Xencor Inc 10-K

Item 8. Financial Statements and Supplementary Dat a Xencor, Inc. Financial Statements Audited Financial Statements for the Years Ended December 31, 2021, 2020 and 2019: ​ Report of Independent Registered Public Accounting Firm (PCAOB ID: 49 ) ​ 76 Balance Sheets ​ 79 Statements of Comprehensive Income (Loss) ​ 80 Statements of Stockholders’ Equity ​ 81 Statements of Cash Flows ​ 82 Notes to Financial Statements ​ 83 ​ ​ 75 Table of Contents Report of Independent Registered Public Accounting Firm ​ ​ To the Stockholders and the Board of Directors of Xencor, Inc. Opinion on the Financial Statements We have audited the accompanying balance sheets of Xencor, Inc. (the Company) as of December 31, 2021 and 2020, the related statements of comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, and the related notes to the financial statements. In our opinion, the financial statements present fairly, in all material respects, the financial position of the Company as of December 31, 2021 and 2020, and the results of its operations and its cash flows for each of the three years in the period ended December 31, 2021, in conformity with accounting principles generally accepted in the United States of America. ​ We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the Company’s internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013, and our report, dated February 24, 2022, expressed an unqualified opinion on the effectiveness of the Company’s internal control over financial reporting. ​ Basis for Opinion These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on the Company’s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion. ​ Critical Audit Matter The critical audit matter communicated below is a matter arising from the current-period audit of the financial statements that was communicated or required to be communicated to the Audit Committee and that: (1) relates to accounts or disclosures that are material to the financial statements; and (2) involved our especially challenging, subjective or complex judgments. The communication of the critical audit matter does not alter in any way our opinion on the financial statements taken as a whole, and we are not, by communicating the critical audit matter below, providing a separate opinion on the critical audit matter or on the accounts or disclosures to which it relates. ​ Revenue Recognition—Collaboration and Licensing Agreements As discussed in Note 10 to the financial statements, the Company entered into collaboration and licensing agreements during the year ended December 31, 2021. These contracts contain multiple performance obligations. 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 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 76 Table of Contents external market data as well as an estimate of future profitability. For each performance obligation identified, the Company recognizes revenue upon transfer of control of promised intellectual property and technology licenses or upon delivery of research and development services to its collaboration and licensing partners in an amount that reflects the consideration the Company expects to receive in exchange for those licenses or services. ​ We identified the Company’s revenue recognition related to the collaboration and licensing agreements as a critical audit matter because auditing the identification and accounting for performance obligations, and the calculation of the SSP for each performance obligation, required significant audit effort and a high degree of auditor judgment and subjectivity to perform our audit procedures and evaluate the audit evidence obtained. ​ Our audit procedures related to the Company’s collaboration and licensing contracts included the following, among others: ​ ● We obtained and read the collaboration and licensing agreements and evaluated the completeness of the performance obligations identified by management, and performed an evaluation of whether these performance obligations were distinct and capable of being distinct. ​ ● We obtained an understanding of the relevant controls related to the collaboration and licensing contracts and tested such controls for design, implementation and operating effectiveness, including management review controls related to identifying distinct performance obligations and when transfer of control is satisfied, and determining the SSP over each of the identified performance obligations. ​ ● We tested management’s process used to estimate the SSP by evaluating the models, including testing the accuracy and completeness of data used, and reasonableness of assumptions applied by management. ​ ● As each contract has multiple performance obligations, we also tested the allocation of the transaction price to each performance obligation based upon the SSP. ​ ​ /s/ RSM US LLP We have served as the Company’s auditor since 2015. ​ Los Angeles, California February 24, 2022 ​ 77 Table of Contents Report of Independent Registered Public Accounting Firm To the Stockholders and the Board of Directors of Xencor, Inc. Opinion on Internal Control Over Financial Reporting We have audited Xencor, Inc.’s (the Company) internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. In our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2021, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission in 2013. ​ We have also audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the balance sheets of the Company as of December 31, 2021 and 2020, the related statements of comprehensive income (loss), stockholders’ equity and cash flows for each of the three years in the period ended December 31, 2021, of the Company and our report, dated February 24, 2022, expressed an unqualified opinion. ​ Basis for Opinion The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express an opinion on the Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB. ​ We conducted our audit in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects. Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, and testing and evaluating the design and operating effectiveness of internal control based on the assessed risk. Our audit also included performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion. ​ Definition and Limitations of Internal Control Over Financial Reporting A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with U.S. GAAP, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of the company’s assets that could have a material effect on the financial statements. ​ Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. ​ /s/ RSM US LLP Los Angeles, California February 24, 2022 78 Table of Contents Xencor, Inc. Balance Sheet s (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 ​ ​ ​ ​ ​ ​ ​ Assets ​ ​ ​ Current assets ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ $ 143,480 ​ $ 163,544 ​ Marketable debt securities ​ ​ 153,767 ​ 434,156 ​ Marketable equity securities ​ ​ 36,860 ​ ​ 5,303 ​ Accounts receivable ​ ​ 66,384 ​ 11,443 ​ Contract asset ​ ​ — ​ ​ 12,500 ​ Prepaid expenses and other current assets ​ ​ 23,877 ​ 10,726 ​ Total current assets ​ ​ 424,368 ​ 637,672 ​ Property and equipment, net ​ ​ 28,240 ​ 21,682 ​ Patents, licenses, and other intangible assets, net ​ ​ 16,493 ​ 15,977 ​ Marketable debt securities - long term ​ ​ 300,465 ​ 1,030 ​ Marketable equity securities - long term ​ ​ 31,262 ​ ​ 16,071 ​ Notes receivable - long term ​ ​ 5,000 ​ ​ — ​ Right of use asset ​ ​ 31,730 ​ ​ 10,600 ​ Other assets ​ ​ 653 ​ 212 ​ Total assets ​ $ 838,211 ​ $ 703,244 ​ Liabilities and stockholders’ equity ​ ​ ​ ​ ​ ​ ​ Current liabilities ​ ​ ​ ​ ​ ​ ​ Accounts payable ​ $ 14,001 ​ $ 8,954 ​ Accrued expenses ​ ​ 19,443 ​ 17,603 ​ Lease liabilities ​ ​ — ​ ​ 1,889 ​ Deferred revenue ​ ​ 37,294 ​ ​ 92,615 ​ Total current liabilities ​ ​ 70,738 ​ 121,061 ​ Lease liabilities, net of current portion ​ ​ 33,969 ​ 9,739 ​ Total liabilities ​ ​ 104,707 ​ 130,800 ​ Commitments and contingencies (see note 9) ​ ​ ​ ​ ​ ​ ​ Stockholders’ equity ​ ​ ​ ​ ​ ​ ​ Preferred stock, $ 0.01 par value: 10,000,000 authorized shares; -0- issued and outstanding shares at December 31, 2021 and 2020 ​ ​ — ​ ​ — ​ Common stock, $ 0.01 par value: 200,000,000 authorized shares; 59,355,558 issued and outstanding shares at December 31, 2021 and 57,873,444 issued and outstanding at December 31, 2020 ​ ​ 595 ​ 580 ​ Additional paid-in capital ​ ​ 1,017,523 ​ 937,525 ​ Accumulated other comprehensive income ​ ​ ( 1,510 ) ​ 74 ​ Accumulated deficit ​ ( 283,104 ) ​ ( 365,735 ) ​ Total stockholders’ equity ​ ​ 733,504 ​ 572,444 ​ Total liabilities and stockholders’ equity ​ $ 838,211 ​ $ 703,244 ​ ​ See accompanying notes to the financial statements. ​ 79 Table of Contents Xencor, Inc. Statements of Comprehensive Income (Los s) (in thousands, except share and per share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ 2021 ​ 2020 ​ 2019 Revenue ​ ​ ​ ​ Collaborations, licenses, milestones, and royalties ​ $ 275,111 ​ $ 122,694 ​ $ 156,700 ​ Operating expenses ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Research and development ​ ​ 192,507 ​ ​ 169,802 ​ 118,590 ​ General and administrative ​ ​ 38,837 ​ ​ 29,689 ​ 24,286 ​ Total operating expenses ​ ​ 231,344 ​ 199,491 ​ 142,876 ​ Income (loss) from operations ​ 43,767 ​ ( 76,797 ) ​ 13,824 ​ Other income (expense) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest income, net ​ ​ 849 ​ ​ 7,264 ​ 13,619 ​ Other income (expense), net ​ ​ ( 1,274 ) ​ ​ 95 ​ ​ ( 256 ) ​ Gain on equity securities, net ​ ​ 39,289 ​ ​ 105 ​ — ​ Total other income, net ​ ​ 38,864 ​ 7,464 ​ 13,363 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Income (loss) before income tax ​ ​ 82,631 ​ ( 69,333 ) ​ 27,187 ​ Income tax expense ​ ​ — ​ ​ — ​ ​ 312 ​ Net income (loss) ​ ​ 82,631 ​ ​ ( 69,333 ) ​ ​ 26,875 ​ Other comprehensive income (loss) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net unrealized gain (loss) on marketable securities available-for-sale ​ ​ ( 1,584 ) ​ ​ ( 1,087 ) ​ ​ 2,132 ​ Comprehensive income (loss) ​ $ 81,047 ​ $ ( 70,420 ) ​ $ 29,007 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) per share attributable to common stockholders: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ $ 1.42 ​ $ ( 1.21 ) ​ $ 0.48 ​ Diluted ​ $ 1.37 ​ $ ( 1.21 ) ​ $ 0.46 ​ Weighted average shares used to compute net income (loss) per share attributable to common stockholders: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Basic ​ ​ 58,379,641 ​ 57,212,737 ​ 56,531,439 ​ Diluted ​ ​ 60,495,455 ​ 57,212,737 ​ 58,467,880 ​ ​ ​ ​ ​ See accompanying notes to the financial statements . ​ ​ 80 Table of Contents ​ Xencor, Inc. Statements of Stockholders’ Equity (in thousands, except share data) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accumulated ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Additional ​ Other ​ ​ ​ ​ Total ​ ​ Common Stock ​ Paid ​ Comprehensive ​ Accumulated ​ Stockholders’ Stockholders’ Equity ​ Shares ​ Amount ​ in-Capital ​ Income (Loss) ​ Deficit ​ Equity Balance, December 31, 2018 56,279,542 ​ $ 563 ​ $ 845,366 ​ $ ( 971 ) ​ $ ( 323,277 ) ​ $ 521,681 Issuance of common stock upon exercise of stock awards ​ 543,887 ​ ​ 5 ​ ​ 9,264 ​ ​ — ​ ​ — ​ ​ 9,269 Issuance of common stock under the Employee Stock Purchase Plan ​ 67,561 ​ ​ 1 ​ ​ 1,392 ​ ​ — ​ ​ — ​ ​ 