 24 months followed by 36 months of amortization payments.

Commencing on October 1, 2019, the Credit Agreement provides that we initially make interest-only payments for 24 months followed by 36 months of amortization payments.

The interest-only period will be extended to 36 months and again to 48 months upon the satisfaction of certain conditions set forth in the Credit Agreement.

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The Credit Agreement also contains certain provisions, such as event of default and change in control provisions, which, if triggered, would require us to make mandatory prepayments on the term loan, which are subject to certain prepayment premiums and additional interest payments.

As discussed above, at closing of the Credit Agreement, $10.0 million was funded in an initial tranche.

The facility also gives us the ability to access an additional $50.0 million at our option, of which $40.0 million is subject to the achievement of certain customary conditions.

As discussed above, at Closing Date, $ 10.0 million was funded in an initial tranche.

In March 2020, we signed a credit extension form for the second tranche amounting to $ 10.0 million, which we received in May 2020.

Excluding the second tranche of $10.0 million, the following table presents the future minimum payments we expect to make on our outstanding loan as of March 31, 2020 (in thousands):

The facility also gives us the ability to access an additional $ 40.0 million at our option, subject to the achievement of certain customary conditions.

The following table presents the future minimum payments we expect to make on our outstanding loan as of June 30, 2020 (in thousands):

Year Ending December 31,

Principal amount (initial tranche)

Principal amount (Tranches 1 and 2)

We paid certain costs and fees totaling $ 236,000 which were recorded as a direct deduction from the term loan on the balance sheet and are being amortized ratably as interest expense over the term of the loan, using the effective interest method.

As of March 31, 2020, the unamortized issuance costs and debt discounts amounted to $171,000.

Interest expense, including amortization of the debt discount and accretion of the final fees, related to the Credit Agreement was $241,000 for the three months ended March 31, 2020.

Accrued interest was $62,000 as of March 31, 2020.

As of March 31, 2020, the outstanding balance of the loan was $9.8 million, net of unamortized debt discount.

The Credit Agreement contains certain covenants which, among others, require us to deliver financial reports at designated times of the year and maintain minimum net revenues and $10.0 million of cash upon the draw of tranche three or tranche four.

As of March 31, 2020, we were not in violation of any covenants.

As of June 30, 2020, the unamortized issuance costs and debt discounts amounted to $ 184,000 .

Interest expense, including amortization of the debt discount and accretion of the final fees, related to the Credit Agreement was $ 353,000 and $ 593,000 , respectively, for the three and six months ended June 30, 2020.

Accrued interest was $ 194,000 as of June 30, 2020.

As of June 30, 2020, the outstanding balance of the loan was $ 19.8 million, net of unamortized debt discount.

The Credit Agreement contains certain covenants which, among others, require us to deliver financial reports at designated times of the year and maintain minimum net revenues and $ 10.0 million of cash in order to draw tranche three or tranche four.

As of June 30, 2020, we were not in violation of any covenants.

Subsequent Events

Under our credit facility agreement with MidCap, in March 2020, we signed a credit extension form for the second tranche amounting to $10.0 million, which we received in May 2020.

The facility also gives us the ability to access an additional $40.0 million at our option subject to the achievement of certain customary conditions.

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

This discussion and analysis should be read in conjunction with our financial statements and the accompanying notes included in this report and the audited financial statements and accompanying notes included in our Annual Report on Form 10-K for the year ended December 31, 2019.

Our financial results for the three months ended March 31, 2020 are not necessarily indicative of results that may occur in future interim periods or for the full fiscal year.

This Quarterly Report on Form 10-Q contains statements indicating expectations about future performance and other forward-looking statements within the meaning of Section 27A of the Securities Act and Section 21E of the Exchange Act, that involve risks and uncertainties.

We usually use words such as “may,”

“will,”

“would,”

“should,”

“could,”

“expect,”

“plan,”

“anticipate,”

“believe,”

“estimate,”

“predict,”

“intend,”

or the negative of these terms or similar expressions to identify these forward-looking statements.

These statements appear throughout this Quarterly Report on Form 10-Q and are statements regarding our current expectation, belief or intent, primarily with respect to our operations and related industry developments.

Examples of these statements include, but are not limited to, statements regarding the following:

our expectations regarding the impact of the global COVID-19 pandemic;

our business and scientific strategies;

risks and uncertainties associated with the commercialization and marketing of TAVALISSE;

and in Europe;

risks that the FDA, EMA or other regulatory authorities may make adverse decisions regarding fostamatinib;

the progress of our and our collaborators’

product development programs, including clinical testing, and the timing of results thereof;

our corporate collaborations and revenues that may be received from our collaborations and the timing of those potential payments;

our expectations with respect to regulatory submissions and approvals;

our drug discovery technologies;

our research and development expenses;

protection of our intellectual property;

sufficiency of our cash and capital resources and the need for additional capital;

and our operations and legal risks.

You should not place undue reliance on these forward-looking statements.

Our actual results could differ materially from those anticipated in these forward-looking statements for many reasons, including as a result of the risks and uncertainties discussed under the heading “Risk Factors”

in Item 1A of Part II of this Quarterly Report on Form 10-Q.

Any forward-looking statement speaks only as of the date on which it is made, and we undertake no obligation to update any forward-looking statement to reflect events or circumstances after the date on which the statement is made or to reflect the occurrence of unanticipated events.

New factors emerge from time to time, and it is not possible for us to predict which factors will arise.

In addition, we cannot assess the impact of each factor on our business or the extent to which any factor, or combination of factors, may cause actual results to differ materially from those contained in any forward-looking statements.

We are a biotechnology company dedicated to discovering, developing and providing novel small molecule drugs that significantly improve the lives of patients with immune and hematologic disorders, cancer and rare diseases.

Our pioneering research focuses on signaling pathways that are critical to disease mechanisms.

Our first U.S.

Food and Drug Administration (FDA) approved product is TAVALISSE ®

The marketing authorization application (MAA) for fostamatinib has been approved by the European Commission (EC) in Europe for the treatment of chronic ITP in adult patients who are refractory to other treatments, and will be marketed in Europe under the name TAVLESSE ®

(fostamatinib).

Our clinical programs include a Phase 3 study of fostamatinib in warm autoimmune hemolytic anemia (AIHA);

a completed Phase 1 study of R835, a proprietary molecule from our interleukin receptor associated kinase (IRAK 1/4) inhibitor program;

and an ongoing Phase 1 study of R552, a proprietary molecule from our receptor-interacting protein kinase (RIP1) inhibitor program.

In addition, we have product candidates in clinical development with

partners BerGenBio ASA (BerGenBio), Daiichi Sankyo (Daiichi), Aclaris Therapeutics (Aclaris), and AstraZeneca AB (AZ).

Business Update

In the first quarter of 2020, 1,398 bottles of TAVALISSE were shipped to patients and clinics with net product sales increasing 57% year over year to $12.7 million.

During the quarter, we experienced typical first quarter reimbursement issues such as the resetting of co-pays and the Medicare donut hole, and were also impacted negatively by the COVID-19 pandemic in the latter part of the quarter.

As of March 31, 2020, a total of 591 bottles remained in our distribution channels, a decrease of 5 bottles from the previous quarter.

Due to the ongoing COVID-19 global pandemic, resources have been deployed to enable our field-based employees to continue to engage remotely with health care providers.

These virtual engagements have enabled our field team to support existing prescribers as well as partner with new prescribers to identify appropriate patients for TAVALISSE.

We are exploring opportunities to collaborate with research institutes to investigate the potential of TAVALISSE to treat COVID-19 pneumonia and related acute respiratory distress syndrome (ARDS).

The SYK signaling pathway plays a known role in mediating the release of cytokines in response to the COVID-19 virus, providing scientific rationale for investigating the potential benefit of SYK-inhibition in these patients.

We currently do not anticipate disruption in the supply of TAVALISSE tablets and drug substance to meet the needs of our U.S.

ITP commercial business, as well as our collaborative partners and clinical trials worldwide.

Our FORWARD study, a pivotal Phase 3 clinical trial in warm AIHA has enrolled 41 patients to date.

Currently, the FORWARD study has over 80 active clinical trial sites established across 22 countries.

