What changed in this filing

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Item 8. Financial Statements and Supplementary Data

2022-02-24 compared with 2021-02-24 · 431 added, 322 removed, 664 unchanged (53% of the section changed)

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Audited Financial Statements for the Years Ended December 31, 2021, 2020 and 2019:

Report of Independent Registered Public Accounting Firm

Report of Independent Registered Public Accounting Firm (PCAOB ID:

Balance Sheets

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Management’s identification of the performance obligations requires significant judgment, including whether the performance obligations are distinct and capable of being distinct, which requires management to evaluate whether the customer can benefit from the good or service on its own, or together with other resources readily available to the customer.

Management applies significant judgment in determining the revenue recognition for these collaboration and licensing contracts including the identification of and accounting for all performance obligations and the calculation of the standalone selling price (SSP) for each identified performance obligation.

Management applies significant judgment in determining the revenue recognition for these collaboration and licensing contracts including the identification of and accounting for all performance obligations and the calculation of the stand-alone selling price (SSP) for each identified performance obligation.

The Company’s estimate of SSP for each performance obligation within these customer contracts requires management to consider many factors, including

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● As each contract has multiple performance obligations, we also tested the allocation of the transaction price to each performance obligation based upon the SSP.

We have served as the Company’s auditor since 2015.

/s/ RSM US LLP

We have served as the Company’s auditor since 2015.

Los Angeles, California

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Cash and cash equivalents

Marketable securities

Equity securities

Marketable debt securities

Marketable equity securities

Accounts receivable

Income tax receivable

Contract asset

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Patents, licenses, and other intangible assets, net

Marketable securities - long term

Equity securities - long term

Income tax receivable

Marketable debt securities - long term

Marketable equity securities - long term

Notes receivable - long term

Right of use asset

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Lease liabilities, net of current portion

Deferred revenue, net of current portion

Total liabilities

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Interest income, net

Other income (expense)

Other income (expense), net

Gain on equity securities, net

Total other income, net

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Stockholders’ Equity

Income (Loss)

Balance, December 31, 2018

Sale of common stock, net of issuance cost

Issuance of common stock upon exercise of stock awards

Issuance of common stock under the Employee Stock Purchase Plan

Comprehensive loss

Issuance of restricted stock units

Comprehensive income

Stock-based compensation

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Issuance of restricted stock units

Comprehensive income

Comprehensive loss

Stock-based compensation

Balance, December 31, 2020

Sale of common stock

Issuance of common stock upon exercise of stock awards

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Issuance of restricted stock units

Comprehensive loss

Comprehensive income

Stock-based compensation

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Depreciation and amortization

Amortization of premium on marketable securities

Amortization of premium (accretion of discount) on marketable securities

Stock-based compensation

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Loss on disposal of assets

Loss (gain) on sale of marketable securities available-for-sale

Gain on sale of marketable securities available-for-sale

Equity received in connection with license agreement

Equity received in connection with sale of financial assets

Cash redemption of equity received in connection with license agreement

Change in fair value of equity security

Change in fair value of equity securities

Equity securities impairment

Changes in operating assets and liabilities:

Accounts receivable

Interest receivable

Interest receivable from marketable debt securities

Prepaid expenses and other current assets

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Deferred rent

Income tax payable

Lease liabilities and ROU assets

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Purchase of property and equipment

Proceeds from repayment of loan receivable

Purchase of convertible note

Exercise of stock options

Net cash provided by (used in) investing activities

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Proceeds from issuance of common stock

Common stock issuance costs

Net cash provided by financing activities

Net increase in cash and cash equivalents

Net (decrease) increase in cash and cash equivalents

Cash and cash equivalents , beginning of year

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(we, us, our, or the Company) was incorporated in California in 1997 and reincorporated in Delaware in September 2004.

We are a clinical-stage biopharmaceutical company focused on discovering and developing engineered monoclonal antibody and cytokine therapeutics to treat patients with cancer and autoimmune diseases who have unmet medical needs.

We are a clinical-stage biopharmaceutical company focused on discovering and developing engineered monoclonal bispecific antibody and cytokine therapeutics to treat patients with cancer and autoimmune diseases who have unmet medical needs.

We create our product candidates using our proprietary XmAb technology platforms, which focus on the portion of an antibody that interacts with multiple segments of the immune system, referred to as the Fc domain, which is constant and interchangeable among antibodies.

