What changed in this filing

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Item 1A. Risk Factors

2024-02-29 compared with 2023-02-27 · 88 added, 145 removed, 593 unchanged (28% of the section changed)

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We have reviewed our risk factors and categorized them into five specific categories:

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Risks related to our unique and specific business operations as a small biotechnology company.

These risks include:

• Our success depends on our ability to use and expand our XmAb technology platform to build a pipeline of XmAb product candidates and develop marketable products.

• Our success depends on our ability to use and expand our XmAb technology platform to build a pipeline of product candidates and develop marketable products.

We cannot be certain our candidates will receive regulatory approval or be successfully commercialized.

• The clinical development stage of our operations may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

• Preliminary, interim, and topline data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

• The COVID-19 pandemic and the future outbreak of other highly infectious or contagious diseases could materially and adversely impact or disrupt our business and our financial condition, results of operations, cash flows and performance.

• The risk of rising inflation in the United States and globally could materially and adversely impact or disrupt our business and our financial condition, results of operations, cash flows and performance.

• Preliminary, interim, and topline data from our clinical trials that we announce or publish may change as more patient data become available that could result in material changes in the final data.

• Our business and results of operations could be adversely impacted by inflation.

Risks specifically related to our financial position, capital requirements and ownership of our common stock.

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• Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of uncertainty.

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

We may never be profitable.

• We will require additional financing and may be unable to raise sufficient capital, which could lead us to delay, reduce or abandon research and development programs or commercialization.

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• Our principal stockholders, directors and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.

• Raising additional funds through debt or equity financing may be dilutive or restrict our operations and raising funds through licensing may require us to relinquish rights to our technology or product candidates.

• Raising additional funds through debt or equity financing may be dilutive and raising funds through licensing may require us to relinquish rights to our technology or product candidates.

• Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our equity incentive plans, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

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• Our patent protection and prosecution for some of our product candidates is dependent on third parties.

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• We rely on third-party manufacturers for the manufacture of our product candidates.

This entails a complex process and manufacturers often encounter difficulties in production.

If we, or any of our third-party manufacturers, encounter any loss of our master cell banks or if any of our third-party manufacturers otherwise fail to comply with their contractual obligations, the development or commercialization of our product candidates could be delayed or stopped.

• Our existing partnerships are important to our business, and future partnerships may also be important to us.

• We rely on third-party manufacturers to manufacture our product candidates and provide supplies for our preclinical candidates.

If any of our third-party manufacturers encounter problems or loss of drug material during production or otherwise fail to comply with their contractual obligations, the development of our product candidates could be delayed or stopped.

• Our existing partnerships are important to our business.

If we are unable to maintain any of these partnerships, or if these partnerships are not successful, our business could be adversely affected.

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Failure of these collaborators to provide services of a suitable quality and within acceptable timeframes may cause the delay or failure of our development programs.

• We rely on third parties to manufacture supplies of our preclinical and clinical product candidates.

The development of such candidates could be stopped or delayed if any such third party fails to provide us with sufficient quantities of product or fails to do so at acceptable quality levels or prices or fails to maintain or achieve satisfactory regulatory compliance.

Risks related to our industry.

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Clinical trials may fail to prove our product candidates are safe and effective.

This could lead to delays, downsizing or termination of clinical development plans for any our product candidates.

• Adverse side effects or other safety risks associated with our product candidates could delay or preclude approval, cause us to suspend or discontinue clinical trials, abandon product candidates, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

• Adverse side effects or other safety risks associated with our product candidates could delay or preclude approval, cause us to suspend or discontinue clinical trials and abandon product candidates.

• If we experience delays or difficulties in the enrollment of patients in clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.

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• We face significant competition from other biotechnology and pharmaceutical companies and our operating results will suffer if we fail to compete effectively.

• Our current and future relationships with healthcare professionals, principal investigators, consultants, customers, and third-party payors in the United States and elsewhere may be subject, directly or indirectly, to applicable anti-kickback, fraud and abuse, false claims, physician payment transparency, health information privacy and security and other healthcare laws and regulations, which could expose us to penalties.

• Present and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.

• Even if we are able to commercialize any product candidates, our product candidates may be subject to unfavorable pricing regulations, third-party coverage and reimbursement policies or healthcare reform initiatives.

• Our business involves the controlled use of hazardous materials, and as such we are subject to environmental and occupational safety laws.

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This platform has led to our current pipeline of candidates as well as the other programs that utilize our technology and that are being developed by our partners and licensees.

While we believe our

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preclinical and clinical data to date, together with our established partnerships, has validated our platform to a degree, most of the programs are in early stages of development.

While we believe our preclinical and clinical data to date, together with our established partnerships, has validated our platform to a degree, most of the programs are in early stages of development.