A vast majority of these sites have temporarily postponed new patient enrollment due to the ongoing COVID-19 pandemic.

As such, we are unable to provide guidance on the timing of enrollment completion.

Enrollment is expected to regain momentum as conditions permit across our globally diverse clinical sites.

In February 2020, we received a $20.0 million payment from Grifols.

The payment was received upon the EC approval of the MAA for fostamatinib for the treatment of chronic ITP in adult patients who are refractory to other treatments.

In addition, as a result of the EC approval, the $25.0 million of the $30.0 million upfront fee that we previously received from Grifols will no longer be repayable by us to Grifols.

Fostamatinib will be marketed in Europe under the brand name TAVLESSE™

(fostamatinib).

With our cash and cash equivalents as of March 31, 2020 of approximately $95.9 million and expected cash flow from operations, we believe our sources of liquidity and capital will be sufficient to finance our continued operations and growth strategy for at least the next twelve months.

In May 2020, w e accessed the second $10.0 million tranche from our $60.0 million credit facility with MidCap.

The facility provides us with access to an additional $40.0 million which is subject to the achievement of certain conditions.

Update on Current and Potential Future Impact of COVID-19 to our Business

In December 2019, a novel coronavirus disease (COVID-19) was reported and in March 2020, the World Health Organization characterized COVID-19 as a global pandemic.

With the global spread of the evolving COVID-19 pandemic, we have undertaken and plan to continue to undertake additional safety measures to keep our staff and their families safe and to help the communities where we live and work reduce the number of people exposed to the virus.

We have closed our office in South San Francisco and required most of our personnel, including our administrative employees to work remotely, restricted on-site staff to only those personnel who must perform essential activities, suspended new laboratory research and limited the number of staff in any given research and development laboratory.

In March 2020, through our existing Crisis Management Team (CMT), we also activated our business continuity plans to prevent or minimize business disruption and ensure the safety and well-being of our personnel.

CMT meets regularly to assess the effectiveness of our business continuity plans and make adjustments accordingly as COVID-19 continues to evolve.

The ultimate impact of the COVID-19 pandemic is highly uncertain and subject to change.

We do not yet know the full extent of the impacts on our business, sales of our product, our ability to continue to secure new collaborations and support existing collaboration efforts with our partners and our clinical and regulatory activities.

Since the COVID-19 pandemic was declared, we have observed reduced patient-doctor interactions and our representatives are having fewer visits with health care providers, which negatively affected our product sales and may continue to negatively affect our product sales in the future.

Resources have been deployed to enable our field team to have virtual engagements to support existing prescribers as well as partner with new prescribers to identify appropriate patients for TAVALISSE.

As such, our field- based employees are continuing to engage remotely with health care providers.

Other commercial related activities, such as our marketing programs, speaker bureaus, and market access initiatives that were in live forums have been delayed or cancelled as a result of the COVID-19 pandemic.

These activities have been re-instigated to take place virtually.

With respect to our supply chain, we currently do not anticipate significant disruption in the supply chain for our commercial product, TAVALISSE.

However, we do not know the full extent of the impact on our supply chain if the COVID-19 pandemic continues and persists for an extended period of time .

We currently rely on third parties to, among other things, manufacture and ship our commercial product, raw materials and product supply for our clinical trials, perform quality testing and supply other goods and services to help manage our commercial activities, our clinical trials and our operations in the ordinary course of business.

We have engaged actively with various elements of our supply chain and distribution channel, including our customers, contract manufacturers, and logistics and transportation provider, to meet demand for TAVALISSE and to remain informed of any challenges within our supply chain.

We continue to monitor demand, and intend to adapt our plans as needed to continue to drive our business and meet our obligations during the evolving COVID-19 pandemic.

With respect to clinical development, we have taken, and continue to take, measures to implement remote and virtual approaches, including remote patient monitoring where possible per recent FDA guidance and working with our investigators for appropriate care of these patients in a safe manner consistent with agency guidelines.

We have a number of ongoing clinical trials, one of which is a global Phase 3 clinical study in warm AIHA.

A number of our clinical trial investigators have paused, postponed or delayed new patient enrollment and restricted site visits of existing patients enrolled to protect both site staff and patients.

We are making decisions country-by-country to minimize risk to the patients and clinical trial sites.

We also rely heavily on our clinical trial investigators to inform us of the best course of action with respect to the temporary pause of enrollment/screening where there is uncertainty around the ability of sites to ensure patient safety or data integrity.

Patients already enrolled in our studies continue to receive study drug, and we remain focused on supporting our sites in providing care for these patients and providing continued investigational drug supply.

At this time, however, we cannot currently fully forecast the scope of impacts that the COVID-19 pandemic may have on our ability to continue to initiate trial sites, continue to treat patients enrolled in our trials, enroll and assess new patients, supply study drug, obtain complete data points in accordance with the study protocol, and overall impact on clinical study results including the timing thereof.

The COVID-19 pandemic has similarly affected our collaboration and licensing partners for the commercialization of fostamatinib globally, as well as in advancing our various clinical stage programs.

We do not yet know the full impact of s uch disruptions in our partners’

ability to advance commercialization of fostamatinib in the market and the timing of enrollment and completion of various clinical trials being conducted by our collaboration partners.

See also the section titled “Risk Factors”

herein for additional information on risks and uncertainties related to the ongoing COVID-19 pandemic.

Our Product Portfolio

The following table summarizes our portfolio:

Commercial Product

TAVALISSE in ITP

Disease background.

Chronic ITP affects an estimated 83,000 adult patients in the U.S.

In patients with ITP, the immune system attacks and destroys the body’s own platelets, which play an active role in blood clotting and healing.

ITP patients can suffer extraordinary bruising, bleeding and fatigue as a result of low platelet counts.

Current therapies for ITP include steroids, platelet production boosters that imitate thrombopoietin (TPOs) and splenectomy.

Orally available fostamatinib program.

Taken in tablet form, fostamatinib blocks the activation of SYK inside immune cells.

ITP is typically characterized by the body producing antibodies that attach to healthy platelets in the blood stream.

Immune cells recognize these antibodies and affix to them, which activates the SYK enzyme inside the immune cell, and triggers the destruction of the antibody and the attached platelet.

When SYK is inhibited by fostamatinib, it interrupts this immune cell function and allows the platelets to escape destruction.

The results of our Phase 2 clinical trial, in which fostamatinib was orally administered to 16 adults with chronic ITP, published in Blood , showed that fostamatinib significantly increased the platelet counts of certain ITP patients, including those who had failed other currently available agents.

Our fostamatinib for immune thrombocytopenia (FIT) Phase 3 clinical program had a total of 150 ITP patients that were randomized into two identical multi-center, double-blind, placebo-controlled clinical trials.

The patients were diagnosed with persistent or chronic ITP, and had blood platelet counts consistently below 30,000 per microliter of blood.

Two-thirds of the subjects received fostamatinib orally at 100 mg twice daily (bid) and the other third received placebo on the same schedule.

Subjects were expected to remain on treatment for up to 24 weeks.

At week four of treatment, subjects who failed to meet certain platelet counts and met certain tolerability thresholds could have their dosage of fostamatinib (or corresponding placebo) increased to 150 mg bid.

The primary efficacy endpoint of this

program was a stable platelet response by week 24 with platelet counts at or above 50,000 per microliter of blood for at least four of the final six qualifying blood draws.

In August 2015, the FDA granted our request for Orphan Drug designation for fostamatinib for the treatment of ITP.

In February 2020, Kissei was granted orphan drug designation from the Japanese Ministry of Health, Labour and Welfare for R788 (fostamatinib) in chronic ITP.

In August 2016, we announced the results of the first FIT study, reporting that fostamatinib met the study’s primary efficacy endpoint.

The study showed that 18% of patients receiving fostamatinib achieved a stable platelet response compared to none receiving a placebo control (p=0.0261).

In October 2016, we announced the results of the second FIT study, reporting that the response rate was 18%, consistent with the first study .

However, one patient in the placebo group (4%) achieved a stable platelet response, therefore the difference between those on treatment and those on placebo did not reach statistical significance (p=0.152) and the study did not meet its primary endpoint.