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Use of Estimates

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes.

Significant estimates include useful lives of long-lived assets, the periods over which certain revenues and expenses will be recognized including collaboration revenue recognized from non-refundable upfront licensing payments, the amount of non-cash compensation costs related to share-based payments to employees and non-employees and the period over which these costs are expensed.

The preparation of 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 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.

Recent Accounting Pronouncements

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Effective January 1, 2021, the Company adopted ASU No.

2016-13, Financial Instruments – Credit Losses (Topic 326):

Measurement of Credit Losses on Financial Instruments, as well as ASU No, 2018-19, Codification Improvements to Topic 326, Financial Instruments – Credit Losses.

The standard amends guidance on reporting credit losses for assets held at amortized cost basis and also provides an available-for-sale (AFS) debt security impairment model that is a modified version of the other-than-temporary-impairment (OTTI) model.

The AFS debt security impairment model no longer allows consideration of the length of time during which the fair value has been less than its amortized cost when determining whether a credit loss exists.

The adoption of this standard did not have any impact on the Company’s financial statements.

Effective January 1, 2020, the Company adopted ASU No.

2018-13, Fair Value Measurement (Topic 820):

Disclosure Framework – Changes to the Disclosure Requirements for Fair Value Measurement, which modifies the disclosures for transfers between Level 1 and Level 2 of the fair value hierarchy, modifies the Level 3 disclosure requirements for non-public entities and requires additional disclosure for Level 3 fair value hierarchy.

The adoption of this standard did not have any impact on the Company’s financial statements.

Effective January 1, 2020, the Company adopted ASU No.

2018-18, Collaborative Arrangements (Topic 808):

Clarifying the Interaction Between Topic 808 and Topic 606, which provides guidance on how to assess whether certain transactions between collaborative arrangement participants should be accounted for within the revenue recognition standard.

The adoption of this standard did not have any impact on the Company’s financial statements.

Pronouncements not yet effective

In December 2019, the FASB issued ASU No.

2019-12, Income Taxes (Topic 740):

Simplifying the Accounting for Income Taxes , which is effective for fiscal years beginning after December 15, 2020, and interim periods within those fiscal years.

The standard removes specific exceptions to the general principles in Topic 740 and simplifies the accounting for income taxes.

The Company does not anticipate that the standard will have a significant impact on its financial statements.

In January 2020, the FASB issued ASU No.

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 amendment is effective for fiscal years beginning after December 15, 2020.

The Company does not anticipate that the standard will have a significant impact on its financial statements.

In October 2020, the FASB issued ASU No.

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 amendment is effective for fiscal years beginning after December 15, 2020.

The Company is currently evaluating the amendment and does not anticipate that it will have an impact on its financial statements.

The adoption of this standard did not have a significant impact on the Company’s financial statements.

Pronouncements not yet effective

There are accounting standards that have been issued by the Financial Accounting Standards Board (FASB) but are not yet effective.

The standards are not expected to have a material impact on our results of operations, financial conditions, or cash flows.

Revenue Recognition

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The licensing agreements also include royalties on sales of any commercialized products by our partners.

We recognize revenue through the five-step process in accordance with ASC 606 Revenue Recognition when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

We recognize revenue through the five-step process in accordance with Accounting Standards Codification (ASC) 606, Revenue from Contracts with Customers , when control of the promised goods or services is transferred to our customers in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services.

Deferred Revenue

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The total amounts reported as deferred revenue were $ 37.3 million and $ 92.6 million at December 31, 2021 and 2020, respectively.

Accounts Receivable

Accounts receivable primarily consists of royalty and milestone revenues receivable from our license and collaboration agreements, as well as receivables arising from cost-sharing development activities.

We did not record allowance for doubtful accounts at December 31, 2021 or 2020, as we expect to collect all receivables within the terms, which are generally between 30 and 60 days .

Research and Development Expenses

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Research and development costs are expensed as incurred.

These costs consist primarily of salaries and benefits, including associated stock-based compensation, laboratory supplies, facility costs, and applicable overhead expenses of personnel directly involved in the research and development of new technology and products, as

well as fees paid to other entities that conduct certain research development activities on our behalf.

We estimate preclinical study and clinical trial expenses based on the services performed pursuant to the contracts with research institutions and clinical research organizations that conduct and manage preclinical studies and clinical trials on our behalf based on the actual time and expenses incurred by them.