1,393 Issuance of restricted stock units ​ 11,311 ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ — Comprehensive income ​ — ​ ​ — ​ ​ — ​ ​ 2,132 ​ ​ 26,875 ​ ​ 29,007 Stock-based compensation ​ — ​ ​ — ​ ​ 31,851 ​ ​ — ​ ​ — ​ ​ 31,851 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 ​ 858,470 ​ ​ 9 ​ ​ 16,608 ​ ​ — ​ ​ — ​ ​ 16,617 Issuance of common stock under the Employee Stock Purchase Plan ​ 50,318 ​ ​ 1 ​ ​ 1,426 ​ ​ — ​ ​ — ​ ​ 1,427 Issuance of restricted stock units ​ 62,355 ​ ​ 1 ​ ​ ( 1 ) ​ ​ — ​ ​ — ​ ​ — Comprehensive loss ​ — ​ ​ — ​ ​ — ​ ​ ( 1,087 ) ​ ​ ( 69,333 ) ​ ​ ( 70,420 ) Stock-based compensation ​ — ​ ​ — ​ ​ 31,619 ​ ​ — ​ ​ — ​ ​ 31,619 Balance, December 31, 2020 ​ 57,873,444 ​ ​ 580 ​ ​ 937,525 ​ ​ 74 ​ ​ ( 365,735 ) ​ ​ 572,444 Sale of common stock ​ 748,062 ​ ​ 7 ​ ​ 28,913 ​ ​ — ​ ​ — ​ ​ 28,920 Issuance of common stock upon exercise of stock awards ​ 520,240 ​ ​ 5 ​ ​ 12,276 ​ ​ — ​ ​ — ​ ​ 12,281 Issuance of common stock under the Employee Stock Purchase Plan ​ 62,257 ​ ​ 1 ​ ​ 1,836 ​ ​ — ​ ​ — ​ ​ 1,837 Issuance of restricted stock units ​ 151,555 ​ ​ 2 ​ ​ ( 2 ) ​ ​ — ​ ​ — ​ ​ — Comprehensive income ​ — ​ ​ — ​ ​ — ​ ​ ( 1,584 ) ​ ​ 82,631 ​ ​ 81,047 Stock-based compensation ​ — ​ ​ — ​ ​ 36,975 ​ ​ — ​ ​ — ​ ​ 36,975 Balance, December 31, 2021 ​ 59,355,558 ​ $ 595 ​ $ 1,017,523 ​ $ ( 1,510 ) ​ $ ( 283,104 ) ​ $ 733,504 ​ ​ ​ ​ ​ ​ ​ ​ See accompanying notes to the financial statements. ​ ​ 81 Table of Contents Xencor, Inc. Statements of Cash Flow s (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year ended December 31, ​ ​ ​ 2021 ​ 2020 ​ 2019 Cash flows from operating activities ​ ​ ​ ​ Net income (loss) ​ $ 82,631 ​ $ ( 69,333 ) ​ $ 26,875 ​ Adjustments to reconcile net income (loss) to net cash provided by (used in) operating activities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Depreciation and amortization ​ ​ 7,491 ​ 5,794 ​ 4,298 ​ Amortization of premium (accretion of discount) on marketable securities ​ ​ 3,160 ​ ​ ( 272 ) ​ ​ ( 4,321 ) ​ Stock-based compensation ​ ​ 36,975 ​ 31,619 ​ 31,851 ​ Abandonment of capitalized intangible assets ​ ​ 934 ​ 535 ​ 221 ​ Loss on disposal of assets ​ 462 ​ 4 ​ 8 ​ Gain on sale of marketable securities available-for-sale ​ ​ — ​ ​ ( 153 ) ​ ​ — ​ Equity received in connection with license agreement ​ ​ ( 22,379 ) ​ ​ ( 26,660 ) ​ ​ — ​ Equity received in connection with sale of financial assets ​ ​ ( 3,300 ) ​ ​ — ​ ​ — ​ Cash redemption of equity received in connection with license agreement ​ ​ — ​ ​ 5,390 ​ ​ — ​ Change in fair value of equity securities ​ ​ ( 20,988 ) ​ ​ ( 105 ) ​ ​ — ​ Equity securities impairment ​ ​ 762 ​ ​ — ​ ​ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Changes in operating assets and liabilities: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Accounts receivable ​ ​ ( 54,941 ) ​ 10,131 ​ ( 11,321 ) ​ Interest receivable from marketable debt securities ​ ​ 655 ​ ​ 1,190 ​ ​ ( 387 ) ​ Prepaid expenses and other current assets ​ ​ ( 13,151 ) ​ ( 4,170 ) ​ 3,828 ​ Income tax receivable ​ ​ — ​ ​ 895 ​ ​ 704 ​ Contract asset and deposits ​ ​ 12,059 ​ ​ ( 12,401 ) ​ ​ — ​ Accounts payable ​ ​ 5,047 ​ ( 1,235 ) ​ 6,392 ​ Accrued expenses ​ ​ 1,840 ​ 8,608 ​ ( 667 ) ​ Deferred rent ​ ​ — ​ ​ — ​ ​ ( 1,513 ) ​ Lease liabilities and ROU assets ​ ​ 1,211 ​ ​ ( 325 ) ​ ​ 1,354 ​ Deferred revenue ​ ​ ( 55,321 ) ​ 45,484 ​ 7,052 ​ Net cash provided by (used in) operating activities ​ ( 16,853 ) ​ ( 5,004 ) ​ 64,374 ​ Cash flows from investing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proceeds from sale and maturities of marketable securities available-for-sale ​ 485,152 ​ 757,617 ​ 456,923 ​ Proceeds from sale of property and equipment ​ ​ 19 ​ 1 ​ — ​ Purchase of marketable securities ​ ​ ( 509,597 ) ​ ​ ( 643,658 ) ​ ​ ( 496,855 ) ​ Purchase of intangible assets ​ ( 2,682 ) ​ ( 3,229 ) ​ ( 3,685 ) ​ Purchase of property and equipment ​ ​ ( 13,299 ) ​ ​ ( 10,539 ) ​ ​ ( 7,353 ) ​ Purchase of convertible note ​ ​ ( 5,000 ) ​ ​ — ​ ​ — ​ Exercise of stock options ​ ​ ( 842 ) ​ ​ — ​ ​ — ​ Net cash provided by (used in) investing activities ​ ( 46,249 ) ​ 100,192 ​ ( 50,970 ) ​ Cash flows from financing activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Proceeds from issuance of common stock upon exercise of stock awards ​ ​ 12,281 ​ 16,617 ​ 9,269 ​ Proceeds from issuance of common stock from Employee Stock Purchase Plan ​ ​ 1,837 ​ 1,427 ​ 1,393 ​ Proceeds from issuance of common stock ​ ​ 28,920 ​ — ​ — ​ Net cash provided by financing activities ​ ​ 43,038 ​ 18,044 ​ 10,662 ​ Net (decrease) increase in cash and cash equivalents ​ ​ ( 20,064 ) ​ 113,232 ​ 24,066 ​ Cash and cash equivalents , beginning of year ​ ​ 163,544 ​ 50,312 ​ 26,246 ​ Cash and cash equivalents , end of year ​ $ 143,480 ​ $ 163,544 ​ $ 50,312 ​ Supplemental disclosures of cash flow information ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash paid for: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Interest ​ $ 14 ​ $ 15 ​ $ 11 ​ Taxes ​ $ — ​ $ — ​ $ 400 ​ Supplemental Schedule of Noncash Investing Activities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net unrealized gain (loss) on marketable securities available-for-sale ​ $ ( 1,584 ) ​ $ ( 1,087 ) ​ $ 2,132 ​ ​ See accompanying notes to the financial statements. ​ 82 Table of Contents 1. Summary of Significant Accounting Policies Description of Business Xencor, Inc. (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 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. Our engineered Fc domains, the XmAb technology, can increase antibody immune inhibition, improve cytotoxicity, extend half-life and most recently are used to create bispecific antibodies and cytokines. Our operations are based in Monrovia, California and San Diego, California. Basis of Presentation The Company’s financial statements as of December 31, 2021, 2020, and 2019 and for the years then ended have been prepared in accordance with accounting principles generally accepted in the United States (U.S.). Use of Estimates 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 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. 