Using the most conservative sensitivity analysis, rather than the protocol’s prespecified analysis, one more patient in the second study is considered a non-responder, resulting in 8 of 50 (16%) responders on fostamatinib (p = 0.256 vs.

When the data from both studies are combined, however, this difference is statistically significant (p=0.007).

Patients from the FIT studies were given the option to enroll in a long-term open-label extension study and receive treatment with fostamatinib, also a Phase 3 trial.

A total of 123 patients enrolled in this study.

All the patients who responded to fostamatinib in the FIT studies and enrolled in the long-term open-label extension study maintained a median platelet count of 106,500/uL at a median of 16 months.

In addition, there were 44 placebo non-responders that enrolled in the long-term open-label extension study, 41 of which patients had at least 12 weeks of follow-up.

Of those, 9 patients (22%) have achieved a prospectively defined stable platelet response, which is statistically significant (p=0.0078) and similar to the response rate fostamatinib achieved in the parent studies.

A stable response was defined as a patient achieving platelet counts of greater than 50,000/uL on more than 4 of the 6 visits between weeks 14 and 24, without rescue medication.

In the post-study analysis we performed, a clinically-relevant platelet response was defined to include patients achieving one platelet count over 50,000/uL during the first 12 weeks of treatment, in absence of rescue medication, but who did not otherwise meet the stable response criteria.

Once the platelet count of greater than 50,000/uL is achieved, a loss of response was defined as two consecutive platelet counts of less than 30,000/uL in any subsequent visits.

In the combined dataset of both stable and clinically-relevant platelet responders for the FIT studies, the response rate was 43% (43/101), compared to 14% (7/49) for placebo (p=0.0006).

In December 2019, we presented data at the 61st American Society of Hematology (ASH) Annual Meeting & Exposition held in Orlando, Florida, which included the post-hoc data analysis we conducted from a Phase 3 clinical program of TAVALISSE in adult patients with ITP.

In this analysis, 32 patients received fostamatinib as a second-line therapy, and 78% (25/32) achieved ≥1 platelet count of ≥50,000/µL (without rescue therapy).

The most frequent adverse events were gastrointestinal-related, and the safety profile of the product was consistent with prior clinical experience, with no new or unusual safety issues uncovered.

TAVALISSE was approved by the FDA in April 2018 for the treatment of chronic ITP in adult patients who have had an insufficient response to a previous treatment, and successfully launched in the U.S.

In January 2020, the EC granted our MAA in Europe for fostamatinib for the treatment of chronic ITP in adult patients who are refractory to other treatments.

Commercial launch activities, including sales and marketing

A significant portion of our business operations were related to our commercial launch activities for TAVALISSE.

Specifically, our marketing and sales efforts are focused on targeting hematologists and hematologist-oncologists in the United States, who manage chronic adult ITP patients.

We have a fully integrated commercial team consisting of sales, marketing, market access, and commercial operations functions.

Our sales team promotes TAVALISSE in the U.S.

wherein, in the ordinary course of the business, we use customary pharmaceutical company practices to market our products in the U.S.

and concentrate our efforts on

hematologists and hematologists-oncologists.

TAVALISSE is sold initially through third-party wholesale distribution and specialty pharmacy channels and group purchasing organizations before being ultimately prescribed to patients.

To facilitate our commercial activities in the U.S., we also enter into arrangements with various third-parties, including advertising agencies, market research firms and other sales-support-related services as needed.

We believe that our commercial team and distribution practices are adequate to ensure that our marketing efforts reach our target customers and deliver our products to patients in a timely and compliant fashion.

Also, to help ensure that all eligible patients in the U.S.

have appropriate access to TAVALISSE, we have established a comprehensive reimbursement and patient support program called Rigel One Care (ROC).

Through ROC, we provide co-pay assistance to qualified, commercially insured patients to help minimize out-of-pocket costs and provide free drug to uninsured or under-insured patients who meet certain clinical and financial criteria.

In addition, ROC is designed to provide comprehensive reimbursement support services, such as prior authorization support, benefits investigation and appeals support.

Competitive landscape for TAVALISSE

Our industry is intensely competitive and subject to rapid and significant technological change.

TAVALISSE is competing with other existing therapies.

In addition, a number of companies are pursuing the development of pharmaceuticals that target the same diseases and conditions that we are targeting.

For example, there are existing therapies and drug candidates in development for the treatment of ITP that may be alternative therapies to TAVALISSE.

Currently, corticosteroids remain the most common first line therapy for ITP, occasionally in conjunction with intravenous immuglobulin (IVIg) or anti-Rh(D) to help further augment platelet count recovery, particularly in emergency situations.

However, it has been estimated that frontline agents lead to durable remissions in only a small percentage of newly-diagnosed adults with ITP.

Moreover, concerns with steroid-related side effects often restrict therapy to approximately four weeks.

As such, many patients progress to persistent or chronic ITP, requiring other forms of therapeutic intervention.

In long-term treatment of chronic ITP, patients are often cycled through several therapies over time in order to maintain a sufficient response to the disease.

Other approaches to treat ITP are varied in their mechanism of action, and there is no consensus about the sequence of their use.

Options include splenectomy, thrombopoietin receptor agonists (TPO-RAs) and various immunosuppressants (such as rituximab).

The response rate criteria of the above-mentioned options vary, precluding a comparison of response rates for individual therapies.

Even with the above treatment options, a significant number of patients remain severely thrombocytopenic for long durations and are subject to risk of spontaneous or trauma-induced hemorrhage.

The addition of fostamatinib to the treatment options could be beneficial since it has a different mechanism of action than any of the therapies that are currently available.

Fostamatinib is a potent and relatively selective SYK inhibitor, and its inhibition of Fc receptors and B-cell receptors of signaling pathways make it a potentially broad immunomodulatory agent.

Other products in the U.S.

that are approved by the FDA to increase platelet production through binding and TPO receptors on megakaryocyte precursors include PROMACTA ®

(Novartis), Nplate ®

(Amgen, Inc.) and DOPTELET ®

(Dova Pharmaceuticals).

Fostamatinib in Global Markets

Fostamatinib in Europe/Turkey

Pursuant to the terms of the license agreement, Grifols has exclusive rights to commercialize, and non-exclusive rights to develop, fostamatinib in Europe and Turkey.

Grifols also received an exclusive option to expand the territory under its exclusive and non-exclusive licenses to include the Middle East, North Africa and Russia (including Commonwealth of Independent States).

We are responsible for performing and funding certain development activities for fostamatinib for ITP and AIHA and Grifols is responsible for all other development activities for fostamatinib in such territories.

We remain responsible for the manufacture and supply of fostamatinib for all development and commercialization activities under the agreement.

In December 2019, we entered into a Drug Product Purchase Agreement with Grifols wherein we agreed to supply and sell to Grifols at 30% mark up the drug product requested under an anticipated first and only purchase order until Grifols enters into a supply agreement directly with a third-party drug product manufacturer.

Under the terms of the agreement, we received an upfront cash payment of $30.0 million and will be eligible to receive regulatory and commercial milestones of up to $297.5 million, which included a $20.0 million non-refundable payment received in the first quarter of 2020, comprised of a $17.5 million payment for EMA approval of fostamatinib for the first indication and a $2.5 million creditable advance royalty payment due upon EMA approval of fostamatinib in the first indication.

We will also receive tiered royalty payments ranging from the mid-teens to 30% of net sales of fostamatinib in Europe and Turkey.

We retain the global rights to fostamatinib outside the Kissei, Grifols and Medison territories.

In January 2020, we received approval of our MAA for fostamatinib for the treatment of chronic ITP in adult patients who are refractory to other treatments.

With this approval, we received a $20.0 million payment as described above.

During the regulatory review process, Grifols began preparing to launch the product in the major European markets and is now able to begin the regulatory processes for marketing in the individual countries.

Fostamatinib in Japan/Asia

In October 2018, we entered into an exclusive license and supply agreement with Kissei to develop and commercialize fostamatinib in all current and potential indications in Japan, China, Taiwan and the Republic of Korea.

Kissei is a Japan-based pharmaceutical company addressing patients' unmet medical needs through its research, development and commercialization efforts, as well as through collaborations with partners.