Further, we accrue expenses related to clinical trials based on the level of patient enrollment and activity according to the related agreement.

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We consider cash equivalents to be only those investments which are highly liquid, readily convertible to cash and which mature within three months from the date of purchase.

Marketable and Equity Securities

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.

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If the Company sells an investment, any realized gains or losses on the sale of the securities will be recognized within other income (expense) in the Statement of Comprehensive Income (Loss) in the period of sale.

The Company also has an investment in an equity security without a readily determinable fair value, where 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.

The Company also has investments in equity securities without a readily determinable fair value, where the Company elects the measurement alternative to record at their 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.

Concentrations of Risk

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Amounts on deposit in excess of federally insured limits at December 31, 2021 and 2020 approximated $ 143.2 million and $ 163.3 million, respectively.

We have payables with one service provider that represent 49 % of our total payables and with two service providers that represented 48 % of our total payables at December 31, 2020 and 2019, respectively.

We rely on three critical suppliers for the manufacture of our drug product for use in our clinical trials.

While we believe that there are alternative vendors available, a change in manufacturing vendors could cause a delay in the availability of drug product and result in a delay of conducting and completing our clinical trials.

We have payables with four service providers that represent 64 % of our total payables and with one service provider that represented 49 % of our total payables at December 31, 2021 and 2020, respectively.

We rely on four critical suppliers for the manufacture of our drug product for use in our clinical trials.

While we believe that there are

alternative vendors available, a change in manufacturing vendors could cause a delay in the availability of drug product and result in a delay of conducting and completing our clinical trials.

No other vendor accounted for more than 10% of total payables at December 31, 2021 or 2020.

We have receivables with two service providers that represent 84 % and 88 % of our total receivables at December 31, 2021 and 2020, respectively.

The receivables are related to royalty revenues from our licensing and collaboration agreements.

No other customer accounted for more than 10% of total receivables at December 31, 2021 or 2020.

Fair Value of Financial Instruments

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Marketable debt securities and cash equivalents are carried at fair value.

The fair value of a financial instrument is the amount that would be received in an asset sale or paid to transfer a liability in an orderly transaction between unaffiliated market participants.

The fair value of the other financial instruments closely approximate their fair value due to their short maturities.

The Company accounts for recurring and non-recurring fair value measurements in accordance with FASB Accounting Standards Codification (ASC) 820, Fair Value Measurements and Disclosures (ASC 820).

The Company accounts for recurring and non-recurring fair value measurements in accordance with FASB ASC 820, Fair Value Measurements and Disclosures .

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.

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Government Securities

Equity Securities with Readily Determinable Fair Value

Equity Securities without Readily Determinable Fair Value

December 31, 2020

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Government Securities

The Company holds equity securities without readily determinable fair value as of December 31, 2020.

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.

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 years ended December 31, 2021 and 2020, there were no transfers between Level 1 and Level 2.

Property and Equipment

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We review our intellectual property on a regular basis to determine if there are changes in the estimated useful life of issued patents and if any capitalized costs for unissued patents should be abandoned.

Capitalized patent costs related to abandoned patent filings are charged off in the period of the decision to abandon.

Capitalized patent costs related to

abandoned patent filings are charged off in the period of the decision to abandon.

During 2021, 2020, and 2019, we abandoned previously capitalized patent and licensing related charges of $ 0.9 million, $ 0.5 million, and $ 0.2 million, respectively.

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We recorded stock-based compensation and expense for stock-based awards to employees, directors, and consultants of approximately $ 37.0 million, $ 31.6 million, and $ 31.9 million for the years ended December 31, 2021, 2020, and 2019, respectively.

Included in the 2020, 2019, and 2018 balances for total compensation expense is $ 0.8 million, $ 0.7 million and $ 0.7 million, respectively, relating to our ESPP.

Net Income (Loss) Per 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:

Basic net income (loss) per common share is computed by dividing the net income or loss by the weighted-average number of common shares outstanding during the period.

Potentially dilutive securities were included

in the diluted net income per common share calculation for 2019.

We included 1,923,310 options to purchase shares of common stock and 13,131 shares of RSUs in the calculation of the weighted-average common shares outstanding used in computing diluted net income per common share.

We excluded 1,022,623 shares of options and RSUs from the calculation for 2019 because the inclusion of such shares would have had an antidilutive effect.

