Xencor Inc 10-Q

Item1. Financial Statements ​ Xencor, Inc. Balance Sheet s (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ September 30, December 31, ​ ​ 2021 ​ 2020 ​ ​ (unaudited) ​ ​ Assets ​ ​ ​ ​ ​ ​ Current assets ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 41,200 ​ $ 163,544 Marketable debt securities ​ ​ 199,423 ​ ​ 434,156 Equity securities ​ ​ 47,578 ​ ​ 5,303 Accounts receivable ​ ​ 20,545 ​ 11,443 Contract asset ​ ​ — ​ ​ 12,500 Prepaid expenses and other current assets ​ ​ 20,883 ​ 10,726 Total current assets ​ ​ 329,629 ​ 637,672 Property and equipment, net ​ 24,179 ​ 21,682 Patents, licenses, and other intangible assets, net ​ ​ 16,675 ​ 15,977 Marketable debt securities - long term ​ ​ 276,743 ​ ​ 1,030 Equity securities - long term ​ ​ 16,583 ​ ​ 16,071 Other assets ​ 33,455 ​ 10,812 Total assets ​ $ 697,264 ​ $ 703,244 Liabilities and stockholders’ equity ​ ​ ​ ​ ​ ​ Current liabilities ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 9,131 ​ $ 8,954 Accrued expenses ​ ​ 22,108 ​ 17,603 Lease liabilities ​ ​ 128 ​ ​ 1,889 Deferred revenue ​ ​ 12,950 ​ 92,615 Total current liabilities ​ ​ 44,317 ​ 121,061 Lease liabilities, net of current portion ​ ​ 34,087 ​ ​ 9,739 Total liabilities ​ ​ 78,404 ​ 130,800 Commitments and contingencies ​ ​ ​ ​ ​ ​ Stockholders’ equity ​ ​ ​ ​ ​ ​ Preferred stock, $ 0.01 par value: 10,000,000 authorized shares; -0- issued and outstanding shares at September 30, 2021 and December 31, 2020 ​ ​ — ​ ​ — Common stock, $ 0.01 par value: 200,000,000 authorized shares at September 30, 2021 and December 31, 2020; 58,454,811 issued and outstanding at September 30, 2021 and 57,873,444 issued and outstanding at December 31, 2020 ​ ​ 585 ​ 580 Additional paid-in capital ​ ​ 974,514 ​ 937,525 Accumulated other comprehensive income (loss) ​ ​ ( 74 ) ​ 74 Accumulated deficit ​ ( 356,165 ) ​ ( 365,735 ) Total stockholders’ equity ​ 618,860 ​ 572,444 Total liabilities and stockholders’ equity ​ $ 697,264 ​ $ 703,244 ​ See accompanying notes . ​ 5 Table of Contents Xencor, Inc. Statements of Comprehensive Income (Loss ) (unaudited) (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ ​ September 30, September 30, ​ 2021 2020 2021 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Revenue ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Collaborations, licenses, milestones, and royalties ​ $ 19,683 ​ $ 35,366 ​ $ 121,096 ​ $ 80,840 Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ 50,610 ​ 44,452 ​ 141,519 ​ 121,853 General and administrative ​ 10,373 ​ 7,636 ​ 27,462 ​ 22,086 Total operating expenses ​ 60,983 ​ 52,088 ​ 168,981 ​ 143,939 Loss from operations ​ ( 41,300 ) ​ ( 16,722 ) ​ ( 47,885 ) ​ ( 63,099 ) Other income (expenses) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income, net ​ 196 ​ 1,423 ​ 558 ​ 6,552 Other income (expense), net ​ ​ ( 593 ) ​ ​ ( 23 ) ​ ​ ( 610 ) ​ ​ 111 Gain on equity securities, net ​ ​ 1,506 ​ ​ 2,772 ​ ​ 57,507 ​ ​ 794 Total other income, net ​ 1,109 ​ 4,172 ​ 57,455 ​ 7,457 Net income (loss) ​ ​ ( 40,191 ) ​ ​ ( 12,550 ) ​ ​ 9,570 ​ ​ ( 55,642 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Other comprehensive income (loss) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net unrealized loss on marketable debt securities ​ ​ ( 59 ) ​ ​ ( 916 ) ​ ​ ( 149 ) ​ ​ ( 594 ) Comprehensive income (loss) ​ $ ( 40,250 ) ​ $ ( 13,466 ) ​ $ 9,421 ​ $ ( 56,236 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic net income (loss) per common share ​ $ ( 0.69 ) ​ $ ( 0.22 ) ​ $ 0.16 ​ $ ( 0.97 ) Diluted net income (loss) per common share ​ $ ( 0.69 ) ​ $ ( 0.22 ) ​ $ 0.16 ​ $ ( 0.97 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic weighted average common shares outstanding ​ ​ 58,350,647 ​ ​ 57,266,112 ​ ​ 58,199,928 ​ ​ 57,091,452 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted weighted average common shares outstanding ​ ​ 58,350,647 ​ ​ 57,266,112 ​ ​ 60,346,480 ​ ​ 57,091,452 ​ See accompanying notes . ​ 6 Table of Contents Xencor, Inc. Statements of Stockholders’ Equity (unaudited) (in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Comprehensive ​ Accumulated ​ Stockholders’ Stockholders’ Equity ​ Shares ​ Amount ​ Capital ​ Income (Loss) ​ Deficit ​ Equity Balance, December 31, 2020 ​ 57,873,444 ​ $ 580 ​ $ 937,525 ​ $ 74 ​ $ ( 365,735 ) ​ $ 572,444 Issuance of common stock upon exercise of stock awards ​ 230,701 ​ ​ 2 ​ ​ 5,337 ​ ​ — ​ ​ — ​ ​ 5,339 Issuance of restricted stock units ​ 117,808 ​ ​ 1 ​ ​ ( 1 ) ​ ​ — ​ ​ — ​ ​ — Comprehensive income (loss) ​ — ​ ​ — ​ ​ — ​ ​ 23 ​ ​ ( 2,487 ) ​ ​ ( 2,464 ) Stock-based compensation ​ — ​ ​ — ​ ​ 8,293 ​ ​ — ​ ​ — ​ ​ 8,293 Balance, March 31, 2021 ​ 58,221,953 ​ ​ 583 ​ ​ 951,154 ​ ​ 97 ​ ​ ( 368,222 ) ​ ​ 583,612 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Issuance of common stock upon exercise of stock awards ​ 52,790 ​ ​ 1 ​ ​ 902 ​ ​ — ​ ​ — ​ ​ 903 Issuance of restricted stock units ​ 10,190 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Issuance of common stock under the Employee Stock Purchase Plan ​ 30,552 ​ ​ — ​ ​ 937 ​ ​ — ​ ​ — ​ ​ 937 Comprehensive income (loss) ​ — ​ ​ — ​ ​ — ​ ​ ( 112 ) ​ ​ 52,248 ​ ​ 52,136 Stock-based compensation ​ — ​ ​ — ​ ​ 9,350 ​ ​ — ​ ​ — ​ ​ 9,350 Balance, June 30, 2021 ​ 58,315,485 ​ ​ 584 ​ ​ 962,343 ​ ​ ( 15 ) ​ ​ ( 315,974 ) ​ ​ 646,938 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Issuance of common stock upon exercise of stock awards ​ 132,709 ​ ​ 1 ​ ​ 3,228 ​ ​ — ​ ​ — ​ ​ 3,229 Issuance of restricted stock units ​ 6,617 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Comprehensive loss ​ — ​ ​ — ​ ​ — ​ ​ ( 59 ) ​ ​ ( 40,191 ) ​ ​ ( 40,250 ) Stock-based compensation ​ — ​ ​ — ​ ​ 8,943 ​ ​ — ​ ​ — ​ ​ 8,943 Balance, September 30, 2021 (unaudited) ​ 58,454,811 ​ $ 585 ​ $ 974,514 ​ $ ( 74 ) ​ $ ( 356,165 ) ​ $ 618,860 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid-in ​ Comprehensive ​ Accumulated ​ Stockholders’ Stockholders’ Equity ​ Shares ​ Amount ​ Capital ​ Income (Loss) ​ Deficit ​ Equity Balance, December 31, 2019 ​ 56,902,301 ​ $ 569 ​ $ 887,873 ​ $ 1,161 ​ $ ( 296,402 ) ​ $ 593,201 Issuance of common stock upon exercise of stock awards ​ 79,930 ​ ​ 1 ​ ​ 1,470 ​ ​ — ​ ​ — ​ ​ 1,471 Issuance of restricted stock units ​ 19,022 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Comprehensive loss ​ — ​ ​ — ​ ​ — ​ ​ ( 105 ) ​ ​ ( 8,074 ) ​ ​ ( 8,179 ) Stock-based compensation ​ — ​ ​ — ​ ​ 6,512 ​ ​ — ​ ​ — ​ ​ 6,512 Balance, March 31, 2020 ​ 57,001,253 ​ ​ 570 ​ ​ 895,855 ​ ​ 1,056 ​ ​ ( 304,476 ) ​ ​ 593,005 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Issuance of common stock upon exercise of stock awards ​ 181,856 ​ ​ 2 ​ ​ 3,273 ​ ​ — ​ ​ — ​ ​ 3,275 Issuance of restricted stock units ​ 2,800 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Issuance of common stock under the Employee Stock Purchase Plan ​ 28,344 ​ ​ — ​ ​ 725 ​ ​ — ​ ​ — ​ ​ 725 Comprehensive income (loss) ​ — ​ ​ — ​ ​ — ​ ​ 427 ​ ​ ( 35,018 ) ​ ​ ( 34,591 ) Stock-based compensation ​ — ​ ​ — ​ ​ 8,231 ​ ​ — ​ ​ — ​ ​ 8,231 Balance, June 30, 2020 ​ 57,214,253 ​ ​ 572 ​ ​ 908,084 ​ ​ 1,483 ​ ​ ( 339,494 ) ​ ​ 570,645 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Issuance of common stock upon exercise of stock awards ​ 130,784 ​ ​ 1 ​ ​ 2,985 ​ ​ — ​ ​ — ​ ​ 2,986 Issuance of restricted stock units ​ 29,900 ​ ​ — ​ ​ — ​ ​ — ​ ​ — ​ ​ — Issuance of common stock under the Employee Stock Purchase Plan ​ — ​ ​ — ​ ​ ​ ​ ​ — ​ ​ — ​ ​ — Comprehensive loss ​ — ​ ​ — ​ ​ — ​ ​ ( 916 ) ​ ​ ( 12,550 ) ​ ​ ( 13,466 ) Stock-based compensation ​ — ​ ​ — ​ ​ 8,318 ​ ​ — ​ ​ — ​ ​ 8,318 Balance, September 30, 2020 (unaudited) ​ 57,374,937 ​ $ 573 ​ $ 919,387 ​ $ 567 ​ $ ( 352,044 ) ​ $ 568,483 ​ See accompanying notes . 7 Table of Contents Xencor, Inc. Statements of Cash Flow s (unaudited) (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Nine Months Ended ​ ​ September 30, ​ 2021 2020 Cash flows from operating activities ​ ​ ​ ​ ​ Net income (loss) ​ $ 9,570 ​ $ ( 55,642 ) Adjustments to reconcile net income (loss) to net cash used in operating activities: ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ 5,384 ​ 4,262 Amortization of premium (accretion of discount) on marketable securities ​ 2,632 ​ ( 981 ) Stock-based compensation ​ 26,586 ​ 23,061 Abandonment of capitalized intangible assets ​ 727 ​ 403 Equity received in connection with license agreement ​ ​ — ​ ​ ( 4,589 ) Equity received in connection with sale of financial assets ​ ​ ( 3,300 ) ​ ​ — Change in fair value of equity securities ​ ​ ( 39,206 ) ​ ​ ( 794 ) Impairment on equity securities ​ ​ 563 ​ ​ — Loss on disposal of assets ​ ​ 17 ​ ​ 4 Gain on sale of marketable securities available for sale ​ ​ — ​ ​ ( 153 ) Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ Accounts receivable ​ ( 9,102 ) ​ 12,040 Interest receivable ​ ​ 182 ​ ​ 1,135 Contract asset and deposits ​ ​ 12,059 ​ ​ 53 Prepaid expenses and other assets ​ ( 10,158 ) ​ ( 3,629 ) Accounts payable ​ 177 ​ 2,920 Accrued expenses ​ 4,505 ​ 2,386 Income taxes ​ ​ — ​ ​ 895 Lease liabilities and right of use (ROU) assets ​ ​ 386 ​ ​ ( 168 ) Deferred revenue ​ ( 79,665 ) ​ ( 3,291 ) Net cash used in operating activities ​ ( 78,643 ) ​ ( 22,088 ) Cash flows from investing activities ​ ​ ​ ​ ​ ​ Purchase of marketable securities ​ ( 387,826 ) ​ ( 477,310 ) Purchase of equity securities ​ ​ ( 842 ) ​ ​ — Proceeds from sale of property and equipment ​ ​ 4 ​ ​ — Purchase of intangible assets ​ ( 2,348 ) ​ ( 2,143 ) Purchase of property and equipment ​ ( 6,979 ) ​ ( 7,390 ) Proceeds from maturities and sale of marketable securities ​ ​ 343,882 ​ ​ 508,256 Net cash (used in) provided by investing activities ​ ( 54,109 ) ​ 21,413 Cash flows from financing activities ​ ​ ​ ​ ​ ​ Proceeds from issuance of common stock upon exercise of stock awards ​ 9,471 ​ 7,732 Proceeds from issuance of common stock under the Employee Stock Purchase Plan ​ ​ 937 ​ ​ 725 Net cash provided by financing activities ​ 10,408 ​ 8,457 Net (decrease) increase in cash and cash equivalents ​ ( 122,344 ) ​ 7,782 Cash and cash equivalents , beginning of period ​ 163,544 ​ 50,312 Cash and cash equivalents , end of period ​ $ 41,200 ​ $ 58,094 ​ ​ ​ ​ ​ ​ ​ Supplemental disclosure of cash flow information ​ ​ ​ ​ ​ ​ Cash paid during the period for: ​ ​ ​ ​ ​ ​ Interest ​ $ 13 ​ $ 15 Supplemental disclosures of non-cash investing activities ​ ​ ​ ​ ​ ​ Unrealized loss on marketable securities ​ $ ( 149 ) ​ $ ( 594 ) ​ ​ ​ ​ ​ ​ ​ ​ See accompanying notes . ​ 8 Table of Contents Xencor, Inc. ​ Notes to Financial Statements (unaudited) ​ September 30, 2021 ​ 1. Summary of Significant Accounting Policies ​ Basis of Presentation The accompanying unaudited interim financial statements for Xencor, Inc. (the Company, Xencor, we or us) have been prepared in accordance with U.S. generally accepted accounting principles (GAAP) for interim financial information. The financial statements include all adjustments (consisting only of normal recurring adjustments) that the management of the Company believes are necessary for a fair presentation of the periods presented. The preparation of interim financial statements requires the use of management’s estimates and assumptions that affect reported amounts of assets and liabilities at the date of the interim financial statements and the reported revenues and expenditures during the reported periods. These interim financial results are not necessarily indicative of the results expected for the full fiscal year or for any subsequent interim period. The accompanying unaudited interim financial statements and related notes should be read in conjunction with the audited financial statements and notes thereto included in the Company’s 2020 Annual Report on Form 10-K filed with the Securities and Exchange Commission (SEC) on February 24, 2021. Use of Estimates The preparation of interim financial statements in conformity with GAAP requires management to make certain estimates and assumptions that affect the reported amounts of assets, liabilities, revenues and expenses, other comprehensive gain (loss) and the related disclosures. On an ongoing basis, management evaluates its estimates, including estimates related to its accrued clinical trial and manufacturing development expenses, stock-based compensation expense, evaluation of intangible assets, investments, leases and other assets for evidence of impairment, fair value measurements, and contingencies. Significant estimates in these interim financial statements include estimates made for royalty revenue, accrued research and development expenses, stock-based compensation expenses, intangible assets, incremental borrowing rate for right-of-use asset and lease liability, estimated standalone selling price of performance obligations, estimated time for completing delivery of performance obligations under certain arrangements, the likelihood of recognizing variable consideration, the carrying value of equity instruments without a readily determinable fair value, and recoverability of deferred tax assets. Intangible Assets The Company maintains definite-lived intangible assets related to certain capitalized costs of acquired licenses and third-party costs incurred in establishing and maintaining its intellectual property rights to its platform technologies and development candidates. These assets are amortized over their useful lives, which are estimated to be the remaining patent life or the contractual term of the license. The straight-line method is used to record amortization expense. The Company assesses its intangible assets for impairment if indicators are present or changes in circumstances suggest that impairment may exist. During the three and nine months ended September 30, 2021, the Company recorded an impairment charge of $ 0.4 million related to an acquired license. There were no impairment charges recorded for the three and nine months ended September 30, 2020. The Company capitalizes certain in-process intangible assets that are then abandoned when they are no longer pursued or used in current research activities. There was no material abandonment of in-process intangible assets during the three and nine months ended September 30, 2021 and 2020. 9 Table of Contents Marketable Debt and Equity Securities The Company has an investment policy that includes guidelines on acceptable investment securities, minimum credit quality, maturity parameters, and concentration and diversification. The Company invests its excess cash primarily in marketable debt securities issued by investment grade institutions. The Company considers its marketable debt securities to be available-for-sale because it is not more likely than not that the Company will be required to sell the securities before recovery of the amortized cost. These assets are carried at fair value and any impairment losses and recoveries related to the underlying issuer’s credit standing are recognized within other income (expense), while non-credit related impairment losses and recoveries are recognized within accumulated other comprehensive income (loss). There were no impairment losses or recoveries recorded for the three and nine months ended September 30, 2021 and 2020. Accrued interest on marketable debt securities is included in the marketable securities’ carrying value. Each reporting period, the Company reviews its portfolio of marketable debt securities, using both quantitative and qualitative factors, to determine if each security’s fair value has declined below its amortized cost basis. The Company receives equity securities in connection with certain licensing transactions with its partners. These investments in equity securities are carried at fair value with changes in fair value recognized each period and reported within other income (expense). For equity securities with a readily determinable fair value, the Company re-measures these equity investments at each reporting period until such time that the investment is sold or disposed. If the Company sells an investment, any realized gain or loss on the sale of the securities will be recognized within other income (expense) in the Statements of Comprehensive Income (Loss) in the period of sale. The Company also has investments in equity securities without readily determinable fair values, where the Company elects the measurement alternative to record the investment at its initial cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. During the three and nine months ended September 30, 2021, the Company recorded an impairment charge of $ 0.6 million in connection with an equity security without a readily determinable fair value. Recent Accounting Pronouncements Pronouncements Adopted in 2021 Effective January 1, 2021, the Company adopted ASU No. 2019-12, Income Taxes (Topic 740): Simplifying the Accounting for Income Taxes , which removes specific exceptions to the general principles in Topic 740 and simplifies the accounting for income taxes. The adoption of this standard did not have a significant impact on the Company’s financial statements. Effective January 1, 2021, the Company adopted ASU No. 2020-01, which clarifies that a company should consider observable transactions that require a company to either apply or discontinue the equity method of accounting under Topic 323, Investment – Equity Method and Joint Ventures , for the purposes of applying the measurement alternative in accordance with Topic 321, Investments – Equity Securities immediately before applying or upon discontinuing the equity method. The adoption of this standard did not have a significant impact on the Company’s financial statements. Effective January 1, 2021, the Company adopted ASU No. 2020-10, Codification Improvements , which amends a variety of topics in the Accounting Standards Codification to improve consistency and clarify guidance. The adoption of this standard did not have a significant impact on the Company’s financial statements. There have been no other material changes to the significant accounting policies previously disclosed in the Company’s 2020 Annual Report on Form 10-K. 10 Table of Contents 2. Fair Value of Financial Instruments ​ Financial instruments included in the financial statements include cash and cash equivalents, marketable debt and equity securities, accounts receivable, accounts payable, and accrued expenses. Marketable debt securities, equity securities, and cash equivalents are carried at fair value. The fair value of the other financial instruments closely approximates their fair value due to their short-term maturities. The Company accounts for recurring and non-recurring fair value measurements in accordance with FASB Accounting Standards Codification 820, Fair Value Measurements and Disclosures (ASC 820). ASC 820 defines fair value, establishes a fair value hierarchy for assets and liabilities measured at fair value, and requires expanded disclosure about fair value measurements. The ASC 820 hierarchy ranks the quality of reliable inputs, or assumptions, used in the determination of fair value and requires assets and liabilities carried at fair value to be classified and disclosed in one of the following three categories: Level 1— Fair value is determined by using unadjusted quoted prices that are available in active markets for identical assets or liabilities. Level 2— Fair value is determined by using inputs other than Level 1 quoted prices that are directly or indirectly observable. Inputs can include quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in markets that are not active. Related inputs can also include those used in valuation or other pricing models, such as interest rates and yield curves that can be corroborated by observable market data. Level 3— Fair value is determined by inputs that are unobservable and not corroborated by market data. Use of these inputs involves significant and subjective judgments to be made by the reporting entity – e.g. determining an appropriate discount factor for illiquidity associated with a given security. The Company measures the fair value of financial assets using the highest level of inputs that are reasonably available as of the measurement date. The assets recorded at fair value are classified within the hierarchy as follows for the periods reported (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ September 30, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ (unaudited) ​ December 31, 2020 ​ Total ​ ​ ​ ​ ​ ​ ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value ​ Level 1 ​ Level 2 ​ Level 3 ​ Fair Value ​ Level 1 ​ Level 2 ​ Level 3 Available-for-Sale Debt Securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money Market Funds ​ $ 23,218 ​ $ 23,218 ​ $ — ​ $ — ​ $ 158,937 ​ $ 158,937 ​ $ — ​ $ — Corporate Securities ​ ​ 103,610 ​ ​ — ​ ​ 103,610 ​ ​ — ​ ​ 119,833 ​ ​ — ​ ​ 119,833 ​ ​ — Government Securities ​ ​ 372,556 ​ ​ — ​ ​ 372,556 ​ ​ — ​ ​ 315,353 ​ ​ — ​ ​ 315,353 ​ ​ — Equity Securities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Securities with Readily Determinable Fair Value ​ ​ 47,578 ​ ​ 47,578 ​ ​ — ​ ​ — ​ ​ 5,303 ​ ​ 5,303 ​ ​ — ​ ​ — Securities without Readily Determinable Fair Value ​ ​ 16,583 ​ ​ — ​ ​ — ​ ​ 16,583 ​ ​ 16,071 ​ ​ — ​ ​ — ​ ​ 16,071 ​ ​ $ 563,545 ​ $ 70,796 ​ $ 476,166 ​ $ 16,583 ​ $ 615,497 ​ $ 164,240 ​ $ 435,186 ​ $ 16,071 ​ Our policy is to record transfers of assets between Level 1 and Level 2 at their fair values as of the end of each reporting period, consistent with the date of the determination of fair value. During the three and nine months ended September 30, 2021 and 2020, there were no transfers between Level 1 and Level 2. During the nine months ended September 30, 2021, an equity investment without a readily determinable fair value was transferred to Level 1 from Level 3. 