83 Table of Contents 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 We have, to date, earned revenue from research and development collaborations, which may include research and development services, licenses of our internally developed technologies, licenses of our internally developed drug candidates, or combinations of these. The terms of our license, research and development, and collaboration agreements generally include non-refundable upfront payments, research funding, co-development payments and reimbursements, license fees, and milestone and other contingent payments to us for the achievement of defined collaboration objectives and certain clinical, regulatory and sales-based events, as well as royalties on sales of any commercialized products. The terms of our licensing agreements include non-refundable upfront fees, annual licensing fees, and contractual payment obligations for the achievement of pre-defined preclinical, clinical, regulatory and sales-based events by our partners. 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 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 Deferred revenue arises from payments received in advance of the culmination of the earnings process. We have classified deferred revenue for which we stand ready to perform within the next 12 months as a current liability. We recognize deferred revenue as revenue in future periods when the applicable revenue recognition criteria have been met. 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 Research and development expenses include costs we incur for our own and for our collaborators’ research and development activities. 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 and 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 they incurred. Further, we accrue expenses related to clinical trials based on the level of patient enrollment and activity according to the related agreement. We monitor patient enrollment levels and related activity to the extent reasonably possible and adjust estimates accordingly. 84 Table of Contents We capitalize acquired research and development technology licenses and third-party contract rights where such assets have an alternative use and amortize the costs over the shorter of the license term or the expected useful life. We review the license arrangements and the amortization period on a regular basis and adjust the carrying value or the amortization period of the licensed rights if there is evidence of a change in the carrying value or useful life of the asset. Cash and Cash Equivalents 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 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 and does not intend to sell these securities, and it is not more likely than not the Company will be required to sell the securities before recovery of the amortized cost basis. 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 years ended in December 31, 2021 and 2020, respectively. Accrued interest on marketable debt securities is included in marketable securities’ carrying value. Accrued interest was $ 0.8 million and $ 1.4 million at December 31, 2021 and 2020, respectively. 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 an equity security 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 remeasures 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 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 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 Cash, cash equivalents, and marketable debt securities are financial instruments that potentially subject the Company to concentrations of risk. We invest our cash in corporate debt securities and U.S. sponsored agencies with strong credit ratings. We have established guidelines relative to diversification and maturities that are designed to help ensure safety and liquidity. These guidelines are periodically reviewed to take advantage of trends in yields and interest rates. Cash and cash equivalents are maintained at financial institutions, and at times, balances may exceed federally insured limits. We have never experienced any losses related to these balances. 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 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 85 Table of Contents 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 Our financial instruments primarily consist of cash and cash equivalents, marketable debt securities, accounts receivable, accounts payable, and accrued expenses. 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 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. 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. 