Under the terms of the agreement, we received an upfront cash payment of $33.0 million, with the potential for an additional $147.0 million in development and commercial milestone payments, and will receive product transfer price payments in the mid to upper twenty percent range based on tiered net sales for the exclusive supply of fostamatinib.

Kissei receives exclusive rights to fostamatinib in ITP and all future indications in Japan, China, Taiwan, and the Republic of Korea.

Rigel retains the global rights to fostamatinib outside the Kissei, Grifols and Medison territories.

In September 2019, our collaboration partner, Kissei, initiated a Phase 3 trial in Japan of fostamatinib in adult patients with chronic ITP.

The efficacy and safety of orally administered fostamatinib will be assessed by comparing it with placebo in a randomized, double-blind study.

Japan has the third highest prevalence of chronic ITP in the world behind the U.S.

In February 2020, Kissei was granted orphan drug designation from the Japanese Ministry of Health, Labour and Welfare for R788 (fostamatinib) in chronic ITP.

Fostamatinib in Canada/Israel

In October 2019, we entered into an exclusive commercialization license agreements with Medison to commercialize fostamatinib in all potential indications in Canada and Israel.

Under the terms of the agreements, we will receive an upfront payment of $5.0 million with the potential for approximately $35.0 million in regulatory and commercial milestones.

In addition, we will receive royalty payments beginning at 30% of net sales.

Under our agreement with Medison for the Canada territory, we have the option to buy back all rights to the product upon regulatory approval in Canada for the indication of AIHA.

The buyback provision if exercised would require both parties to mutually agree on commercially reasonable terms for us to purchase back the rights, taking into account Medison’s investment and the value of the rights, among others.

Clinical Stage Programs

Fostamatinib—AIHA

Disease background .

AIHA is a rare, serious blood disorder where the immune system produces antibodies that result in the destruction of the body's own red blood cells.

Symptoms can include fatigue, shortness of breath, rapid heartbeat, jaundice or enlarged spleen.

While no medical treatments are currently approved for AIHA, physicians generally treat acute and chronic cases of the disorder with corticosteroids, other immuno-suppressants, or splenectomy.

Research has shown that inhibiting SYK with fostamatinib may reduce the destruction of red blood cells.

This disorder affects an estimated 45,000 Americans annually, for whom no approved treatment options currently exist.

Orally available fostamatinib program .

We completed our Phase 2 clinical trial, also known as the SOAR study in patients with warm AIHA.

This trial was an open-label, multi-center, two-stage study that evaluated the efficacy and safety of fostamatinib in patients with warm AIHA who had previously received treatment for the disorder but have relapsed.

The primary efficacy endpoint of this study was to achieve increased hemoglobin levels by week 12 of greater than 10 g/dL, and greater than or equal to 2 g/dL higher than baseline.

In November 2019, we announced updated data that in a Phase 2 open-label study of fostamatinib in patients with warm AIHA, data showed that 44% (11/25) of evaluable patients met the primary efficacy endpoint of a Hgb level >10 g/dL with an increase of ≥2 g/dL from baseline by week 24.

Including one late responder at week 30, the overall response rate was 48% (12/25).

Adverse events were manageable and consistent with those previously reported with fostamatinib.

In March 2019, we initiated our warm AIHA pivotal Phase 3 clinical study of fostamatinib, known as FORWARD study.

The clinical trial protocol calls for a placebo-controlled study of approximately 80 patients with primary or secondary warm AIHA who have failed at least one prior treatment.

The primary endpoint will be a durable Hgb response on at least 3 visits by week 24, defined as Hgb > 10 g/dL and > 2 g/dL increase from baseline and durability response, with the response not being attributed to rescue therapy.

In May 2019, we enrolled the first patient in the FORWARD study.

We have enrolled 41 patients to date.

Currently, the FORWARD study has over 80 active clinical trial sites established across 22 countries.

A vast majority of these sites have temporarily postponed new patient enrollment due to the ongoing COVID-19 pandemic.

As such, we are unable to provide guidance on the timing of enrollment completion.

Enrollment is expected to regain momentum as conditions permit across our globally diverse clinical sites.

In January 2018, the FDA granted our request for Orphan Drug designation for fostamatinib for the treatment of AIHA.

R835, an IRAK1/4 Inhibitor for Autoimmune and Inflammatory Diseases

Orally Available IRAK 1/4 Inhibitor Program.

During the second quarter of 2018, we selected R835, a proprietary molecule from our IRAK 1/4 preclinical development program, for human clinical trials.

This investigational candidate was an orally administered, potent and selective inhibitor of IRAK1 and IRAK4 that blocks inflammatory cytokine production in response to toll-like receptor (TLR) and the interleukin-1 (IL-1R) family receptor signaling.

TLRs and IL-1Rs play a critical role in the innate immune response and dysregulation of these pathways can lead to a variety of inflammatory conditions including psoriasis, rheumatoid arthritis, inflammatory bowel disease and gout (among others).

R835 prevents cytokine release in response to TLR and IL-1R activation in vitro.

R835 is active in multiple rodent models of inflammatory disease including psoriasis, arthritis, lupus, multiple sclerosis and gout.

Preclinical studies show that R835 inhibits both the IRAK1 and IRAK4 signaling pathways, which play a key role in inflammation and immune responses to tissue damage.

Dual inhibition of IRAK1 and IRAK4 allows for more complete suppression of pro-inflammatory cytokine release.

In October 2019, we announced results from a Phase 1 clinical trial of R835 in healthy subjects to assess safety, tolerability, PK and pharmacodynamics.

The Phase 1 study was a randomized, placebo-controlled, double-blind trial in 91 healthy subjects, ages 18 to 55.

The Phase 1 trial showed positive tolerability and PK data as well as established

proof-of-mechanism by demonstrating the inhibition of inflammatory cytokine production in response to a lipopolysaccharide (LPS) challenge.

R552, a RIP1 Inhibitor for Autoimmune and Inflammatory Diseases

Orally Available RIP1 Inhibitor Program.

R552, is a potent and selective inhibitor of RIP1.

RIP1 is believed to play a critical role in induction of necroptosis.

Necroptosis is a form of regulated cell death where the rupturing of cells leads to the dispersion of their inner contents, which activates immune responses and enhances inflammation.

Initial data from our ongoing Phase 1 in healthy volunteers suggests that R552 has an attractive PK and safety profile with a half-life of approximately 14 hours which may allow for once a day dosing.

In preclinical studies, R552 prevented joint and skin inflammation in a RIP1-mediated murine model of inflammation and tissue damage.

In addition, we intend to search for a central nervous system molecule to potentially advance into the clinic.

Partnered Clinical Programs

R548 (ATI-501 and ATI-502) - Aclaris

Aclaris is developing ATI-501 and ATI-502, an oral and topical janus kinase (JAK) 1/3 inhibitor discovered in Rigel’s laboratories.

ATI- 501 is being developed as an oral treatment for patients with alopecia areata (AA), including the more severe forms of AA that result in total scalp hair loss, known as alopecia totalis (AT), and total hair loss on the scalp and body, known as alopecia universalis (AU).

In December 2018, Aclaris also reported on the enrollment and/or results for a number of Phase 2 studies with ATI-502 for the topical treatment of AA and Vitiligo, including results from its AUATB-201 study.

In June 2019, Aclaris reported positive results from its Phase 2 clinical trial of ATI-502 topical (AGA-201) in patients with androgenetic alopecia (AGA), a condition commonly known as male/female-pattern baldness.

There were no treatment-related serious adverse events.

Later in June 2019, Aclaris reported that its Phase 2 clinical trial of ATI-502 topical (AA-201) in patients with AA did not meet its endpoints.

ATI-502 was observed to be generally well-tolerated.

Adverse events were primarily mild or moderate in severity.

No treatment-related serious adverse events were reported.

In July 2019, Aclaris announced that ATI-501 achieved statistically significant improvement over placebo in several measures of hair growth, including the primary endpoint and certain secondary endpoints of this trial.

ATI-501 was observed to be generally well-tolerated at all doses.

There were no serious adverse events reported.

All adverse events (AEs) were mild or moderate in severity and rates of AEs were similar across all groups.

