What changed in this filing

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Item 2. Management’s Discussion and Analysis

2021-05-05 compared with 2020-11-05 · 222 added, 336 removed, 354 unchanged (61% of the section changed)

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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, 2020.

Our financial results for the three and nine months ended September 30, 2020 are not necessarily indicative of results that may occur in future interim periods or for the full fiscal year.

Our financial results for the three months ended March 31, 2021 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.

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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.

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

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

Our first product approved by the United States Food and Drug Administration (FDA) is TAVALISSE ® (fostamatinib disodium hexahydrate) tablets, 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 product has been approved by the European Commission (EC) 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).

Fostamatinib is currently being studied in a Phase 3 trial for the treatment of warm autoimmune hemolytic anemia (AIHA);

a NIH/NHLBI-Sponsored Phase 2 trial for the treatment of hospitalized COVID-19 patients, in collaboration with Inova ® Health System;

and a Phase 2 trial for the treatment of COVID-19 pneumonia being conducted by Imperial College London.

Additionally, we plan to study fostamatinib in a Phase 3 clinical trial for the treatment of hospitalized COVID-19 patients which is expected to launch in the fourth quarter of 2020.

Other clinical trials include an ongoing Phase 1 study of R835, a proprietary molecule from its interleukin receptor associated kinase (IRAK) inhibitor program;

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

In addition, we have product candidates in clinical development with partners AstraZeneca (AZ), BerGenBio ASA (BerGenBio), and Daiichi Sankyo (Daiichi).

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

The product is also commercially available in Europe (TAVLESSE) and Canada (TAVALISSE) for the treatment of chronic immune thrombocytopenia in adult patients.

Fostamatinib is currently being studied in a Phase 3 trial for the treatment of warm autoimmune hemolytic anemia (wAIHA);

a Phase 3 clinical trial for the treatment of hospitalized patients with COVID-19, a National Institutes of Health (NIH)/National Heart, Lung, and Blood Institute (NHLBI)-sponsored Phase 2 trial for the treatment of hospitalized patients with COVID-19, in collaboration with Inova Health System;

and a Phase 2 trial for the treatment of COVID-19 being conducted by Imperial College London.

Our other clinical programs include our interleukin receptor-associated kinase (IRAK) inhibitor program and a receptor-interacting serine/threonine-protein kinase (RIP1) inhibitor program in clinical development with partner Eli Lilly and Company (Lilly).

In addition, we have product candidates in clinical development with partners AstraZeneca AB (AZ), BerGenBio ASA (BerGenBio) and Daiichi Sankyo (Daiichi).

Business Update

In the first nine months of 2020, net product sales of TAVALISSE increased by 47% year over year to $43.9 million.

During the first nine months, our sales were negatively impacted by the COVID-19 pandemic as further discussed below.

Due to the evolving effect of the 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.

Post-hoc data analysis from our Phase 3 clinical program, which highlights the potential benefit of using TAVALISSE in earlier lines of therapy in adult patients with chronic ITP was published in the July 2020 British Journal of Haematology.

TAVALISSE IN ITP

In the first quarter of 2021, net product sales of TAVALISSE was $12.4 million which represented a decrease of 2% compared to same period in 2020.

During the quarter, we experienced lower than anticipated sales of TAVALISSE due to continuing impacts of the COVID-19 pandemic as well as the typical first quarter reimbursement issues such as the resetting of co-pays and the Medicare donut hole, along with physician and patient access issues created by the COVID-19 pandemic.

Incrementally, our net product sales were negatively impacted by the decrease in level of inventories remaining at our distribution channels.

Due to the evolving effects of the COVID-19 pandemic, we continue to deploy resources to enable our field-based employees to continue to engage virtually with health care providers.

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

We also conducted market research with chronic ITP (cITP) prescribers in 2020 to understand the impact of COVID on cITP management.

More than half of respondents reported that COVID had an impact on their management of cITP, and about a third of respondents anticipate a surge of patients post-COVID.

This is because clinicians have found it challenging to both start a therapy, and switch to new therapies.

A post-hoc analysis from our Phase 3 clinical program in adult patients with cITP, highlighting the potential benefit of using TAVALISSE in earlier lines of therapy, was published in the British Journal of Haematology in July 2020.

Inclusion in one of the leading peer-reviewed journals in the field of hematology underscores the significance of the 78% (25/32) response rate defined as at least one platelet count of at least 50,000/µL when TAVALISSE was used as a second-line therapy in our Phase 3 clinical program.

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

Our sales force is now sharing this analysis with physicians.

We recently launched FORTE, an observational study to further evaluate fostamatinib as a second-line treatment for adult chronic ITP.

The study goal is to generate additional data on patient quality of life and financial expenditures relative to the healthcare of ITP patients.

Our FORWARD study, a pivotal Phase 3 clinical trial in warm AIHA has enrolled 57 of the 90 patients targeted for enrollment.

Currently, the FORWARD study has over 90 active clinical trial sites established across 22 countries and clinical trial sites have resumed screening patients after a temporary pause due to the ongoing COVID-19 pandemic.

We continue to evaluate enrollment timing in light of COVID-19 impacts, and at this time, we are unable to provide an update on anticipated enrollment completion.

In November 2020, we announced that we will launch a Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib in hospitalized COVID-19 patients without respiratory failure that have certain high-risk prognostic factors.

This multi-center, double-blind, placebo-controlled, adaptive design study will randomly assign either fostamatinib plus standard of care (SOC) or matched placebo plus SOC (1:1) to over 300 evaluable patients.

Treatment will be administered orally twice daily for 14 days with follow up to day 60.

The primary endpoint of this study is the proportion of subjects who progress to severe/critical disease within 29 days.

In September 2020, we announced a Phase 2 clinical trial to be sponsored by the NIH/NHLBI in order to evaluate the safety of fostamatinib for the treatment of hospitalized COVID-19 patients.

This multi-center, double-blind, placebo-controlled study will randomly assign fostamatinib or matched placebo (1:1) to approximately 60 evaluable patients.

Treatment will be administered orally twice daily for 14 days.

There will be a follow-up period to day 60.

The primary endpoint of this study is cumulative incidence of serious adverse events (SAE) through day 29.

The trial also includes multiple secondary endpoints designed to assess the early efficacy and clinically relevant endpoints of disease course.

In November 2020, we announced that the trial has enrolled 9 patients.