Although drug candidates incorporating our Fc technology, or Fc candidates, have been approved by the FDA, other product candidates have not yet been, and may never lead to, approved or marketable therapeutic antibody products.

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Accordingly, you should not rely upon the results of any quarterly or annual periods as indications of future operating performance.

Preliminary, interim, and topline data from our clinical trials that we announce or publish from time to time may change as more patient data become available and are subject to audit and verification procedures that could result in material changes in the final data.

Preliminary, interim, and topline data from our clinical trials that we announce or publish may change as more patient data become available that could result in material changes in the final data.

From time to time, we may publicly disclose preliminary, interim or topline data from our clinical trials.

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Adverse changes between preliminary or interim data and final data could significantly harm our business and prospects.

Further, additional disclosure of interim data by us or by our competitors in the future could result in volatility in the price of our common stock.

Further, additional disclosure of interim data by us

or by our competitors in the future could result in volatility in the price of our common stock.

See the description of risks under the heading “Risks Specifically Related to Our Financial Position, Capital Requirements and Ownership of Our Common Stock” for more disclosure related to the risk of volatility in our stock price.

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In addition, the information we choose to publicly disclose regarding a particular study or clinical trial is typically selected from a more extensive amount of available information.

You or others may not agree with what

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we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product, product candidate or our business.

You or others may not agree with what we determine is the material or otherwise appropriate information to include in our disclosure, and any information we determine not to disclose may ultimately be deemed significant with respect to future decisions, conclusions, views, activities or otherwise regarding a particular product, product candidate or our business.

If the preliminary or topline data that we report differ from late, final or actual results, or if others, including regulatory authorities, disagree with the conclusions reached, our ability to obtain approval for, and commercialize our product candidates may be harmed, which could harm our business, financial condition, results of operations and prospects.

The COVID-19 pandemic and the future outbreak of other highly infectious or contagious diseases, could materially and adversely impact or disrupt our business and our financial condition, results of operations, cash flows and performance.

On March 11, 2020, the World Health Organization (WHO) declared the rapid spread of COVID-19 a global pandemic, and on March 19, 2020, the Governor of the State of California, where we are headquartered and where our principal place of business is located, implemented a mandatory stay at home order for residents working in non-critical businesses.

While we have managed to maintain our operations during the COVID-19 pandemic, additional developments with this pandemic or another epidemic or pandemic, could cause significant disruptions to our business operations, business operations of our partners, on whom we rely for potential revenue, and product development collaborations;

operations of our third-party manufacturers and contract research organizations (CROs), on which we rely to conduct our clinical trials;

and to our clinical trials, including as a result of significant restrictions or bans on travel into and within the countries in which our manufacturers produce our product candidates or where we conduct our clinical trials.

Such disruptions could impede, delay, limit or prevent our employees and CROs from continuing research and development activities.

Although the COVID-19 pandemic has not materially affected our clinical development for the year ended December 31, 2022, certain of our clinical programs have seen slower enrollment and there have also been delays in initiating new studies as a result of the COVID-19 pandemic.

These delays are not seen across all our trials and are specific to certain trials enrolling at certain sites.

In the future, the COVID-19 pandemic could further adversely affect our and our partners’ ability to enroll and recruit patients in current and future clinical trials.

Our success is dependent on our ability and the ability of our partners to advance our wholly-owned and partnered development programs into later stages of clinical development.

Many pharmaceutical and biotechnology companies have indicated that their clinical trials will be delayed and enrollment of current and ongoing trials will suffer as a result of the COVID-19 pandemic.

Completion of our ongoing clinical and preclinical studies or commencement of new clinical trials could be impeded, delayed, limited or prevented by the effects of the COVID-19 pandemic and related restrictions including negative effects on the production, delivery or release of our product candidates to our clinical trial sites, as participation by our clinical trial investigators, patients or other critical staff, which to could delay data collection, analysis and other related activities, any of which could cause delay or denial of regulatory approval of our product candidates.

The delay and impact on enrollment cannot be determined at this time and will depend on the length and severity of the COVID-19 pandemic.

Continued delays on our clinical and preclinical studies or trials will increase our costs and expenses and seriously harm our operations and financial condition, which will adversely affect our business.

The COVID-19 pandemic could also potentially affect the business of the FDA as well as other health regulatory authorities, which could result in delays in our communications with these authorities and ultimately in the ability for us and our partners to have drug products approved.

The COVID-19 pandemic and mitigation measures also have had an adverse impact on global economic conditions which could have an adverse effect on our business and financial condition, including impairment of our ability to raise capital when needed.

The trading prices for biopharmaceutical companies’ stock, including our common shares have been highly volatile as a result of the COVID-19 pandemic.

In addition, a recession, depression, or other sustained adverse market event resulting from the COVID-19 pandemic could materially and adversely affect our business and the value of our common shares.