No thromboembolic events were observed in the trial.

Aclaris is currently seeking a development and commercialization partner for ATI-501 and ATI-502 as potential treatments for alopecia.

BGB324 - BerGenBio

BerGenBio is conducting Phase 1/2 studies with BGB324 (bemcentinib), a first-in-class selective AXL kinase inhibitor, as a single agent in relapsed acute myeloid leukemia (AML) and myelodysplastic syndrome (MDS);

and in combination with erlotinib (Tarceva®) in advanced (EGFR-positive) non-small-cell lung carcinoma .

BerGenBio is also conducting Phase 2 studies with BGB324 in combination with KEYTRUDA®

(pembrolizumab) in non-small cell adenocarcinoma of the lung and triple negative breast cancer in collaboration with another company.

In November 2019, BerGenBio showed that the primary endpoint of Overall Response Rate (ORR) had been met in Cohort A of its Phase II clinical trial evaluating bemcentinib in combination with KEYTRUDA as a potential new treatment regimen for previously treated advanced non-small cell lung cancer (NSCLC).

The primary efficacy endpoint requires that at least 25% evaluable patients achieve a clinical response when treated with the novel drug combination,

defined as either complete or partial response, as measured by Response Evaluation Criteria in Solid Tumors (RECIST).

A secondary endpoint of median Progression Free Survival (mPFS) reported significant 3-fold improvement in AXL positive vs negative patients, as defined by BerGenBio’s composite AXL tumor-immune score.

In December 2019, BerGenBio reported results in combination with low-dose cytarabine (LDAC) in elderly AML patients.

The bemcentinib-LDAC combination was safe and well tolerated in elderly AML patients.

The overall response rate and duration surpass historical benchmarks and compare favorably to other LDAC combinations.

In April 2020, BerGenBio announced that bemcentinib has been selected as the first potential treatment to be fast-tracked in a new UK national multi-center randomized Phase II clinical trial initiative to potentially receive an early indication of bemcentinib’s effectiveness in treating the most vulnerable patients with COVID-19.

DS-3032 - Daiichi

DS-3032 is an investigational oral selective inhibitor of the murine double minute 2 (MDM2) protein currently being investigated by Daiichi in three Phase 1 clinical trials for solid and hematological malignancies including AML, acute lymphocytic leukemia, chronic myeloid leukemia in blast phase, lymphoma and MDS.

Preliminary safety and efficacy data from a Phase 1 study of DS-3032 suggests that DS-3032 may be a promising treatment for hematological malignancies including relapsed/refractory AML and high-risk MDS.

Evaluation of additional dosing schedules of DS-3032 is underway and combination studies with fostamatinib are currently being conducted by Daiichi.

AZ-D0449 –

AZ is currently conducting a Phase 1 study in healthy volunteers and patients with mild asthma to investigate the safety, anti-inflammatory effect of inhaled AZ-D0449.

The study, which follows the single and multiple ascending doses, is currently recruiting patients.

Research/Preclinical Programs

We are conducting proprietary research in the broad disease areas of inflammation/immunology, immuno-oncology and cancers.

Within these disease areas, our researchers are investigating mechanisms of action as well as screening compounds against potential novel targets and optimizing those leads that appear to have the greatest potential.

Commercialization and Sponsored Research and License Agreements

We conduct research and development programs independently and in connection with our corporate collaborators.

As of March 31, 2020, we are a party to collaboration agreements with ongoing performance obligations with Kissei Pharmaceutical Co., Ltd.

(Kissei) for the development and commercialization of fostamatinib in Japan, China, Taiwan and the Republic of Korea and with Grifols, S.A.

(Grifols) to commercialize fostamatinib in all indications, including chronic ITP and AIHA, in Europe and Turkey and with Medison Pharma Ltd.

(Medison) to commercialize fostamatinib in all indications, including chronic ITP and AIHA in Canada and Israel.

Total future contingent payments to us under all of these agreements could exceed $611.7 million if all potential product candidates achieved all of the payment

triggering events under all of our current agreements (based on a single product candidate under each agreement).

This estimated future contingent amount does not include any estimated royalties that could be due to us if the partners successfully commercialize any of the licensed products.

Future events that may trigger payments to us under the agreements are based solely on our partners’

future efforts and achievements of specified development, regulatory and/or commercial events.

Due to the COVID-19 pandemic, the commercial launch of fostamatinib in Europe by our partner, Grifols, could be delayed or undertaken in a virtual manner.

In addition, our partner, Kissei is currently conducting a Phase 3 clinical trial for fostamatinib in ITP in Japan the timing and completion of which could be delayed due to the COVID-19 pandemic.

At this time, however, we cannot fully forecast the scope of impacts that the COVID-19 pandemic may have under these partnerships.

Grifols License Agreement

In January 2019, we entered into an exclusive license agreement with Grifols to commercialize fostamatinib in all indications, including chronic ITP and AIHA, in Europe and Turkey.

Under the agreement, we received an upfront payment of $30.0 million, with the potential for $297.5 million in total regulatory and commercial milestones, which included a $20.0 million payment upon approval from the European Medicines Agency (EMA) for fostamatinib in chronic ITP as discussed below.

We will also receive stepped double-digit royalty payments based on tiered net sales which may reach 30% of net sales.

In return, Grifols will receive exclusive rights to fostamatinib in human diseases, including chronic ITP and AIHA, in Europe and Turkey.

The agreement also requires us to conduct the Phase 3 trial in AIHA in the U.S.

In January 2020, we received European Commission’s approval of our MAA for fostamatinib for the treatment of chronic immune thrombocytopenia in adult patients who are refractory to other treatments.

With this approval, we received in February 2020 a $20.0 million non-refundable payment, which is comprised of a $17.5 million payment for EMA approval of fostamatinib for the first indication and a $2.5 million creditable advance royalty payment, based on the terms of our collaboration agreement with Grifols.

The above milestone payment will be allocated to the distinct performance obligation in the collaboration agreement with Grifols.

We accounted for this agreement under ASC 606 and identified the following distinct performance obligations at inception of the agreement:

(a) granting of the license, (b) performance of research and regulatory services related to our ongoing long-term open-label extension study on patients with ITP, and (c) performance of research services related to our Phase 3 study in AIHA.

In addition, we will enter into a commercial supply agreement for the licensed territories.

We concluded each of these performance obligations is distinct.

We based our assessment on the following:

(i) our assessment that Grifols can benefit from the license on its own by developing and commercializing the underlying product using its own resources, and (ii) the fact that the manufacturing services are not highly specialized in nature and can be performed by other vendors.

Upon execution of our agreement with Grifols, we determined that the upfront fee of $5.0 million, which is the non-refundable portion of the $30.0 million upfront fee, represented the transaction price.

In the first quarter of 2020, we revised the transaction price to include the $25.0 million of the upfront payment that is no longer refundable under our agreement and the $20.0 million payment received that is no longer constrained.

We allocated the updated transaction price to the distinct performance obligations in our collaboration agreement based on our best estimate of the relative standalone selling price as follows:

(a) for the license, we estimated the standalone selling price using the adjusted market assessment approach to estimate its standalone selling price in the licensed territories;

(b) for the research and regulatory services, we estimated the standalone selling price using the cost plus expected margin approach.

As a result of the adjusted transaction price, adjustments are recorded on a cumulative catch-up basis, and recorded as part of contract revenues from collaborations in the first quarter of 2020.

The remaining future variable consideration of $277.5 million related to future regulatory and commercial milestones were fully constrained due to the fact that it was probable that a significant reversal of cumulative revenue would occur, given the inherent uncertainty of success with these future milestones.

We will recognize revenues related

the research and regulatory services throughout the term of the respective clinical programs using the input method.

For sales-based milestones and royalties, we determined that the license is the predominant item to which the royalties or sales-based milestones relate.

We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

Deferred revenues as of March 31, 2020 was $2.2 million.

Kissei License Agreement

Kissei is responsible for performing and funding all development activities for fostamatinib in the above-mentioned territories .

We received an upfront cash payment of $33.0 million, with the potential for up to an additional $147.0 million in development, regulatory and commercial milestone payments , and will receive mid to upper twenty percent, tiered, escalated net sales-based payments for the supply of fostamatinib.