In July 2020, we announced a Phase 2 clinical trial sponsored by Imperial College London in order to evaluate the efficacy of fostamatinib for the treatment of COVID-19 pneumonia.

This is a two-stage, open label, controlled clinical trial with patients randomized (1:1:1) to fostamatinib plus SOC, ruxolitinib plus SOC, or standard of care alone.

Treatment will be administered twice daily for 14 days and patients will receive a follow-up assessment at day 14 and day 28 after the first dose.

The primary endpoint of this study is progression from mild to severe COVID-19 pneumonia within 14 days in hospitalized patients.

In November 2020, we announced that the Imperial College London-sponsored clinical trial began enrolling patients.

The Broad Institute of the Massachusetts Institute of Technology (MIT) and Harvard led a recent screen to identify FDA-approved compounds that reduce mucin-1 (MUC1) protein abundance.

MUC1 is a biomarker used to predict the development of ALI and ARDS and correlates with poor clinical outcomes.

Of the 3,713 compounds that were screened, fostamatinib was the only compound identified which both decreased expression of MUC1 and is FDA approved, and so allows for rapid repurposing for patients with COVID-19 lung injury.

Fostamatinib demonstrated preferential depletion of MUC1 from epithelial cells without affecting cell viability.

The research was focused on drug repurposing for the much lower risk of toxicity and the ability of FDA-approved treatments to be delivered on a shortened timescale, which is critical for patients afflicted with lung disease resulting from COVID-19.

Recent in vitro studies led by the Amsterdam University Medical Center at the University of Amsterdam, showed that R406, the active metabolite of fostamatinib, blocked macrophage hyper-inflammatory responses to a combination of immune complexes formed by anti-Spike IgG in serum from severe COVID-19 patients.

Anti-Spike IgG levels are known to correlate with the severity of COVID-19.

These results suggest that by inhibiting anti-Spike IgG-mediated hyperinflammation, R406 could potentially play a role in the prevention of cytokine storms as well as pulmonary edema and thrombosis associated with severe COVID-19.

In June 2020, at the European League Against Rheumatism (EULAR) 2020 E-Congress, we presented two oral and two poster presentations highlighting our investigational compound R835, a potent and selective inhibitor of both IRAK1 and IRAK4.

In multiple pre-clinical rodent models of acute and chronic inflammation, R835 administration resulted in reduced inflammation, and in Phase 1 trials, it showed encouraging pharmacokinetic (PK) properties.

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

The payment was received upon the EC approval of the Marketing Authorization Application (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 is marketed in Europe under the brand name TAVLESSE™ (fostamatinib).

Grifols launched TAVLESSE™ in the UK and Germany in July 2020, and expects a phased roll-out over the next 18 months across Europe.

We currently anticipate no disruption related to the COVID-19 pandemic in the supply of TAVALISSE tablets and drug substance to meet the needs for our U.S.

ITP sales, as well as for our collaborative partners and clinical trials worldwide.

With our cash and cash equivalents and short term investments as of September 30, 2020 of approximately $72.8 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, we 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.

Additionally, on August 4, 2020, we entered into an Open Market Sale Agreement SM (Sales Agreement) with Jefferies LLC (Jefferies), as our sole sales agent, pursuant to which we may sell, from time to time, through Jefferies, shares of our common stock having an aggregate offering price of up to $65.0 million.

Management Update

On August 4, 2020, we announced the appointment of David Santos as our new executive vice president and chief commercial officer.

Santos joined us on August 10, 2020, and brings over 30 years of commercial experience in the biopharmaceutical industry with companies such as Bristol-Myers Squibb, Lilly, Genentech, and most recently Jazz Pharmaceuticals, where he led the Hematology/Oncology Business Unit.

He has a robust track record of success in sales and marketing leadership roles, building commercial capabilities, and growing brands in the hematology-oncology area, where he has spent most of his career.

On October 2, 2020, Nelson D.

Cabatuan, delivered notice of his resignation from his position as Vice President, Finance and Principal Accounting Officer, and employment with the Company, to be effective on October 16, 2020.

Our sales force is now sharing this data with physicians.

Global Strategic Partnership with Lilly

In February 2021, we entered into a global exclusive license agreement and strategic collaboration with Lilly, to develop and commercialize R552, a receptor-interacting serine/threonine-protein kinase 1 (RIP1) inhibitor, for the treatment of non-central nervous system (non-CNS) diseases.

In addition, the collaboration is aimed at developing additional RIP1 inhibitors for the treatment of central nervous system (CNS) diseases.

Pursuant to the terms of the license agreement, we granted to Lilly the exclusive rights to develop and commercialize R552 and related RIP1 inhibitors in all indications worldwide.

The parties’ collaboration is governed through a joint governance committee and appropriate subcommittees.

The agreement became effective in March 2021 upon clearance under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976.

We are responsible for 20% of development costs for R552 in the U.S., Europe, and Japan, up to a specified cap.

Lilly is responsible for funding the remainder of all development activities for R552 and other non-CNS disease development candidates.

We have the right to opt-out of co-funding the R552 development activities in the U.S., Europe and Japan at two different specified times.

If we exercise our first opt-out right, we will continue to fund our share of the R552 development activities in the U.S., Europe, and Japan up to a maximum funding commitment of $65.0 million.

We are responsible for performing and funding initial discovery and identification of CNS disease development candidates, which is nearly completed.

Following candidate selection, Lilly will be responsible for performing and funding all future development and commercialization of the CNS disease development candidates.

Under the terms of the license agreement, we were entitled to receive an upfront cash payment of $125.0 million, which we subsequently received in April 2021, with the potential for an additional $330.0 million in milestone payments upon the achievement of specified development and regulatory milestones by non-CNS disease products and $255.0 million in milestone payments upon the achievement of specified development and regulatory milestones by CNS disease products.

We are also eligible to receive up to $100.0 million in sales milestone payments on a product-by-product basis for non-CNS disease products and up to $150.0 million in sales milestone payments on a product-by-product basis for CNS disease products.

In addition, depending on the extent of our co-funding of R552 development activities, we would be entitled to receive tiered royalty payments on net sales of non-CNS disease products at percentages ranging from the mid-single digits to high-teens, subject to certain standard reductions and offsets.

We would be entitled to receive tiered royalty payments on net sales of CNS disease products up to low-double digits, subject to certain standard reductions and offsets.