The COVID-19 pandemic could potentially affect our partnerships and collaborations which provide us with revenue and non-dilutive payments in the form of upfront payments, milestone payments, royalties, and cost-sharing of co-development programs.

If our partners’ and collaborators’ operations are severely affected by the COVID-19 pandemic, it will adversely affect our future potential revenue from such partners and collaborators.

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During 2020 and 2021, we required most of our employees, including all of our administrative employees, to work remotely, restricted on-site staff to only those employees that must perform essential activities that must be completed on-site and limited the number of staff allowed in our laboratory and offices.

During 2022, we returned to on-site activity for all employees with some continuing to work in a hybrid manner.

If there is a resurgence of COVID-19 related illnesses due to the emergence of new variants of the disease, this could negatively affect our employees and our ability to continue onsite operations.

In prior years, the COVID-19 pandemic adversely affected our supply chain for our research, development, and clinical programs.

We rely on third party vendors for research supplies, development activities including manufacturing of drug product for our clinical studies and testing of drug material.

In 2020, several manufacturing vendors notified us of critical supply shortages which delayed the development timelines for our earlier stage development programs.

These supply shortages did not delay the timelines for our programs that were already in clinical studies.

However, if there is resurgence of Covid-19 related illnesses, our supply chain could again be negatively affected which could potentially delay our development programs and research activities.

The COVID-19 pandemic continues to rapidly evolve.

Its ultimate impact on our business operations is highly uncertain and subject to change that will depend on future developments, which cannot be accurately predicted, including the duration of the COVID-19 pandemic, additional or modified government actions, new information that will emerge concerning the severity and impact of COVID-19 and the actions taken to address its impact in the short and long term, among others.

We do not yet know the full extent of potential delays or impacts on our business, our clinical trials, our research programs, healthcare systems or the global economy.

We will continue to monitor the situation closely.

Our business and results of operations could be adversely impacted by inflation.

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For the year ended December 31, 2023, we incurred a net loss of $126.1 million and as of December 31, 2023, we had an accumulated deficit of $464.4 million.

We expect to incur additional net losses in future years as we execute our plan to continue our discovery, research and development activities, including the ongoing and planned clinical development of our antibody and cytokine product candidates, and incur the additional costs of operating as a public company.

We expect to incur additional net losses in future years as we execute our plan to continue our discovery, research and development activities, including the ongoing and planned clinical development of our antibody product candidates, and incur the additional costs of operating as a public company.

We are unable to predict the extent of any future losses or when we will become profitable, if ever.

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Biopharmaceutical product development is a highly speculative undertaking and involves a substantial degree of uncertainty.

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

We may never be profitable.

We have devoted substantially all of our financial resources and efforts to developing our proprietary XmAb technology platform, identifying potential product candidates and conducting preclinical studies and clinical trials.

We are still in the early stages of developing our product candidates, and we have not completed development of any of our wholly-owned products.

Our revenue to date has been primarily revenue from the license of our proprietary XmAb

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technology platform and drug candidates for the development of product candidates by others or revenue from our partners.

Our revenue to date has been primarily revenue from the license of our proprietary XmAb technology platform and drug candidates for the development of product candidates by others or revenue from our partners.

Our ability to generate revenue and achieve profitability depends in large part on our ability, alone or with partners, to achieve milestones and to successfully complete the development of, obtain the necessary regulatory approvals for, and commercialize and market, product candidates.

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We will require additional financing and may be unable to raise sufficient capital, which could lead us to delay, reduce or abandon research and development programs or commercialization.

As of December 31, 2022, we had $613.5 million in cash, cash equivalents, marketable debt securities, and receivables.

We expect our expenses to increase in connection with our ongoing development activities, including the continued development of our pipeline of bispecific antibody and cytokine drug candidates and other research activities.

As of December 31, 2023, we had $697.4 million in cash, cash equivalents, and marketable debt securities.

We expect our expenses to increase in connection with our ongoing development activities, including the continued development of our pipeline of bispecific antibody drug candidates and other research activities.

Identifying potential product candidates and conducting preclinical testing and clinical trials are time-consuming, expensive, and uncertain processes that take years to complete, and we or our partners may never generate the necessary data or results required to obtain regulatory approval and achieve product sales.

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

We believe our existing cash, cash equivalents and marketable securities, together with interest thereon and expected milestones and royalty payments will be sufficient to fund our operations through the end of 2025.

However, changing circumstances or inaccurate estimates by us may cause us to use capital significantly faster than we currently anticipate, and we may need to spend more money than currently expected because of circumstances beyond our control.

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The trading price of our common stock is likely to be volatile.

Since our IPO, the trading price of our common stock has ranged from a low of

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approximately $5.75 to a high of approximately $58.345.