In 2020 and 2018, we excluded all options and awards from the calculations because we reported net losses in the periods, and the inclusion of such shares would have had an antidilutive effect.

Potentially dilutive securities were included in the diluted net income per common share calculation for 2021 and 2019.

In 2020, we excluded all options and awards from the calculations because we reported net losses in the period, and the inclusion of such shares would have had an antidilutive effect.

Year Ended December 31,

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Weighted average number of common shares outstanding used in computing basic net income (loss) per common share

Dilutive effect of employee stock options and ESPP

Dilutive effect of employee stock options, RSUs, and ESPP

Weighted-average number of common shares outstanding used in computing diluted net income (loss) per common share

Diluted net income (loss) per common share

For the year ended December 31, 2021, we excluded 1,196,268 shares of options and RSUs from the calculation of diluted net income per common share because the inclusion of such shares would have had an anti-dilutive effect.

For the year ended December 31, 2020, all outstanding potentially dilutive securities were excluded from the calculation as the effect of including such securities would have been anti-dilutive.

For the year ended December 31, 2019, we excluded 1,022,623 shares of options and RSUs from the calculation because the inclusion of such shares would have had an anti-dilutive effect.

Segment Reporting

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Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss).

For the years ended December 31, 2020 and 2019, the only component of other comprehensive income (loss) is net unrealized gains on marketable debt securities.

For the years ended December 31, 2021, 2020, and 2019, the only component of other comprehensive income (loss) is net unrealized gain (loss) on marketable debt securities.

There were no material reclassifications out of accumulated other comprehensive loss during the year ended December 31, 2021.

Marketable Securities

Marketable Debt and Equity Securities

The Company’s marketable debt securities held as of December 31, 2021 and 2020 are summarized below:

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Mature in one year or less

Mature after one year through five years

Mature within two years

The unrealized losses on available-for-sale investments and their related fair values as of December 31, 2021 and 2020 are as follows:

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Corporate Securities

Government Securities

The unrealized losses from the listed securities are due to a change in the interest rate environment and not a change in the credit quality of the securities.

For the year ended December 31, 2020, the Company received shares of Aimmune common stock and MiRagen common stock in connection with the Aimmune and MiRagen Agreements (both as defined below).

Aimmune common stock was redeemed for cash within the same year;

MiRagen common stock is classified as equity securities with a readily determinable fair value at December 31, 2020.

For the year ended December 31, 2020, the Company also received equity of a private company in connection with a licensing agreement.

The Company elects measurement alternative to carry the investment 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.

There has not been any impairment or observable price changes related to this investment.

We did not hold any equity securities in our investment portfolio during the year ended December 31, 2019.

Net gains and losses during the year ended December 31, 2020 and 2019 consist of the following:

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 December 31, 2021 and 2020 are as follows:

December 31, 2021

December 31, 2020

Astria Common Stock

INmune Common Stock

Viridian Common Stock

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 year ended December 31, 2021, the Company recorded an impairment charge of $ 0.8 million related to the Astria preferred stock.

Equity securities without a readily determinable fair value and their carrying values (in thousands) as of December 31, 2021 and 2020 are as follows:

Carrying Value

December 31, 2021

December 31, 2020

Astria Preferred Stock

Zenas Preferred Stock

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 without 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 total 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.

The adjustment in the fair value of the Astria common stock has been recorded in unrealized gain (loss) on equity securities for the year ended December 31, 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.

The Company subsequently recorded impairment charges of $ 0.8 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 $ 15.0 million in proceeds and an additional 192,533 shares of INmune common stock in exchange for the option to acquire 10 % of INmune.

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 was recorded in gain (loss) on equity securities for the year ended December 31, 2021.

In December 2020, the Company received 322,407 shares of common stock of Viridian Therapeutics, Inc.

(Viridian) in connection with the Viridian Agreement (defined below).

In December 2021, the Company received an additional 394,737 shares of common stock of Viridian in connection with the Second Viridian Agreement (defined below).

The shares of Viridian common stock are classified as equity securities with a readily determinable fair value and the adjustment in the fair value of the shares of Viridian common stock was recorded in gain (loss) on equity securities for the year ended at December 31, 2021.

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.

In 2021, the Company received a warrant to receive equity from Zenas in connection with the Second Zenas Agreement (defined below).

During the year ended December 31, 2021, there have not been any impairment or observable price changes related to this investment.