Fostamatinib in Hospitalized COVID-19 patients

In April 2021, we reported positive topline results from a multi-center, Phase 2 clinical trial evaluating the safety of fostamatinib, our oral SYK inhibitor, for the treatment of hospitalized patients with COVID-19.

The trial met its primary endpoint of comparable safety than standard of care, and showed broad and consistent improvement in numerous efficacy endpoints, including mortality, ordinal scale assessment, and number of days in the ICU.

This trial was conducted in collaboration with the National Heart, Lung, and Blood Institute (NHLBI), part of the National Institutes of Health (NIH), and Inova Health System.

The NHLBI is expected to publish a full analysis of the trial data in a peer-reviewed journal.

We are discussing the results with the health authorities, including the FDA, and intend to apply for Emergency Use Authorization (EUA) for the fostamatinib as a treatment for hospitalized patients with COVID-19.

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

The global COVID-19 pandemic has resulted, and is expected to continue to result, in significant economic disruption, and has adversely affected and will likely continue to adversely affect our business.

As of the date of this filing, significant uncertainty exists concerning the duration and severity of the COVID-19 pandemic.

We have undertaken, and plan to continue to undertake, safety measures to keep our staff, patients, investigators and stockholders safe and to help the communities where we live and work reduce the number of people exposed to the virus.

We are continuing to monitor the impact of the evolving effects of the COVID-19 pandemic and have undertaken, and plan to continue to undertake, safety measures to keep our staff, patients, investigators and stockholders safe and to help the communities where we live and work reduce the number of people exposed to the virus.

We have previously implemented work-from-home policies for certain employees and restricted on-site staff at our office in South San Francisco to only those personnel performing essential activities.

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The ultimate impact of the COVID-19 pandemic on our business and financial condition is highly uncertain and subject to change, and as such, we cannot ascertain the full extent of the impacts on our 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.

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 ability to grow 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 primarily 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 conducted virtually, delayed or cancelled as a result of the COVID-19 pandemic.

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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 had paused, postponed or delayed new patient enrollment and restricted site visits of existing patients enrolled, but since May 2020, trial sites have resumed screening and enrolling 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 resuming of enrollment/screening considering 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 treat patients enrolled in our trials, enroll and assess new patients, supply study drug, obtain complete data points in accordance with study protocol and overall impact on clinical study results including the timing thereof.

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.

The delays may potentially delay future royalties on sales, as well as, receipt of future potential milestones.

At this time, however, we cannot fully forecast the scope of impacts that the COVID-19 pandemic may have under our partnership with Kissei.

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” in Item 1A of Part II of this Quarterly Report on Form 10-Q for additional information on risks and uncertainties related to the ongoing COVID-19 pandemic.

See also the section titled “Risk Factors” in Item 1A of this Form 10-Q for additional information on risks and uncertainties related to the ongoing COVID-19 pandemic.

Our Product Portfolio

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Chronic ITP affects an estimated 81,300 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.

In patients with ITP, the immune system attacks and destroys the body’s own blood 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.

Current therapies for ITP include steroids, blood 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

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.

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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.

Our Fostamatinib for Immune Thrombocytopenia (FIT) Phase 3 clinical program had a total of 150 ITP patients which 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.

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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 February 2020, Kissei was granted orphan drug designation from the Japanese Ministry of Health, Labor and Welfare for R788 (fostamatinib) in chronic idiopathic thrombocytopenic purpura.

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

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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 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.

A paper presenting this data analysis, as well as accompanying commentary have been published in the July 2020 British Journal of Haematology.

We recently launched FORTE, an observational study to further evaluate fostamatinib as a second-line treatment for adult chronic ITP.

The study goal is to generate additional data on patient quality of life and financial expenditures relative to the healthcare of ITP patients.

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.

TAVALISSE was approved by the FDA in April 2018 for the treatment of 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.

Grifols launched TAVLESSE TM in the UK and Germany in July 2020, and expects a phased roll-out over the next 18 months across Europe .

Commercial launch activities, including sales and marketing

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

Commercial activities, including sales and marketing

A significant portion of our business operations was related to our commercial 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.

Grifols launched TAVLESSE in the UK and Germany in July 2020, and thereafter, expects a phased roll-out over the next 18 months across Europe.

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

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Fostamatinib in Global Markets

We have entered into various license agreements to commercialize fostamatinib globally.

The following describes the arrangements we have in place with Grifols, Kissei and Medison.

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

Fostamatinib in Europe/Turkey

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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).

In November 2020, Grifols exercised its option to include these territories under the agreement.

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 the drug product requested under an executed 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.

Grifols launched TAVLESSE TM in the UK and Germany in July 2020, and expects a phased roll-out over the next 18 months across Europe.

Grifols launched TAVLESSE in the UK and Germany in July 2020, and thereafter, expects a phased roll-out over the next 18 months across Europe .

In December 2020, the Scottish Medicines Consortium accepted TAVLESSE for use in NHS in Scotland.

Fostamatinib in Japan/Asia

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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.

In September 2019, 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.

Japan has the third highest prevalence of chronic ITP in the world behind the United States and Europe.

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

Kissei has completed the enrollment of its Phase 3 clinical trial of fostamatinib in adult Japanese patients with 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 October 2019, we entered into exclusive commercialization license agreements with Medison to commercialize fostamatinib in all potential indications in Canada and Israel.

Under the terms of the agreements, we received 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.

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Pursuant to this exclusive commercialization license agreement, in August 2020, we entered into a commercial supply agreement with Medison.

In November 2020, Health Canada approved the New Drug Submission for TAVALISSE for the treatment of thrombocytopenia in adult patients with chronic ITP who have had an insufficient response to other treatments.

Medison is anticipating a decision on a New Drug Application in the third quarter of 2021.

Clinical Stage Programs

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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.

A utoimmune hemolytic anemia ( 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.

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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.

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

Orally-available fostamatinib program .

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Currently, we have enrolled 72 patients of the 90 patients targeted for enrollment.

The FORWARD study has over 90 active clinical trial sites established across 22 countries and a number of clinical trial sites have resumed screening patients after a temporary pause due to the ongoing COVID-19 pandemic.

Given the uncertainty of the COVID-19 pandemic, we are unable to provide an update on anticipated enrollment completion.

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

The FORWARD study has over 90 clinical trial sites established across 22 countries and a limited number of clinical trial sites have resumed screening patients after a temporary pause due to the ongoing COVID-19 pandemic.