86 Table of Contents 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value ​ Level 1 ​ Level 2 ​ Level 3 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money Market Funds in Cash and Cash Equivalents ​ $ 123,892 ​ $ 123,892 ​ $ — ​ $ — Corporate Securities ​ ​ 144,418 ​ ​ — ​ ​ 144,418 ​ ​ — Government Securities ​ ​ 309,814 ​ ​ — ​ ​ 309,814 ​ ​ — ​ ​ $ 578,124 ​ $ 123,892 ​ $ 454,232 ​ $ — ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ Total ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value ​ Level 1 ​ Level 2 ​ Level 3 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money Market Funds in Cash and Cash Equivalents ​ $ 158,937 ​ $ 158,937 ​ $ — ​ $ — Corporate Securities ​ ​ 119,833 ​ ​ — ​ ​ 119,833 ​ ​ — Government Securities ​ ​ 315,353 ​ ​ — ​ ​ 315,353 ​ ​ — ​ ​ $ 594,123 ​ $ 158,937 ​ $ 435,186 ​ $ — ​ 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 Property and equipment are recorded at cost and depreciated using the straight-line method over the estimated useful lives of the assets. Expenditures for repairs and maintenance are charged to expense as incurred, while renewals and improvements are capitalized. Useful lives by asset category are as follows: ​ ​ ​ ​ ​ ​ ​ Computers, software and equipment 3 - 5 years ​ Furniture and fixtures 5 - 7 years ​ Leasehold improvements 5 - 7 years or remaining ​ ​ ​ lease term, whichever is less ​ ​ Patents, Licenses, and Other Intangible Assets The cost of acquiring licenses is capitalized and amortized on the straight-line basis over the shorter of the term of the license or its estimated economic life, ranging from 1 to 18 years . Third-party costs incurred for acquiring patents are capitalized. Capitalized costs are accumulated until the earlier of the period that a patent is issued, or we abandon the patent claims. Cumulative capitalized patent costs are amortized on a straight-line basis from the date of issuance over the shorter of the patent term or the estimated useful economic life of the patent, ranging from 3 to 27 years . Our senior management, with advice from outside patent counsel, assesses three primary criteria to determine if a patent will be capitalized initially: i) technical feasibility, ii) magnitude and scope of new technical function covered by the patent compared to the company’s existing technology and patent portfolio, particularly assessing the value added to our product candidates or licensing business, and iii) legal issues, primarily assessment of patentability and prosecution cost. 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 87 Table of Contents 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. The carrying amount and accumulated amortization of patents, licenses, and other intangibles is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 Patents, definite life $ 13,231 $ 12,038 ​ Patents, pending issuance ​ ​ 8,821 ​ 8,432 ​ Licenses and other amortizable intangible assets ​ ​ 2,474 ​ 2,560 ​ Nonamortizable intangible assets (trademarks) ​ ​ 399 ​ 399 ​ Total gross carrying amount ​ ​ 24,925 ​ 23,429 ​ Accumulated amortization—patents ​ ​ ( 6,800 ) ​ ( 5,791 ) ​ Accumulated amortization—licenses and other ​ ​ ( 1,632 ) ​ ( 1,661 ) ​ Total intangible assets, net ​ $ 16,493 ​ $ 15,977 ​ ​ Amortization expense for patents, licenses, and other intangible assets was $ 1.2 million, $ 1.1 million, and $ 0.9 million for the years ended December 31, 2021, 2020, and 2019, respectively. Future amortization expense for patent, licenses, and other intangible assets recorded as of December 31, 2021, and for which amortization has commenced, is as follows: ​ ​ ​ ​ ​ ​ ​ Year ended ​ ​ December 31, ​ ​ (in thousands) 2022 ​ $ 1,073 ​ 2023 ​ ​ 957 ​ 2024 ​ ​ 770 ​ 2025 ​ ​ 680 ​ 2026 ​ ​ 586 ​ Thereafter ​ ​ 3,207 ​ Total ​ $ 7,273 ​ ​ The above amortization expense forecast is an estimate. Actual amounts of amortization expense may differ from estimated amounts due to additional intangible asset acquisitions, impairment of intangible assets, accelerated amortization of intangible assets, and other events. As of December 31, 2021, the Company has $ 8.8 million of intangible assets which are in-process and have not been placed in service, and accordingly amortization on these assets has not commenced. Long-Lived Assets Management reviews long-lived assets which include fixed assets and amortizable intangibles for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset (or asset group) may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured as the amount by which the carrying amount of the assets exceeds the fair value of the assets. We did not recognize a loss from impairment for the years ended December 31, 2021, 2020, or 2019. 88 Table of Contents Income Taxes We account for income taxes in accordance with accounting guidance which requires an asset and liability approach to financial accounting and reporting for income taxes. Deferred income tax assets and liabilities are computed annually for differences between the financial statement and tax bases of assets and liabilities that will result in taxable or deductible amounts in the future based on enacted tax laws and rates applicable to the periods in which the differences are expected to affect taxable income. Valuation allowances are established when necessary to reduce deferred tax assets to the amount expected to be realized. Income tax expense is the tax payable or refundable for the period plus or minus the change during the period in deferred tax assets and liabilities. We assess our income tax positions and record tax benefits for all years subject to examination based upon our evaluation of the facts, circumstances, and information available at the reporting date. For those tax positions where there is greater than 50% likelihood that a tax benefit will be sustained, we have recorded the largest amount of tax benefit that may potentially be realized upon ultimate settlement with a taxing authority that has full knowledge of all relevant information. For those income tax positions where there is a 50% or less likelihood that a tax benefit will be sustained, no tax benefit has been recognized in the financial statements. We did not have any material uncertain tax