Unrealized gains and losses recognized on equity securities (in thousands) during the year ended December 31, 2021 and 2020 consist of the following:

Year Ended December 31,

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net gains recognized on equity securities redeemed

Unrealized losses recognized on equity securities

Unrealized gain (losses) recognized on equity securities

Sale of Additional Common Stock

In March 2018, we completed the sale of 8,395,000 shares of commons stock which included shares we issued pursuant to our underwriters’ exercise of their over-allotment option pursuant to a follow-on financing.

We received net proceeds of $245.5 million, after underwriters’ discounts and offering expenses.

Under the terms of the Stock Purchase Agreement (defined below), Johnson & Johnson Innovation, JJDC, Inc.

(JJDC), purchased $ 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 Company issued 748,062 shares of common stock to JJDC on November 12, 2021.

The issued shares are subject to customary resale restrictions pursuant to Rule 144 of the Securities Act of 1933.

Property and Equipment

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Leasehold and tenant improvements

Total gross carrying amount

Less accumulated depreciation and amortization

Total property and equipment, net

Depreciation expense related to property and equipment in 2021, 2020, and 2019 was $ 6.3 million, $ 4.7 million, and $ 3.4 million, respectively.

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Stock-based compensation

Change in state rate

Net change in valuation allowance

Income tax provision (benefit)

Income tax provision

The tax effect of temporary differences that give rise to a significant portion of the deferred tax assets and liabilities at December 31, 2021 and 2020 is presented below (in thousands):

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Unrealized loss on securities

Capitalized lease assets

Accrued compensation

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The Company’s net deferred income tax asset is not more likely than not to be realized due to the lack of sufficient sources of future taxable income and cumulative losses that have resulted over the years.

During the year ended December 31, 2020, the valuation allowance increased by $ 28.6 million.

During the year ended December 31, 2021, the valuation allowance decreased by $ 12.4 million.

The Company’s tax years starting in 2017 through 2020 remain open to potential examination by the U.S.

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Our federal net operating loss carryforwards expire starting in 2026, state net operating loss carryforwards expire starting in 2035, and federal tax credit carryforwards began to expire in 2019.

A total of $ 0.03 million in federal tax credits expired in 2019, and an additional $ 0.3 million will expire over the next five years if not utilized.

A total of $ 0.5 million in federal tax credits will expire over the next four years if not utilized.

Utilization of our net operating loss and tax credit carryforwards are subject to a substantial annual limitation under Section 382 of the Code due to the fact that we have experienced ownership changes.

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As of December 31, 2021, the Company has awarded 1,124,487 RSUs to certain employees pursuant to the 2013 Plan.

Vesting of these awards will be in three equal annual installments and is contingent on continued employment terms.

Vesting of these awards will be annually over equal installments, either a two or three-year vesting period, and is contingent on continued employment terms.

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.

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We have reserved a total of 581,286 shares of common stock for issuance under the ESPP.

Unless otherwise determined by our Board, beginning on January 1, 2014, and continuing until the expiration of the ESPP, the total number 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.

immediately preceding year, or (ii) 621,814 shares of common stock.

On January 1, 2014, the total number of shares of common stock available for issuance under the ESPP was automatically increased by 313,545 shares, which is included in the number of shares reserved for issuance above.

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The expected stock price volatility for our stock options for the years ended December 31, 2021, 2020, and 2019 was determined using a blended volatility by examining the historical volatility for industry peer companies and the volatility of our stock from the effective date that our shares were publicly traded on a national stock exchange.

For the year ended December 31, 2018, expected stock volatility was determined by examining the historical volatilities for industry peers and adjusting for differences in our life cycle and financing leverage.

Industry peers consist of several public companies in the biopharmaceutical industry.

We determined the average expected life of stock options based on the anticipated time period between the measurement date and the exercise date by examining the option holders’ past exercise patterns.

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The remaining unamortized compensation expense will be recognized over the next 1.95 years.

The Company leases office and laboratory space in Monrovia, CA under a lease that expired in June 2020.

In April 2020 and in September 2020, the Company entered into amendments to the lease to extend the term of the lease under the original terms through October 2020.

In November 2020, the Company entered into an amended lease for the space, which includes a 62-month term with an option to renew for an additional five years at then market rates.

In July 2017, the Company entered into an amended lease agreement 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 assesses that it is likely to exercise both options of the lease term extensions.

The Company also leased office space in San Diego, CA through July 2020 which included an option to renew for an additional five years .