Given the uncertainty of the COVID-19 pandemic, we are experiencing slower than expected enrollment and are unable to provide an update on anticipated enrollment completion.

In November 2020, we reached an agreement with the FDA on the durable response measure for the primary efficacy endpoint of the study as well as the inclusion of additional secondary endpoints.

In January 2021, we announced that the FDA had granted Fast Track designation to TAVALISSE for the treatment of warm AIHA.

The FDA previously granted TAVALISSE Orphan Drug designation for the treatment of warm AIHA in January 2018.

Fostamatinib—in Hospitalized COVID-19 Patients

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COVID-19 is the infectious disease caused by Severe Acute Respiratory Syndrome Coronavirus-2 (SARS-CoV-2).

SARS-CoV-2 primarily infects the upper and lower respiratory tract and can lead to acute respiratory distress syndrome (ARDS).

SARS-CoV-2 primarily infects the upper and lower respiratory tract and can lead to ARDS.

Additionally, some patients develop other organ dysfunction including myocardial injury, acute kidney injury, shock resulting in endothelial dysfunction and subsequently micro and macrovascular thrombosis.

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SYK is involved in the intracellular signaling pathways of many different immune cells.

Therefore, SYK inhibition may improve outcomes in patients with COVID-19 via inhibition of key Fc gamma receptor (FcγR) and c-type lectin receptor (CLR) mediated drivers of pathology such as inflammatory cytokine release by monocytes and macrophages, production of neutrophil extracellular traps (NETs) by neutrophils, and platelet aggregation.

Furthermore, SYK inhibition in neutrophils and platelets may lead to decreased thromboinflammation, alleviating organ dysfunction in critically ill patients with COVID-19.

Orally-available fostamatinib program.

In November 2020, we launched a Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib in hospitalized COVID-19 patients without respiratory failure that have certain high-risk prognostic factors.

We were awarded $16.5 million from the U.S.

Department of Defense's (DOD) Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (JPEO-CBRND) to support this Phase 3 clinical trial.

This multi-center, double-blind, placebo-controlled, adaptive design study will randomly assign either fostamatinib plus SOC or matched placebo plus SOC (1:1) to approximately 308 evaluable patients.

Treatment will be administered orally twice daily for 14 days with follow up to day 60.

The primary endpoint of this study is the proportion of subjects who progress to severe/critical disease within 29 days.

In addition, our COVID-19 program includes an investigator-sponsored trial currently being conducted by Imperial College London.

In September 2020, we announced a Phase 2 clinical trial to be sponsored by the NIH/NHLBI in order to evaluate the safety of fostamatinib for the treatment of hospitalized COVID-19 patients.

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There will be a follow-up period to day 60.

The primary endpoint of this study is cumulative incidence of serious adverse events (SAE) through day 29.

The primary endpoint of this study is cumulative incidence of SAE through day 29.

The trial also includes multiple secondary endpoints designed to assess the early efficacy and clinically relevant endpoints of disease course.

In November 2020, we announced that the trial has enrolled 9 patients.

The study completed the enrollment in March 2021 and in April 2021, w e announced that this Phase 2 clinical trial met its primary endpoint of safety.

Fostamatinib reduced the incidence of SAEs by half.

By day 29, there were three SAEs in the fostamatinib plus SOC group of 30 patients compared to six SAEs in the placebo plus SOC group of 29 patients (p=0.23).

Of these, there was a reduction for the disease related SAE of hypoxia in the fostamatinib group compared to placebo (1 vs 3, respectively;

Based on these data, we are discussing these results with the health authorities, including the FDA, and intend to apply for EUA for fostamatinib for treatment of hospitalized patients with COVID-19.

Key findings from the NIH/NHLBI Phase 2 clinical data readout include:

● At Day 29, in the overall population there were zero deaths in the fostamatinib group of 30 patients compared to three deaths in the placebo group of 29 patients (p=0.07).

In more severe patients, those with an ordinal scale assessment of 6 or 7, the difference was zero of nineteen patients compared to three of seventeen patients (p=0.049), respectively.

● There were four intubated patients in the trial on mechanical ventilation (ordinal scale 7) with two patients randomized to each treatment group.

Both patients in the fostamatinib group improved within 7 days and came off the ventilator, while both patients in the placebo group deceased.

● Fostamatinib was superior to placebo in accelerating improvement in clinical status by day 15 (mean change -3.6 compared to -2.6, p=0.035) and by day 29 (mean change -4.2 compared to -3.3, p=0.12) using ordinal scale assessments.

● The median number of days in the ICU was reduced by 4 days, from 7 days in the placebo group to 3 days in the fostamatinib group (p=0.07).

● Despite general SOC use of both steroids and remdesivir in all 59 patients, there was a consistently greater reduction in NETosis and other inflammatory biomarkers (CRP, Ferritin, D-Dimer, Fibrinogen) in the fostamatinib group as compared to the placebo group.

In July 2020, we announced a Phase 2 clinical trial sponsored by Imperial College London in order to evaluate the efficacy of fostamatinib for the treatment of COVID-19 pneumonia.

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The primary endpoint of this study is progression from mild to severe COVID-19 pneumonia within 14 days in hospitalized patients.

In November 2020, we announced that the Imperial College London-sponsored clinical trial began enrolling patients.

Researchers at MIT and Harvard led a recent screen to identify FDA-approved compounds that reduce mucin-1 (MUC1) protein abundance.

In November 2020, we announced that the Imperial College London-sponsored clinical trial began enrolling patients, and as of the date hereof, there are 112 patients enrolled under this study.

Researchers at MIT and Harvard led a recent screen to identify FDA-approved compounds that reduce MUC1 protein abundance.

MUC1 is a biomarker used to predict the development of ALI and ARDS and correlates with poor clinical outcomes.

In June 2020, the results were presented.

Of the 3,713 compounds that were screened, fostamatinib was the only compound identified which both decreased expression of MUC1 and is FDA approved.

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Anti-Spike IgG levels are known to correlate with the severity of COVID-19.

These results suggest that by inhibiting anti-Spike

IgG-mediated hyperinflammation, R406 could potentially play a role in the prevention of cytokine storms as well as pulmonary edema and thrombosis associated with severe COVID-19.