11 Table of Contents The following table provides a roll-forward account balance for recurring Level 3 fair value measurements (in thousands): ​ ​ ​ ​ ​ ​ ​ Securities without Readily Determinable Fair Value Balance at December 31, 2020 ​ $ 16,071 Issuance ​ ​ 12,148 Impairment ​ ​ ( 563 ) Transfer out of Level 3 ​ ​ ( 11,073 ) Balance at September 30, 2021 ​ $ 16,583 ​ The Company held equity securities without a readily determinable fair value at September 30, 2021 and December 31, 2020, respectively. The Company elects the measurement alternative to record at its initial cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. During the three and nine months ended September 30, 2021, the Company recorded an impairment charge of $ 0.6 million related to an equity security without a readily determinable value. This impairment charge was recorded as other income (expense). ​ 3. Net Income (Loss) Per Common Share ​ Basic net income (loss) per common share is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common shares outstanding during the period without consideration of common stock equivalents. Diluted net income (loss) per common share is computed by dividing the net income (loss) attributable to common stockholders by the weighted-average number of common stock equivalents outstanding for the period. Potentially dilutive securities consisting of stock issuable pursuant to outstanding options and restricted stock units (RSUs), and stock issuable pursuant to the 2013 Employee Stock Purchase Plan (ESPP) are not included in the per common share calculation in periods when the inclusion of such shares would have an anti-dilutive effect. Basic and diluted net income (loss) per common share is computed as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2021 2020 2021 2020 ​ ​ (in thousands, except share and per share data) Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) attributable to common stockholders ​ $ ( 40,191 ) ​ $ ( 12,550 ) ​ $ 9,570 ​ $ ( 55,642 ) Denominator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average common shares outstanding used in computing basic net income (loss) ​ 58,350,647 ​ 57,266,112 ​ ​ 58,199,928 ​ ​ 57,091,452 Effect of dilutive securities ​ ​ — ​ ​ — ​ ​ 2,146,552 ​ ​ — Weighted-average common shares outstanding used in computing diluted net income (loss) ​ ​ 58,350,647 ​ ​ 57,266,112 ​ ​ 60,346,480 ​ ​ 57,091,452 Basic net income (loss) per common share ​ $ ( 0.69 ) ​ $ ( 0.22 ) ​ $ 0.16 ​ $ ( 0.97 ) Diluted net income (loss) per common share ​ $ ( 0.69 ) ​ $ ( 0.22 ) ​ $ 0.16 ​ $ ( 0.97 ) ​ For the nine months ended September 30, 2021, we excluded 1,139,403 shares of stock issuable pursuant to outstanding options and RSUs from the calculation, respectively, because the inclusion of such shares would have had an anti-dilutive effect. For the three months ended September 30, 2021 and the three and nine months ended September 30, 2020, all outstanding potentially dilutive securities have been excluded from the calculation of diluted net income (loss) per common share as the effect of including such securities would have been anti-dilutive. 12 Table of Contents 4. Comprehensive Income (Loss) ​ Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). For the three and nine months ended September 30, 2021 and 2020, the only component of other comprehensive income (loss) is net unrealized loss on marketable securities. There were no material reclassifications out of accumulated other comprehensive income (loss) during the three and nine months ended September 30, 2021 and 2020. 5. Marketable Debt and Equity Securities ​ The Company’s marketable debt securities held as of September 30, 2021 and December 31, 2020 are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ Amortized Unrealized ​ Unrealized ​ September 30, 2021 ​ Cost ​ Gains ​ Losses ​ Fair Value (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money Market Funds ​ $ 23,218 ​ $ — ​ $ — ​ $ 23,218 Corporate Securities ​ ​ 103,623 ​ ​ 9 ​ ​ ( 22 ) ​ ​ 103,610 Government Securities ​ ​ 372,607 ​ ​ 32 ​ ​ ( 83 ) ​ ​ 372,556 ​ ​ $ 499,448 ​ $ 41 ​ $ ( 105 ) ​ $ 499,384 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reported as ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 23,218 Marketable securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 476,166 Total investments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 499,384 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ Amortized Unrealized ​ Unrealized ​ December 31, 2020 ​ Cost ​ Gains ​ Losses ​ Fair Value (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money Market Funds ​ $ 158,937 ​ $ — ​ $ — ​ $ 158,937 Corporate Securities ​ ​ 119,782 ​ ​ 57 ​ ​ ( 6 ) ​ ​ 119,833 Government Securities ​ ​ 315,319 ​ ​ 37 ​ ​ ( 3 ) ​ ​ 315,353 ​ ​ $ 594,038 ​ $ 94 ​ $ ( 9 ) ​ $ 594,123 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reported as ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 158,937 Marketable securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 435,186 Total investments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 594,123 ​ 13 Table of Contents The maturities of the Company’s marketable debt securities as of September 30, 2021 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortized Estimated September 30, 2021 ​ Cost ​ Fair Value (in thousands) ​ ​ ​ ​ ​ ​ Mature in one year or less ​ $ 199,416 ​ $ 199,423 Mature within two years ​ ​ 276,814 ​ ​ 276,743 ​ ​ $ 476,230 ​ $ 476,166 ​ The unrealized losses on available-for-sale investments and their related fair values as of September 30, 2021 and December 31, 2020 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 months ​ 12 months or greater ​ ​ ​ ​ ​ Unrealized ​ ​ ​ ​ Unrealized September 30, 2021 ​ Fair value ​ losses ​ Fair value ​ losses (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporate Securities ​ $ 21,732 ​ $ ( 9 ) ​ $ 11,727 ​ $ ( 13 ) Government Securities ​ ​ — ​ ​ — ​ ​ 161,209 ​ ​ ( 83 ) ​ ​ $ 21,732 ​ $ ( 9 ) ​ $ 172,936 ​ $ ( 96 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Less than 12 months ​ 12 months or greater ​ ​ ​ ​ ​ Unrealized ​ ​ ​ ​ Unrealized December 31, 2020 ​ Fair value ​ losses ​ Fair value ​ losses (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporate Securities ​ $ 15,843 ​ $ ( 6 ) ​ $ — ​ $ — Government Securities ​ ​ 40,802 ​ ​ ( 3 ) ​ ​ — ​ ​ — ​ ​ $ 56,645 ​ $ ( 9 ) ​ $ — ​ $ — ​ The unrealized losses from the available-for-sale securities are primarily due to a change in the interest rate environment and not a change in the credit quality of the securities. The Company’s equity securities include securities with a readily determinable fair value. These investments are carried at fair value with changes in fair value recognized each period and reported within other income (expense). Equity securities with a readily determinable fair value and their fair values (in thousands) as of September 30, 2021 and December 31, 2020 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Fair Value ​ ​ September 30, 2021 ​ December 31, 2020 Astria Common Stock ​ $ 5,657 ​ $ — INmune Common Stock ​ ​ 36,617 ​ ​ — Viridian Common Stock ​ ​ 5,304 ​ ​ 5,303 ​ ​ $ 47,578 ​ $ 5,303 ​ 14 Table of Contents The Company also has investments in equity securities without a readily determinable fair value. The Company elects the measurement alternative to record these investments at their initial cost and evaluate such investments at each reporting period for evidence of impairment, or observable price changes in orderly transactions for the identical or a similar investment of the same issuer. During the three and nine months ended September 30, 2021, the Company recorded an impairment charge of $ 0.6 million related to the Astria preferred stock. Equity securities without a readily determinable fair value and their carrying values (in thousands) as of September 30, 2021 and December 31, 2020 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ Carrying Value Carrying Value ​ ​ September 30, 2021 ​ December 31, 2020 Astria Preferred Stock ​ $ 512 ​ $ — Zenas Preferred Stock ​ ​ 16,071 ​ ​ 16,071 ​ ​ $ 16,583 ​ $ 16,071 ​ In 2018, the Company received equity shares in Quellis Biosciences, Inc. (Quellis) in connection with a licensing transaction. The Company recorded the Quellis equity as securities not having a readily determinable fair value, and the investment was recorded at its original cost. In 2021, Quellis merged into Catabasis Pharmaceuticals, Inc. (Catabasis), and the Company received 259,206 shares of common stock and 3,928 shares of preferred stock in Catabasis in exchange for its Quellis equity. In June 2021, 3,581 shares of the Catabasis preferred stock were exchanged for 3,580,539 shares of Catabasis common stock. The 3,839,745 shares of the Catabasis common stock have a readily determinable fair value. In August 2021, Catabasis effected a reverse stock split of its shares of common stock at a ratio of 1 :6, and in September 2021, Catabasis changed its name to Astria Therapeutics, Inc. (Astria). The adjustment in the fair value of the Astria common stock has been recorded in unrealized gain (loss) on equity securities for the three and nine months ended September 30, 2021. The Company records its investment in the shares of Astria preferred stock as an equity interest without a readily determinable fair value. The Company elected to record the original 3,928 shares of preferred stock at their initial cost of $ 12.1 million and to review the carrying value for impairment or other changes in carrying value at each reporting period. After the conversion of 3,581 shares of Astria preferred stock to common stock in June 2021, the Company owned 347 shares of preferred stock and continued to carry the shares at their original cost of $ 1.1 million. During the three and nine months ended September 30, 2021, the Company recorded an impairment charge of $ 0.6 million related to its investment in Astria’s preferred stock. In 2017, the Company received 1,585,000 shares of common stock of INmune Bio, Inc.