Under the agreement, we granted Kissei the license rights to fostamatinib in the territories above and are obligated to supply Kissei with drug product for use in clinical trials and pre-commercialization activities.

We are also responsible for the manufacture and supply of fostamatinib for all future development and commercialization activities under the agreement.

We accounted for this agreement under ASC 606 and identified the following distinct performance obligations at inception of the agreement:

(a) granting of the license, (b) supply of fostamatinib for clinical use and (c) material right associated with discounted fostamatinib that are supplied for use other than clinical or commercial.

In addition, we will provide commercial product supply if the product is approved in the licensed territory.

We concluded that each of these performance obligations is distinct.

We based our assessment on the following:

(i) our assessment that Kissei can benefit from the license on its own by developing and commercializing the underlying product using its own resources and (ii) the fact that the manufacturing services are not highly specialized in nature and can be performed by other vendors.

Moreover, we determined that the upfront fee of $33.0 million represented the transaction price and was allocated to the performance obligations based on our best estimate of the relative standalone selling price as follows:

(a) for the license, we estimated the standalone selling price using the adjusted market assessment approach to estimate its standalone selling price in the licensed territories;

(b) for the supply of fostamatinib and the material right associated with discounted fostamatinib, we estimated the standalone selling price using the cost plus expected margin approach.

Variable consideration of $147.0 million related to future development and regulatory milestones was fully constrained due to the fact that it was probable that a significant reversal of cumulative revenue would occur, given the inherent uncertainty of success with these future milestones.

We will recognize revenues related to the supply of fostamatinib and material right upon delivery of fostamatinib to Kissei.

For sales-based milestones and royalties, we determined that the license is the predominant item to which the royalties or sales-based milestones relate to.

We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur.

We did not recognize any revenues during the three months ended March 31, 2020.

Other license agreements

In October 2019, we entered into two exclusive commercial and license agreements with Medison for the commercialization of fostamatinib for chronic ITP in Israel and in Canada pursuant to which we received a $5.0 million upfront payment under our agreement in Canada.

We accounted for the agreement made with an upfront payment under ASC 606 and identified the following combined performance obligations at inception of the agreement:

(a) granting of the license and (b) obtaining regulatory approval in Canada of fostamatinib in ITP.

We determined that the non-refundable upfront fee of $5.0 million represented the transaction price.

However, under the agreement, we have the option to buy back all rights to the product in Canada within six months that we obtain regulatory approval in Canada of the product for the indication of AIHA.

The buyback option precludes us from transferring control of the license to Medison under ASC 606.

We believe that the buyback provision, if exercised, will require us to repurchase the license at an amount equal to or more than the upfront $5.0 million.

As such this arrangement is accounted for as a financing arrangement.

Accrued interest related to this financing arrangement as of March 31, 2020 is immaterial.

Results of Operations

Three Months Ended March 31, 2020

Three Months Ended

(in thousands)

Product sales, net

Contract revenues from collaborations

Total revenues

The following table summarizes revenues from each of our customers and collaboration partners who individually accounted for 10% or more of our total revenues (as a percentage of total revenues):

Three Months Ended

ASD Healthcare and Oncology Supply

McKesson Specialty Care Distribution Corporation

Product sales during the three months ended March 31, 2020 and 2019 related to sales of TAVALISSE in the U.S.

and represent increasing sales volume since we launched in May 2018.

For the three months ended March 31, 2020, the increase in product sales was mainly due to TAVALISSE sales volume increase of 37% compared to the same period in 2019, as well as increases in the selling price of TAVALISSE.

TAVALISSE has been prescribed across all lines of therapy in steroid refractory patients in ITP.

It has been utilized by an increasing broad base of prescribers and community physicians, with growing early line use and continued strong refill rates.

We recognize product sales, net of discounts and allowances, that are described in “Note 3”

to our “Notes to Condensed Financial Statements”

contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Contract revenues from collaborations of $43.1 million in the first quarter of 2020 relate to revenue from the upfront fee we previously received from Grifols in the first quarter of 2019, as well as the milestone payment received from Grifols in the first quarter of 2020 upon EC approval of the MAA for fostamatinib in Europe.

For the same period in 2019, we recognized contract revenues of $4.6 million primarily from the $4.4 million of the $30.0 million upfront fee recognized as revenue upon delivery of license rights to Grifols and our performance of certain research and development services.

Our potential future revenues may include product sales from TAVALISSE, payments from our current partners and from new partners with whom we enter into agreements in the future, if any, the timing and amount of which is unknown at this time.

W e cannot currently fully forecast the extent of the impacts that the COVID-19 pandemic may have on our product sales.

As of March 31, 2020, we had deferred revenues of $3.6 million which we will recognize as revenue upon satisfaction of our remaining performance obligations under our collaboration agreements with Grifols and Kissei.

Cost of Product Sales

Three Months Ended

(in thousands)

Cost of product sales

We recognized $155,000 and $107,000 in cost of product sales during the three months ended March 31, 2020 and 2019, respectively, related to our product, TAVALISSE.

Prior to the FDA approval, manufacturing and related costs were charged to research and development expense.

Therefore, these costs were not capitalized and as a result, are not fully reflected in the costs of product sales during the three months ended March 31, 2020 and 2019.

We will continue to have a lower cost of product sales that excludes the cost of the active pharmaceutical product that was produced prior to FDA approval until we sell TAVALISSE that includes newly manufactured API.

We expect that this will be the case for the near-term and as a result, our cost of product sales will be less than we anticipate it will be in future periods.

As we produce TAVALISSE in the future, our inventory cost in the Balance Sheet and Cost of Product Sales will increase reflecting the full cost of manufacturing.

Research and Development Expense

Three Months Ended

(in thousands)

Research and development expense

Stock-based compensation expense included in research and development expense

The increase in research and development expense for the three months ended March 31, 2020, compared to the same period in 2019, was primarily due to the $5.0 million ramp up in research and development cost for our on-going Phase 3 study in warm AIHA, Phase 1 study of our RIP1 inhibitor program and Phase 1 study in our IRAK 1/4 inhibitor program, as well as consultants and outside services of $300,000 and personnel-related expenses of $100,000 partially offset by a decrease of $200,000 in various third-party costs.

We expect our research and development expense in the remainder of 2020 will increase as we continue our activities in our Phase 3 warm AIHA studies and RIP1 and IRAK 1/4 programs.

Although a vast majority of the clinical trial sites for our FORWARD study for warm AIHA have temporarily postponed new patient enrollment due to the ongoing COVID-19 pandemic, we expect to continue to incur expenses in managing the study and expenses related to measures to implement remote and virtual approaches, including remote patient monitoring and other alternative course of actions to maintain our study in warm AIHA.

W e cannot currently fully forecast the scope of impacts that the COVID-19 pandemic may have on our ability to continue to initiate trial sites, continue to treat patients enrolled in our trials, enroll and assess new patients, supply study drug, obtain complete data points in accordance with the study protocol, and overall impact on clinical study results including the timing thereof.

Our research and development expenditures include costs related to preclinical and clinical trials, scientific personnel, supplies, equipment, consultants, sponsored research, stock-based compensation, and allocated facility costs.

We do not track fully burdened research and development costs separately for each of our drug candidates.

We review our research and development expenses by focusing on three categories:

research, development, and other.

Our research team is focused on creating a portfolio of product candidates that can be developed into small molecule therapeutics in our own proprietary programs or with potential collaborative partners and utilizes our robust discovery engine to rapidly discover and validate new product candidates in our focused range of therapeutic indications.

“Research”

expenses relate primarily to personnel expenses, lab supplies, fees to third party research consultants and compounds.

Our development group leads the implementation of our clinical and regulatory strategies and prioritizes disease indications in which our compounds may be studied in clinical trials.

“Development”

expenses relate primarily to clinical trials, personnel expenses, costs related to the submission and management of our NDA, lab supplies and fees to third party research consultants.

“Other”

expenses primarily consist of allocated facilities costs and allocated stock-based compensation expense relating to personnel in research and development groups.