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

These results, presented in July 2020, suggest that by inhibiting anti-Spike IgG-mediated hyperinflammation, R406 could potentially play a role in the prevention of cytokine storms as well as pulmonary edema and thrombosis associated with severe COVID-19.

In December 2020, the Journal of Infectious Diseases published research from NIH which demonstrated that R406, the active metabolite of fostamatinib, was able to inhibit NETosis ex vivo in donor plasma from patients with COVID-19.

NETosis is a unique type of cell death resulting in the release of NETs.

NETs contribute to thromboinflammation and have been associated with mortality in COVID-19.

These data provide insights for how fostamatinib may mitigate neutrophil-associated mechanisms contributing to COVID-19 immunopathogenesis.

R835, an Oral IRAK1/4 Inhibitor for Autoimmune, Inflammatory and Hematology-Oncology Diseases

Orally Available IRAK 1/4 Inhibitor Program.

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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.

We continue to advance the development of our IRAK1/4 program, which includes R835, an orally available, potent and selective inhibitor that inhibits both IRAK1 and IRAK4.

We are currently identifying therapeutic opportunities in the areas of hematology/oncology and rare immune diseases.

We began the discussions with the FDA regarding initiating a Phase 2 clinical trial in low-risk myelodysplastic syndrome (MDS) and are also in discussions regarding academic medical collaborations in this indication.

In rare immune diseases, we are exploring opportunities including palmoplantar pustulosis (PPP), hidradenitis suppurativa (HS), and others.

Partnered Clinical Programs

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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.

The collaboration agreement with Aclaris was terminated on April 30, 2021.

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);

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 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 had been met in Cohort A of its Phase 2 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 Tumor.

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

In November 2019, BerGenBio showed that the primary endpoint of Overall Response Rate (ORR) had been met in Cohort A of its Phase 2 clinical trial evaluating bemcentinib in combination with KEYTRUDA as a potential new treatment regimen for previously treated advanced non-small cell lung cancer (NSCLC).

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.

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The trial is recruiting patients in the second stage of the cohort.

In July 2020, BerGenBio announced first patient dosed in a trial assessing bemcentinib in recurrent glioblastoma (GBM).

In July 2020, BerGenBio announced that its first patient was dosed in a trial assessing bemcentinib in recurrent glioblastoma (GBM).

The trial is sponsored by Ichiro Nakano, MD, Professor in the Department of Neurosurgery and co-leader of the Neuro-Oncology Program at University of Alabama at Birmingham, and is funded by the National Cancer Institute.

This is an open label, multi-center, intra-tumoral tissue PK study of bemcentinib in patients with recurrent GBM for whom a surgical resection is medically indicated.

The trial intends to enroll up to 20 recurrent GBM

patients, at up to 15 sites in the U.S.

The trial intends to enroll up to 20 recurrent GBM patients, at up to 15 sites in the U.S.

The end points of the study include an evaluation of bemcentinib’s ability to cross the blood brain barrier, AXL expression, PK, safety and tolerability, as well as efficacy assessments including PFS and Overall Survival.

In October 2020, BerGenBio announced first patient enrolled in Phase II trial assessing bemcentinib as a potential treatment for COVID-19 patients in South Africa.

In October 2020, BerGenBio announced first patient enrolled in Phase 2 trial assessing bemcentinib as a potential treatment for COVID-19 patients in India and South Africa and in December 2020, BerGenBio announced that the first patient has been enrolled with bemcentinib in the UK Research and Innovation (UKRI) funded COVID-19 ACCORD clinical study.

In March 2021, BerGenBio announced that it has closed recruitment into the company sponsored randomised Phase 2 clinical trial (BGBC020), assessing the efficacy and safety of bemcentinib for the treatment of hospitalized COVID-19 patients in South Africa and India.

Further, BerGenBio announced that the effect of bemcentinib demonstrated potent antiviral effects in preclinical SARS-CoV-2 and other coronavirus models.

Further, the findings supported BerGenBio’s ongoing Phase 2 trial evaluating bemcentinib for the treatment of hospitalized COVID-19 patients in South Africa and India.

In April 2021, BerGenBio announced that BGBC020 completed 96% of its targeted enrolment with a total of 115 patients participating (60 in India and 55 in South Africa, with 58 receiving bemcentinib).

Throughout the study, bemcentinib was well tolerated by patients and no safety signals of concern were reported.

DS-3032 - Daiichi

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

For the three and nine months ended September 2020, we recognized $2.1 million of revenue as a result of the achievement of a milestone in accordance with the Amended Collaboration Agreement dated April 20, 2005 with Daiichi.

All deliverables under the agreement had been previously delivered, as such the above payment has been recognized as revenue in the third quarter of 2020.

We received the milestone payment from Daiichi in October 2020.

In September 2020, worldwide rights to DS-3032 were out-licensed from Daiichi to Rain Therapeutics Inc.

AZ-D0449 – AZ

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Commercialization and Sponsored Research and License Agreements

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

As of September 30, 2020, we are a party to collaboration agreements with ongoing performance obligations with Kissei for the development and commercialization of fostamatinib in Japan, China, Taiwan and the Republic of Korea and with 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.

As of September 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 $607.2 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 $67.5 million relates to the achievement of development events, up to $163.7 million relates to the achievement of regulatory events and up to $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.

In July 2020, Grifols launched TAVLESSE® in Germany and the UK.

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

Grifols expects a phased roll-out over the next 18 months across Europe.

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, we cannot fully forecast the scope of impacts that the COVID-19 pandemic may have on 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 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 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 was allocated to the distinct performance obligations 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 October 2020, we entered 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.

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.

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

During the nine months ended September 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 related to the performance of research services as of September 30, 2020 was $1.8 million.

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

Kissei License Agreement

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 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 and nine months ended September 30, 2020.

At September 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.

Medison Commercial and 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 September 30, 2020 is immaterial.

Other license agreements

All deliverables under the agreement had been previously delivered, as such the above payment has been recognized as revenue in the third quarter of 2020.

We received the milestone payment from Daiichi in October 2020.

