RIGEL PHARMACEUTICALS INC 10-Q

Item 1. Financial Statements ​ RIGEL PHARMACEUTICALS, INC. CONDENSED BALANCE SHEET S (In thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ ​ 2021 2020(1) ​ ​ (unaudited) ​ ​ ​ Assets ​ ​ ​ ​ ​ ​ Current assets: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 30,403 ​ $ 30,373 Short-term investments ​ 112,743 ​ 26,954 Accounts receivable, net ​ 14,991 ​ 15,973 Inventories ​ ​ 7,035 ​ 1,638 Prepaid and other current assets ​ 5,932 ​ 14,045 Total current assets ​ 171,104 ​ 88,983 Property and equipment, net ​ 2,655 ​ 2,676 Operating lease right-of-use asset ​ ​ 11,824 ​ ​ 17,895 Other assets ​ 935 ​ 824 ​ ​ $ 186,518 ​ $ 110,378 Liabilities and stockholders’ equity ​ ​ ​ ​ ​ ​ Current liabilities: ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 3,144 ​ $ 3,707 Accrued compensation ​ 9,461 ​ 9,592 Accrued research and development ​ 9,475 ​ 4,889 Other accrued liabilities ​ 13,486 ​ 11,014 Lease liabilities, current portion ​ ​ 9,574 ​ ​ 8,621 Deferred revenue ​ ​ 3,157 ​ ​ 3,018 Other long-term liabilities, current portion ​ ​ 10,985 ​ ​ — Total current liabilities ​ 59,282 ​ 40,841 ​ ​ ​ ​ ​ ​ ​ Long-term portion of lease liabilities ​ 3,314 ​ 10,651 Loans payable, net of discount ​ ​ 19,887 ​ ​ 19,815 Other long-term liabilities ​ 54,365 ​ 5,045 ​ ​ ​ ​ ​ ​ ​ Commitments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity: ​ ​ ​ ​ ​ ​ Preferred stock ​ — ​ — Common stock ​ 171 ​ 169 Additional paid-in capital ​ 1,350,736 ​ 1,339,833 Accumulated other comprehensive income (loss) ​ 8 ​ ( 4 ) Accumulated deficit ​ ( 1,301,245 ) ​ ( 1,305,972 ) Total stockholders’ equity ​ 49,670 ​ 34,026 ​ ​ $ 186,518 ​ $ 110,378 (1) The balance sheet as of December 31, 2020 has been derived from the audited financial statements included in Rigel’s Annual Report on Form 10-K for the year ended December 31, 2020 filed with the Securities and Exchange Commission (SEC) on March 2, 2021 . ​ See Accompanying Notes to Condensed Financial Statements ​ 3 ​ Table of Contents ​ RIGEL PHARMACEUTICALS, INC. CONDENSED STATEMENTS OF OPERATION S (In thousands, except per share amounts) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2021 2020 2021 2020 Revenues: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Product sales, net ​ $ 16,012 ​ $ 16,289 ​ $ 45,441 ​ $ 43,943 Contract revenues from collaborations ​ ​ 4,531 ​ ​ 2,100 ​ ​ 73,886 ​ ​ 46,228 Government contract ​ ​ 1,000 ​ ​ — ​ ​ 9,500 ​ ​ — Total revenues ​ ​ 21,543 ​ ​ 18,389 ​ ​ 128,827 ​ ​ 90,171 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Costs and expenses: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cost of product sales ​ ​ 151 ​ ​ 140 ​ ​ 596 ​ ​ 574 Research and development ​ 18,300 ​ 14,600 ​ ​ 51,933 ​ 44,963 Selling, general and administrative ​ 22,877 ​ 17,430 ​ ​ 67,376 ​ 54,780 Total costs and expenses ​ 41,328 ​ 32,170 ​ 119,905 ​ 100,317 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) from operations ​ ( 19,785 ) ​ ( 13,781 ) ​ 8,922 ​ ( 10,146 ) Interest income ​ 14 ​ 36 ​ 31 ​ 563 Interest expense ​ ​ ( 1,317 ) ​ ​ ( 429 ) ​ ​ ( 3,561 ) ​ ​ ( 924 ) Income (loss) before income taxes ​ ​ ( 21,088 ) ​ ​ ( 14,174 ) ​ ​ 5,392 ​ ​ ( 10,507 ) Provision for (benefit from) income taxes ​ ​ ( 136 ) ​ ​ — ​ ​ 665 ​ ​ — Net income (loss) ​ $ ( 20,952 ) ​ $ ( 14,174 ) ​ $ 4,727 ​ $ ( 10,507 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ ( 0.12 ) ​ $ ( 0.08 ) ​ $ 0.03 ​ $ ( 0.06 ) Diluted ​ $ ( 0.12 ) ​ $ ( 0.08 ) ​ $ 0.03 ​ $ ( 0.06 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average shares used in computing net income (loss) per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ ​ 170,886 ​ ​ 168,932 ​ ​ 170,297 ​ ​ 168,658 Diluted ​ ​ 170,886 ​ ​ 168,932 ​ ​ 176,452 ​ ​ 168,658 ​ See Accompanying Notes to Condensed Financial Statements ​ 4 ​ Table of Contents RIGEL PHARMACEUTICALS, INC. CONDENSED STATEMENTS OF COMPREHENSIVE INCOME (In thousands) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended September 30, ​ Nine Months Ended September 30, ​ 2021 2020 2021 2020 Net income (loss) ​ $ ( 20,952 ) ​ $ ( 14,174 ) ​ $ 4,727 ​ $ ( 10,507 ) Other comprehensive income (loss): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net unrealized gain (loss) on short-term investments ​ 1 ​ ( 44 ) ​ 12 ​ ( 21 ) Comprehensive income (loss) ​ $ ( 20,951 ) ​ $ ( 14,218 ) ​ $ 4,739 ​ $ ( 10,528 ) ​ See Accompanying Notes to Condensed Financial Statements ​ 5 ​ Table of Contents RIGEL PHARMACEUTICALS, INC. CONDENSED STATEMENTS OF STOCKHOLDERS’ EQUITY (In thousands, except share amounts) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Comprehensive ​ Accumulated ​ Stockholders’ ​ Shares Amount Capital Loss Deficit Equity Balance as of January 1, 2021 169,316,782 ​ $ 169 ​ $ 1,339,833 ​ $ ( 4 ) ​ $ ( 1,305,972 ) ​ $ 34,026 Net income — ​ ​ — ​ ​ — ​ ​ — ​ ​ 39,500 ​ 39,500 Net unrealized gain on short-term investments — ​ ​ — ​ ​ — ​ ​ 3 ​ ​ — ​ 3 Issuance of common stock upon exercise of options 813,854 ​ ​ 1 ​ ​ 2,096 ​ ​ — ​ ​ — ​ 2,097 Stock-based compensation expense — ​ ​ — ​ ​ 2,672 ​ ​ — ​ ​ — ​ 2,672 Balance as of March 31, 2021 170,130,636 ​ $ 170 ​ $ 1,344,601 ​ $ ( 1 ) ​ $ ( 1,266,472 ) ​ $ 78,298 Net loss — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 13,821 ) ​ ​ ( 13,821 ) Net unrealized gain on short-term investments — ​ ​ — ​ ​ — ​ ​ 8 ​ ​ — ​ ​ 8 Issuance of common stock upon exercise of options and participation in Purchase Plan 711,847 ​ ​ 1 ​ ​ 1,318 ​ ​ — ​ ​ — ​ ​ 1,319 Stock-based compensation expense — ​ ​ — ​ ​ 2,306 ​ ​ — ​ ​ — ​ ​ 2,306 Balance as of June 30, 2021 ​ 170,842,483 ​ $ 171 ​ $ 1,348,225 ​ $ 7 ​ $ ( 1,280,293 ) ​ $ 68,110 Net loss — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 20,952 ) ​ ​ ( 20,952 ) Net unrealized gain on short-term investments — ​ ​ — ​ ​ — ​ ​ 1 ​ ​ — ​ ​ 1 Issuance of common stock upon exercise of options 127,265 ​ ​ — ​ ​ 274 ​ ​ — ​ ​ — ​ ​ 274 Stock-based compensation expense — ​ ​ — ​ ​ 2,237 ​ ​ — ​ ​ — ​ ​ 2,237 Balance as of September 30, 2021 170,969,748 ​ $ 171 ​ $ 1,350,736 ​ $ 8 ​ $ ( 1,301,245 ) ​ $ 49,670 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Comprehensive ​ Accumulated ​ Stockholders’ ​ Shares Amount Capital Income Deficit Equity Balance as of January 1, 2020 167,987,850 ​ $ 168 ​ $ 1,329,852 ​ $ 23 ​ $ ( 1,276,228 ) $ 53,815 Net income — ​ ​ — ​ ​ — ​ ​ — ​ ​ 21,243 ​ 21,243 Net unrealized gain on short-term investments — ​ ​ — ​ ​ — ​ ​ 55 ​ ​ — ​ 55 Issuance of common stock upon exercise of options 581,675 ​ ​ 1 ​ ​ 1,335 ​ ​ — ​ ​ — ​ 1,336 Stock-based compensation expense — ​ ​ — ​ ​ 2,050 ​ ​ — ​ ​ — ​ 2,050 Balance as of March 31, 2020 168,569,525 ​ $ 169 ​ $ 1,333,237 ​ $ 78 ​ $ ( 1,254,985 ) ​ $ 78,499 Net loss — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 17,576 ) ​ ( 17,576 ) Net unrealized loss on short-term investments — ​ ​ — ​ ​ — ​ ​ ( 32 ) ​ ​ — ​ ( 32 ) Issuance of common stock upon exercise of options and participation in Purchase Plan 348,098 ​ ​ — ​ ​ 541 ​ ​ — ​ ​ — ​ 541 Stock-based compensation expense — ​ ​ — ​ ​ 1,778 ​ ​ — ​ ​ — ​ 1,778 Balance as of June 30, 2020 ​ 168,917,623 ​ $ 169 ​ $ 1,335,556 ​ $ 46 ​ $ ( 1,272,561 ) ​ $ 63,210 Net loss — ​ ​ — ​ ​ — ​ ​ — ​ ​ ( 14,174 ) ​ ( 14,174 ) Net unrealized loss on short-term investments — ​ ​ — ​ ​ — ​ ​ ( 44 ) ​ ​ — ​ ( 44 ) Issuance of common stock upon exercise of options 25,811 ​ ​ — ​ ​ 52 ​ ​ — ​ ​ — ​ 52 Stock-based compensation expense — ​ ​ — ​ ​ 1,911 ​ ​ — ​ ​ — ​ 1,911 Balance as of September 30, 2020 168,943,434 ​ $ 169 ​ $ 1,337,519 ​ $ 2 ​ $ ( 1,286,735 ) ​ $ 50,955 ​ ​ ​ ​ ​ ​ ​ ​ See Accompanying Notes to Condensed Financial Statements ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 6 ​ Table of Contents ​ RIGEL PHARMACEUTICALS, INC. CONDENSED STATEMENTS OF CASH FLOW S (In thousands) (unaudited) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended September 30, ​ ​ 2021 2020 Operating activities ​ ​ ​ ​ ​ ​ Net income (loss) ​ $ 4,727 ​ $ ( 10,507 ) Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: ​ ​ ​ ​ ​ ​ Stock-based compensation expense ​ 7,147 ​ 5,665 Depreciation and amortization ​ 758 ​ 500 Non-cash interest expense ​ ​ 2,314 ​ ​ — Net amortization and accretion of discount on short-term investments and term loan ​ ​ 171 ​ ​ ( 171 ) Changes in assets and liabilities: ​ ​ ​ ​ ​ ​ Accounts receivable, net ​ 982 ​ ( 4,520 ) Inventories ​ ​ ( 5,325 ) ​ ( 235 ) Prepaid and other current assets ​ 8,113 ​ ( 893 ) Other assets ​ ( 111 ) ​ ( 124 ) Right-of-use assets ​ 6,071 ​ ​ 5,836 Accounts payable ​ ( 656 ) ​ ( 1,869 ) Accrued compensation ​ ( 131 ) ​ ( 646 ) Accrued research and development ​ 4,586 ​ ( 2,664 ) Other accrued liabilities ​ 2,563 ​ 1,731 Lease liability ​ ​ ( 6,384 ) ​ ​ ( 5,239 ) Deferred revenue ​ ​ 139 ​ ​ ( 23,477 ) Net cash provided by (used in) operating activities ​ 24,964 ​ ( 36,613 ) Investing activities ​ ​ ​ ​ ​ ​ Purchases of short-term investments ​ ( 117,076 ) ​ ( 63,671 ) Maturities of short-term investments ​ 31,200 ​ 103,184 Capital expenditures ​ ( 648 ) ​ ( 758 ) Net cash (used in) provided by investing activities ​ ( 86,524 ) ​ 38,755 Financing activities ​ ​ ​ ​ ​ ​ Cost share advance from collaboration partner ​ ​ 57,900 ​ ​ — Net proceeds from issuances of common stock upon exercise of options and participation in Purchase Plan ​ 3,690 ​ 1,929 Net proceeds from term loan financing ​ ​ — ​ ​ 9,975 Net cash provided by financing activities ​ 61,590 ​ 11,904 Net increase in cash and cash equivalents ​ 30 ​ 14,046 Cash and cash equivalents at beginning of period ​ 30,373 ​ 22,521 Cash and cash equivalents at end of period ​ $ 30,403 ​ $ 36,567 Supplemental disclosure of cash flow information ​ ​ ​ ​ ​ ​ Interest paid ​ $ 1,094 ​ $ 814 ​ See Accompanying Notes to Condensed Financial Statements ​ ​ 7 ​ Table of Contents Rigel Pharmaceuticals, In c. Notes to Condensed Financial Statements (unaudited) In this report, “Rigel,” “we,” “us” and “our” refer to Rigel Pharmaceuticals, Inc. 1. Nature of Operations 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 is also commercially available in Europe, the United Kingdom (TAVLESSE) and Canada (TAVALISSE) for the treatment of chronic ITP 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 high-risk patients with COVID-19; a National Institute of Health (NIH)/National Heart, Lung, and Blood Institute (NHLBI) sponsored Phase 3 trial (ACTIV-4 Host Tissue Trial) for the treatment of COVID-19 in hospitalized patients; 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). 