Since our IPO, the trading price of our common stock has ranged from a low of approximately $5.75 to a high of approximately $58.345.

Our stock price could be subject to wide fluctuations in response to a variety of factors, including the following:

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This may prevent or discourage unsolicited acquisition proposals, offers for our common stock or other transactions or arrangements that you may believe are in your best interest as one of our stockholders.

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Raising additional funds through debt or equity financing may be dilutive or restrict our operations and raising funds through licensing may require us to relinquish rights to our technology or product candidates.

Raising additional funds through debt or equity financing may be dilutive and raising funds through licensing may require us to relinquish rights to our technology or product candidates.

To the extent that additional capital is raised through the sale of equity or convertible debt securities, the issuance of those securities could result in substantial dilution for our current stockholders and the terms may include liquidation or other preferences that adversely affect the rights of our current stockholders.

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Pursuant to our 2023 equity incentive plan (2023 plan), subject to board approval, our management is authorized to grant stock options and other equity-based awards to our employees, directors and consultants.

The number of shares available for future grant under the 2013 plan will automatically increase each year until 2023 by 4% of all shares of our capital stock outstanding as of December 31 of the prior calendar year, subject to the ability of our Board of Directors to take action to reduce the size of the increase in any given year.

As of December 31, 2023, we had options to purchase 11,142,986 shares outstanding under our equity compensation plans.

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We plan to register the number of shares available for issuance or subject to outstanding awards under our equity compensation plans.

If our Board of Directors elects to increase the number of shares available for future grant by the maximum amount each year, our stockholders may experience additional dilution, which could cause our stock price to fall.

If our internal control over financial reporting is not effective, we may not be able to accurately report our financial results or file our periodic reports in a timely manner, which may cause investors to lose confidence in our reported financial information and may lead to a decline in our stock price.

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As a large accelerated filer, we are subject to additional internal control requirements of the Sarbanes-Oxley Act of 2002.

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Sales of a substantial number of shares of our common stock by our existing stockholders in the public market could cause our stock price to fall.

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tax attributes (such as research tax credits) to offset its post-change income or taxes may be limited.

It is also possible that we have in the past undergone, and in the future may undergo, ownership changes that could result in additional limitations on our net operating loss and tax credit carryforwards.

It is also possible that we have in the past

undergone, and in the future may undergo, ownership changes that could result in additional limitations on our net operating loss and tax credit carryforwards.

As a result, our pre-2018 NOL carryforwards may expire prior to being used.

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The TCJA changed the income tax treatment of research and development expenses which may result in additional federal and state tax liabilities.

For tax years ended in December 31, 2022 and subsequent years, research and development costs must be capitalized and amortized over a period of years which could result in additional federal and state tax liabilities in 2022 and future years.

For tax years ended in December 31, 2022 and subsequent years, research and development costs must be capitalized and amortized over a period of years;

this has resulted in additional federal tax expense and liabilities to us in 2022 and 2023.

Currently, there is proposed legislation in Congress that would retroactively restore the deduction of research and development expenses, which if enacted, would reduce our 2023 federal tax expense and liabilities by a material amount.

We do not intend to pay dividends on our common stock so any returns will be limited to the value of our stock.

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• eliminating the ability of stockholders to call a special meeting of stockholders;

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• establishing advance notice requirements for nominations for election to the Board of Directors or for proposing matters that can be acted upon at stockholder meetings.

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Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all.

Investors' expectations of our performance relating to environmental, social and governance factors may impose additional costs and expose us to new risks.

There is an increasing focus from certain investors, employees, regulators and other stakeholders concerning corporate responsibility, specifically related to environmental, social and governance (ESG) factors.

Some investors may use these factors to guide investment strategies and decisions.

Complying with ESG standards and expectations may impose additional costs and expose us to new risks for not meeting investor and third-party expectations in meeting published ESG guidelines.

Risks Related to Our Intellectual Property

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As of December 31, 2023, we held over 1,500 issued patents and pending patent applications.

We file patent applications in the United States, Canada, Japan, Europe and other major

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markets either directly or via the Patent Cooperation Treaty.

We file patent applications in the United States, Canada, Japan, Europe and other major markets either directly or via the Patent Cooperation Treaty.

Our ability to stop third parties from making, using, selling, offering to sell or importing our product candidates is dependent upon the extent to which we have rights under valid and enforceable patents or trade secrets that cover these activities.

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patent laws have recently changed, there have been changes regarding how patent laws are interpreted, and the U.S.

Patent and Trademark Office (the PTO) has also implemented changes to the patent system.

Patent and Trademark Office (the PTO) has also implemented changes to the

patent system.

Some of these changes are currently being litigated, and we cannot accurately determine the outcome of any such proceedings or predict future changes in the interpretation of patent laws or changes to patent laws which might be enacted into law.