positions at December 31, 2021 or 2020. Our policy is to recognize interest and penalties on taxes, if any, as a component of income tax expense. The Tax Cuts and Jobs Act of 2017 (TCJA) enacted on December 22, 2017 included several key provisions impacting the accounting for and reporting of income taxes. The most significant provisions reduced the U.S. corporate statutory tax rate from 35 % to 21 %, eliminated the corporate Alternative Minimum Tax (AMT) system, and made changes to the carryforward of net operating losses beginning on January 1, 2018. The tax reform provided for a refund of unused AMT carryforwards for years beginning after December 31, 2017. We received an income tax refund during the years ended December 31, 2020 and 2019 of $ 0.8 million each year related to our federal AMT carryforwards. Stock-Based Compensation We recognize compensation expense using a fair-value-based method for costs related to all share-based payments, including stock options, restricted stock units (RSUs), and shares issued under our Employee Stock Purchase Plan (ESPP). Stock-based compensation cost related to employees and directors is measured at the grant date, based on the fair-value-based measurement of the award using the Black-Scholes method, and is recognized as expense over the requisite service period on a straight-line basis. We account for forfeitures when they occur. 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. 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 2021 and 2019. 89 Table of Contents 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, ​ ​ 2021 ​ 2020 ​ 2019 ​ ​ (in thousands, except share and per share data) Basic ​ ​ ​ ​ Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) attributable to common stockholders for basic net income (loss) per share ​ $ 82,631 ​ $ ( 69,333 ) ​ $ 26,875 ​ Denominator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted-average common shares outstanding ​ ​ 58,379,641 ​ 57,212,737 ​ 56,531,439 ​ Basic net income (loss) per common share ​ $ 1.42 ​ $ ( 1.21 ) ​ $ 0.48 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Diluted ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Numerator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Net income (loss) attributable to common stockholders for diluted net income (loss) per share ​ $ 82,631 ​ $ ( 69,333 ) ​ $ 26,875 ​ Denominator: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted average number of common shares outstanding used in computing basic net income (loss) per common share ​ ​ 58,379,641 ​ 57,212,737 ​ 56,531,439 ​ Dilutive effect of employee stock options, RSUs, and ESPP ​ ​ 2,115,814 ​ — ​ 1,936,441 ​ Weighted-average number of common shares outstanding used in computing diluted net income (loss) per common share ​ ​ 60,495,455 ​ 57,212,737 ​ 58,467,880 ​ Diluted net income (loss) per common share ​ $ 1.37 ​ $ ( 1.21 ) ​ $ 0.46 ​ ​ 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 The Company determines its segment reporting based upon the way the business is organized for making operating decisions and assessing performance. The Company has only one operating segment related to the development of pharmaceutical products . 2. Comprehensive Income (Loss) Comprehensive income (loss) is comprised of net income (loss) and other comprehensive income (loss). 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. 90 Table of Contents 3. Marketable Debt and Equity Securities The Company’s marketable debt securities held as of December 31, 2021 and 2020 are summarized below: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ Amortized Unrealized ​ Unrealized ​ ​ ​ Cost ​ Gains ​ Losses ​ Fair Value (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Money Market Funds ​ $ 123,892 ​ $ — ​ $ — ​ $ 123,892 Corporate Securities ​ ​ 144,584 ​ ​ — ​ ​ ( 166 ) ​ ​ 144,418 Government Securities ​ ​ 311,148 ​ ​ 1 ​ ​ ( 1,335 ) ​ ​ 309,814 ​ ​ $ 579,624 ​ $ 1 ​ $ ( 1,501 ) ​ $ 578,124 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Reported as ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Cash and cash equivalents ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 123,892 Marketable securities ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ 454,232 Total investments ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ $ 578,124 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ ​ ​ ​ ​ Gross ​ Gross ​ ​ ​ ​ Amortized Unrealized ​ Unrealized ​ ​ ​ 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 ​ The maturities of the Company’s marketable debt securities as of December 31, 2021 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Amortized Estimated ​ ​ Cost ​ Fair Value (in thousands) ​ ​ ​ ​ ​ ​ Mature in one year or less ​ $ 153,871 ​ $ 153,767 Mature within two years ​ ​ 301,861 ​ ​ 300,465 ​ ​ $ 455,732 ​ $ 454,232 ​ 91 Table of Contents The unrealized losses on available-for-sale investments and their related fair values as of December 31, 2021 and 2020 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2021 ​ ​ Less than 12 months ​ 12 months or greater ​ ​ ​ Fair value ​ ​ Unrealized losses ​ ​ Fair value ​ ​ Unrealized losses (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporate Securities ​ $ 50,337 ​ $ ( 51 ) ​ $ 45,872 ​ $ ( 115 ) Government Securities ​ ​ 39,909 ​ ​ ( 54 ) ​ ​ 254,593 ​ ​ ( 1,281 ) ​ ​ $ 90,246 ​ $ ( 105 ) ​ $ 300,465 ​ $ ( 1,396 ) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, 2020 ​ ​ Less than 12 months ​ 12 months or greater ​ ​ ​ Fair value ​ ​ Unrealized losses ​ ​ Fair value ​ ​ Unrealized losses (in thousands) ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Corporate Securities ​ $ 15,843 ​ $ ( 6 ) ​ $ — ​ $ — Government Securities ​ ​ 40,802 ​ ​ ( 3 ) ​ ​ — ​ ​ — ​ ​ $ 56,645 ​ $ ( 9 ) ​ $ — ​ $ — ​ 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. 