2. Basis of Presentation Our accompanying unaudited condensed financial statements have been prepared in accordance with U.S. generally accepted accounting principles (U.S. GAAP), for interim financial information and pursuant to the instructions to Form 10-Q and Article 10 of Regulation S-X of the Securities Act of 1933, as amended (Securities Act). Accordingly, they do not include all the information and notes required by U.S. GAAP for complete financial statements. These unaudited condensed financial statements include only normal and recurring adjustments that we believe are necessary to fairly state our financial position and the results of our operations and cash flows. Interim-period results are not necessarily indicative of results of operations or cash flows for a full-year or any subsequent interim period. The balance sheet as of December 31, 2020 has been derived from audited financial statements at that date but does not include all disclosures required by U.S. GAAP for complete financial statements. Because certain disclosures required by U.S. GAAP for complete financial statements are not included herein, these interim unaudited condensed financial statements and the notes accompanying them should be read in conjunction with our audited financial statements and the notes thereto included in our Annual Report on Form 10-K for the year ended December 31, 2020. The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. We base our estimates on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. Actual results could differ from these estimates. 8 ​ Table of Contents 3. Summary of Significant Accounting Policies Recently Adopted Accounting Pronouncement In December 2019, the Financial Accounting Standards Board (FASB) issued ASU No. 2019-12, Income Taxes (Topic 740) Simplifying the Accounting for Income Taxes , which simplifies the accounting for income taxes by removing variety of exceptions within the framework of ASC 740. There were nine amendments in the ASU, such as the elimination of the incremental approach to intraperiod tax allocation, recognition of deferred tax liability for outside basis differences, changes to the accounting of hybrid tax regimes, amendments to the accounting of tax basis step-up in goodwill, clarification on separate financial statements of legal entities not subject to tax, guidance on the accounting for ownership changes in investments, and guidance on interim-period accounting for tax law changes and year-to-date loss limitations. The guidance is effective for fiscal years beginning after December 15, 2020 and for interim periods within those fiscal years. We adopted this new guidance effective in the first quarter of 2021 with no material impact on our financial statements and disclosures. Inventories Inventories are stated at the lower of cost or estimated net realizable value. We determine the cost of inventories using the standard cost method, which approximates actual cost based on a first-in, first-out basis. Inventories consist primarily of third-party manufacturing costs and allocated internal overhead costs. We began capitalizing inventory costs associated with our product upon regulatory approval when, based on management’s judgment, future commercialization was considered probable and the future economic benefit was expected to be realized. Prior to FDA approval of TAVALISSE, all manufacturing costs were charged to research and development expense in the period incurred. As of September 30, 2021 and December 31, 2020, our physical inventory included active pharmaceutical product for which costs have been previously charged to research and development expense. However, manufacturing of drug product, finished bottling and other labeling activities that occurred post FDA approval are included in the inventory value at each balance sheet date. We provide reserves for potential excess, dated or obsolete inventories based on an analysis of forecasted demand compared to quantities on hand and any firm purchase orders, as well as product shelf life. Cost of Product Sales Cost of product sales consists of third-party manufacturing costs, transportation and freight, and indirect overhead costs associated with the manufacture and distribution of TAVALISSE. A portion of the cost of producing the product sold to date was expensed as research and development prior to the Company’s New Drug Application approval for TAVALISSE and therefore is not included in the cost of product sales during this period. Accounts Receivable Accounts receivable are recorded net of customer allowances for prompt payment discounts and any allowance for doubtful accounts. We estimate the allowance for doubtful accounts based on existing contractual payment terms, actual payment patterns of our customers and individual customer circumstances. As of September 30, 2021 and December 31, 2020, customer allowance for prompt payment discounts were $ 100,000 and $ 171,000 , respectively. To date, we have determined that an allowance for doubtful accounts is not required. Revenue Recognition We recognize revenue in accordance with ASC Topic 606, Revenue From Contracts with Customers (ASC 606) , when our customer obtains control of promised goods or services, in an amount that reflects the consideration which we expect to receive in exchange for those goods or services. To determine whether arrangements are within the scope of ASC 606, we perform the following five steps: (i) identify the contract(s) with a customer; (ii) identify the performance obligations in the contract; (iii) determine the transaction price; (iv) allocate the transaction price to the performance obligations in the contract; and (v) recognize revenue when (or as) the Company satisfies its performance obligation. We apply the five-step model to contracts when it is probable that we will collect the consideration we are entitled to in exchange for the goods or services we transfer to the customer. At contract inception, once the contract is determined to be within the scope of this new guidance, we assess the goods or services promised 9 ​ Table of Contents within each contract and identify, as a performance obligation, and assess whether each promised good or service is distinct. We then recognize as revenue the amount of the transaction price that is allocated to the respective performance obligation when (or as) the performance obligation is satisfied. Product Sales Revenues from product sales are recognized when the specialty distributors (SDs), who are our customers, obtain control of our product, which occurs at a point in time, upon delivery to such SDs. These SDs subsequently resell our products to specialty pharmacy providers, health care providers, hospitals and clinics. In addition to distribution agreements with these SDs, we also enter into arrangements with specialty pharmacy providers, in-office dispensing providers, group purchasing organizations, and government entities that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of our products. Under ASC 606, we are required to estimate the transaction price, including variable consideration that is subject to a constraint, in our contracts with our customers. Variable consideration is included in the transaction price to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur. Revenue from product sales are recorded net of certain variable consideration which includes estimated government-mandated rebates and chargebacks, distribution fees, estimated product returns and other deductions. Provisions for returns and other adjustments are provided for in the period the related revenue is recorded. Actual amounts of consideration ultimately received may differ from our estimates. If actual results in the future vary from our estimates, we will adjust these estimates, which would affect net product revenue and earnings in the period such variances become known. The following are our significant categories of sales discounts and allowances: Sales Discounts . We provide our customers prompt payment discounts that are explicitly stated in our contracts and are recorded as a reduction of revenue in the period the related product revenue is recognized. Product Returns. We offer our SDs a right to return product purchased directly from us, which is principally based upon the product’s expiration date. Product return allowances are estimated and recorded at the time of sale. Government Rebates: We are subject to discount obligations under the state Medicaid programs and Medicare prescription drug coverage gap program. We estimate our Medicaid and Medicare prescription drug coverage gap rebates based upon a range of possible outcomes that are probability-weighted for the estimated payor mix. These reserves are recorded in the same period the related revenue is recognized, resulting in a reduction of product revenue and the establishment of a current liability that is included as part of Other Accrued Liabilities account in the Balance Sheet. Our liability for these rebates consists primarily of estimates of claims for the current quarter, and estimated future claims that will be made for product that has been recognized as revenue, but remains in the distribution channel inventories at the end of each reporting period. Chargebacks and Discounts: Chargebacks for fees and discounts represent the estimated obligations resulting from contractual commitments to sell products to certain specialty pharmacy providers, in-office dispensing providers, group purchasing organizations, and government entities at prices lower than the list prices charged to our SDs who directly purchase the product from us. These SDs charge us for the difference between what they pay for the product and our contracted selling price to these specialty pharmacy providers, in-office dispensing providers, group purchasing organizations, and government entities. These reserves are established in the same period that the related revenue is recognized, resulting in a reduction of product revenue. Actual chargeback amounts are generally determined at the time of resale to the specialty pharmacy providers, in-office dispensing providers, group purchasing organizations, and government entities by our SDs. The estimated obligations arising from these chargebacks and discounts are included as part of Other Accrued Liabilities in the balance sheet. Co-Payment Assistance: We offer co-payment assistance to commercially insured patients meeting certain eligibility requirements. The calculation of the accrual for co-pay assistance is based on an estimate of claims and the cost per claim that we expect to receive associated with product that has been recognized as revenue. 