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the patent and patent enforcement laws of some foreign jurisdictions do not protect intellectual property rights to the same extent as laws in the United States, and many companies have encountered significant difficulties in protecting and defending such rights in foreign jurisdictions.

If we encounter such difficulties or we are

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otherwise precluded from effectively protecting our intellectual property rights in foreign jurisdictions, our business prospects could be substantially harmed;

If we encounter such difficulties or we are otherwise precluded from effectively protecting our intellectual property rights in foreign jurisdictions, our business prospects could be substantially harmed;

we may not develop additional proprietary technologies that are patentable.

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If there is any conflict, dispute, disagreement or issue of non-performance between us and our licensing partners regarding our rights or obligations under the license agreements, including any such conflict, dispute or disagreement arising from our failure to satisfy payment obligations under any such agreement, we may owe damages, our licensor may have a right to terminate the affected license, and our and our partners' ability to utilize the affected intellectual property in our drug discovery and development efforts, and our ability to enter into collaboration or marketing agreements for an affected product or therapeutic candidate, may be adversely affected.

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We may be required to reduce the scope of our intellectual property due to third party intellectual property claims.

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patent laws under the America Invents Act resulted in the United States changing from a “first to invent” country to a “first to file” country.

As a result, we may lose the ability to obtain a patent if a third-party files with the PTO first and could become involved in proceedings before the PTO to resolve disputes related to inventorship.

result, we may lose the ability to obtain a patent if a third-party files with the PTO first and could become involved in proceedings before the PTO to resolve disputes related to inventorship.

We may also become involved in similar proceedings in other jurisdictions.

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For example, we are aware of issued patents owned by Merus B.V.

(Merus) that may relate to and claim components of our bispecific antibody product candidates and partnered bispecific product candidates, including plamotamab, vudalimab, XmAb104, and XmAb819 will putatively expire in 2033.

We are additionally aware of several patents and pending applications directed to the use of IL-15 fused with Fc domains, and in some cases in combination with targeting domains, that might be relevant to XmAb306, with putative expirations ranging from 2025 to later than 2032.

It is possible that these terms could be extended, for example, as a result of patent term restoration to compensate for regulatory delays.

(Merus) that may relate to and claim components of our bispecific antibody product candidates and partnered bispecific product candidates, including plamotamab, vudalimab and XmAb819 will putatively expire in 2033.

It is possible that the patent terms could be extended, for example, as a result of patent term restoration to compensate for regulatory delays.

While we believe that our current development of these candidates currently falls into the “safe harbor” of non-infringement under 35 U.S.C.

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In addition, there can be no assurance that our interpretation of this statutory exemption would be upheld.

We believe there exists reasonable arguments of invalidity for the Merus patents and the IL-15 patents;

We believe there exists reasonable arguments of invalidity for the Merus patents;

however, we cannot assure that if challenged in litigation for infringement of these patents that we would prevail.

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Third parties may assert infringement claims against us based on existing patents or patents that may be granted in the future.

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

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However, we may not be able to obtain any required license on commercially reasonable terms or at all.

Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us and could require us to make substantial royalty payments.

Even if we were able to obtain a license, it could be non-exclusive, thereby giving our competitors access to the same technologies licensed to us and could require us to make

substantial royalty payments.

We could also be forced, including by court order, to cease commercializing the infringing technology or product.

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Moreover, the applicable time period or the scope of patent protection afforded could be less than we request.

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following our patent expiration, and our business, financial condition, results of operations and prospects could be materially harmed.

If we are unable to obtain patent term extension or the term of any such extension is shorter than what we request or we fail to choose the most optimal patents to extend, our competitors may obtain approval of competing products following our patent expiration, and our business, financial condition, results of operations and prospects could be materially harmed.

Risks Related to Our Dependence on Third Parties

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While we normally seek and gain the right to fully prosecute the patents relating to our product candidates, there may be times when patents relating to our product candidates are controlled by our licensors.

We rely on third-party manufacturers for the manufacture of our XmAb-engineered antibodies.

This entails a complex process and manufacturers often encounter difficulties in production.

We rely on third-party manufacturers to manufacture our product candidates and provide supplies for our studies.

If any of our third-party manufacturers, encounter problems or loss of drug material during production or otherwise fail to comply with their contractual obligations, the development of our product candidates could be delayed or stopped.

The manufacture of biopharmaceutical products is complex and requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls.

We and our contract manufacturers must comply with cGMP regulations and guidelines.

We and our contract

manufacturers must comply with cGMP regulations and guidelines.

Manufacturers of biopharmaceutical products often encounter difficulties in production, particularly in scaling up and validating initial production and contamination.

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Accordingly, failures or difficulties faced at any level of our supply chain could materially adversely affect our business and delay or impede the development and commercialization of any of our product candidates or products and could have a material adverse effect on our business, prospects, financial condition and results of operations.