(INmune) and an option to acquire an additional 10 % of INmune’s outstanding shares of common stock in connection with a licensing transaction. The Company also received an option to acquire 108,000 shares of INmune common stock in connection with a designee appointed by us serving on the board of directors of INmune. The Company initially recorded its equity interest, including its option to acquire additional equity in INmune, at cost pursuant to ASC 323, Investments – Equity Method and Joint Ventures . In June 2021, the Company entered into an Option Cancellation Agreement with INmune and received an additional 192,533 shares of INmune common stock. During the three-month period ended June 30, 2021, the Company determined that it should no longer account for its investment in INmune under the equity method. In September 2021, the Company exercised its option to purchase 108,000 shares of INmune common stock for $ 0.8 million and the Company recorded a gain of $ 0.9 million on the purchase. The 1,885,533 shares of INmune common stock have a readily determinable fair value, and the adjustment in the fair value of the shares of INmune common stock has been recorded in gain (loss) on equity securities for the three and nine months ended September 30, 2021. In 2020, the Company received 322,407 shares of common stock of Viridian Therapeutics, Inc. (Viridian) in connection with the Viridian Agreement (defined below). The shares of Viridian common stock are classified as equity securities with a readily determinable fair value at September 30, 2021. 15 Table of Contents In 2020, the Company received an equity interest in Zenas BioPharma Limited (Zenas), in connection with the Zenas Agreement (defined below). The Company elected the measurement alternative to carry the Zenas equity at cost minus impairment, plus or minus changes resulting from observable price changes in orderly transactions for the identical or a similar investment of the same issuer. During the three and nine months ended September 30, 2021, there has not been any impairment or observable price changes related to this investment. Unrealized gains recognized on equity securities during the three and nine months ended September 30, 2021 and 2020 consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ ​ September 30, September 30, ​ 2021 2020 2021 2020 Net gains recognized on equity securities ​ $ 1,506 ​ $ 2,772 ​ $ 57,507 ​ $ 794 Less: net gains recognized on sale of equity securities ​ — ​ — ​ ( 18,301 ) ​ — Unrealized gains recognized on equity securities ​ $ 1,506 ​ $ 2,772 ​ $ 39,206 ​ $ 794 ​ ​ 6. Stock Based Compensation ​ Our Board of Directors (the Board) and the requisite stockholders previously approved the 2010 Equity Incentive Plan (the 2010 Plan). In October 2013, the Board approved the 2013 Equity Incentive Plan (the 2013 Plan), and in November 2013, our stockholders approved the 2013 Plan, which became effective as of December 3, 2013. As of December 2, 2013, we suspended the 2010 Plan, and no additional awards may be granted under the 2010 Plan. Any shares of common stock covered by awards granted under the 2010 Plan that terminate after December 2, 2013 by expiration, forfeiture, cancellation, or other means without the issuance of such shares will be added to the 2013 Plan reserve. As of September 30, 2021, the total number of shares of common stock available for issuance under the 2013 Plan is 13,243,218 , which includes 2,684,456 shares of common stock that were available for issuance under the 2010 Plan as of the effective date of the 2013 Plan. Unless otherwise determined by the Board, beginning January 1, 2014, and continuing until the expiration of the 2013 Plan, the total number of shares of common stock available for issuance under the 2013 Plan will automatically increase annually on January 1 of each year by 4 % of the total number of issued and outstanding shares of common stock as of December 31 of the immediately preceding year. Pursuant to approval by the Board, the total number of shares of common stock available for issuance under the 2013 Plan was increased by 2,314,937 shares on January 1, 2021. As of September 30, 2021, a total of 12,235,413 options have been granted under the 2013 Plan. In November 2013, the Board and our stockholders approved the ESPP, which became effective as of December 5, 2013. We have reserved a total of 581,286 shares of common stock for issuance under the ESPP. Unless otherwise determined by the Board, beginning on January 1, 2014, and continuing until the expiration of the ESPP, the total number of shares of common stock available for issuance under the ESPP will automatically increase annually on January 1 by the lesser of (i) 1 % of the total number of issued and outstanding shares of common stock as of December 31 of the immediately preceding year, or (ii) 621,814 shares of common stock. Pursuant to approval by our Board, there was no increase in the number of authorized shares in the ESPP from 2015 to 2020. As of September 30, 2021, we have issued a total of 498,147 shares of common stock under the ESPP. During the nine months ended September 30, 2021, the Company awarded 313,084 RSUs to certain employees. The standard vesting of these awards is generally in three equal annual installments and is contingent on continued service to the Company. The fair value of these awards is determined based on the intrinsic value of the stock on the date of grant and will be recognized as stock-based compensation expense over the requisite service period. As of September 30, 2021, we have granted a total of 766,871 shares of common stock issuable upon the vesting of RSUs. 16 Table of Contents Total employee, director and non-employee stock-based compensation expense recognized for the three and nine months ended September 30, 2021 and 2020 are as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ ​ September 30, September 30, ​ 2021 2020 2021 2020 General and administrative ​ $ 3,370 ​ $ 2,881 ​ $ 9,300 ​ $ 7,975 Research and development ​ 5,573 ​ 5,437 ​ 17,286 ​ 15,086 ​ ​ $ 8,943 ​ $ 8,318 ​ $ 26,586 ​ $ 23,061 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2021 2020 ​ 2021 2020 Stock options ​ $ 6,959 ​ $ 6,624 ​ $ 20,844 ​ $ 19,172 ESPP ​ ​ 265 ​ ​ 209 ​ ​ 766 ​ ​ 616 RSUs ​ ​ 1,719 ​ ​ 1,485 ​ ​ 4,976 ​ ​ 3,273 ​ ​ $ 8,943 ​ $ 8,318 ​ $ 26,586 ​ $ 23,061 ​ The following table summarizes option activity under our stock plans and related information: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted Weighted ​ ​ ​ ​ ​ ​ Average Average ​ ​ ​ ​ Number of ​ Exercise Remaining ​ Aggregate ​ ​ Shares Subject ​ Price Contractual ​ Intrinsic ​ ​ to Outstanding ​ (Per Term ​ Value ​ ​ Options ​ Share) (in years) ​ (in thousands) Balance at December 31, 2020 7,751,789 ​ $ 26.23 ​ ​ 7.00 ​ $ 134,941 Options granted 1,662,574 ​ $ 41.68 ​ ​ ​ ​ ​ ​ Options forfeited ( 352,210 ) ​ $ 36.06 ​ ​ ​ ​ ​ ​ Options exercised ( 416,200 ) ​ $ 22.76 ​ ​ ​ ​ ​ ​ Balance at September 30, 2021 8,645,953 ​ $ 28.97 ​ ​ 6.79 ​ $ 54,470 Exercisable ​ 5,394,241 ​ $ 23.74 ​ ​ 5.61 ​ $ 52,877 ​ We calculate the intrinsic value as the difference between the exercise price of the options and the closing price of common stock of $ 32.66 per share as of September 30, 2021. The weighted-average fair value of options granted during the nine-month periods ended September 30, 2021 and 2020 were $ 21.96 and $ 16.60 per share, respectively. There were 1,562,774 options granted during the nine-month period ended September 30, 2020. We estimated the fair value of each stock option using the Black-Scholes option-pricing model based on the date of grant of such stock option with the following weighted average assumptions for the three and nine months ended September 30, 2021 and 2020: 17 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options ​ Options ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ ​ September 30, ​ September 30, ​ 2021 2020 2021 2020 Expected term (years) ​ 6.0 6.0 ​ 6.2 6.1 ​ Expected volatility ​ 55.6 % 56.2 % 55.6 % 54.5 % Risk-free interest rate ​ 0.88 % 0.35 % 1.00 % 0.80 % Expected dividend yield ​ — % — % — % — % ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ESPP ​ ESPP ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ 2021 2020 2021 2020 Expected term (years) 0.5 - 2.0 0.5 - 2.0 ​ 0.5 - 2.0 0.5 - 2.0 ​ Expected volatility ​ 46.1 - 66.4 % 50.8 - 62.6 % 46.1 - 66.4 % 50.8 - 62.6 % Risk-free interest rate 0.04 - 1.65 % 0.18 - 1.65 % 0.04 - 1.65 % 0.18 - 1.65 % Expected dividend yield ​ — % — % — % — % ​ As of September 30, 2021, the unamortized compensation expense related to unvested stock options was $ 58.8 million. The remaining unamortized compensation expense will be recognized over the next 2.7 years. As of September 30, 2021, the unamortized compensation expense under our ESPP was $ 0.3 million. The remaining unamortized expense will be recognized over the next 0.2 years. The following table summarizes the RSU activity for the nine-month period ended September 30, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted ​ ​ Restricted ​ Average Grant ​ ​ Stock ​ Date Fair Value ​ ​ Units ​ (Per unit) ​ ​ ​ ​ ​ ​ Unvested RSUs at December 31, 2020 358,825 ​ $ 33.04 Granted 313,084 ​ ​ 41.40 Vested ( 134,615 ) ​ ​ 31.94 Forfeited ( 48,515 ) ​ ​ 36.59 Unvested RSUs at September 30, 2021 488,779 ​ $ 38.35 ​ As of September 30, 2021, the unamortized compensation expense related to unvested RSUs was $ 14.7 million. The remaining unamortized expense will be recognized over the next 2.2 years. 