10 ​ Table of Contents Contract Revenues from Collaborations In the normal course of business, we conduct research and development programs independently and in connection with our corporate collaborators, pursuant to which we license certain rights to our intellectual property to third parties. The terms of these arrangements typically include payment to us for a combination of one or more of the following: upfront license fees; development, regulatory and commercial milestone payments; product supply services; and royalties on net sales of licensed products. Upfront License Fees: If the license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from upfront license fees allocated to the license when the license is transferred to the licensee and the licensee is able to use and benefit from the license. For licenses that are bundled with other promises, we determine whether the combined performance obligation is satisfied over time or at a point in time. If the combined performance obligation is satisfied over time, we use judgment in determining the appropriate method of measuring progress for purposes of recognizing revenue from the up-front license fees. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition. For arrangements that require us to share in the development costs but to which we do not participate in the co-development work, the portion of the upfront fee attributed to our share in the future development costs is excluded from the transaction price. If such share in the development costs is payable beyond 12 months from the delivery of the corresponding license, a significant financing component is deemed to exist. If a significant financing component is identified, we adjust the transaction price by reducing the upfront fee by the net present value of our share in future development costs over the expected commitment period. Such discounted amount will be reported as a liability in the balance sheet, with a corresponding interest expense being accreted based on a discount rate applied over the expected commitment period. Development, Regulatory or Commercial Milestone Payments: At the inception of each arrangement that includes payments based on the achievement of certain development, regulatory and commercial or launch events, we evaluate whether the milestones are considered probable of being achieved and estimate the amount to be included in the transaction price using the most likely amount method. If it is probable that a significant revenue reversal would not occur, the associated milestone value is included in the transaction price. Milestone payments that are not within our or the licensee’s control, such as regulatory approvals, are not considered probable of being achieved until uncertainty associated with the approvals has been resolved. The transaction price is then allocated to each performance obligation, on a relative standalone selling price basis, for which we recognize revenue as or when the performance obligations under the contract are satisfied. At the end of each subsequent reporting period, we re-evaluate the probability of achieving such development and regulatory milestones and any related constraint, and if necessary, adjust our estimate of the overall transaction price. Any such adjustments are recorded on a cumulative catch-up basis, and recorded as part of contract revenues from collaborations during the period of adjustment. Product Supply Services: Arrangements that include a promise for future supply of drug product for either clinical development or commercial supply at the licensee’s discretion are generally considered as options. We assess if these options provide a material right to the licensee and if so, they are accounted for as separate performance obligations. Sales-based Milestone Payments and Royalties: For arrangements that include sales-based royalties, including milestone payments based on the volume of sales, we determine whether the license is deemed to be the predominant item to which the royalties or sales-based milestones relate to and if such is the case, we 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). 11 ​ Table of Contents Government Contract As described in Note 8 below, in January 2021, we were awarded up to $ 16.5 million by the U.S. Department of Defense’s Joint Program Executive Office for Chemical, Biological, Radiological and Nuclear Defense (referred here as U.S. Department of Defense) to support our ongoing Phase 3 clinical trial to evaluate the safety and efficacy of fostamatinib for the treatment of hospitalized high-risk patients with COVID-19. We determined that the government award should be accounted for under IAS 20, Accounting for Government Grants and Disclosure of Government Assistance, which is outside the scope of Topic 606, as the U.S. Department of Defense is not receiving reciprocal value for their contributions. Revenue is recognized when there is reasonable assurance that the conditions of the grant will be met, and the grant will be received. For the U.S. Department of Defense’s contract, this occurs when either each milestone has been accepted by Department of Defense or management has concluded that the conditions of the grant have been substantially met. Leases We currently lease our research and office space under a noncancelable lease agreement with our landlord through January 2023. In December 2014, we entered into a sublease agreement with an unrelated third party to occupy a portion of our research and office space through January 2023. All of our leases outstanding as September 30, 2021 continued to be classified as operating leases. We recorded an operating lease right-of-use asset and an operating lease liability on our balance sheet. Right-of-use lease assets represent our right to use the underlying asset for the lease term and the lease obligation represents our commitment to make the lease payments arising from the lease. Right-of-use lease assets and obligations are recognized at the commencement date based on the present value of remaining lease payments over the lease term. As our lease does not provide an implicit rate, we have used an estimated incremental borrowing rate based on the information available at the commencement date in determining the present value of lease payments. The operating lease right-of-use asset includes any lease payments made prior to commencement. The lease term may include options to extend or terminate the lease when it is reasonably certain that we will exercise that option. Operating lease expense is recognized on a straight-line basis over the lease term, subject to any changes in the lease or expectations regarding the terms. Variable lease costs such as common area costs and property taxes are expensed as incurred. Leases with an initial term of 12 months or less are not recorded on the balance sheet. For our sublease agreement wherein we are the lessor, sublease income will be recognized on a straight-line basis over the term of the sublease. The difference between the cash received, and the straight-line lease income recognized, if any, will be recorded as part of prepaid and other current assets in the balance sheet. Research and Development Accruals We have various contracts with third parties related to our research and development activities. Costs that are incurred but not billed to us as of the end of the period are accrued. We make estimates of the amounts incurred in each period based on the information available to us and our knowledge of the nature of the contractual activities generating such costs. Clinical trial contract expenses are accrued based on units of activity. Expenses related to other research and development contracts, such as research contracts, toxicology study contracts and manufacturing contracts are estimated to be incurred generally on a straight-line basis over the duration of the contracts. Raw materials and study materials not related to our approved drug, purchased for us by third parties are expensed at the time of purchase. Income Taxes Income taxes have been provided using the liability method whereby deferred tax assets and liabilities are determined based on differences between financial reporting and tax bases of assets and liabilities and net operating loss and tax credit carryforwards measured using the enacted tax rates and laws that will be in effect when the differences are expected to reverse or the carryforwards are utilized. Valuation allowances are established when it is determined that it is more likely than not that such assets will not be realized. We account for uncertain tax positions consistent with authoritative guidance. The guidance prescribes a “more likely than not” recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return. We do not expect any material change in our unrecognized tax benefits over the next 12 months. We recognize interest and penalties related to unrecognized tax 12 ​ Table of Contents benefits as a component of income taxes. 