Certain of our third-party manufactures are located outside the United States, and our ability to continue to receive drug material for our development candidates would be at-risk in the event of instability or geopolitical problems between the United States and the country's where these manufacturers are located.

Our existing partnerships are important to our business, and future partnerships may also be important to us.

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Because developing biologics products, conducting clinical trials, obtaining regulatory approval, establishing manufacturing capabilities and marketing approved products are expensive, we have entered into partnerships, and may seek to enter into additional partnerships, with companies that have more resources and experience than us, and we may become dependent upon the establishment and successful implementation of partnership agreements.

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Our partnership and license agreements include those we have announced with Janssen, Genentech, Vir, Amgen, MorphoSys, Alexion and others.

Our partnership and license agreements include those we have with J&J, Genentech, Vir, Amgen, Incyte, Alexion and others.

These partnerships and license agreements also have provided us with important funding for our development programs, and we expect to receive additional funding under these partnerships in the future.

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collaborators have significant discretion in determining the efforts and resources that they will apply to these partnerships;

For example, in 2021, Novartis notified us of its decision to return the rights to vibecotamab to us under the terms of the Novartis Agreement, and in 2020, Amgen notified us of its decision to return the rights to AMG 424 to us under the terms of the Amgen Agreement;

our Janssen Agreement provides for cost-sharing on development costs for the bispecific candidate, plamotamab.

Such an arrangement may require us to incur substantial costs in excess of our available resources;

our Genentech Agreement requires that we fund 45% of worldwide development costs of XmAb306 and other IL-15 candidates.

Such an arrangement may require us to incur substantial costs in excess of available resources;

collaborators may not pursue development and commercialization of any product candidates that achieve regulatory approval or may elect not to continue or renew development or commercialization programs based on clinical trial results, changes in the collaborators’ strategic focus or available funding, or external factors, such as an acquisition, that divert resources or create competing priorities;

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If our partnerships and license agreements do not result in the successful development and commercialization of products or if one of our collaborators terminates its agreement with us, we may not receive any future research and development funding or milestone or royalty payments under the arrangement.

If we do not receive the funding we expect

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under these arrangements, our continued development of our product candidates could be delayed, and we may need additional resources to develop additional product candidates.

If we do not receive the funding we expect under these arrangements, our continued development of our product candidates could be delayed, and we may need additional resources to develop additional product candidates.

All of the risks described in these risk factors relating to product development, regulatory approval and commercialization described in this Annual Report also apply to the activities of our collaborators and there can be no assurance that our partnerships and license agreements will produce positive results or successful products on a timely basis or at all.

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There is no assurance these third parties will pass FDA or regulatory audits, which could delay or prohibit regulatory approval.

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We rely on third parties to manufacture supplies of our preclinical and clinical product candidates.

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Clinical trials may fail to prove our product candidates are safe and effective.

This could lead to delays, downsizing or termination of clinical development plans for any our product candidates.

Each product candidate must receive regulatory approval and therefore must undergo rigorous and extensive preclinical studies and clinical trials to demonstrate safety and efficacy in patients.

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Additionally, regulatory authorities may determine that the data provided is not sufficient to grant marketing approval for our product candidates and may request additional data including additional clinical trials or reject product approval.

Adverse side effects or other safety risks associated with our product candidates could delay or preclude approval, cause us to suspend or discontinue clinical trials, abandon product candidates, limit the commercial profile of an approved label, or result in significant negative consequences following marketing approval, if any.

Adverse side effects or other safety risks associated with our product candidates could delay or preclude approval, cause us to suspend or discontinue clinical trials and abandon product candidates.

Conducting early clinical trials is complex and the outcomes are uncertain.

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We may not be able to initiate or continue clinical trials for our product candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials as required by the FDA or similar regulatory authorities outside the United States.

In addition, some of our competitors have ongoing clinical trials for product

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candidates that treat the same indications as our product candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates.

In addition, some of our competitors have ongoing clinical trials for product candidates that treat the same indications as our product candidates, and patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ product candidates.

Our inability to enroll a sufficient number of patients for any of our clinical trials could result in significant delays and could require us to abandon one or more clinical trials altogether.

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Further, we do not maintain “key person” insurance for any of our executives or other employees.

The loss of the services of any of our executive officers and our inability to find suitable replacements could harm our business, financial condition, prospects and ability to achieve the successful development or commercialization of our product candidates.

commercialization of our product candidates.

Our success also depends on our ability to continue to attract, retain and motivate highly skilled scientific and medical personnel at all levels.

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We have competitors both in the United States and internationally, including major multinational pharmaceutical companies, biotechnology companies, universities and other research institutions.

Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations

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and well-established sales forces.