The lease expired and the Company did not exercise its option to extend the lease.

The Company leases additional office space in San Diego, CA through August 2022, with an option to extend for an additional five years .

The Company assesses that it is unlikely to exercise the option to extend the lease term.

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.

In June 2021, the Company entered into an Agreement of Lease (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 year ended December 31, 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 $ 15,000.00 .

The Company received delivery of the premises on July 19, 2021.

For the year ended December 31, 2021, ROU assets obtained in exchange for new operating lease liabilities are $ 0.3 million.

The Company’s lease agreements do not contain any residual value guarantees or restrictive covenants.

As of December 31, 2020, the Company did not have additional operating leases that have not yet commenced.

The following table reconciles the undiscounted cash flows for the operating leases at December 31, 2021 to the operating lease liabilities recorded on the balance sheet (in thousands):

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Total undiscounted lease payments

Tenant allowance

Imputed interest

Present value of lease payments

Lease liabilities - short-term

Lease liabilities - long-term

Total lease liabilities

The following table summarizes lease costs and cash disclosures for the years ended December 31, 2020 and 2019 (in thousands):

The following table summarizes lease costs, cash, and other disclosures for the years ended December 31, 2021, 2020, and 2019 (in thousands):

Operating lease cost

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the measurement of lease liabilities

Rent expense for the year ended December 31, 2018 was $ 2.5 million.

The 2020 lease amendments to the Monrovia, CA lease are lease modifications.

Non-cash activities involving right of use assets related to the lease modification were $ 3.1 million.

At December 31, 2020 and 2019, the weighted-average remaining lease terms for operating leases were 7.4 years and 5.5 years, respectively, and the weighted average discount rates for operating leases were both 5.5 %.

Weighted-average remaining lease term

—operating leases (in years)

Weighted-average discount rate

—operating leases

Commitments and Contingencies

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The revenue reported for each agreement has been adjusted to reflect the adoption of ASC 606 for each period presented.

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 Xencor and Janssen will conduct research and development activities to discover novel CD28 bispecific antibodies for the treatment of prostate cancer.

Janssen and Xencor 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 include $ 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.

Pursuant to the Janssen Agreement, upon development of a bispecific candidate by Janssen through proof of concept, we have the right to opt-in to fund 20 % of development costs and to perform 30 % of detailing efforts in the U.S.

If we exercise this right, we will be eligible to receive tiered royalties in the low-double digit to mid-teen percentage range.

We 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

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.

Janssen will benefit from delivery of the bispecific antibodies upon completion of the research activities.

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 candidate selection option payment is substantive and is a separate performance obligation.

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.

The Company will recognize the $ 50.0 million transaction price as it satisfies its performance obligation to deliver CD28 bispecific antibodies to Janssen.

The Company will recognize revenue related to the performance obligation over the expected period of time to complete and deliver the CD28 bispecific antibodies to Janssen using the expected input method which considers an estimate of the Company’s efforts to complete the research activities outlined in the Janssen Agreement.

No revenue was recognized under this arrangement for the year ended December 31, 2020, and there is $ 50.0 million in deferred revenue as of December 31, 2020 related to our obligation to complete research activities and deliver CD28 bispecific antibodies under the Janssen Agreement.

Aimmune Therapeutics, Inc.

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The Company determined that the transaction price is to be allocated to the performance obligations.

The Aimmune Agreement includes variable consideration for potential future milestones and royalties that are contingent on future success factors for the XmAb7195 program.

The Aimmune Agreement includes variable consideration for potential future milestones and royalties that are contingent on future

success factors for the XmAb7195 program.

The Company used the “most likely amount” method to determine the variable consideration.

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The license to XmAb7195 was transferred to Aimmune at inception of the Aimmune Agreement, and the XmAb7195 data were transferred to Aimmune in March 2020.

No revenue was recognized for the year ended December 31, 2021;

the Company recognized $ 9.6 million of revenue related to the agreement for the year ended December 31, 2020.

There is no deferred revenue as of December 31, 2021 or 2020 related to this agreement.

Alexion Pharmaceuticals, Inc.

In January 2013, the Company entered into an option and license agreement with Alexion Pharmaceuticals, Inc.

Under the terms of the agreement, the Company granted to Alexion an exclusive research license, with limited sublicensing rights, to make and use our Xtend technology.