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: ​ ​ ​ ​ ​ ​ ​ ​ ​ Fair Value Fair Value ​ ​ December 31, 2021 ​ December 31, 2020 Astria Common Stock ​ $ 3,449 ​ $ — INmune Common Stock ​ ​ 19,233 ​ ​ — Viridian Common Stock ​ ​ 14,178 ​ ​ 5,303 ​ ​ $ 36,860 ​ $ 5,303 ​ 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: 92 Table of Contents ​ ​ ​ ​ ​ ​ ​ ​ ​ Carrying Value Carrying Value ​ ​ December 31, 2021 ​ December 31, 2020 Astria Preferred Stock ​ $ 312 ​ $ — Zenas Preferred Stock ​ ​ 30,950 ​ ​ 16,071 ​ ​ $ 31,262 ​ $ 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 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. (Astria). 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. 93 Table of Contents 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, ​ ​ 2021 ​ 2020 ​ ​ ​ Net gains recognized on equity securities ​ $ 39,289 ​ $ 105 Less: net gains recognized on equity securities redeemed ​ ​ 18,301 ​ 801 Unrealized gain (losses) recognized on equity securities ​ $ 20,988 ​ $ ( 696 ) ​ ​ 4. Sale of Additional Common Stock ​ 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. ​ 5. Property and Equipment Property and equipment consist of the following: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 ​ ​ (in thousands) Computers, software and equipment $ 41,955 $ 31,229 ​ Furniture and fixtures ​ ​ 539 ​ 527 ​ Leasehold and tenant improvements ​ ​ 8,574 ​ 6,957 ​ Total gross carrying amount ​ ​ 51,068 ​ 38,713 ​ Less accumulated depreciation and amortization ​ ( 22,828 ) ​ ( 17,031 ) ​ Total property and equipment, net ​ $ 28,240 ​ $ 21,682 ​ ​ Depreciation expense related to property and equipment in 2021, 2020, and 2019 was $ 6.3 million, $ 4.7 million, and $ 3.4 million, respectively. 6. Inc ome Taxes Our effective tax rate differs from the statutory federal income tax rate, primarily as a result of the changes in valuation allowance. There was no provision for taxes for the years ended December 31, 2021 and December 31, 2020. The provision for income taxes for the year ended December 31, 2019 was $ 0.3 million, which represents the current state alternative minimum tax for the year. 94 Table of Contents A reconciliation of the federal statutory income tax to our effective income tax is as follows (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2021 ​ 2020 ​ 2019 Federal statutory income tax $ 17,352 $ ( 14,559 ) $ 5,709 ​ State and local income taxes ​ ​ 783 ​ ​ ( 4,659 ) ​ 2,549 ​ Research and development credit ​ ( 10,492 ) ​ ( 9,669 ) ​ ( 6,747 ) ​ Stock-based compensation ​ ​ 2,424 ​ ​ 529 ​ ​ 1,927 ​ State credit ​ ​ — ​ ​ — ​ ​ 1,725 ​ Other ​ ​ 95 ​ ​ 56 ​ ( 301 ) ​ Change in state rate ​ ​ 2,599 ​ ​ — ​ ​ — ​ Net change in valuation allowance ​ ​ ( 12,761 ) ​ ​ 28,302 ​ ( 4,550 ) ​ Income tax provision ​ $ — ​ $ — ​ $ 312 ​ 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): ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 2020 ​ Deferred income tax assets ​ ​ ​ ​ ​ ​ ​ Net operating loss carryforwards ​ $ 46,629 ​ $ 56,182 ​ Research credits ​ ​ 48,128 ​ 38,047 ​ Unrealized loss on securities ​ ​ 327 ​ 195 ​ Capitalized lease assets ​ ​ 489 ​ ​ 288 ​ Accrued compensation ​ ​ 9,207 ​ 8,464 ​ Deferred revenue ​ ​ — ​ 11,925 ​ Gross deferred income tax assets ​ ​ 104,780 ​ 115,101 ​ Valuation allowance ​ ( 93,580 ) ​ ( 105,995 ) ​ Net deferred income tax assets ​ ​ 11,200 ​ 9,106 ​ Deferred income tax liabilities ​ ​ ​ ​ ​ ​ ​ Patent costs ​ ( 3,416 ) ​ ( 4,219 ) ​ Equity investment ​ ​ ( 3,508 ) ​ ​ ( 4,497 ) ​ Licensing costs ​ ( 151 ) ​ ( 194 ) ​ Capitalized legal costs ​ ( 13 ) ​ ( 21 ) ​ Depreciation ​ ​ ( 288 ) ​ ​ ( 151 ) ​ Unrealized gain on securities ​ ​ ( 3,824 ) ​ ​ ( 24 ) ​ Gross deferred income tax liabilities ​ ( 11,200 ) ​ ( 9,106 ) ​ Net deferred income tax asset ​ $ — ​ $ — ​ The Tax Cuts and Jobs Act of 2017 (TCJA) was enacted in December 2017 and made substantial changes in the U.S. tax system. One of the changes was elimination of the AMT tax system for corporations and allowance of an income tax refund for AMT tax credit carryforwards as of December 31, 2017. We have received an income tax refund of $ 0.8 million and $ 0.8 million for each year ended December 31, 2020 and 2019 for U.S. AMT credit carryforwards. We have net deferred tax assets relating primarily to net operating loss carryforwards and research and development tax credit carryforwards. Due to the uncertainty surrounding the realization of the benefits of our deferred tax assets in future tax periods, we have placed a valuation allowance against our deferred tax assets at December 31, 2021 and 2020. The Company recognizes valuation allowances to reduce deferred tax assets to the amount that is more likely than not to be realized. 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, 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. and state taxing authorities due to carryforwards of net operating losses. 95 Table of Contents As of December 31, 2021, we had cumulative net operating loss carryforwards for federal and state income tax purposes of $ 168.2 million and $ 161.6 million, respectively, and available tax credit carryforwards of approximately $ 34.0 million for federal income tax purposes and $ 17.8 million for state income tax purposes, which can be carried forward to offset future taxable income, if any. The federal net operating loss carryforwards consist of $ 63.9 million of losses incurred prior to January 1, 2018, which are subject to carryforward limitations and $ 104.3 million of losses incurred after January 1, 2018, which may be carried forward indefinitely. 