4. Net Income (Loss) Per Share Basic net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period. Diluted net income (loss) per share is computed by dividing net income (loss) by the weighted-average number of shares of common stock outstanding during the period and the number of additional shares of common stock that would have been outstanding if potentially dilutive securities had been issued. Potentially dilutive securities include stock options, restricted stock units and shares issuable under our Purchase Plan. The dilutive effect of these potentially dilutive securities is reflected in diluted earnings per share by application of the treasury stock method. Under the treasury stock method, an increase in the fair market value of our common stock can result in a greater dilutive effect from potentially dilutive securities. The following table sets forth the computation of basic and diluted earnings per share (in thousands except per share amounts): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2021 2020 2021 2020 EPS Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) ​ $ ( 20,952 ) ​ $ ( 14,174 ) ​ $ 4,727 ​ $ ( 10,507 ) EPS Denominator—Basic: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average common shares outstanding ​ 170,886 ​ 168,932 ​ 170,297 ​ 168,658 EPS Denominator—Diluted: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average common shares outstanding ​ 170,886 ​ 168,932 ​ 170,297 ​ 168,658 Dilutive effect of stock options, restricted stock units and shares under Purchase Plan ​ — ​ — ​ 6,155 ​ — Weighted-average shares outstanding and common stock equivalents ​ 170,886 ​ 168,932 ​ 176,452 ​ 168,658 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) per share ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ ( 0.12 ) ​ $ ( 0.08 ) ​ $ 0.03 ​ $ ( 0.06 ) Diluted ​ $ ( 0.12 ) ​ $ ( 0.08 ) ​ $ 0.03 ​ $ ( 0.06 ) ​ The potential shares of common stock that were excluded from the computation of diluted net income (loss) per share for the periods presented because including them would have been antidilutive are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2021 2020 ​ 2021 2020 Outstanding stock options ​ ​ 30,490 ​ ​ 27,646 ​ ​ 9,450 ​ ​ 27,646 Restricted stock units ​ ​ 234 ​ ​ — ​ ​ 4 ​ ​ — Purchase Plan ​ ​ 313 ​ ​ 59 ​ ​ — ​ ​ 59 Total ​ ​ 31,037 ​ ​ 27,705 ​ ​ 9,454 ​ ​ 27,705 ​ ​ 5. Stock Award Plans ​ On May 16, 2018, our stockholders approved the adoption of the Company’s 2018 Equity Incentive Plan (2018 Plan). The 2018 Plan is the successor plan to the 2011 Equity Incentive Plan, the 2000 Equity Incentive Plan, and the 2000 Non-Employee Directors' Stock Option Plan. ​ We have two equity plans, our 2018 Plan and the Company’s Inducement Plan, as amended (collectively, the Equity Incentive Plans), that provide for granting of stock awards to our officers, directors and all other employees and consultants. To date, we granted stock options and restricted stock units under our Equity Incentive Plans. We also have our Employee Stock Purchase Plan (Purchase Plan), wherein eligible employees can purchase shares of our common stock at a price per share equal to the lesser of 85 % of the fair market value on the first day of the offering period or 85 % of the fair market value on the purchase date. The fair value of each option award is estimated on the date of grant using 13 ​ Table of Contents the Black-Scholes option pricing model which considered our stock price, as well as assumptions regarding a number of complex and subjective variables. The fair value of the restricted stock unit grant is based on the market price of our common stock on the date of grant. We use the straight-line attribution method over the requisite employee service period for the entire award in recognizing stock-based compensation expense. We account for forfeitures as they occur. ​ We granted performance-based stock options to purchase shares of our common stock which will vest upon the achievement of certain corporate performance-based milestones. We determined the fair values of these performance-based stock options using the Black-Scholes option pricing model at the date of grant. For the portion of the performance-based stock options of which the performance condition is considered probable of achievement, we recognize stock-based compensation expense on the related estimated grant date fair values of such options on a straight-line basis from the date of grant up to the date when we expect the performance condition will be achieved. For the performance conditions that are not considered probable of achievement at the grant date or upon quarterly re-evaluation, prior to the event actually occurring, we recognize the related stock-based compensation expense when the event occurs or when we can determine that the performance condition is probable of achievement. In those cases, we recognize the change in estimate at the time we determine the condition is probable of achievement (by recognizing stock-based compensation expense as cumulative catch-up adjustment as if we had estimated at the grant date that the performance condition would have been achieved) and recognize the remaining compensation cost up to the date when we expect the performance condition will be achieved, if any. ​ 6. Stock-Based Compensation ​ Total stock-based compensation related to all of our share-based payments that we recognized for the three and nine months ended September 30, 2021 and 2020 were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2021 2020 ​ 2021 2020 Selling, general and administrative ​ $ 1,800 ​ $ 1,352 ​ $ 5,625 ​ $ 3,981 Research and development ​ ​ 402 ​ ​ 532 ​ ​ 1,522 ​ ​ 1,684 Total stock-based compensation expense ​ $ 2,202 ​ $ 1,884 ​ $ 7,147 ​ $ 5,665 ​ During the nine months ended September 30, 2021, we granted options to purchase 6,373,981 shares of common stock with a grant-date weighted-average fair value of $ 2.36 per share, and 1,176,386 options to purchase shares were exercised. As of September 30, 2021, total stock options outstanding was 30,489,827 shares, of which, 2,018,125 shares outstanding are performance-based stock options wherein the achievement of the corresponding corporate-based milestones was not considered as probable. Accordingly, the related grant date fair value for these performance-based stock options of $ 4.2 million has not been recognized as stock-based compensation expense as of September 30, 2021. The exercise price of stock options granted under our stock plans is equal to the fair market value of the underlying shares on the date of grant. Options become exercisable at varying dates and generally expire 10 years from the date of grant. The fair value of each option award is estimated on the date of grant using the Black-Scholes option pricing model. We have segregated option awards into the following three homogenous groups for the purposes of determining fair values of options: officers and directors, all other employees, and consultants. We account for forfeitures as they occur. We determined weighted-average valuation assumptions separately for each of these groups as follows: ● Volatility—We estimated volatility using our historical share price performance over the expected life of the option. We also considered other factors, such as implied volatility, our current clinical trials and other company activities that may affect the volatility of our stock in the future. We determined that at this time historical volatility is more indicative of our expected future stock performance than implied volatility. ● Expected term—For options granted to consultants, we use the contractual term of the option, which is generally ten years , for the initial valuation of the option and the remaining contractual term of the option for the succeeding periods. We analyzed various historical data to determine the applicable 14 ​ Table of Contents expected term for each of the other option groups. This data included: (1) for exercised options, the term of the options from option grant date to exercise date; (2) for cancelled options, the term of the options from option grant date to cancellation date, excluding non-vested option forfeitures; and (3) for options that remained outstanding at the balance sheet date, the term of the options from option grant date to the end of the reporting period and the estimated remaining term of the options. The consideration and calculation of the above data gave us reasonable estimates of the expected term for each employee group. We also considered the vesting schedules of the options granted and factors surrounding exercise behavior of the option groups, our current market price and company activity that may affect our market price. In addition, we considered the optionee type (i.e., officers and directors or all other employees) and other factors that may affect the expected term of the options. ● Risk-free interest rate—The risk-free interest rate is based on U.S. Treasury constant maturity rates with similar terms to the expected term of the options for each option group. ● Dividend yield—The expected dividend yield is 0 % as we have not paid and do not expect to pay dividends in the future. The following table summarizes the weighted-average assumptions relating to options granted pursuant to our Equity Incentive Plans for the three and nine months ended September 30, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ ​ Nine Months Ended ​ ​ ​ September 30, ​ ​ September 30, ​ ​ 2021 2020 2021 2020 Risk-free interest rate ​ 1.1 % 0.5 % ​ 1.0 % 1.2 % Expected term (in years) ​ 6.0 ​ 6.7 ​ ​ 6.5 ​ 6.5 ​ Dividend yield ​ 0.0 % 0.0 % ​ 0.0 % 0.0 % Expected volatility ​ 70.4 % 70.5 % ​ 70.6 % 66.0 % ​ During the nine months ended September 30, 2021, we granted 233,750 restricted stock units with grant-date weighted-average fair value of $ 3.67 per share. The restricted stock units granted vests over 1 to 2 years , all of which are outstanding as of September 30, 2021. ​ As of September 30, 2021, there were approximately $ 15.5 million of unrecognized