For a discussion of our Commercialization and Sponsored Research and License Agreements, see Note 8 to our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

Results of Operations

Three and Nine Months Ended September 30, 2020 and 2019

Three Months Ended March 31, 2021 and 2020

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Product sales, net

Contract revenues from collaborations

Government contract

Total revenues

The following table summarizes revenues from each of our customers and collaboration partners who individually accounted for 10% or more (wherein * denotes less than 10%) of our total revenues for the three and nine months ended September 30, 2020 and 2019 (as a percentage of total revenues):

Three Months Ended

Nine Months Ended

September 30,

The following table summarizes the percentages of revenues from each of our customers who individually accounted for 10% or more (wherein * denotes less than 10%) of the total net product sales and revenues from collaborations:

ASD Healthcare and Oncology Supply

McKesson Specialty Care Distribution Corporation

Product sales during the three and nine months ended September 30, 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 and nine months ended September 30, 2020, the increase in product sales was mainly due to TAVALISSE sales volume increases of 27% and 30%, respectively, compared to the same periods in 2019, as well as increases in the selling price of TAVALISSE.

Product sales during the three months ended March 31, 2021 and 2020 were related to sales of TAVALISSE in the U.S.

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

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, as 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 $2.1 million in the three months ended September 30, 2020 relate to a milestone payment under our collaboration agreement with Daiichi.

Contract revenues from collaborations of $46.2 million in the nine months ended September 30, 2020 relate to revenue from the upfront fee 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 and the milestone payment under our collaboration agreement with Daiichi.

For the same periods in 2019, we recognized contract revenues of $9.1 million and $13.9 million primarily related to the license and milestone revenues from our collaboration agreements with Aclaris and Celgene as well as portions of the upfront fees from our collaboration agreements with Grifols and Kissei recognized as revenue from licenses and upon our performance of certain research and development services and supply of fostamatinib.

It has been utilized by an increasingly 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.

For the three months ended March 31, 2021, net product sales decreased by 2% compared to the same period in 2020 mainly due to continuing impacts of the COVID-19 pandemic as well as the typical first quarter reimbursement issues such as the resetting of co-pays and the Medicare donut hole, along with physician and patient access issues created by the COVID-19 pandemic .

Incrementally, our net product sales were negatively impacted by the decrease in level of inventories remaining at our distribution channels.

Contract revenues from collaborations of $65.6 million in the three months ended March 31, 2021 is comprised of $60.6 million revenue related to our license agreement with Lilly, $4.0 million revenue related to grant of non-exclusive license of a certain patent to an unrelated third-party company, and $1.0 million revenue for the delivery of drug supply under our collaboration agreement with Grifols.

Contract revenues from collaborations of $43.1 million in the three months ended March 31, 2020 pertained to the revenue from 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.

Government contract revenue was related to the income we recognized from the $16.5 million government award granted to us, pursuant to the agreement we entered in January 2021 with the U.S.

Department of Defense to support our ongoing Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib in hospitalized COVID-19 patients.

We expect to receive the remaining award of $13.5 million and will recognize as income throughout the period we conduct our clinical trial, when there is reasonable assurance that the conditions of the grant will be met, and the grant will be received.

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 September 30, 2020, we had deferred revenues of $3.2 million which we will recognize as revenue upon satisfaction of our remaining performance obligations under our collaboration agreements with Grifols and Kissei.

As of March 31, 2021, we had deferred revenues of $9.5 million which we will recognize as revenue upon satisfaction of our remaining performance obligations under our collaboration agreements with Lilly, Grifols and Kissei.

Cost of Product Sales

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Cost of product sales

We recognized $140,000 and $574,000 in cost of product sales during the three and nine months ended September 30, 2020 related to our product, TAVALISSE.

The cost of product sales during the three months ended March 31, 2021 and 2020 were 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 and nine months ended September 30, 2020 and 2019.

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, 2021 and 2020.

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

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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.

The increase in cost of product sales during the three months ended March 31, 2021 compared to the same period in 2020 was mainly due to the delivery of drug supply to Grifols for its commercialization in the current quarter.

Research and Development Expense

Three Months Ended

Nine Months Ended

September 30,

(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 September 30, 2020, compared to the same period in 2019, was primarily due to the increases of $235,000 in personnel-related expenses and $161,000 in

third-party costs partially offset by the decrease of $259,000 in research and development costs mainly for the Phase 1 trial of our RIP1 inhibitor program and Phase 1 trial in our IRAK 1/4 inhibitor program.

The increase in research and development expense for the nine months ended September 30, 2020, compared to the same period in 2019, was primarily due to the increases of $6.7 million in research and development cost for our on-going Phase 3 trial in warm AIHA, Phase 1 trial in our RIP 1 inhibitor program and Phase 1 trial in our IRAK 1/4 inhibitor program and $275,000 in personnel-related expenses partially offset by the decreases of $500,000 in stock-based compensation expense and $150,000 in third-party costs.

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

We have resumed new patient enrollment in the majority of the clinical trial sites for our FORWARD study for warm AIHA and 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 the evolving effects of COVID-19 pandemic may have on our ability to 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, and timing of, clinical study results.

The increase in research and development expense for the three months ended March 31, 2021, compared to the same period in 2020, was primarily due to the increase in research and development costs related to our ongoing Phase 3 clinical trial on hospitalized COVID-19 patients of $3.5 million and development of our IRAK 1/4 inhibitor program of $576,000, partially offset by decrease due to the completion of Phase 1 clinical trial in our RIP 1 inhibitor program of $3.0 million, research-related supplies of $126,000, stock-based compensation of $108,000 and various other costs of $175,000.

We expect our research and development expense in 2021 to increase as we continue our activities in our Phase 3 warm AIHA and COVID-19 studies.

We have resumed new patient enrollment in certain clinical trial sites for our FORWARD study for warm AIHA and we expect to continue to incur expenses in managing the study and expenses related to measures to implement remote and virtual approaches, including delays in new patient enrollment, remote patient monitoring and other alternative course of actions to maintain our study in warm AIHA.

We have also recently initiated our Phase 3 clinical trial in hospitalized COVID-19 patients and expect to continue to enroll patients in 2021.

The $16.5 million grant awarded by the Department of Defense in January 2021 will partially fund our Phase 3 clinical trial for hospitalized COVID-19 patients.

We cannot currently fully forecast the scope the evolving effects of COVID-19 pandemic may have on our ability to 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, and timing of, clinical study results.

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.

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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.

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.

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Three Months Ended

Nine Months Ended

September 30,

From January 1, 2007*

to September 30, 2020

to March 31, 2021

* 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 each for the three months ended September 30, 2020 and 2019 and allocated stock-based compensation expense of approximately $532,000 and $487,000 for the three months ended September 30, 2020 and 2019, respectively.