Many of our competitors have substantially greater financial, technical and other resources, such as larger research and development staff and experienced marketing and manufacturing organizations and well-established sales forces.

Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries.

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If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, including, without limitation, damages, fines, imprisonment, disgorgement, exclusion from participation in government healthcare programs, such as Medicare and Medicaid, additional reporting requirements and/or oversight if we become subject to a corporate integrity agreement or similar agreement to resolve allegations of non-compliance with these laws, and the curtailment or restructuring of our operations, as well as reputational harm, which could significantly harm our business.

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Present and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.

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Current and future legislation may significantly change the approval requirements in ways that could involve additional costs and cause delays in obtaining approvals.

Some countries require approval of the sale price of a product before it can be marketed.

Some countries

require approval of the sale price of a product before it can be marketed.

In many countries, the pricing review period begins after marketing or product licensing approval is granted.

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For example, we may be sued if any product we develop allegedly causes injury or is found to be otherwise unsuitable during clinical testing, manufacturing, marketing, or sale.

Any such product liability

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claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, and a breach of warranties.

Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability, and a breach of warranties.

Claims could also be asserted under state consumer protection acts.

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Even if we are successful in proving in a court of law that a third party is infringing one or more of our issued patents or trademarks there can be no assurance that we would be successful in halting their infringing activities, for example, through a permanent injunction, or that we would be fully or even partially financially compensated for any harm to our business.

We may be forced to enter into a license or other agreement with the infringing third party at terms less profitable or otherwise commercially acceptable to us than if the license or agreement were negotiated under conditions between those of a willing licensee and a willing licensor.

We may be forced to enter into a license or other agreement with the infringing

third party at terms less profitable or otherwise commercially acceptable to us than if the license or agreement were negotiated under conditions between those of a willing licensee and a willing licensor.

We may not become aware of a third-party infringer within legal timeframes for compensation or at all, thereby possibly losing the ability to be compensated for any harm to our business.

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Litigation may be necessary to defend against these claims.

If we fail in

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defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights.

If we fail in defending such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights.

A loss of key research personnel work product could hamper or prevent our ability to commercialize certain potential products, which could severely harm our business.

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

Our business could be negatively impacted by cyber security threats and other disruptions, including the theft of our intellectual property, and could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

Our business could be negatively impacted by cybersecurity threats and other disruptions, including the theft of our intellectual property, and could compromise our information and expose us to liability, which would cause our business and reputation to suffer.

We are increasingly dependent on information technology systems and infrastructure, including mobile technologies, to operate our business.

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It is important to our operations and business strategy that this electronic information remains secure and is perceived to be secure.

The size and complexity of our information technology systems, and those of our partners and third-party vendors with whom we contract together with the volume of data we retain, make such systems potentially vulnerable to breakdown, malicious intrusion, security breaches and other cyber-security attacks.

Information security risks have significantly increased in recent years in part due to the proliferation of new technologies and the increased sophistication and activities of organized crime, hackers, terrorists and other external parties, including foreign state actors.

We face various cyber security threats, including cyber security attacks to our information technology infrastructure and attempts by others to gain access to our proprietary or sensitive information.

We face various cybersecurity threats, including cybersecurity attacks to our

information technology infrastructure and attempts by others to gain access to our proprietary or sensitive information.

A security breach or privacy violation that leads to disclosure or modification of or prevents access to personally identifiable information or other protected information could harm our reputation, compel us to comply with federal and/or state breach notification laws and foreign law equivalents, subject us to mandatory corrective action, require us to verify the correctness of database contents and otherwise subject us to liability under laws and regulations that protect personal data, resulting in increased costs or loss of revenue.

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As cyber threats continue to evolve, we may be required to expend significant additional resources to continue to modify or enhance our protective measures or to investigate and remediate any information security vulnerabilities.

The procedures and controls we use to monitor these threats and mitigate our exposure may not be sufficient to prevent cyber security incidents.

The procedures and controls we use to monitor these threats and mitigate our exposure may not be sufficient to prevent cybersecurity incidents.

The result of these incidents could have a material adverse effect on our business, financial condition and results of operations including disrupted operations, lost opportunities, misstated financial data, liability for stolen assets or information, increased costs arising from the implementation of additional security protective measures, litigation and reputational damage.

Any remedial costs or other liabilities related to cyber security incidents may not be fully insured or indemnified by other means.

Any remedial costs or other liabilities related to cybersecurity incidents may not be fully insured or indemnified by other means.

The increasing use of social media platforms presents new risks and challenges.

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There is also a risk of inappropriate disclosure of sensitive information or negative or inaccurate posts or comments about us on any social networking website.

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these events were to occur or we otherwise fail to comply with applicable regulations, we could incur liability, face overly restrictive regulatory actions or incur other harm to our business.