In addition to reviewing the three categories of research and development expenses described in the preceding paragraph, we principally consider qualitative factors in making decisions regarding our research and development programs, which include enrollment in clinical trials and the results thereof, the clinical and commercial potential for our drug candidates and competitive dynamics.

We also make our research and development decisions in the context of our overall business strategy, which includes the evaluation of potential collaborations for the development of our drug candidates.

We do not have reliable estimates regarding the timing of our clinical trials.

Preclinical testing and clinical development are long, expensive and uncertain processes.

In general, biopharmaceutical development involves a series of steps, beginning with identification of a potential target and including, among others, proof of concept in animals and Phase 1, 2 and 3 clinical trials in humans.

Significant delays in clinical testing could materially impact our product development costs and timing of completion of the clinical trials.

We do not know whether planned clinical trials will begin on time, will need to be halted or revamped or will be completed on schedule, or at all.

Clinical trials can be delayed for a variety of reasons, including delays in obtaining regulatory approval to commence a trial, delays from scale up, delays in reaching agreement on acceptable clinical trial agreement terms with prospective clinical sites, delays in obtaining institutional review board approval to conduct a clinical trial at a prospective clinical site or delays in recruiting subjects to participate in a clinical trial.

We currently do not have reliable estimates of total costs for a particular drug candidate to reach the market.

Our potential products are subject to a lengthy and uncertain regulatory process that may involve unanticipated additional clinical trials and may not result in receipt of the necessary regulatory approvals.

Failure to receive the necessary regulatory approvals would prevent us from commercializing the product candidates affected.

In addition, clinical trials of our potential products may fail to demonstrate safety and efficacy, which could prevent or significantly delay regulatory approval.

The following table presents our total research and development expense by category (in thousands).

Three Months Ended

From January 1, 2007*

to March 31, 2020

* We started tracking research and development expense by category on January 1, 2007.

“Other”

expenses mainly represent allocated facilities costs of approximately $1.5 million and $1.6 million for the three months ended March 31, 2020 and 2019, respectively and allocated stock-based compensation expense of approximately $694,000 and $787,000 for the three months ended March 31, 2020 and 2019, respectively.

For the three months ended March 31, 2020 and 2019, a major portion of our total research and development expense was associated with our AIHA, RIP1, and IRAK programs, salaries of our research and development personnel and allocated facilities costs.

Selling, General and Administrative Expense

Three Months Ended

(in thousands)

Selling, general and administrative expense

Stock-based compensation expense included in selling, general and administrative expense

The decrease in selling, general and administrative expense for the three months ended March 31, 2020 compared to the same period in 2019, was primarily due to reduction of $836,000 in stock-based compensation expense, $625,000 of costs related to our customer-facing team, consultants and outside services, and $500,000 of legal fees, partially offset by an increase of $400,000 for various expense items.

We expect our selling, general and administrative expense to increase as we continue to expand our commercial activities for TAVALISSE.

As discussed above, resources have been deployed to enable our field-based employees to continue to engage remotely with healthcare providers during the ongoing COVID-19 pandemic.

These virtual engagements have enabled our field team to support existing prescribers as well as partner with new prescribers to identify appropriate patients for TAVALISSE.

However, we are not currently able to fully forecast the scope of impacts that the COVID-19 pandemic may have on our commercial activities and sales of TAVALISSE.

Interest Income

Three Months Ended

(in thousands)

Interest income

Interest income results from our interest-bearing cash and investment balances.

The decrease in interest income for the three months ended March 31, 2020 as compared to the same period in 2019 was primarily due to decrease in yield on our investments, as well as our average cash and investment balances.

Interest Expense

Three Months Ended

(in thousands)

Interest expense

Interest expense for the three months ended March 31, 2020 was related to the outstanding balance on our term loan from Midcap.

We expect interest expense to increase given the additional tranche of $10.0 million funded in May 2020.

Critical Accounting Policies and the Use of Estimates

Our discussion and analysis of our financial condition and results of operations is based upon our financial statements, which have been prepared in accordance with U.S.

generally accepted accounting principles (U.S.

The preparation of these financial statements requires us to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

On an ongoing basis, we evaluate our estimates, including any potential impact of the COVID-19 pandemic to the carrying values of our assets and liabilities, those related to revenue recognition on product sales and collaboration agreements, recoverability of our assets, including accounts receivables and inventories, stock-based compensation, the probability of achievement of corporate performance-based milestone for our performance-based stock option awards, impairment issues, the estimated useful life of assets, estimated accruals, particularly research and development accruals, and estimates related our valuation of the operating lease right-of-use asset and lease liability, including the incremental borrowing rate used.

We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances, the results of which form the basis for making judgments about the carrying values of assets and liabilities that are not readily apparent from other sources.

Actual results may differ from these estimates under different assumptions or conditions.

We believe that there have been no significant changes in our critical accounting policies and estimates disclosed in our Annual Report on Form 10-K for the year ended December 31, 2019, as filed with the SEC.

Recent Accounting Pronouncements

For a discussion of new accounting pronouncements, see “

Note 3”

to our “Notes to Condensed Financial Statements”

contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Liquidity and Capital Resources

Cash Requirements

From inception, we have financed our operations primarily through sales of equity securities, contract payments under our collaboration agreements and from sales of TAVALISSE beginning in May 2018.

We have consumed substantial amounts of capital to date as we continue our research and development activities, including preclinical studies and clinical trials and our ongoing commercial launch of TAVALISSE.

As of March 31, 2020, we had approximately $95.9 million in cash, cash equivalents and short‑term investments, as compared to approximately $98.1 million as of December 31, 2019, a decrease of approximately $1.7 million.

The decrease was primarily attributable to payments associated with funding our operating expenses during the three months ended March 31, 2020.

In September 2019, we entered into a $60.0 million term loan credit facility with MidCap.

$10.0 million was funded to us in an initial tranche.

We accessed the second $10.0 million tranche from our term loan credit facility with MidCap which we received in May 2020.

The facility provides the company with access to an additional $40.0 million which is subject to the achievement of certain customary conditions.

In January 2019, we entered into an exclusive commercialization license agreement with Grifols to commercialize fostamatinib for the treatment, palliation, or prevention of human diseases, including chronic or persistent ITP, AIHA, and IgAN in Europe and Turkey, in which we received an upfront payment of $30.0 million, with the potential for $297.5 million in payments related to regulatory and commercial milestones, which includes a $20.0 million payment received in February 2020, comprised of a $17.5 million for EMA approval of fostamatinib for the first indication and a $2.5 million creditable advance royalty payment due upon EMA approval of fostamatinib in the first indication in chronic ITP.

We will also receive stepped double-digit royalty payments based on tiered net sales which may reach 30% of net sales of fostamatinib.

In return, Grifols receives

exclusive rights to fostamatinib in human diseases, including chronic ITP and AIHA in Europe and Turkey.

We retain the global rights to fostamatinib outside the Kissei, Grifols and Medison territories.

In December 2014, we entered into a sublease agreement with an unrelated third party to occupy a portion of our research and office space.

This sublease agreement was amended in February 2017 to sublease additional research and office space.

Effective July 2017, the sublease agreement was amended primarily to extend the term of the sublease through January 2023.

During the three months ended March 31, 2020, we received approximately $1.3 million of sublease income and reimbursements.

We expect to receive approximately $12.9 million in future sublease income (excluding our subtenant’s share of facility’s operating expenses) through January 2023.

We believe that our existing capital resources will be sufficient to support our current and projected funding requirements, including the ongoing commercial launch of TAVALISSE in the U.S., through at least the next 12 months from the filing date of this report.

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

Because of the numerous risks and uncertainties associated with commercial launch, the development of our product candidates and other research and development activities, we are unable to estimate with certainty our future product revenues, our revenues from our current and future collaborative partners, the amounts of increased capital outlays and operating expenditures associated with our current and anticipated clinical trials and other research and development activities.

Our operations will require significant additional funding for the foreseeable future.

Unless and until we are able to generate a sufficient amount of product, royalty or milestone revenue, we expect to finance future cash needs through public and/or private offerings of equity securities, debt financings and/or collaboration and licensing arrangements, and to a much lesser extent through the proceeds from exercise of stock options and interest income earned on the investment of our excess cash balances and short-term investments.