stock-based compensation cost which is expected to be recognized over the remaining weighted-average period of 1.98 years, related to time-based stock options, RSUs and performance-based stock options, wherein achievement of the corresponding corporate-based milestones was considered as probable. ​ In January 2021, our Board of Directors approved the 825,000 shares increase in available number of shares for future grant under our 2018 Plan, which became effective upon approval by our stockholders during the stockholders annual meeting in May 2021. As of September 30, 2021, there were 10,403,690 shares of common stock available for future grant under our Equity Incentive Plans. ​ Employee Stock Purchase Plan ​ Our Purchase Plan permits eligible employees to purchase common stock at a discount through payroll deductions during defined offering periods. The price at which the stock is purchased is equal to the lesser of 85 % of the fair market value of our common stock on the first day of the offering or 85 % of the fair market value of our common stock on the purchase date. ​ The fair value of awards granted under our Purchase Plan is estimated on the date of grant using the Black-Scholes option pricing model, which uses weighted-average assumptions . Our Purchase Plan provides for a twenty-four -month offering period comprised of four six-month purchase periods with a look-back option. A look-back option is a provision in our Purchase Plan under which eligible employees can purchase shares of our common stock at a price per share equal to the lesser of 85 % of the fair market value on the first day of the offering period or 85 % of the fair market value on the purchase date. Our Purchase Plan also includes a feature that provides for a new offering period to begin when the fair market value of our common stock on any purchase date during an offering period falls below the fair 15 ​ Table of Contents market value of our common stock on the first day of such offering period. This feature is called a “reset.” Participants are automatically enrolled in the new offering period. We had a “reset” in January 2020 because the fair market value of our stock on December 31, 2019 was lower than the fair market value of our stock on January 1, 2019, the first day of the offering period. Following the “reset” in January 2020, January 1, 2020 was the new first day of the two-year offering period of our Purchase Plan. We applied modification accounting in accordance with the relevant accounting guidance. The total incremental fair value associated with this “reset” was approximately $ 753,000 and is being recognized as expense from January 1, 2020 to December 31, 2021. In July 2020, we had another “reset” because the fair market value of our stock on June 30, 2020 was lower than the fair market value of our stock on January 1, 2020. Following the “reset” in July 2020, July 1, 2020 is the new start date of our two-year offering period of our Purchase Plan. We applied modification accounting in accordance with the relevant accounting guidance. The total incremental fair value associated with this “reset” was approximately $ 535,000 and is being amortized to expenses from July 1, 2020 to June 30, 2022. ​ In January 2021, our Board of Directors approved the 5,500,000 shares increase in the maximum number of shares authorized for issuance under the Purchase Plan, which became effective upon approval by our stockholders during the annual stockholders meeting in May 2021. As of September 30, 2021, there were 5,039,922 shares reserved for future issuance under the Purchase Plan. As of September 30, 2021, unrecognized stock-based compensation cost related to our Purchase Plan amounted to $ 193,000 , which is expected to be recognized over the remaining weighted average period of 0.33 years. ​ ​ ​ 7. Revenues ​ Revenues disaggregated by category were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2021 2020 ​ 2021 2020 Product sales: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross product sales ​ $ 20,546 ​ $ 20,318 ​ $ 58,692 ​ $ 54,042 Discounts and allowances ​ ​ ( 4,534 ) ​ ​ ( 4,029 ) ​ ​ ( 13,251 ) ​ ​ ( 10,099 ) Total product sales, net ​ ​ 16,012 ​ ​ 16,289 ​ ​ 45,441 ​ ​ 43,943 Revenues from collaborations: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ License revenues ​ ​ 2,431 ​ ​ — ​ ​ 70,354 ​ ​ 39,858 Development milestones ​ ​ 1,875 ​ ​ 2,100 ​ ​ 1,875 ​ ​ 2,100 Research and development services and others ​ ​ 225 ​ ​ — ​ ​ 1,657 ​ ​ 4,270 Total revenues from collaborations ​ ​ 4,531 ​ ​ 2,100 ​ ​ 73,886 ​ ​ 46,228 Government contract ​ ​ 1,000 ​ ​ — ​ ​ 9,500 ​ ​ — Total revenues ​ $ 21,543 ​ $ 18,389 ​ $ 128,827 ​ $ 90,171 ​ 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2021 2020 ​ 2021 2020 ASD Healthcare and Oncology Supply ​ ​ 25 % ​ ​ 48 % ​ ​ 15 % ​ ​ 26 % McKesson Specialty Care Distribution Corporation ​ ​ 35 % ​ ​ 34 % ​ ​ 17 % ​ ​ 20 % Lilly ​ ​ 12 % ​ ​ — ​ ​ 56 % ​ ​ — Cardinal Healthcare ​ ​ 18 % ​ ​ * ​ ​ * ​ ​ * Grifols ​ ​ * ​ ​ * ​ ​ * ​ ​ 49 % Daiichi ​ ​ * ​ ​ 11 % ​ ​ * ​ ​ * ​ Our first and only FDA approved product, TAVALISSE ® , was approved by the U.S. FDA in April 2018. We commenced commercial sale of TAVALISSE in the U.S. in May 2018. Fostamatinib is marketed in Europe under the 16 ​ Table of Contents brand name TAVLESSE™ (fostamatinib). In July 2020, Grifols S.A. (Grifols) launched TAVLESSE in the United Kingdom (UK) and Germany. In September 2021, Grifols announced that it began commercializing TAVLESSE in France, Italy and Spain. In December 2020, the Scottish Medicines Consortium accepted TAVLESSE for use in NHS in Scotland. In addition to the distribution agreements with our customers and SDs, we also enter into arrangements with specialty pharmacy providers, in-office dispensing providers, group purchasing organizations, and government entities that provide for government-mandated and/or privately-negotiated rebates, chargebacks and discounts with respect to the purchase of our products which reduced our gross product sales. Also refer to Revenue Recognition policy discussion in Note 3 above. ​ The following table summarizes activity in each of the product revenue allowance and reserve categories for the nine months ended September 30, 2021 and 2020 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Chargebacks, ​ Government ​ ​ ​ ​ ​ ​ Discounts and ​ and Other ​ ​ ​ ​ ​ ​ Fees ​ Rebates ​ Returns ​ Total Balance at January 1, 2021 $ 2,461 $ 2,115 ​ $ 1,489 ​ $ 6,065 Provision related to current period sales ​ ​ 7,326 ​ ​ 3,995 ​ ​ 739 ​ ​ 12,060 Credit or payments made during the period ​ ​ ( 7,073 ) ​ ​ ( 3,367 ) ​ ​ ( 387 ) ​ ​ ( 10,827 ) Balance at September 30, 2021 $ 2,714 ​ $ 2,743 ​ $ 1,841 ​ $ 7,298 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Chargebacks, ​ Government ​ ​ ​ ​ ​ ​ ​ ​ Discounts and ​ and Other ​ ​ ​ ​ ​ ​ ​ ​ Fees ​ Rebates ​ Returns ​ Total Balance at January 1, 2020 $ 1,293 $ 1,801 ​ $ 238 ​ $ 3,332 Provision related to current period sales ​ ​ 5,625 ​ ​ 2,775 ​ ​ 676 ​ ​ 9,076 Adjustment related to prior period sales ​ ​ ( 75 ) ​ ​ ( 490 ) ​ ​ 565 ​ ​ — Credit or payments made during the period ​ ​ ( 5,020 ) ​ ​ ( 2,407 ) ​ ​ ( 72 ) ​ ​ ( 7,499 ) Balance at September 30, 2020 $ 1,823 ​ $ 1,679 ​ $ 1,407 ​ $ 4,909 ​ Of the $ 13.3 million discounts and allowances from gross product sales for the nine months ended September 30, 2021, $ 12.1 million was accounted for as additions to other accrued liabilities and $ 1.2 million as reductions in accounts receivable and prepaid and other current assets in the balance sheet. Other accrued liabilities related to the discounts and allowances had a remaining outstanding balance of $ 7.3 million as of September 30, 2021. ​ Of the $ 10.1 million discounts and allowances from gross product sales for the nine months ended September 30, 2020, $ 9.1 million was accounted for as additions to other accrued liabilities and $ 1.0 million as reductions in accounts receivable and prepaid and other current assets in the balance sheet. Other accrued liabilities related to the discounts and allowances had a remaining outstanding balance of $ 4.9 million as of September 30, 2020. ​ 8. Sponsored Research and License Agreements and Government Contract Sponsored Research and License Agreements We conduct research and development programs independently and in connection with our corporate collaborators. As of September 30, 2021, we are a party to collaboration agreements with Lilly to develop and commercialize R552, a RIP1 inhibitor, for the treatment of non-central nervous system (non-CNS) diseases and collaboration aimed at developing additional RIP1 inhibitors for the treatment of central nervous system (CNS) diseases; with Grifols to commercialize fostamatinib for human diseases in all indications, including chronic ITP and autoimmune hemolytic anemia (AIHA), in Europe and Turkey; with Kissei Pharmaceutical Co., Ltd. (Kissei) to develop and commercialize fostamatinib in Japan, China, Taiwan and the Republic of Korea; and with Medison Pharma Trading AG 17 ​ Table of Contents (Medison Canada) and Medison Pharma Ltd. (Medison Israel and, together with Medison Canada, Medison) to commercialize fostamatinib in all indications, including chronic ITP and AIHA, in Canada and Israel, respectively. Further, we are also a party to collaboration agreements, but do not have ongoing performance obligations, with AZ for the development and commercialization of R256, an inhaled JAK inhibitor; with BerGenBio for the development and commercialization of AXL inhibitors in oncology; and with Daiichi to pursue research related to MDM2 inhibitors, a novel class of drug targets called ligases. Our collaboration agreement with Aclaris related to the development and commercialization of JAK inhibitors for the treatment of alopecia areata and other dermatological conditions was terminated in April 2021. Under the above existing agreements that 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 $ 1.4 billion 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, $ 