7. Leases ​ The Company leases office and laboratory space in Monrovia, California under a lease that expires in December 2025 with an option to renew for an additional five years at then market rates. In July 2017, under a separate lease agreement, the Company entered into a lease for additional space in the same building with a lease that continues through September 2022, also with an option to renew for an additional five years . The Company has assessed that it is unlikely to exercise either of the lease term extension options. The Company leases additional office space in San Diego, California through August 2022, with an option to extend for an additional five years . The Company has assessed that it is unlikely to exercise the option to extend the lease term. The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants. 18 Table of Contents In June 2021, the Company entered into an Agreement of Lease (465 N. Halstead), (the Halstead Lease) relating to 129,543 rentable square feet, for laboratory and office space, in Pasadena, California, where the Company intends to move its corporate headquarters in the second half of 2022. The term of the Halstead Lease will become effective in two phases. The first phase commences on July 1, 2022 and encompasses 83,083 square feet while the second phase commences no later than September 30, 2026 and encompasses an additional 46,460 square feet. The term of the Halstead Lease is 13 years from the first phase commencement date. The Company received delivery of the first phase premises on July 1, 2021 and is scheduled to complete construction of office, laboratory, and related improvements in the second half of 2022. The Halstead Lease provides the Company with improvement allowances of up to $ 17,032,015 and $ 3,252,000 in connection with the Phase 1 and Phase 2 building improvements, respectively. The initial base monthly rent is $ 386,335.95 , or $ 4.65 per square foot, and includes increases of three percent annually. The Company will also be responsible for its proportionate share of operating expenses, tax expense, and utility costs. In July 2021, the Halstead Lease was amended to clarify the start date of the new lease as August 1, 2022 and to amend other provisions of the Halstead Lease to reflect the new start date of the lease. For the three and nine months ended September 30, 2021, ROU assets obtained in exchange for new operating lease liabilities are $ 29.7 million. In June 2021, the Company entered into an 18-month lease for a 7,020 -square-foot office space in Monrovia, California. The lease began on August 1, 2021, and the initial base monthly rent is $ 15,000 . The Company received delivery of the premises on July 19, 2021. For the three and nine months ended September 30, 2021, ROU assets obtained in exchange for new operating lease liabilities are $ 0.3 million. The following table reconciles the undiscounted cash flows for the operating leases at September 30, 2021 to the operating lease liabilities recorded on the balance sheet (in thousands): ​ ​ ​ ​ ​ Years ending December 31, ​ ​ For the remainder of 2021 ​ $ 495 2022 ​ 2,337 2023 ​ ​ 5,566 2024 ​ ​ 5,713 2025 ​ ​ 5,817 2026 ​ ​ 5,279 Thereafter ​ ​ 52,117 Total undiscounted lease payments ​ ​ 77,324 Less: Tenant allowance ​ ​ ( 17,032 ) Less: Imputed interest ​ ​ ( 26,077 ) Present value of lease payments ​ $ 34,215 ​ ​ ​ ​ Lease liabilities - short-term ​ $ 128 Lease liabilities - long-term ​ ​ 34,087 Total lease liabilities ​ $ 34,215 ​ The following table summarizes lease costs and cash payments for the three and nine months ended September 30, 2021 and 2020 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended ​ Nine Months Ended ​ ​ September 30, ​ September 30, ​ ​ 2021 2020 ​ 2021 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating lease cost ​ $ 1,553 ​ $ 599 ​ $ 2,780 ​ $ 1,896 Variable lease cost ​ ​ 16 ​ ​ 70 ​ ​ 44 ​ ​ 129 Total lease costs ​ $ 1,569 ​ $ 669 ​ $ 2,824 ​ $ 2,025 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash paid for amounts included in ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ the measurement of lease liabilities ​ $ 1,034 ​ $ 527 ​ $ 2,081 ​ $ 1,650 19 Table of Contents ​ As of September 30, 2021, the weighted-average remaining lease term for operating leases is 12.3 years, and the weighted-average discount rate for operating leases is 5.7 % . As of September 30, 2020, the weighted-average remaining lease term for operating leases is 5.1 years, and the weighted-average discount rate for operating leases is 5.5 % . ​ ​ ​ 8. Commitments and Contingencies ​ From time to time, the Company may be subject to various litigation and related matters arising in the ordinary course of business. The Company does not believe it is currently subject to any material matters where there is at least a reasonable possibility that a material loss may be incurred. The Company is obligated to make future payments to third parties under in-license agreements, including sublicense fees, royalties, and payments that become due and payable on the achievement of certain development and commercialization milestones. As the amount and timing of sublicense fees and the achievement and timing of these milestones are not probable and estimable, such commitments have not been included on the Company’s balance sheet. The Company has also entered into agreements with third-party vendors that will require us to make future payments upon the delivery of goods and services in future periods. 9. Collaboration and Licensing Agreements ​ The following is a summary description of the material revenue arrangements, including arrangements that generated revenue in the three and nine months ended September 30, 2021 and 2020. Aimmune Therapeutics, Inc. On February 4, 2020, the Company entered into a License, Development and Commercialization Agreement (the Aimmune Agreement) with Aimmune pursuant to which the Company granted Aimmune an exclusive worldwide license to XmAb7195, which was renamed AIMab7195. The Company received an upfront payment of $ 5.0 million and 156,238 shares of Aimmune common stock with an aggregate value of $ 4.6 million on the closing date. Under the Aimmune Agreement, the Company is also eligible to receive up to $ 385.0 million in milestones, which includes $ 22.0 million in development milestones, $ 53.0 million in regulatory milestones and $ 310.0 million in sales milestones, and tiered royalties on net sales of approved products from high-single to mid-teen percentage range. No revenue was recognized in the three and nine months ended September 30, 2021, or the three months ended September 30, 2020. The Company recognized $ 9.6 million of revenue related to the agreement for the nine months ended September 30, 2020. There is no deferred revenue as of September 30, 2021 related to this agreement. Alexion Pharmaceuticals, Inc. In January 2013, the Company entered into an Option and License Agreement (the Alexion Agreement) with Alexion Pharmaceuticals, Inc. (Alexion). Under the terms of the Alexion Agreement, the Company granted to Alexion an exclusive research license, with limited sublicensing rights, to make and use the Company’s Xtend technology to evaluate and advance compounds. Alexion exercised its rights to one target program, ALXN1210, which is now marketed as Ultomiris®. The Company is eligible to receive contractual milestones for certain commercial achievements and is also entitled to receive royalties based on a percentage of net sales of Ultomiris sold by Alexion, its affiliates or its sublicensees, which percentage is in the low single digits. Alexion’s royalty obligations continue on a product-by-product and country-by-country basis until the expiration of the last-to-expire valid claim in a licensed patent covering the applicable product in such country. At December 31, 2020, the Company recorded a contract asset of $ 10.0 million related to a contractual sales milestone; the Company received payment for this milestone during the three-month period ended March 31, 2021. 20 Table of Contents Under ASC 606, Revenue from Contracts with Customers , the Company recognizes revenue for sales-based royalties upon the subsequent sale of the product. The Company recognized $ 5.8 million and $ 4.3 million of royalty revenue under this arrangement for the three months ended September 30, 2021 and 2020, respectively. The Company recognized $ 16.4 million and $ 11.5 million of revenue for the nine months ended September 30, 2021 and 2020, respectively. As of September 30, 2021, there is a receivable of $ 10.5 million related to royalties due under the arrangement. There is no deferred revenue related to this agreement. Amgen Inc. In September 2015, the Company entered into a research and license agreement (the Amgen Agreement) with Amgen Inc. (Amgen) to develop and commercialize bispecific antibody product candidates using the Company’s proprietary XmAb bispecific Fc technology. Under the Amgen Agreement, the Company granted an exclusive license to Amgen to the rights to our CD38 x CD3 preclinical program and developed AMG 424. Amgen also applied our bispecific Fc technology to create AMG 509, a STEAP1 x CD3 XmAb 2+1 bispecific antibody. In May 2020, Amgen notified the Company that it was terminating its rights with respect to the AMG 424 program, (now XmAb968). Under the terms of the Amgen Agreement, the rights to the XmAb968 program reverted to the Company. Pursuant to the termination agreement, the Company entered into a supply agreement with Amgen under which Amgen will provide drug product of XmAb968 to the Company. In the second quarter of 2021, the Company purchased XmAb968 drug product from Amgen to enable it to support additional studies of XmAb968. There is a payable of $ 0.9 million due to Amgen in connection with the drug supply agreement at September 30, 2021. No revenue was recognized under the Amgen Agreement during the three and nine months ended September 30, 2021 or 2020. As of September 30, 2021, there is no deferred revenue related to the arrangement. Astellas Pharma Inc. Effective March 29, 2019, the Company entered into a Research and License Agreement (the Astellas Agreement) with Astellas Pharma Inc. (Astellas). Pursuant to the Astellas Agreement, the Company applied its bispecific Fc technology to research antibodies provided by Astellas to generate bispecific antibody candidates and returned the candidates to Astellas for further development and commercialization. Pursuant to the Astellas Agreement, the Company received an upfront payment of $ 15.0 million and is eligible to receive up to $ 240.0 million in milestones, which include $ 32.5 million in development milestones, $ 57.5 million in regulatory milestones and $ 150.0 million in sales milestones. The Company recognized the $ 13.6 million allocated to the bispecific antibodies when it satisfied its performance obligation and transferred the bispecific antibodies to Astellas in June 2019. The $ 1.4 million allocated to the research activities was recognized as the research services were completed. The Company completed the remaining activities under the research plan during the second quarter of 2020. At December 31, 2020, the Company recorded a contract asset of $ 2.5 million related to a development milestone; the Company received payment for this milestone in the three-month period ended March 31, 2021. The Company did not recognize revenue related to the arrangement for the three and nine months ended September 30, 2021, or the three months ended September 30, 2020. The Company recognized $ 0.9 million revenue for the nine months ended September 30, 2020. There is no deferred revenue as of September 30, 2021 related to the arrangement. 