If any of these events were to occur or we otherwise fail to comply with applicable regulations, we could incur liability, face overly restrictive regulatory actions or incur other harm to our business.

Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and the failure to comply with such requirements could have a material adverse effect on our business, financial condition or results of operations.

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and transferring personal data to countries outside the EU, including the U.S.

The GDPR imposes substantial fines for breaches of data protection requirements, which can be up to four percent of global revenue or 20 million euros, whichever is greater, and it also confers a private right of action on data subjects for breaches of data protection requirements.

The GDPR imposes substantial fines for breaches of data protection requirements, which can be up to four percent of global revenue or

20 million euros, whichever is greater, and it also confers a private right of action on data subjects for breaches of data protection requirements.

Transfers of personal information out of the European Union face a constantly shifting set of requirements, as courts in Europe have invalidated intergovernmental agreements and European regulators have required changes to standard contracting terms, which themselves do not fit all situations.

As a result, significant uncertainty exists with respect to GDPR compliance and the attendant obligations going forward as the regulatory environment is rapidly developing.

In addition, from January 1, 2021, companies have had to comply with both the GDPR and the GDPR as incorporated into United Kingdom national law, the latter regime having the ability to separately fine up to the greater of £17.5 million or 4% of global turnover.

The EC has adopted an adequacy decision in favor of the United Kingdom, enabling data transfers from EU member states to the United Kingdom without additional safeguards.

However, the UK adequacy decision will automatically expire in June 2025 unless the EC re-assesses and renews/extends that decision.

Outside Europe, significant data privacy regulatory regimes exist in major markets including Brazil, India, China, and elsewhere.

The ever-shifting landscape of global data privacy regulation requires significant investment and attention to avoid significant noncompliance liabilities.

The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal information from our clinical trials, could require us to change our business practices or lead to government enforcement actions, private litigation or significant penalties against us and could have a material adverse effect on our business, financial condition or results of operations.

Additionally, California recently enacted legislation that has been dubbed the first “GDPR-like” law in the U.S.

Known as the California Consumer Privacy Act (CCPA), it creates new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households.

The CCPA, which went into effect on January 1, 2020, requires covered companies to provide new disclosures to California consumers, and provides such consumers new ways to opt-out of certain sales of personal information.

Additionally, the California Consumer Privacy Act (CCPA), which took effect in January 2020, created new individual privacy rights for consumers (as that word is broadly defined in the law) and places increased privacy and security obligations on entities handling personal data of consumers or households and requires covered companies to provide new disclosures to California consumers, and provides such consumers new ways to opt-out of certain sales of personal information.

The CCPA provides for civil penalties for violations, as well as a private right of action for data breaches that is expected to increase data breach litigation.

The CCPA may increase our compliance costs and potential liability.

Some observers have noted that the CCPA could mark the beginning of a trend toward more stringent privacy legislation in the U.S., which could increase our potential liability and adversely affect our business.

Further, the California Privacy Rights Act (CPRA) revised and expanded the CCPA, adding additional data protection obligations on covered businesses, including additional consumer rights processes, limitations on data uses, new audit requirements for higher risk data, and opt outs for certain uses of sensitive data.

It also created a new California data protection agency authorized to issue substantive regulations and could result in increased privacy and information security enforcement.

The CPRA is in full effect as of January 1, 2023, and similar laws passed in Virginia, Colorado, Connecticut, and Utah took effect in 2023.

Additionally, Delaware, Indiana, Iowa, Montana, Oregon, Tennessee and Texas have adopted privacy laws, which take effect from July 1, 2024 through 2026.

Further, Washington’s My Health My Data Act, taking effect July 1, 2024, imposes similar requirements specific to consumer health data.

As a result, additional compliance investment and potential business process changes may be required.

In the event that we are subject to or affected by HIPAA, the CCPA, the CPRA or other domestic privacy and data protection laws, any liability from failure to comply with the requirements of these laws could adversely affect our financial condition.

Additional legislation proposed at the federal level and in other states, along with increased regulatory action, reflect a trend toward more stringent privacy legislation in the United States.

We may be vulnerable to disruption, damage and financial obligation as a result of system failures.

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We are exposed to the risk of employee fraud or other misconduct.

Misconduct by employees could include intentional failures to comply with FDA regulations, to provide accurate information to the FDA, to comply with manufacturing standards we have established, to comply with federal and state healthcare fraud and abuse laws and regulations, or to report financial information or data accurately or disclose unauthorized activities to us.

In particular,

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sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices.

regulations, or to report financial information or data accurately or disclose unauthorized activities to us.

In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices.

These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements.

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Such a claim, with or without merit, could also result in substantial expenditures of time and money, and divert attention of our management team from other tasks important to the success of our business.

Unresolved Staff Comments.

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

What changed 10-K

Item 1A. Risk Factors