For the nine months ended September 30, 2020 and 2019, allocated facilities costs were approximately $4.5 million and $4.6 million, respectively, and allocated stock-based compensation expense were approximately $1.7 million and $2.1 million, respectively.

For the three and nine months ended September 30, 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.

“Other” expenses mainly represent allocated facilities costs of approximately $1.5 million for each of the three months ended March 31, 2021 and 2020, and allocated stock-based compensation expense of approximately $586,000 and $694,000 for the three months ended March 31, 2021 and 2020, respectively.

For the three months ended March 31, 2021, a major portion of our total research and development expense was associated with our COVID-19, AIHA and IRAK programs, personnel-related costs of our research and development personnel and allocated facilities costs.

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

Selling, General and Administrative Expense

Three Months Ended

Nine Months Ended

September 30,

(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 September 30, 2020 compared to the same period in 2019 was primarily due to the decreases of $2.1 million in costs related to commercial activities and $259,000 in stock-based compensation expense partially offset by the increases of $1.4 million in personnel-related costs and $268,000 costs of consultants.

The decrease in selling, general and administrative expense for the nine months ended September 30, 2020 compared to the same period in 2019 was primarily due to the decreases of $2.1 million in costs of consultants and third party services, $1.5 million in stock-based compensation expense and $784,000 in costs related to commercial activities partially offset by the increases of $2.8 million in personnel costs and $88,000 in various expense items.

We expect our selling, general and administrative expense to increase for the remainder of 2020 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.

The increase in selling, general and administrative expense for the three months ended March 31, 2021 compared to the same period in 2020 was primarily due to the increases in costs of consultants and third-party services of $1.3 million, personnel-related costs of $1.2 million, stock-based compensation of $723,000 and professional fees of $614,000, partly offset by decreases in commercial activities and other various costs of $146,000.

We expect our selling, general and administrative expense in 2021 to increase as we continue to expand our commercial activities for TAVALISSE, and assuming we will be able to resume in-person office visits and live engagements with healthcare providers.

In response to the limitations on in-person office visits during the ongoing COVID-19 pandemic, we continue to deploy resources to enable our field-based employees to continue to engage virtually with healthcare 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.

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Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Interest income

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

The decreases in interest income for the three and nine months ended September 30, 2020 as compared to the same period in 2019 were primarily due to decrease in yield on our investments.

The decreases in interest income for the three months ended March 31, 2021 as compared to the same period in 2020 were primarily due to decrease in yield on our investments.

Interest Expense

Three Months Ended

Nine Months Ended

September 30,

(in thousands)

Interest expense

Interest expense for the three and nine months ended September 30, 2020 was related to the outstanding balance on our term loan from Midcap.

Interest expense for the three months ended March 31, 2021 and 2020 was related to the outstanding balance on our term loan from Midcap.

The increase in interest expense in the three months ended March 31, 2021 compared with the same period in 2020 was due to the increase in the outstanding term loan credit balance.

The principal balance of loan as of March 31, 2020 was the initial $10.0 million under Tranche 1.

In May 2020, we accessed the Tranche 2 for an additional $10.0 million.

Provision for Income Taxes

Three Months Ended

(in thousands)

Provision for income taxes

The quarterly provision for or benefit from income taxes is based on applying the estimated annual effective tax rate to the year-to-date pre-tax income (loss), plus any discrete items.

We update our estimate of our annual effective tax rate at the end of each quarterly period.

The estimate considers annual forecasted income (loss) before income taxes and any significant permanent tax items.

The provision for income taxes for the three months ended March 31, 2021 was primarily related to state tax on our pre-tax book income.

We estimated a state tax liability over our forecasted pre-tax income for 2021, primarily due to revenue recognized for the Lilly agreement.

We do not expect to owe federal income taxes due to the sufficient net operating loss carryforwards that were generated prior to the enactment of the Tax Cuts and Jobs Act, as well as significant research and development credit carryforwards.

Although we are projecting book income for 2021, we continue to record a full valuation allowance on our deferred tax assets considering our cumulative losses in prior years and forecasted losses in the future.

For the three months ended March 31, 2020, we did not record provision for income taxes due to our pre-tax book loss.

Critical Accounting Policies and the Use of Estimates

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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.

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, estimates related our valuation of the operating lease right-of-use asset and lease liability, including the incremental borrowing rate used, and net present value of our liability related to our share in the development costs under the Lilly agreement, including the applicable discount rate.

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.

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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.

We adopted ASU 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes, in the first quarter of 2021.

See “Note 3” to our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q for related discussions on our adoption of the recent accounting pronouncement.

Additionally, we continue to evaluate accounting standards that were recently issued but not yet adopted, as applicable.

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.

Since 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 September 30, 2020, we had approximately $72.8 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 $25.3 million.

The decrease was primarily attributable to payments associated with funding our operating expenses during the nine months ended September 30, 2020.

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

At closing, $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 August 2020, we entered into a Sales Agreement with Jefferies, pursuant to which we may sell, through Jefferies, up to an aggregate of $65.0 million in shares of our common stock.

In October 2020, we received $2.1 million representing payment for a milestone under our collaboration agreement with Daiichi.

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 nine months ended September 30, 2020, we received approximately $4.0 million of sublease income and reimbursements.

We expect to receive approximately $10.7 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.

As of March 31, 2021, we had approximately $39.3 million in cash, cash equivalents and short-term investments, as compared to approximately $57.3 million as of December 31, 2020.

The decrease of approximately $18.0 million was primarily attributable to the cash used in our operating activities.

In February 2021, we entered into a global exclusive license agreement with Lilly to develop and commercializ e R552, wherein we were entitled to receive a non-refundable and non-creditable upfront cash payment of $125.0 million, which we subsequently received in April 2021, and may also be eligible for potential development, regulatory, and commercial milestone payments totaling up to an additional $835.0 million, as well as tiered royalties on net sales of non-CNS and CNS disease products up to low-double digits that will vary depending upon our clinical development investment.

In January 2021, we were awarded $16.5 million by the U.S.

Department of Defense to support our ongoing Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib in hospitalized COVID-19 patients.

Under the agreement with the U.S.

Department of Defense, we are entitled to receive such award based on the agreed-upon payment schedule, dependent on certain triggering events.

During the three months ended March 31, 2021, we recognized income from the awards from the U.S.

Department of Defense of $3.0 million.