21 Table of Contents Astria Therapeutics, Inc. In May 2018, the Company entered into an agreement with Quellis, pursuant to which the Company provided Quellis a non-exclusive license to its Xtend Fc technology to apply to an identified antibody. Quellis is responsible for all development and commercialization activities. The Company received an equity interest in Quellis and is eligible to receive up to $ 66.0 million in milestones, which include $ 6.0 million in development milestones, $ 30.0 million in regulatory milestones and $ 30.0 million in sales milestones. In addition, the Company is eligible to receive royalties in the mid-single digit percentage range on net sales of approved products. In January 2021, Quellis merged into Catabasis, and the Company received common stock and preferred stock of Catabasis in exchange for its equity in Quellis. The Company recognized an increase in the fair value of its equity interest for the exchange of shares, which was recorded as unrealized gain for the three months ended March 31, 2021. In June 2021, a portion of the Company’s preferred stock in Catabasis was converted to common stock, which was recorded at its fair value as of June 30, 2021. The remaining Catabasis preferred stock is carried at its original cost and is reviewed for impairment or other changes at each reporting period. In August 2021, Catabasis effected a reverse stock split of its shares of common stock at a ratio of 1 :6, and in September 2021, Catabasis changed its name to Astria. The Company recorded an impairment charge of $ 0.6 million for its investment in Astria preferred stock for the three months ended September 30, 2021. The Company recognized unrealized loss of $ 2.4 million and unrealized gain of $ 6.7 million related to its equity interest in Astria for the three and nine months ended September 30, 2021. There is no deferred revenue as of September 30, 2021 related to this agreement. Bristol Myers Squibb Company In May 2021, the Company entered into a Technology License Agreement (the BMS Agreement ) with Bristol-Myers Squibb Company (BMS) pursuant to which the Company provided a non-exclusive license to its Xtend technology to extend the half-life of antibodies that specifically bind to SARS-CoV-2. Under the terms of the BMS Agreement, BMS is responsible for all research, development, regulatory and commercial activities for antibodies, and the Company is eligible to receive royalties on net sales of approved products in the low-single digit percentage range. BMS initiated a Phase 2 study with a licensed antibody to treat patients with COVID-19 in the third quarter of 2021. No revenue was recognized for the three and nine months ended September 30, 2021. There is no deferred revenue as of September 30, 2021 related to this agreement. Genentech, Inc., and F. Hoffmann-La Roche Ltd. In February 2019, the Company entered into a collaboration and license agreement (the Genentech Agreement) with Genentech, Inc. and F. Hoffman-La Roche Ltd (collectively, Genentech) for the development and commercialization of novel IL-15 collaboration products (Collaboration Products), including XmAb306 (also named RG6323), the Company’s IL-15/IL-15Ra candidate. Pursuant to the Genentech Agreement, XmAb306 is designated as a development program and all costs incurred for developing XmAb306 from March 8, 2019, the effective date of the Genentech Agreement, are being shared with Genentech under the initial cost-sharing percentage of 45 %. In October 2020, a second candidate, a targeted IL-15 molecule, was designated as a development candidate, and all development costs incurred from the date of designation are being shared with Genentech under the initial cost-sharing percentage of 45 %. In August 2021, Genentech and Xencor ceased development of the targeted IL-15 program due to observations in preclinical studies that suggested an undesirable risk/benefit profile. Pursuant to the Genentech Agreement, the Company and Genentech conducted joint research activities for a two -year period to identify and discover additional IL-15 candidates developed from the Company’s cytokine and bispecific technologies. The two-year research term expired in March 2021. The Company is eligible for clinical milestone payments for new Collaboration Products identified from the research efforts. 22 Table of Contents The Company recognized the $ 111.7 million allocated to the license when it satisfied its performance obligation and transferred the license to Genentech in March 2019. A total of $ 8.3 million of the transaction price was allocated to the research activities and is being recognized over a period of time through the end of the research term that services are rendered. The research term expired in the first half of 2021, and the balance in deferred revenue related to the Genentech Agreement was recognized as the Company is no longer required to render services. The Company did no t recognize revenue for the three months ended September 30, 2021. For the three months ended September 30, 2020, the Company recognized $ 0.9 million of revenue. For the nine months ended September 30, 2021 and 2020, the Company recognized $ 2.5 million and $ 2.3 million of revenue, respectively. As of September 30, 2021, there is a $ 5.3 million payable related to cost-sharing development activities during the third quarter of 2021 for the XmAb306 and the targeted IL-15 programs. There is no deferred revenue as of September 30, 2021, as the obligation to perform research activities has expired. Gilead Sciences, Inc. In January 2020, the Company entered into a Technology License Agreement (the Gilead Agreement) with Gilead Sciences, Inc. (Gilead), pursuant to which the Company provided an exclusive license to its Cytotoxic Fc and Xtend Fc technologies for an initial identified antibody and options for up to three additional antibodies directed to the same molecular target. The Company retains the right to grant licenses for other antibodies directed to the target. Gilead is responsible for all development and commercialization activities for all target candidates. The Company received an upfront payment of $ 6.0 million and is eligible to receive up to $ 67.0 million in milestones, which includes $ 10.0 million in development milestones, $ 27.0 million in regulatory milestones and $ 30.0 million in sales milestones for each product incorporating the antibodies selected. In addition, the Company is eligible to receive royalties in the low-single digit percentage range on net sales of approved products. The Company did no t recognize any revenue related to the Gilead Agreement for the three and nine months ended September 30, 2021, or the three months ended September 30, 2020. The Company recognized $ 13.5 million of revenue related to the Gilead Agreement for the nine months ended September 30, 2020. There is no deferred revenue as of September 30, 2021 related to this agreement. INmune Bio, Inc. In October 2017, the Company entered into a License Agreement (the INmune Agreement) with INmune. Under the terms of the INmune Agreement, the Company provided INmune with an exclusive license to certain rights to a proprietary protein, XPro1595. In connection with the agreement the Company received 1,585,000 shares of INmune common stock and an option to acquire additional shares of INmune. The Company also received an option to acquire 108,000 shares of INmune common stock with a designee appointed by us serving on the board of directors of INmune. The option had a six-year term from the date of the INmune Agreement and provided the Company the option to purchase up to 10 % of the fully diluted outstanding shares of INmune common stock for $ 10.0 million. The Company initially recorded its equity interest in INmune, including its option to acquire additional INmune shares, at cost pursuant to ASC 323. In June 2021, the Company entered into the First Amendment to License Agreement (the Amended INmune Agreement) and an Option Cancellation Agreement (the Option Agreement) with INmune. The Amended INmune Agreement modified certain diligence provisions in the INmune Agreement with no change in total consideration or performance obligations. The Option Agreement provided for the sale of the option to INmune for the total consideration of $ 18.3 million which includes $ 15.0 million in cash and $ 3.3 million in additional shares of INmune common stock, which represented an additional 192,533 shares of INmune common stock. The Company recorded a realized gain of $ 18.3 million according to ASC 860, Transfer and Servicing , and recorded the additional investment of 192,533 shares of INmune common stock according to ASC 321, Investments – Equity Securities . 23 Table of Contents During the three months ended June 30, 2021, the Company determined that it should no longer record its investment in INmune under the equity method and recorded its investment in INmune pursuant to ASC 321. The Company adjusted the carrying value of this investment by recognizing an unrealized gain of $ 27.8 million as other income for the three months ended June 30, 2021. In September 2021, the Company exercised its option to purchase 108,000 shares of INmune common stock for $ 0.8 million. The Company recognized an unrealized gain of $ 2.0 million, which consists of $ 1.1 million of fair value of the option and $ 0.9 million gain on the purchase, as other income for the three months ended September 30, 2021. For the three months ended September 30, 2021, the Company recorded $ 4.5 million of unrealized gain related to its investment in INmune. For the nine months ended September 30, 2021, the Company recorded $ 32.5 million of unrealized gain and $ 18.3 million of realized gain related to its investment in INmune. At the inception of the INmune Agreement in 2017, INmune was a related party as a result of the Company's significant influence with respect to its investment in INmune, as determined under ASC 323. The Company did not have any amounts due to or from INmune at June 30, 2021 or December 31, 2020. At June 30, 2021, the Company determined that it no longer has a significant influence in INmune and that INmune is no longer a related party. Janssen Biotech, Inc. In November 2020, the Company entered into a Collaboration and License Agreement (the Janssen Agreement) with Janssen Biotech, Inc. (Janssen) pursuant to which the Company and Janssen will conduct