Alexion exercised its rights to include our technology in ALXN1210, which is now marketed as Ultomiris.

The Company is eligible to receive contractual milestones for certain commercial achievements, and the Company is also entitled to receive royalties based on a percentage of net sales of such products sold by Alexion, its affiliates, or its sub licensees, 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.

In 2019, Alexion completed certain regulatory submissions for Ultomiris, and the Company received a total of $ 8.0 million in milestone payments.

During 2019, the Company also recorded royalty revenue of $ 5.0 million in connection with reported net sales of Ultomiris by Alexion.

In 2020, the Company received $ 10.0 million for the achievement of certain sales milestones of Ultomiris in 2020 and also recorded royalty revenue of $ 16.2 million on net sales.

In 2021, the Company recorded royalty revenue of $ 22.2 million on net sales.

The total revenue recognized under this arrangement was $ 22.2 million, $ 26.2 million, and $ 13.0 million for the years ended December 31, 2021, 2020, and 2019, respectively.

As of December 31, 2021, there is a receivable of $ 10.8 million, and there is no deferred revenue related to this agreement.

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.

The Company also agreed to apply its bispecific technology to five previously identified Amgen provided targets (each a Discovery Program).

Amgen has advanced one of the discovery programs into clinical development.

The Company is eligible to receive up to $ 255.0 million in future development, regulatory and sales milestones in total for the program and is eligible to receive royalties on any global net sales of products.

In the third quarter of 2019, a $ 5.0 million milestone was recognized in connection with a development milestone for a Discovery Program.

During the year ended December 31, 2019, the Company recognized $ 5.0 million in revenue under this arrangement.

No revenue was recognized for the year ended December 31, 2021, or 2020.

As of December 31, 2021, there was no deferred revenue related to the arrangement.

Astellas Pharma Inc.

Effective March 29, 2019, the Company entered into a Research and License Agreement (Astellas Agreement) with Astellas Pharma Inc.

(Astellas) pursuant to which the Company and Astellas conducted a discovery program to characterize compounds and products for development and commercialization.

Under the Astellas Agreement, Astellas was granted a worldwide exclusive license, with the right to sublicense products in the field created by the research activities.

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.

Astellas will assume full responsibility for development and commercialization of the antibody candidate.

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.

If commercialized, the Company is eligible to receive royalties on net sales that range from the high-single to low-double digit percentages.

Astellas has advanced an antibody that was delivered into development, and we received a milestone related to the candidate in 2020.

The Company recognized the $ 13.6 million of revenue in 2019 and recognized $ 2.5 million related to the milestone in 2020.

The $ 1.4 million allocated to the research activities was recognized as the research services were completed.

No revenue was recognized for the year ended December 31, 2021.

We recognized $ 3.5 million and $ 14.0 million of revenue under this arrangement for the years ended December 31, 2020 and 2019, respectively.

There is no deferred revenue as of December 31, 2021.

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 $ 0.8 million for its investment in Astria preferred stock for the year ended December 31, 2021.

The Company recognized unrealized gain of $ 4.5 million related to its equity interest in Astria for the year ended December 31, 2021.

There is no deferred revenue as of December 31, 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 year ended December 31, 2021.

There is no deferred revenue as of December 31, 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.

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Genentech and Xencor will jointly collaborate on worldwide development of XmAb306 and potentially other Collaboration Products.

The two-year research term expired in March 2021.

The Company received a $ 120.0 million upfront payment and is eligible to receive up to an aggregate of $ 160.0 million in clinical milestone payments for XmAb306 and up to $ 180.0 million in clinical milestone payments for each new Collaboration Product.

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Pursuant to the Genentech Agreement, XmAb306 is designated as a development program and all costs incurred for developing both XmAb306 is being shared with Genentech under the initial cost-sharing percentage.

Under the Genentech Agreement, the Company and Genentech will conduct 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 may be extended an additional year if both parties agree.

The Company and Genentech are each responsible for their own costs in conducting the research activities.

The Company is eligible for clinical milestone payments for new Collaboration Products identified from the research efforts.

The Company evaluated the Genentech Agreement under the provisions of ASU No.

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The Company identified the following performance obligations under the Genentech Agreement:

(i) the license of XmAb306 and (ii) research services during a two-year period to identify up to potentially nine additional IL-15 candidates, each a separate research program and a separate performance obligation.

The Company determined that the license and each of the potential research programs are separate performance obligations because they are capable of being distinct and are distinct in the context of the Genentech Agreement.