However, the COVID-19 pandemic continues to rapidly evolve and has already resulted in a significant disruption of global financial markets.

Our ability to raise additional capital may be adversely impacted by potential worsening of global economic conditions and the recent disruptions to, and volatility in, the credit and financial markets in the U.S.

and worldwide resulting from the pandemic.

If the disruption persists and deepens, we could experience an inability to access additional capital, which could in the future negatively affect our capacity for certain corporate development transactions or our ability to make important, opportunistic investments.

In addition, any additional capital we raise by issuing equity securities, our stockholders could at that time experience substantial dilution.

Our current credit facility with MidCap and any debt financing that we are able to obtain in the future may involve operating covenants that may restrict our business.

To the extent that we raise additional funds through collaboration and licensing arrangements, we may be required to relinquish some of our rights to our technologies or product candidates or grant licenses on terms that are not favorable to us.

Our future funding requirements will depend upon many factors, including, but not limited to:

the ongoing costs to commercialize TAVALISSE for the treatment of ITP in the U.S., or any other future product candidates, if any such candidate receives regulatory approval for commercial sale;

the progress and success of our clinical trials and preclinical activities (including studies and manufacture of materials) of our product candidates conducted by us;

our ability to meet operating covenants under our current and future credit facilities, if any;

our ability to enter into partnering opportunities across our pipeline within and outside the U.S.;

the costs and timing of regulatory filings and approvals by us and our collaborators;

the progress of research and development programs carried out by us and our collaborative partners;

any changes in the breadth of our research and development programs;

the ability to achieve the events identified in our collaborative agreements that may trigger payments to us from our collaboration partners;

our ability to acquire or license other technologies or compounds that we may seek to pursue;

our ability to manage our growth;

competing technological and market developments;

the costs and timing of obtaining, enforcing and defending our patent and other intellectual property rights;

expenses associated with any unforeseen litigation, including any arbitration and securities class action lawsuits.

Insufficient funds may require us to delay, scale back or eliminate some or all of our commercial efforts and/or research or development programs, to lose rights under existing licenses or to relinquish greater or all rights to product candidates at an earlier stage of development or on less favorable terms than we would otherwise choose or may adversely affect our ability to operate as a going concern.

For the three months ended March 31, 2020 and 2019, we maintained an investment portfolio primarily in money market funds, U.

treasury bills, government‑sponsored enterprise securities, and corporate bonds and commercial paper.

Cash in excess of immediate requirements is invested with regard to liquidity and capital preservation.

Wherever possible, we seek to minimize the potential effects of concentration and degrees of risk.

We will continue to monitor the impact of the changes in the conditions of the credit and financial markets to our investment portfolio and assess if future changes in our investment strategy are necessary.

Cash Flows from Operating, Investing and Financing Activities

Three Months Ended March 31,

(in thousands)

Net cash provided by (used in):

Operating activities

Investing activities

Financing activities

Net (decrease) increase in cash and cash equivalents

Net cash used in operating activities was approximately $3.1 million for the three months ended March 31, 2020, compared to approximately $569,000 for the three months ended March 31, 2019.

Net cash used in operating activities for the three months ended March 31, 2020 was related to our research and development programs and our ongoing commercialization of TAVALISSE, partially offset by the $20.0 million payment received from Grifols and proceeds from sale of TAVALISSE.

Net cash used in operating activities for the three months ended March 31, 2019 was related to our research and development programs and our commercialization of TAVALISSE partially offset by the $30.0 million upfront fee received from Grifols.

The timing of cash requirements may vary from period to period depending on our ongoing commercial activities related to TAVALISSE , timing of collaboration revenues, our ability to access additional funds from our credit facility with MidCap, our research and development activities, including our planned preclinical and clinical trials, and future requirements to establish commercial capabilities for any products that we may develop.

Net cash provided by investing activities was approximately $24.5 million for the three months ended March 31, 2020, compared to net cash used in investing activities of approximately $1.1 million for the three months ended March 31, 2019.

Net cash provided by investing activities during the three months ended March 31, 2020 related to net

maturities of short-term investments, partially offset by capital expenditures.

Net cash used in investing activities during the three months ended March 31, 2019 related to net purchases of short-term investments and capital expenditures.

Capital expenditures were approximately $607,000 for the three months ended March 31, 2020, compared to approximately $377,000 for the same period in 2019.

Net cash provided by financing activities was approximately $1.3 million for the three months ended March 31, 2020, compared to approximately $16,000 for the three months ended March 31, 2019.

Net cash provided by financing activities for the three months ended March 31, 2020 and 2019 related to the proceeds from exercise of stock options.

Off-Balance Sheet Arrangements

As of March 31, 2020, we had no off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of Regulation S-K under the Exchange Act).

Contractual Obligations

We conduct our commercial activities and research and development programs internally and through third parties that include, among others, arrangements with collaboration partners, vendors, consultants, contract research organizations (CRO) and universities.

We have contractual arrangements with these parties, however our contracts with them are cancelable generally on reasonable notice within one year and our obligations under these contracts are primarily based on services performed.

We do not have any purchase commitments under any collaboration arrangements.

We have agreements with certain clinical research organizations to conduct our clinical trials and with third parties relative to our commercialization of TAVALISSE.

The timing of payments for any amounts owed under the respective agreements will depend on various factors including, but not limited to, patient enrollment and other progress of the clinical trial and various activities related to commercial launch.

We will continue to enter into contracts in the normal course of business with various third parties who support our clinical trials, support our preclinical research studies, and provide other services related to our operating purposes as well as our commercial launch of TAVALISSE.

We can terminate these agreements at any time, and if terminated, we would not be liable for the full amount of the respective agreements.

Instead, we will be liable for services provided through the termination date plus certain cancellation charges, if any, as defined in each of the respective agreements.

In addition, these agreements may, from time to time, be subjected to amendments as a result of any change orders executed by the parties.

As of September 30, 2019, we do not have material contractual commitments with respect to the arrangements discussed above, but we had the following contractual commitments related to our facilities lease and credit facility:

Payment Due By Period

(in thousands)

Facilities lease (1)

Credit facility with MidCap (2)

In December 2014, we entered into a sublease agreement, which was amended in 2017, with an unrelated third party to lease up a portion of the research and office space.

The facilities lease obligations above do not include the sublease income of approximately $12.9 million which we expect to receive over the term of the sublease through January 2023.

In September 2019, we entered into a Credit Agreement with MidCap.

We received funding for the first tranche of $10.0 million.

In March 2020, we accessed the second $10.0 million tranche from our term loan credit facility with MidCap which we received in May 2020 and is not included in the above table.

Under the agreement, we are obligated to make interest payments at an annual rate of one-month LIBOR plus 5.65% for

the first 24 months and the interest plus principal amortization for the next 36 months.

We will be obligated to pay administrative fees annually and a final fee upon final payment.

We are also subject to claims related to the patent protection of certain of our technologies, as well as purported securities class action lawsuit, other litigations, and other contractual agreements.

We are required to assess the likelihood of any adverse judgments or outcomes to these matters as well as potential ranges of probable losses.

A determination of the amount of reserves required, if any, for these contingencies is made after careful analysis of each individual matter.

Quantitative and Qualitative Disclosures About Market Risk

During the three months ended March 31, 2020, there were no material changes to our market risk disclosures as set forth in Part II, Item 7A, “Quantitative and Qualitative Disclosures About Market Risk,”

of our Annual Report on Form 10-K for the year ended December 31, 2019.

On August 4, 2020, we entered into an Open Market Sale Agreement SM (Sales Agreement) with Jefferies LLC (Jefferies), as our sales agent, pursuant to which, from time to time, we may sell through Jefferies, shares of our common stock having an aggregate offering price of up to $ 65.0 million (Shares) in “at-the-market” offerings as defined in Rule 415 under the Securities Act of 1933, as amended (Securities Act), and are registered under the Securities Act.

We pay a commission of up to 3 % of the gross proceeds of any Shares sold pursuant to the Sales Agreement.

We and Jefferies may each terminate the Sales Agreement at any time upon prior written notice.

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

What changed 10-Q

Item 1. Financial Statements