research and development activities to discover novel CD28 bispecific antibodies for the treatment of prostate cancer. Janssen and the Company will conduct joint research activities for up to a three-year period to discover XmAb bispecific antibodies against CD28 and against an undisclosed prostate tumor-target with Janssen maintaining exclusive worldwide rights to develop and commercialize licensed products identified from the research activities. Under the Janssen Agreement, the Company will conduct research activities and apply its bispecific Fc technology to antibodies targeting prostate cancer provided by Janssen. Upon completion of the research activities Janssen will have a candidate selection option to advance an identified candidate for development and commercialization. The activities will be conducted under a research plan agreed to by both parties. Janssen will assume full responsibility for development and commercialization of the CD28 bispecific antibody candidate. Pursuant to the Janssen Agreement, the Company received an upfront payment of $ 50.0 million and is eligible to receive up to $ 662.5 million in milestones which includes $ 161.9 million in development milestones, $ 240.6 million in regulatory milestones and $ 260.0 million in sales milestones. If commercialized, the Company is eligible to receive royalties on net sales that range from the high-single to low-double digit percentages. The Company evaluated the Janssen Agreement under ASC 606 and identified the performance obligation under the Agreement to be delivery of CD28 bispecific antibodies to Janssen from the research activities outlined in the research plan. The Company determined that the license to the bispecific antibodies is not a separate performance obligation because it is not capable of being distinct; the license to the antibodies cannot be separated from the underlying antibodies. The Company determined that the transaction price of the Janssen Agreement at inception was $ 50.0 million consisting of the upfront payment. The potential milestones are not included in the transaction price as these are contingent on future events, and the Company would not recognize these in revenue until it is not probable that these would not result in significant reversal of revenue amounts in future periods. The Company will re-assess the transaction price at each reporting period and when event outcomes are resolved or changes in circumstances occur. The Company allocated the transaction price to the single performance obligation, delivery of CD28 bispecific antibodies to Janssen. 24 Table of Contents The Company is recognizing the $ 50.0 million transaction price as it satisfies its performance obligation to deliver CD28 bispecific antibodies to Janssen. The Company is using the expected input method, which considers an estimate of the Company’s efforts to complete the research activities outlined in the Janssen Agreement. The Company recognized $ 6.3 million and $ 37.0 million of revenue under this arrangement for the three and nine months ended September 30, 2021, and there is $ 13.0 million in deferred revenue as of September 30, 2021 related to our obligation to complete research activities and deliver CD28 bispecific antibodies under the Janssen Agreement. MorphoSys AG In June 2010, the Company entered into a Collaboration and License Agreement with MorphoSys AG (MorphoSys), which was subsequently amended. Under the agreement, we granted MorphoSys an exclusive worldwide license to the Company’s patents and know-how to research, develop and commercialize the XmAb5574 product candidate (subsequently renamed MOR208 and tafasitamab) with the right to sublicense under certain conditions. If certain developmental, regulatory and sales milestones are achieved, the Company is eligible to receive future milestone payments and royalties. In February 2020, the U.S. Food and Drug Administration (FDA) accepted MorphoSys’ Biologics License Application (BLA) for tafasitamab and the Company received a milestone payment of $ 12.5 million. The Company recognized the payment as revenue in the period that the milestone event occurred. On July 31, 2020, the FDA granted accelerated approval to MorphoSys’ BLA for tafasitamab (now Monjuvi®) for marketing in the United States. In connection with the approval, the Company received a milestone payment of $ 25.0 million. During the three months ended March 31, 2021, MorphoSys reported to us its plans to initiate additional clinical studies of Monjuvi, and the Company recorded a contract asset of $ 12.5 million as an adjustment to the total transaction price. In April 2021, MorphoSys and Incyte Corporation (Incyte) announced the dosing of the first patient in one of their planned Phase 3 clinical studies and the contract asset was recorded as a receivable. The Company received payment for this receivable in the three months ended June 30, 2021. The Company is eligible to receive royalties in the high-single to low-double digit percentage range on approved sales of Monjuvi. Under ASC 606, the Company recognizes revenue for sales-based royalties upon the subsequent sale of the product. The Company recorded royalties for Monjuvi based on an estimate of sales to be reported by MorphoSys for the three and nine months ended September 30, 2021. The Company recognized $ 1.3 million and $ 25.2 million of revenue during the three months ended September 30, 2021 and 2020, respectively. The Company recognized $ 16.4 million and $ 37.7 million of revenue during the nine months ended September 30, 2021, and 2020, respectively. As of September 30, 2021, there is a receivable of $ 1.5 million related to estimated royalties due under the arrangement. As of September 30, 2021, there is no deferred revenue related to this agreement. Novartis Institute for Biomedical Research, Inc. In June 2016, the Company entered into a Collaboration and License Agreement (the Novartis Agreement) with Novartis Institutes for BioMedical Research, Inc. (Novartis) to develop and commercialize bispecific and other Fc engineered antibody drug candidates using the Company’s proprietary XmAb technologies and drug candidates. Pursuant to the Novartis Agreement: ● the Company and Novartis are co-developing vibecotamab worldwide and sharing development costs; ● the Company will apply its bispecific technology in up to four target pair antibodies identified by Novartis (each a Global Discovery Program) during the research term; and 25 Table of Contents ● the Company will provide Novartis with a non-exclusive license to certain of its Fc technologies to apply against up to ten targets identified by Novartis during the research term. In August 2021, Novartis notified the Company it was terminating its rights with respect to the vibecotamab program, which will be effective in February 2022. Under the Novartis Agreement, Novartis is responsible for its share of vibecotmab development costs through August 2022. We completed delivery of separate Global Discovery Programs in 2017 and in 2018. The research term expired in June 2021 without delivery of additional Global Discovery Programs. In June 2021, Novartis selected an Fc candidate and received a non-exclusive license to the Company’s Fc technology. Novartis will assume full responsibility for development and commercialization of the licensed Fc product candidate. The Company is eligible to receive development, clinical, and sales milestones and royalties on net sales of approved products for the licensed Fc candidate. During the three months ended June 30, 2021, Novartis advanced the Fc candidate into investigational new drug (IND)-enabling studies and the Company recognized a milestone of $ 1.0 million. The Company recognized $ 40.1 million of revenue during the nine months ended September 30, 2021, as a result of the expiration of the research term under the Novartis Agreement. The Company also recognized $ 1.0 million of milestone revenue during the nine months ended September 30, 2021. No revenue was recognized during the three months ended September 30, 2021, or the three and nine months ended September 30, 2020. As of September 30, 2021, there is a receivable of $ 0.6 million related to cost-sharing of development activities for the third quarter of 2021 for the vibecotamab program. There is no deferred revenue as of September 30, 2021 as the research term to deliver additional Global Discovery Programs to Novartis under the arrangement has expired. Vir Biotechnology, Inc. In the third quarter of 2019, the Company entered into a Patent License Agreement (the Vir Agreement) with Vir Biotechnology, Inc. (Vir) pursuant to which the Company provided a non-exclusive license to its Xtend technology for up to two targets. In March 2020, the Company entered into a second Patent License Agreement (the Second Vir Agreement) with Vir pursuant to which the Company provided a non-exclusive license to its Xtend technology to extend the half-life of two novel antibodies Vir is investigating as potential treatments for patients with COVID-19. Under the terms of the Second Vir Agreement, Vir is responsible for all research, development, regulatory and commercial activities for the antibodies, and the Company is eligible to receive royalties on the net sales of approved products in the mid-single digit percentage range. In May 2021, the FDA granted emergency use authorization (EUA) to Vir’s COVID-19 antibody, sotrovimab (VIR-7831), for the treatment of mild-to-moderate COVID-19 in high-risk adults and patients. In February 2021, the Company entered into the Vir Amendment No. 1 to the Vir Agreement and the Vir Amendment No. 1 to the Second Vir Agreement (collectively, the Vir Amendments), in each case, pursuant to which the Company provided a non-exclusive license to additional Fc technology for the targets previously identified in the Vir Agreement and the Second Vir Agreement, respectively. If Vir incorporates additional Fc technologies in the identified targets, the Company is eligible to receive additional royalties on net sales of approved products from low to mid-single digit range. The Company determined that the Second Vir Agreement and the Vir Amendments were modifications of the original Vir Agreement, and that the transfer of the license occurred at inception of the Vir Agreement. The total consideration under the arrangement did not change with the Second Vir Agreement or the Amendments as the Company will potentially receive additional royalty revenue which is variable consideration and is not included in the transaction price. In June 2021, Vir announced its plan to initiate a Phase 2 study for VIR-3434 and subsequently completed dosing of the first patient in such study in July 2021. The Company recorded a $ 0.5 million contract asset in connection with this milestone event, and the payment was received in August 2021. 