(i) the license of XmAb306 and (ii) research services during a two-year period, which expired in March 2021, to identify additional IL-15 candidates, each a separate research program and a separate performance obligation.

The Company determined that the license and each of the potential research programs are separate performance obligations because they were capable of being distinct in the context of the Genentech Agreement.

The license to XmAb306 has standalone functionality as Genentech has exclusive worldwide rights to the program, including the right to sublicense to third parties.

Upon the transfer of the license of XmAb306, Genentech could develop and commercialize XmAb306 without further assistance from the Company.

The Company determined that the research services for each potential additional IL-15 candidate and research program were separate standalone performance obligations.

The Genentech Agreement provides an outline of an integrated research plan for the programs to be conducted by the two companies, and the research activities are separate and distinct from the license to XmAb306.

In October 2020, an additional program was declared a Collaboration Program under the Agreement, and the Company completed its performance obligation for that specific research program as the program and licensed rights were transferred to Genentech.

The Company determined that the research services for a potential additional IL-15 candidate and research program were separate standalone performance obligations.

The Genentech Agreement provided an outline of an integrated research plan for the programs to be conducted by the two companies, and the research activities were separate and distinct from the license to XmAb306.

In October 2020, an additional program was declared a Collaboration Program under the Agreement, and the Company completed its performance obligation for that specific

research program as the program and licensed rights were transferred to Genentech.

The Company determined the standalone selling price of the license to be $ 114.4 million using the adjusted market assessment approach considering similar collaboration and license agreements and transactions.

The standalone selling price for the research activities for all nine of the potential IL-15 programs to be performed during the research term was determined to be $ 8.5 million using the expected cost approach which was derived from the Company’s experience and information from providing similar research activities to other parties.

The Company determined that the transaction price of the Genentech Agreement at inception was $ 120.0 million consisting of the upfront payment.

The standalone selling price for the research activities to be performed during the research term was determined to be $ 8.5 million using the expected cost approach which was derived from the Company’s experience and information from providing similar research activities to other parties.

The Company determined that the transaction price of the Genentech Agreement at inception was $ 120.0 million consisting of the upfront payment, and allocated the transaction price to each of the separate performance obligations using the relative standalone selling price with $ 111.7 million allocated to the license to XmAb306, $ 4.1 million allocated to the additional program and $ 4.2 million allocated to the research services.

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, and the $ 8.3 million allocated to the research activities was recognized over a period of time through the end of the research term or the time that a program is delivered to Genentech.

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.

A total of $ 2.5 million, $ 3.5 million, and $ 2.2 million of revenue related to the research activities was recognized for the years ended December 31, 2021, 2020, and 2019, respectively.

For the years ended December 31, 2021, 2020, and 2019, we recognized $ 2.5 million, $ 3.5 million, and $ 113.9 million of income, respectively from the Genentech Agreement.

As of December 31, 2021, there is a $ 2.2 million payable related to cost-sharing development activities during the fourth quarter of 2021.

There is no deferred revenue as of December 31, 2021.

Gilead Sciences, Inc.

In January 2020, the Company entered into a Technology License Agreement (the Gilead Agreement) with Gilead Sciences, Inc.

(Gilead), in which the Company provided Gilead 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.

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 include $ 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.

In the second quarter of 2020, Gilead exercised options on three additional antibody compounds, and in April 2020, we received a total of $ 7.5 million in payment of the three options.

The total transaction price is $ 13.5 million which includes the upfront payment of $ 6.0 million and the option fee payment of $ 7.5 million which was contractually due with the exercise of the three options by Gilead.

The milestone payments are variable consideration to which the Company applied the “most likely amount” method and concluded at inception of the Gilead Agreement it is unlikely that the Company will collect such payments.

The milestone payments were not included in the transaction price, and the Company will review this conclusion and update at each reporting period.

No revenue was recognized for the year ended December 31, 2021.

The Company recognized $ 13.5 million of revenue related to the Gilead Agreement for the year ended December 31, 2020.

There is no deferred revenue as of December 31, 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 .

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 year ended December 31, 2021, the Company recorded $ 15.1 million of unrealized gain and $ 18.3 million of realized gain related to its investment in INmune.

No revenue was recognized for the year ended December 31, 2021, 2020, or 2019.

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 December 31, 2021 or 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.

Janssen Agreement