309.5 million relates to the achievement of development events, $ 303.1 million relates to the achievement of regulatory events and $ 816.0 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. Global Exclusive License Agreement with Eli Lilly ​ On February 18, 2021, we entered into a global exclusive license agreement and strategic collaboration with Lilly (Lilly Agreement), which became effective on March 27, 2021, to develop and commercialize R552, a RIP1 inhibitor, for the treatment of non-CNS diseases. In addition, the collaboration is aimed at developing additional RIP1 inhibitors for the treatment of CNS diseases. Pursuant to the terms of the license agreement, we granted to Lilly exclusive rights to develop and commercialize R552 and related RIP1 inhibitors in all indications worldwide. The agreement became effective in March 2021 upon clearance under the Hart-Scott-Rodino (HSR) Antitrust Improvements Act of 1976. The parties’ collaboration is governed through a joint governance committee and appropriate subcommittees. ​ 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 (no later than September 30, 2023), under the Lilly Agreement, we are required 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 through April 1, 2024. If we decide not to exercise our opt- out rights, we will be required to share in global development costs of up to certain amounts at a specified cap, as provided for in the Lilly Agreement. ​ We are responsible for performing and funding initial discovery and identification of CNS disease development candidates. Following candidate selection, Lilly will be responsible for performing and funding all future development and commercialization of the CNS disease development candidates. ​ 18 ​ Table of Contents Under the terms of the license agreement, we were entitled to receive a non-refundable and non-creditable upfront cash payment amounting to $ 125.0 million, which we received in April 2021, and a 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. ​ 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 rights over the non-CNS penetrant intellectual property (IP), and (b) granting of the license rights over the CNS penetrant IP which will be delivered to Lilly upon completion of the additional research and development efforts specified in the agreement. We concluded each of these performance obligations is distinct. We based our assessment on the assumption that Lilly can benefit from each of the licenses on its own by developing and commercializing the underlying product using its own resources. ​ Under the Lilly Agreement, we are required to share 20 % of the development costs for R552 in the U.S., Europe and Japan up to a specified cap. Given our rights to opt- out from the development of R552, we believe at the minimum, we have a commitment to fund the development costs up to $ 65.0 million as discussed above. We considered this commitment to fund the development costs as a significant financing component of the contract, which we accounted for as a reduction of the upfront fee to derive the transaction price. This financing component was recorded as a liability at its net present value of approximately $ 57.9 million using a 6.4 % discount rate. Interest expense is being accreted on such liability over the expected commitment period. Interest expense accreted during the three and nine months ended September 30, 2021 was $ 836,000 and $ 1.9 million, respectively. As of September 30, 2021, the outstanding financing liability of $ 59.8 million to Lilly was included within other long-term liabilities, current portion, and other long-term liabilities in the condensed balance sheet. ​ We allocated the net transaction price of $ 67.1 million to each performance obligation based on our best estimate of its relative standalone selling price using the adjusted market assessment approach. We concluded that the license rights over the non-CNS penetrant IP represents functional IP that is not expected to change over time, and we have no ongoing or undelivered obligations relative to such IP that Lilly will benefit from the use of such IP on the delivery date. As such, the transaction price allocated to the non-CNS penetrant IP of $ 60.4 million was recognized as revenue in the first quarter of 2021 upon delivery of the non-CNS penetrant IP to Lilly in March 2021. For the delivery of license rights over the CNS penetrant IP, we are obligated to perform additional research and development efforts before Lilly can accept the license. The allocated transaction price to the CNS penetrant IP of $ 6.7 million is being recognized as revenue from the effective date of the Lilly Agreement through the eventual acceptance by Lilly using the input method. We recognized revenue during the three and nine months ended September 30, 2021 of $ 2.4 million and $ 6.0 million, respectively, relative to the delivery of CNS penetrant IP. As of September 30, 2021, the remaining deferred revenue amounted to $ 744,000 . ​ The remaining future variable consideration related to future milestone payments as discussed above were fully constrained because we cannot conclude that it is probable that a significant reversal of the amount of cumulative revenue recognized will not occur, given the inherent uncertainty of success with these future milestones. 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. 19 ​ Table of Contents 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. We will also receive stepped double-digit royalty payments based on tiered net sales which may reach 30 % of net sales. In return, Grifols received exclusive rights to commercialize fostamatinib for human diseases, including chronic ITP, AIHA, and IgAN, in Europe and Turkey. Grifols also received an exclusive option to expand the territory under its exclusive and non-exclusive licenses to include the Middle East, North Africa and Russia (including Commonwealth of Independent States). In November 2020, Grifols exercised its option to include these territories as part of the licensed territories under the agreement. The agreement also required us to continue to conduct our long-term open-label extension study on patients with ITP through European Medicines Agency (EMA) approval of ITP in Europe or until the study ends as well as conduct the Phase 3 trial in AIHA. ​ In December 2019, we entered into a Drug Product Purchase Agreement with Grifols wherein we agreed to supply and sell to Grifols at 30 % mark up the drug product requested under an anticipated first and only purchase order until Grifols enters into a supply agreement directly with a third-party drug product manufacturer. In October 2020, we entered into a Commercial Supply Agreement with Grifols. In January 2020, the European Commission granted a centralized Marketing Authorization (MA) for fostamatinib valid throughout the European Union and in the UK after the departure of the UK from the European Union 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, comprised of a $ 17.5 million payment due upon Marketing Authorization Application (MAA) approval by the EMA 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 because we cannot conclude that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur, given the inherent uncertainty of success with these future milestones. We are recognizing 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. 20 ​ Table of Contents ​ As of September 30, 2021 and December 31, 2020, the remaining deferred revenue was $ 1.0 million and $ 1.6 million, respectively, related to the performance of research services. During the three and nine months ended September 30, 2021, we recognized $ 225,000 and $ 605,000 , respectively, in revenue related to the research and development services. During the nine months ended September 30, 2021, we also recognized $ 1.0 million in revenue for the delivery of drug supplies in the first quarter of 2021 to Grifols for its commercialization. ​ During the three months ended September 30, 2020, we recognized no revenues from Grifols. During the nine months ended September 30, 2020, we recognized $ 39.9 million in revenues in the first quarter of 2020 related to the licensed rights in intellectual property and $ 3.6 million in revenues in the first and second quarters of 2020 related to the research services performed. During the nine months ended September 30, 2020, we also recognized $ 651,000 in revenue for delivery of drug supplies in the second quarter of 2020 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 because we cannot conclude that it is probable that a significant reversal in the amount of cumulative revenue recognized will not 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. Accordingly, we will recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). We will re-evaluate the transaction price in each reporting period and as uncertain events are resolved or other changes in circumstances occur. ​ We did no t recognize any revenue with regards to the performance obligations related to the supply of fostamatinib and material right associated with discounted fostamatinib supply during the three and nine months ended September 30, 2021 and 2020. As of September 30, 2021 and December 31, 2020, the remaining deferred revenue 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 21 ​ Table of Contents upfront payment with respect to the 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 from obtaining regulatory approval for the treatment of AIHA in Canada. 