We expect to receive the remaining awards of $13.5 million throughout the period of which we conduct our clinical trial, subject to us meeting certain clinical trial events or milestones and approval by the U.S.

Department of Defense as specified in the agreement.

In February 2021, we entered into a non-exclusive license agreement with an unrelated third party whereby we granted such unrelated third-party rights to a certain patent.

In consideration for the license rights granted, we received a one-time fee of $4.0 million.

See further discussions of our Commercialization and Sponsored Research and License Agreements and Government Grants in Note 8 to our “Notes to Condensed Financial Statements” contained in Part I, Item 1 of this Quarterly Report on Form 10-Q.

As of March 31, 2021, we have principal term loan outstanding with MidCap amounting to $20.0 million, pursuant to the Credit and Security Agreement (Credit Agreement) we entered in September 2019.

The Credit Agreement provides for $60.0 million term loan credit facility.

To date, the credit facility provides us with access for an additional $40.0 million term loan subject to the achievement of certain customary conditions.

In August 2020, we entered into an Open Market Sale Agreement with Jefferies LLC, as a sole agent, pursuant to which we may sell from time to time, through Jefferies, shares of our common stock having an aggregate offering price of up to $65.0 million.

As of March 31, 2021, we have not yet sold any shares under the Open Market Sale Agreement.

We have a sublease agreement originally entered in December 2014, amended in February 2017 and July 2017, with an unrelated third party to occupy a portion of our research and office space which expire in January 2023.

As of March 31, 2021, we expect to receive approximately $8.5 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 continued commercial launch of TAVALISSE in the U.S., through at least the next 12 months from the Form 10-Q filing date.

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.

Because of the numerous risks and uncertainties associated with commercializing a product, 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.

Unless and until we are able to generate a sufficient amount of product, royalty or milestone revenue, we expect to opportunistically 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.

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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 and nine months ended September 30, 2020 and 2019, we maintained an investment portfolio primarily in money market funds, U.S.

As of March 31, 2021 and December 31, 2020, we maintained an investment portfolio primarily in money market funds, U.S.

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

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Cash Flows from Operating, Investing and Financing Activities

Nine Months Ended September 30,

Three Months Ended March 31,

(in thousands)

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Net (decrease) increase in cash and cash equivalents

Net cash used in operating activities was approximately $36.6 million for the nine months ended September 30, 2020, compared to approximately $31.9 million for the nine months ended September 30, 2019.

Net cash used in operating activities for the nine months ended September 30, 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 nine months ended September 30, 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 $38.8 million for the nine months ended September 30, 2020, compared to net cash used in investing activities of approximately $16.0 million for the nine months ended September 30, 2019.

Net cash provided by investing activities during the nine months ended September 30, 2020 related to net maturities of short-term investments, partially offset by capital expenditures.

Net cash used in investing activities during the nine months ended September 30, 2019 related to net purchases of short-term investments and capital expenditures.

Capital expenditures were approximately $758,000 for the nine months ended September 30, 2020, compared to approximately $844,000 for the same period in 2019.

Net cash provided by financing activities was approximately $11.9 million for the nine months ended September 30, 2020, compared to approximately $10.7 million for the nine months ended September 30, 2019.

Net cash provided by financing activities for the nine months ended September 30, 2020 related to the proceeds from funding of the second $10.0 million tranche from our term loan credit facility with MidCap and exercise of stock options and participation in the Purchase Plan.

Net cash provided by financing activities for the nine months ended September 30, 2019 related to the funding of the first $10.0 million tranche from our term loan credit facility with MidCap and proceeds from exercise of stock options and participation in the Purchase Plan.

Net cash used in operating activities was approximately $20.0 million for the three months ended March 31, 2021, compared to approximately $3.1 million for the three months ended March 31, 2020.

Net cash used in operating activities for the three months ended March 31, 2021 was primarily related to payments of our research and development programs and other operating expenses, partially offset by the proceeds from sales of TAVALISSE, cash received related to a non-exclusive license agreement with an unrelated third party of $4.0 million, cash received from the awards granted by the U.S.

Department of Defense of $2.0 million and cash received from Grifols of $1.0 million for a delivery of drug supply for its commercialization.

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

Net cash provided by investing activities was approximately $7.5 million for the three months ended March 31, 2021, compared to net cash used in investing activities of approximately $24.4 million for the three months ended March 31, 2020.

Net cash provided by investing activities during the three months ended March 31, 2021 related to net maturities of short-term investments of $7.6 million, partially offset by capital expenditures.

Net cash provided by investing activities during the three months ended March 31, 2020 related to net maturities of short-term investments of $25.1 million, partially offset by capital expenditures.

Net cash provided by financing activities was approximately $2.1 million for the three months ended March 31, 2021, compared to approximately $1.3 million for the three months ended March 31, 2020.

Net cash provided by financing activities for the three months ended March 31, 2021 and 2020 were related to the proceeds from exercise of stock options.

Off-Balance Sheet Arrangements

As of September 30, 2020, we had no off-balance sheet arrangements (as defined in Item 303(a)(4)(ii) of Regulation S-K under the Exchange Act).

As of March 31, 2021, 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 conduct our commercial activities and research and development programs internally and through third parties that include, among others, arrangements with 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 CROs to conduct our clinical trials and with third parties relative to our commercialization of TAVALISSE.

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.

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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, 2020, 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:

As of March 31, 2021, 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

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

Our Credit Agreement provides us an option to extend the principal amortization of our outstanding loan subject to certain conditions.

Subject to us providing the evidence that we met the extension conditions and approval of MidCap, the extended amortization start date shall be the earlier of October 1, 2022 if we satisfy the first extension condition but fails to satisfy the second extension condition, or October 1, 2023 if we satisfy both first and second extension conditions.

As discussed in detail in Note 8 of Notes to Condensed Financial Statement, pursuant to our global exclusive license agreement and strategic collaboration agreement with Lilly, we are responsible for funding the development costs for R552 in the U.S., Europe, and Japan, up to $65.0 million through April 1, 2024.

We have the right to opt-out of co-funding of development costs at two different specified times.

If we decide not to exercise our opt-out rights, we will be required to share in global development costs up to certain amounts at a specified cap, specified in the agreement.

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.

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Quantitative and Qualitative Disclosures About Market Risk

During the nine months ended September 30, 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.

During the three months ended March 31, 2021, 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, 2020.

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 2. Management’s Discussion and Analysis