26 Table of Contents The Company recognized $ 6.3 million and $ 7.7 million of revenue for the three and nine months ended September 30, 2021, respectively. Total revenue recognized under the Vir Agreement and Second Vir Agreement includes $ 6.3 million and $ 7.2 million of royalty revenue for the three and nine months ended September 30, 2021 and $ 0.5 million and $ 0.3 million of milestone revenue for the nine months ended September 30, 2021 and September 30, 2020. There is a receivable of $ 6.3 million related to estimated royalty due under this agreement. There is no deferred revenue as of September 30, 2021 related to this agreement. Viridian Therapeutics, Inc. In December 2020, the Company entered into a Technology License Agreement (Viridian Agreement) with Viridian, pursuant to which the Company provided Viridian a non-exclusive license to its Xtend Fc technology and an exclusive license to apply its Xtend Fc technology to antibodies targeting IGF-1R. Viridian is responsible for all development and commercialization activities. The Company received an upfront payment of 322,407 shares of Viridian common stock valued at $ 6.0 million and is eligible to receive up to $ 55.0 million in milestones, which includes $ 10.0 million in development milestones, $ 20.0 million in regulatory milestones and $ 25.0 million in sales milestones. If commercialized, the Company is eligible to receive royalties on net sales in the mid-single digit percentage range. The Company recognized revenue of $ 6.0 million from the Viridian Agreement in 2020, which includes the upfront payment of 322,407 shares of Viridian common stock at their fair value at the date of the Viridian Agreement. At inception of the Viridian Agreement, these shares were recorded at their fair value and are adjusted to their fair value at the end of each reporting period. The Company reported unrealized loss in other income of $ 0.6 million for the three months ended September 30, 2021 related to the shares of Viridian common stock. The Company did no t recognize revenue for the three and nine months ended September 30, 2021, and there is no deferred revenue as of September 30, 2021 related to this agreement. Zenas BioPharma Limited In November 2020, the Company entered into a License Agreement (the Zenas Agreement) with Zenas, pursuant to which the Company granted Zenas exclusive, worldwide rights to develop and commercialize three preclinical-stage Fc-engineered drug candidates: XmAb6755, XPro9523 and XmAb10171. Under the Zenas Agreement, Zenas will be responsible for all further development and commercialization activities for the drug candidates. The Company received a 15 % equity interest in Zenas with a fair value of $ 16.1 million, and the Company is eligible to receive royalties on net sales of approved products in the mid-single digit to mid-teen percentage range. The total transaction price is $ 16.1 million, which includes the upfront payment of 15 % of the equity of Zenas at its fair value using the measurement alternative under ASC 321 as of the date of the Zenas Agreement. The Company recorded licensing revenue of $ 16.1 million for the Zenas Agreement for the three months ended December 31, 2020. The equity in Zenas is recorded at the fair value as of the date of the Zenas Agreement and is reviewed each reporting period for impairment or other evidence of change in value. The Company did no t record an impairment or change in the value of the Zenas equity at September 30, 2021. The Company did no t recognize any revenue related to the Zenas Agreement for the three and nine months ended September 30, 2021. There is no deferred revenue as of September 30, 2021 related to this agreement. 27 Table of Contents Revenue earned The revenues recorded for the three and nine months ended September 30, 2021 and 2020 were earned principally from the following licensees (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ ​ September 30, September 30, ​ ​ 2021 ​ 2020 2021 ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ Aimmune ​ $ — $ — ​ $ — ​ $ 9.6 Alexion ​ 5.8 ​ ​ 4.3 ​ ​ 16.4 ​ 11.5 Astellas ​ ​ — ​ ​ — ​ ​ — ​ ​ 0.9 Genentech ​ ​ — ​ ​ 0.9 ​ ​ 2.5 ​ ​ 2.3 Gilead ​ ​ — ​ ​ — ​ ​ — ​ ​ 13.5 Janssen ​ ​ 6.3 ​ ​ — ​ ​ 37.0 ​ ​ — MorphoSys ​ ​ 1.3 ​ ​ 25.2 ​ ​ 16.4 ​ ​ 37.7 Novartis ​ ​ — ​ — ​ ​ 41.1 ​ — Omeros ​ ​ — ​ ​ 5.0 ​ ​ — ​ ​ 5.0 Vir ​ ​ 6.3 ​ — ​ ​ 7.7 ​ 0.3 Total ​ $ 19.7 ​ $ 35.4 ​ $ 121.1 ​ $ 80.8 ​ The table below summarizes the disaggregation of revenue recorded for the three and nine months ended September 30, 2021 and 2020 (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Three Months Ended Nine Months Ended ​ ​ September 30, September 30, ​ ​ 2021 ​ 2020 2021 ​ 2020 ​ ​ ​ ​ ​ ​ ​ ​ ​ Research collaboration $ 6.3 $ 0.9 ​ $ 79.7 $ 3.2 Milestone ​ ​ — ​ 25.0 ​ ​ 14.0 ​ 37.8 Licensing ​ ​ — ​ 5.0 ​ ​ — ​ 28.1 Royalties ​ ​ 13.4 ​ ​ 4.5 ​ ​ 27.4 ​ ​ 11.7 Total ​ $ 19.7 ​ $ 35.4 ​ $ 121.1 ​ $ 80.8 ​ Remaining Performance Obligations and Deferred Revenue The Company’s remaining performance obligation as of September 30, 2021 is conducting research activities pursuant to research plans under the Janssen Agreement. The Company completed its performance obligations for research activities pursuant to the Astellas Agreement in the second quarter of 2020. The Company’s obligation to perform research services for Genentech and to deliver additional Global Discovery Programs under the Novartis Agreement ended upon expiration of the respective research terms for each agreement in the second quarter of 2021. As of September 30, 2021 and 2020, the Company has deferred revenue of $ 13.0 million and $ 43.8 million, respectively. All deferred revenue as of September 30, 2021 is classified as current liabilities as the Company’s obligations to perform services are due on demand when requested by Janssen under the Janssen Agreement. ​ 28 Table of Contents 10. Income taxes ​ There was no provision for income taxes for the three and nine months ended September 30, 2021 or 2020. For the three and nine months ended September 30, 2021, taxable income was reduced by temporary differences in revenue recognition and from unrealized gains in equity securities. As of September 30, 2021, the Company’s deferred income tax assets, consisting primarily of net operating loss and tax credit carryforwards, have been fully offset by a valuation allowance. 11. Subsequent Event ​ Janssen Agreement On October 1, 2021, the Company entered into a second Collaboration and License Agreement (the Second Janssen Agreement) with Janssen pursuant to which the Company granted Janssen an exclusive worldwide license to develop, manufacture, and commercialize plamotamab, the Company’s CD20 x CD3 development candidate, and pursuant to which Xencor and Janssen will conduct research and development activities to discover novel CD28 bispecific antibodies. The parties will conduct joint research activities for up to a two-year period to discover XmAb bispecific antibodies against CD28 and undisclosed B cell tumor-targets with Janssen receiving exclusive worldwide rights, subject to certain Xencor opt-in rights, to develop, manufacture and commercialize pharmaceutical products that contain one or more of such discovered antibodies (“CD28 Licensed Antibodies”). Under the terms of the Second Janssen Agreement, the Company will receive a $ 100.0 million upfront payment and Johnson & Johnson Innovation , JJDC, Inc. (“Johnson and Johnson”), will purchase $ 25.0 million of newly issued unregistered shares of the Company’s common stock, priced at a 30-day volume-weighted average price of $ 33.4197 per share as of October 1, 2021. The 748,062 shares of Company common stock to be issued to Johnson and Johnson will be subject to customary resale restrictions pursuant to Rule 144 of the Securities Act of 1933. In addition, the Company is eligible to receive milestone payments and royalties on net sales as follows: ● Plamotamab . The Company is eligible to receive up to a total of $ 517.5 million in milestone payments, which includes $ 120.0 million in development milestones, $ 137.5 million in regulatory milestones and $ 260.0 million in sales milestones, as well as tiered royalties in the mid-teen to low-twenties percent range on net sales of products containing plamotamab, including CD28/plamotamab combination products developed under the agreement. ● CD28 Licensed Antibodies. The Company is eligible to receive up to a total of $ 670.0 million in milestone payments, which includes an aggregate of $ 169.4 million in development milestones and $ 240.6 million in regulatory milestones. For any products containing CD28 Licensed Antibodies, but excluding CD28/plamotamab combination products, the Company is eligible to receive $ 260.0 million in sales milestones, as well as tiered royalties in the high-single digit to low-double digit range on net sales. The Company will collaborate with Janssen on further clinical development of plamotamab with Janssen paying 80 % and the Company paying 20 % of costs. The Company will continue, at its own expense, to conduct the previously announced clinical collaboration to evaluate the combination of plamotamab, tafasitamab, and lenalidomide in patients with B-cell lymphoma after which Janssen may opt into cost sharing to further develop the combination after establishing proof of concept. The Company is generally responsible for conducting research activities under the Second Janssen Agreement, and Janssen is generally responsible for all development, manufacturing, and commercialization activities for CD28 Licensed Antibodies that are advanced. Independent of plamotamab development activities, upon clinical proof-of-concept for a CD28 Licensed Antibody that is being developed outside of a plamotamab combination, the Company has the right to opt-in to fund 15 % of development costs and, if it opts-in to fund such development costs, to perform up to 30 % of the detailing efforts in the United States. The Company would then be eligible for low-double digit to mid-teen percent royalties on net sales of those products. 29 Table of Contents The Second Janssen Agreement contains customary closing conditions, including clearance under the Hart-Scott-Rodino Antitrust Improvements Act, and the Company expects the closing to occur in the fourth quarter of 2021 .