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 was accounted for as a financing arrangement. During the three and nine months ended September 30, 2021, we accrued interest amounting to $ 50,000 and $ 387,000 , respectively, related to this financing arrangement. No interest was accrued during the three and nine months ended September 30, 2020. Pursuant to this exclusive commercialization license agreement, in August 2020, we entered into a commercial supply agreement with Medison. As of September 30, 2021, the outstanding financing liability of $ 5.5 million to Medison was included within other long-term liabilities in the condensed balance sheet. In August 2021, Medison Israel received the licenses for registrational approval from the Ministry of Health. Pursuant to the exclusive commercial and license agreement, this event triggered the first milestone that is the regulatory approval of the product in Israel for the first indication, for a non-refundable payment of $ 75,000 . We recognized this amount as revenue during the three and nine months ended September 30, 2021. Daiichi Collaboration Agreement Pursuant to the Amended Collaboration Agreement dated April 20, 2005 with Daiichi, during the three and nine months ended September 30, 2021, we recognized $ 1.8 million of revenue related to the achievement of a certain milestone, of which the payment was received in October 2021. During the three and nine months ended September 2020, we also recognized $ 2.1 million related to the achievement of a certain milestone, of which payment was received in October 2020. All deliverables under the agreement had been previously delivered, and as such the above had been recognized as revenue in the corresponding periods such milestones were achieved. Other license agreements 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. All the deliverables under the agreement had been delivered and the one-time fee was recognized as revenue in the first quarter of 2021. Government Contract - U.S. Department of Defense’s JPEO-CBRND In January 2021, we were awarded up to $ 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 for the treatment of hospitalized high-risk patients with COVID-19. The amount of award we will receive from the U.S. Department of Defense is subject to submission of proper documentation as evidence of completion of certain clinical trial events or milestones as specified in the agreement, and approval by the U.S. Department of Defense that such events or milestones have been met. We determined that this government award should be accounted for under IAS 2, Accounting for Government Grants and Disclosure of Government Assistance, which is outside of the scope of Topic 606, as the U.S. Department of Defense is not receiving reciprocal value for their contributions. We record government contract revenue in the statement of operations in the period when it is probable that we will receive the award, which is when we comply with the conditions associated with the award and obtain approval from the U.S. Department of Defense that such conditions have been met. For the three and nine months ended September 30, 2021, we recognized $ 1.0 million and $ 9.5 million, respectively, related to this grant, all of which had been invoiced and collected as of September 30, 2021. We expect to receive the remaining award of $ 7.0 million throughout the period 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. ​ ​ ​ 22 ​ Table of Contents 9. Inventories ​ As of September 30, 2021 and December 31, 2020, we have the following inventories (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ ​ 2021 2020 Raw materials ​ $ 5,142 ​ $ — Work in process ​ ​ 483 ​ ​ 1,189 Finished goods ​ ​ 1,410 ​ ​ 449 Total ​ $ 7,035 ​ $ 1,638 ​ As of December 31, 2020, we have $ 4.0 million in advance payments to our manufacturer of our raw materials, which was included as part of Prepaid and Other Current Assets in our condensed balance sheet. During the first quarter of 2021, the production of raw materials was completed, and ownership was transferred to us. Accordingly, such advance payments were reclassified to inventories as raw materials. ​ 10. Cash, Cash Equivalents and Short-Term Investments ​ Cash, cash equivalents and short-term investments consisted of the following (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, ​ December 31, ​ ​ 2021 2020 Cash ​ $ 2,610 ​ $ 1,988 Money market funds ​ 25,794 ​ 19,487 U.S. treasury bills ​ 37,991 ​ 10,034 Government-sponsored enterprise securities ​ 14,735 ​ 4,920 Corporate bonds and commercial paper ​ 62,016 ​ 20,898 ​ ​ $ 143,146 ​ $ 57,327 Reported as: ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 30,403 ​ $ 30,373 Short-term investments ​ 112,743 ​ 26,954 ​ ​ $ 143,146 ​ $ 57,327 ​ Cash equivalents and short-term investments include the following securities with gross unrealized gains and losses (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Gross ​ ​ ​ ​ Amortized ​ Unrealized ​ Unrealized ​ ​ ​ September 30, 2021 ​ Cost ​ Gains ​ Losses ​ Fair Value U.S. treasury bills ​ $ 37,985 ​ $ 8 ​ $ ( 2 ) ​ $ 37,991 ​ Government-sponsored enterprise securities ​ ​ 14,734 ​ ​ 2 ​ ​ ( 1 ) ​ ​ 14,735 ​ Corporate bonds and commercial paper ​ 62,015 ​ 5 ​ ( 4 ) ​ 62,016 ​ Total ​ $ 114,734 ​ $ 15 ​ $ ( 7 ) ​ $ 114,742 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross Gross ​ ​ ​ ​ Amortized ​ Unrealized ​ Unrealized ​ ​ ​ December 31, 2020 ​ Cost ​ Gains ​ Losses ​ Fair Value U.S. treasury bills ​ $ 10,036 ​ $ — ​ $ ( 2 ) ​ $ 10,034 ​ Government-sponsored enterprise securities ​ ​ 4,920 ​ ​ — ​ ​ — ​ ​ 4,920 ​ Corporate bonds and commercial paper ​ 20,900 ​ — ​ ( 2 ) ​ 20,898 ​ Total ​ $ 35,856 ​ $ — ​ $ ( 4 ) ​ $ 35,852 ​ ​ As of September 30, 2021 and December 31, 2020, our cash equivalents and short-term investments had a weighted-average time to maturity of approximately 227 days and 78 days , respectively. Our short-term investments are classified as available-for-sale securities. Accordingly, we have classified certain securities as short-term investments on our balance sheets as they are available for use in the current operations. As of September 30, 2021, we had no 23 ​ Table of Contents investments that had been in a continuous unrealized loss position for more than 12 months. As of September 30, 2021, a total of 19 individual securities had been in an unrealized loss position for 12 months or less, and the losses were determined to be temporary. The gross unrealized losses above were caused by interest rate increases. No significant facts or circumstances have arisen to indicate that there has been any significant deterioration in the creditworthiness of the issuers of the securities held by us. Based on our review of these securities, including the assessment of the duration and severity of the unrealized losses and our ability and intent to hold the investments until maturity, there were no other-than-temporary impairments for these securities as of September 30, 2021. ​ The following table shows the fair value and gross unrealized losses of our investments in individual securities that are in an unrealized loss position, aggregated by investment category (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2021 Fair Value Unrealized Losses U.S. treasury bills ​ $ 12,814 ​ $ ( 2 ) ​ Government-sponsored enterprise securities ​ ​ 3,338 ​ ​ ( 1 ) ​ Corporate bonds and commercial paper ​ ​ 22,336 ​ ​ ( 4 ) ​ Total ​ $ 38,488 ​ $ ( 7 ) ​ ​ ​ ​ ​ 11. Fair Value ​ Under FASB ASC 820, Fair Value Measurements and Disclosures , fair value is defined as the price at which an asset could be exchanged, or a liability transferred in a transaction between knowledgeable, willing parties in the principal or most advantageous market for the asset or liability. Where available, fair value is based on observable market prices or parameters or derived from such prices or parameters. Where observable prices or parameters are not available, valuation models are applied. ​ Assets and liabilities recorded at fair value in our financial statements are categorized based upon the level of judgment associated with the inputs used to measure their fair value. Hierarchical levels directly related to the amount of subjectivity associated with the inputs to fair valuation of these assets and liabilities, are as follows: ​ Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets at the reporting date. Active markets are those in which transactions for the asset or liability occur in sufficient frequency and volume to provide pricing information on an ongoing basis. ​ The fair valued assets we hold that are generally included under this Level 1 are money market securities where fair value is based on publicly quoted prices. ​ Level 2—Inputs, other than quoted prices included in Level 1, that are either directly or indirectly observable for the asset or liability through correlation with market data at the reporting date and for the duration of the instrument’s anticipated life. ​ The fair valued assets we hold that are generally assessed under Level 2 included government-sponsored enterprise securities, U.S. treasury bills and corporate bonds and commercial paper. We utilize third party pricing services in developing fair value measurements where fair value is based on valuation methodologies such as models using observable market inputs, including benchmark yields, reported trades, broker/dealer quotes, bids, offers and other reference data. We use quotes from external pricing service providers and other on-line quotation systems to verify the fair value of investments provided by our third-party pricing service providers. We review independent auditor’s reports from our third-party pricing service providers particularly regarding the controls over pricing and valuation of financial instruments and ensure that our internal controls address certain control deficiencies, if any, and complementary user entity controls are in place. ​ Level 3—Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities and which reflect management’s best estimate of what market participants would use in pricing the asset or liability at the reporting date. Consideration is given to the risk inherent in the valuation technique and the risk inherent in the inputs to the model. ​ 24 ​ Table of Contents We do not have fair valued assets and liabilities classified under Level 3. ​ Fair Value on a Recurring Basis ​ Financial assets measured at fair value on a recurring basis are categorized in the tables below based upon the lowest level of significant input to the valuations (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Assets at Fair Value as of September 30, 2021 ​ Level 1 Level 2 Level 3 Total Money market funds ​ $ 25,794 ​ $ — ​ $ — ​ $ 25,794 U.S. treasury bills ​ ​ — ​ ​ 37,991 ​ ​ — ​ ​ 37,991 Government-sponsored enterprise securities ​ — ​ 14,735 ​ — ​ 14,735 Corporate bonds and commercial paper ​ — ​ 62,016 ​ — ​ 62,016 Total ​ $ 25,794 ​ $ 114,742 ​ $ — ​ $ 140,536 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Assets at Fair Value as of December 31, 2020 ​ Level 1 Level 2 Level 3 Total Money market funds ​ $ 19,487 ​ $ — ​ $ — ​ $ 19,487 U.S. treasury bills ​ ​ — ​ ​ 10,034 ​ ​ — ​ ​ 10,034 Government-sponsored enterprise securities ​ — ​ 4,920 ​ — ​ 4,920 Corporate bonds and commercial paper ​ — ​ 20,898 ​ — ​ 20,898 Total ​ $ 19,487 ​ $ 35,852 ​ $ — ​ $ 55,339 ​ ​ 12. Lease Agreements ​ We currently lease our research and office space under a noncancelable lease agreement with our landlord, Healthpeak Properties, Inc. (formerly known as HCP BTC, LLC), which was originally set to expire in 2018. The lease term provides for renewal option for up to two additional periods of five years each. In July 2017, we exercised our option to extend the term of our lease for another five years through January 2023 and modified the amount of monthly base rent during such renewal period. ​ In December 2014, we entered into a sublease agreement, which was amended in 2017, with an unrelated third party to occupy approximately 57,000 square feet of our research and office space. In February 2017, we entered into an amendment to the sublease agreement to increase the subleased research and office space for an additional 9,328 square feet under the same term of the sublease. Effective July 2017, the sublease agreement was amended primarily to extend the term of the sublease through January 2023 and modified the monthly base rent to equal the amount we will pay our landlord. Because the future sublease income under the extended sublease agreement is the same as the amount we will pay our landlord, we did not recognize any loss on sublease relative to this amendment. We expect to receive approximately $ 6.2 million in future sublease income (excluding our subtenant’s share of facilities operating expenses) through January 2023. ​ We recorded rent expense on a straight-line basis for our lease, net of sublease income. For our sublease arrangement which we classified as an operating lease, our loss on the sublease was comprised of the present value of our future payments to our landlord less the present value of our future rent payments expected from our subtenant over the term of the sublease. ​ As of September 30, 2021 and December 31, 2020, we had operating lease right-of-use asset of $ 11.8 million and $ 17.9 million, respectively, and lease liability of $ 12.9 million and $ 19.3 million, respectively, in the condensed balance sheet. The weighted average remaining term of our lease as of September 30, 2021 was 1.33 years. ​ As of September 30, 2021, we received from our landlord leasehold improvement incentives amounting to $ 563,000 related to leasehold improvements. We record these leasehold improvement incentives as a reduction to operating lease right-of-use asset and lease liability until the lease ends and the asset is transferred. ​ 25 ​ Table of Contents The components of our operating lease expense were as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2021 ​ 2020 ​ 2021 ​ 2020 Fixed operating lease expense $ 1,340 $ 1,340 $ 4,020 $ 4,020 Variable operating lease expense ​ ​ 259 ​ ​ 237 ​ ​ 651 ​ ​ 704 Total operating lease expense $ 1,599 $ 1,577 $ 4,671 $ 4,724 ​ Supplemental information related to our operating lease were as follow (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2021 ​ 2020 ​ 2021 ​ 2020 Cash payments included in the measurement of operating lease liabilities ​ $ 2,529 ​ $ 2,431 ​ $ 7,554 ​ $ 7,263 ​ Supplemental information related to our operating sublease was as follow (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2021 ​ 2020 ​ 2021 ​ 2020 Fixed sublease expense $ 1,095 $ 1,096 $ 3,285 $ 3,286 Variable sublease expense ​ ​ 236 ​ ​ 245 ​ ​ 680 ​ ​ 742 Sublease income ​ ​ ( 1,331 ) ​ ​ ( 1,341 ) ​ ​ ( 3,965 ) ​ ​ ( 4,028 ) Net $ — $ — $ — $ — ​ The following table presents the future lease payments of our operating lease liabilities as of September 30, 2021 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating Lease ​ ​ Sublease Receipts ​ ​ Net Remainder of 2021 ​ $ 2,529 ​ $ ( 1,137 ) ​ $ 1,392 2022 ​ ​ 10,485 ​ ​ ( 4,716 ) ​ ​ 5,769 2023 ​ ​ 877 ​ ​ ( 394 ) ​ ​ 483 Total minimum payments required ​ $ 13,891 ​ $ ( 6,247 ) ​ $ 7,644 ​ ​ 13. Debt On September 27, 2019 (Closing Date), we entered into a Credit and Security Agreement (Credit Agreement) with MidCap Financial Trust (MidCap). The Credit Agreement provides for a $ 60.0 million term loan credit facility with the following tranches: (i) on the Closing Date, $ 10.0 million aggregate principal amount of term loans (Tranche 1), (ii) until December 31, 2020, an additional $ 10.0 million term loan facility at our option (Tranche 2), (iii) until March 31, 2021, an additional $ 20.0 million term loan facility subject to the satisfaction of certain conditions and at our option (Tranche 3) and (iv) until March 31, 2022, an additional $ 20.0 million term loan facility subject to the satisfaction of certain conditions and at our option (Tranche 4). The obligations under the Credit Agreement are secured by a perfected security interest in all of our assets except for intellectual property and certain other customary excluded property pursuant to the terms of the Credit Agreement. At the Closing Date, $ 10.0 million was funded in an initial tranche. In March 2020, we signed a credit extension form for Tranche 2 amounting to $ 10.0 million, which we received in May 2020. In April 2021, we amended the Credit Agreement to extend the period through which Tranche 3 will be available through March 31, 2022, subject to the satisfaction of certain conditions and at our option. To date, the facility gives us the ability to access an additional $ 40.0 million at our option, subject to the achievement of certain customary conditions. The outstanding principal balance of the loan bears interest at an annual rate of one-month LIBOR ( or a comparable applicable index rate determined pursuant to the Credit Agreement. if the LIBOR is no longer available) 26 ​ Table of Contents plus 5.65 % , subject to a LIBOR floor of 1.50 % and is payable monthly in arrears. Commencing on October 1, 2019, the Credit Agreement provides that we initially make interest-only payments for 24 months followed by 36 months of amortization payments. The interest-only period can be extended to 36 months and again to 48 months upon the satisfaction of certain conditions set forth in the Credit Agreement. In June 2021, we satisfied the conditions under the Credit Agreement which effectively extended the interest-only period to 36 months or through October 1, 2022. All unpaid principal and accrued interest are due and payable no later than September 1, 2024. A final payment fee of 2.5 % of principal is due on the final payment of the term loan. We may make voluntary prepayments, in whole or in part, subject to certain prepayment premiums and additional interest payments. The Credit Agreement also contains certain provisions, such as event of default and change in control provisions, which, if triggered, would require us to make mandatory prepayments on the term loan, which are subject to certain prepayment premiums and additional interest payments. As of September 30, 2021 and December 31, 2020, the outstanding balance of the loan, net of unamortized debt discount, was $ 19.9 million and $ 19.8 million, respectively. Debt issuance costs are recorded as a direct deduction from the term loan on the balance sheet and are being amortized ratably as interest expense over the term of the loan, using the effective interest method. As of September 30, 2021 and December 31, 2020, the unamortized issuance costs and debt discounts amounted to $ 113,000 and $ 185,000 , respectively. For the three and nine months ended September 30, 2021, interest expense, including amortization of the debt discount and accretion of the final fees related to the Credit Agreement was $ 427,000 and $ 1.2 million, respectively. For the three and nine months ended September 30, 2020, interest expense, including amortization of the debt discount and accretion of the final fees related to the Credit Agreement was $ 429,000 and $ 1.0 million, respectively. Accrued interest of $ 351,000 was included within other accrued liabilities in the condensed balance sheet as of September 30, 2021. The following table presents the future minimum principal payments of the outstanding loan as of September 30, 2021 under the current Credit Agreement (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ Remainder of 2021 ​ $ — 2022 ​ ​ 2,500 2023 ​ ​ 10,000 2024 ​ ​ 7,500 Principal amount (Tranches 1 and 2) ​ $ 20,000 ​ The Credit Agreement contains certain covenants which, among others, require us to deliver financial reports at designated times of the year and maintain minimum net revenues and $ 10.0 million of cash to draw Tranche 3 or Tranche 4. As of September 30, 2021, we were not in violation of any covenants. ​ Note 14. Income Taxes For the three and nine months ended September 30, 2021, we recorded benefit from income tax of $ 136,000 and provision for income tax of $ 665,000 , respectively. The benefit from and the provision for income tax for the three and nine months ended September 30, 2021 were determined using our effective tax rate on our year-to-date income (loss). We estimated a state tax liability over our pre-tax income (loss) for 2021, which is 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. 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 and nine months ended September 30, 2020, we did no t record provision for income taxes due to our pre-tax book loss. ​ 27 ​ Table of Contents