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 $ 0.5 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. As a result of these changes, certain of our net operating loss and tax credit carryforwards may expire before we can use them. 7. Stock-Based Compensation Our Board of Directors and the requisite stockholders previously approved the 2010 Equity Incentive Plan (the 2010 Plan). In October 2013, our Board of Directors approved the 2013 Equity Incentive Plan (the 2013 Plan), and in November 2013, our stockholders approved the 2013 Plan. The 2013 Plan provides for the grant of incentive stock options, nonstatutory stock options, stock appreciation rights, restricted stock awards, restricted stock unit awards, performance stock awards, performance cash awards, and other stock awards. The 2013 Plan became effective as of December 2, 2013, the date of the pricing of the Company’s initial public offering. 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 December 31, 2021, the total number of shares of common stock available for issuance under the 2013 Plan was 13,122,238 . 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 by 4 % of the total number of issued and outstanding shares of common stock as of December 31 of the immediately preceding year. On January 1, 2021, the total number of shares of common stock available for issuance under the 2013 Plan was increased by 2,314,937 shares, which is included in the number of shares available for issuance above. As of December 31, 2021, a total of 12,400,073 options have been granted under the 2013 Plan. 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 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. In November 2013, our Board of Directors and stockholders approved the 2013 Employee Stock Purchase Plan (ESPP), which became effective as of December 5, 2013. Under the ESPP our employees may elect to have between 1 - 15 % of their compensation withheld to purchase shares of the Company’s common stock at a discount. The ESPP had an initial two-year term that includes four six-month purchase periods, and employee withholding amounts may be used to purchase Company stock during each six-month purchase period. The initial two-year term ended in December 2015 and pursuant to the provisions of the ESPP, the second two-year term began automatically upon the end of the initial term. The total number of shares that can be purchased with the withholding amounts are based on the lower of 85 % of the Company’s common stock price at the initial offering date or 85 % of the Company’s stock price at each purchase date. 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 96 Table of Contents 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. Pursuant to approval by our board, there were no increases in the number of authorized shares in the ESPP in years from 2015 to 2021. As of December 31, 2021, we have issued a total of 529,852 shares of common stock under the ESPP. Total employee, director and non-employee stock-based compensation expense recognized was as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, (in thousands) ​ 2021 ​ 2020 ​ 2019 General and administrative $ 12,813 $ 10,769 $ 8,854 ​ Research and development ​ ​ 24,162 ​ ​ 20,850 ​ 22,997 ​ ​ ​ $ 36,975 ​ $ 31,619 ​ $ 31,851 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ ​ December 31, ​ (in thousands) ​ 2021 ​ 2020 ​ 2019 ​ Stock options $ 27,909 $ 26,045 $ 30,502 ​ ESPP ​ ​ 992 ​ 804 ​ 687 ​ RSUs ​ ​ 8,074 ​ 4,770 ​ 662 ​ ​ ​ $ 36,975 ​ $ 31,619 ​ $ 31,851 ​ ​ Information with respect to stock options outstanding is as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ December 31, ​ ​ 2021 ​ 2020 ​ 2019 Exercisable options ​ 5,576,430 ​ 4,668,179 ​ 3,950,965 ​ Weighted average exercise price per share of exercisable options ​ $ 24.15 ​ $ 21.75 ​ $ 17.79 ​ Weighted average grant date fair value per share of options granted during the year ​ $ 21.65 ​ $ 16.96 ​ $ 20.74 ​ Options available for future grants ​ 3,597,371 ​ 3,346,092 ​ 3,975,160 ​ Weighted average remaining contractual life ​ 6.65 ​ 7.00 ​ 7.32 ​ ​ 97 Table of Contents The following table summarizes stock option activity for the years ended December 31, 2021 and 2020: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ Weighted- ​ Average ​ ​ ​ ​ ​ ​ ​ Average ​ Remaining ​ ​ ​ ​ ​ ​ ​ Exercise ​ Contractual ​ Aggregate ​ ​ Number of ​ Price ​ Term ​ Intrinsic Value ​ ​ Shares ​ (Per Share) (1) ​ (in years) ​ (in thousands) (2) Balances at December 31, 2019 7,174,319 ​ 24.03 7.32 ​ $ 79,116 ​ Options granted 1,679,324 ​ ​ 33.08 ​ ​ ​ ​ ​ ​ Options forfeited ( 243,384 ) ​ ​ 32.93 ​ ​ ​ ​ ​ ​ Options exercised (3) ( 858,470 ) ​ ​ 19.36 ​ ​ ​ ​ ​ ​ Balances at December 31, 2020 7,751,789 ​ 26.23 7.00 ​ $ 134,941 ​ Options granted 1,827,234 ​ ​ 41.22 ​ ​ ​ ​ ​ ​ Options forfeited ( 382,454 ) ​ ​ 36.15 ​ ​ ​ ​ ​ ​ Options exercised (3) ( 520,240 ) ​ ​ 23.61 ​ ​ ​ ​ ​ ​ Balances at December 31, 2021 8,676,329 ​ $ 29.11 ​ 6.65 ​ $ 100,057 ​ As of December 31, 2021 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options vested and expected to vest 8,676,329 ​ $ 29.11 6.65 ​ $ 100,057 ​ Exercisable 5,576,430 ​ $ 24.15 5.53 ​ $ 89,287 ​ (1) The weighted average exercise price per share is determined using exercise price per share for stock options. (2) The aggregate intrinsic value is calculated as the difference between the exercise price of the option and the fair value of our common stock for in-the-money options at December 31, 2021 and 2020. (3) The total intrinsic value of stock options exercised was $ 9.2 million, $ 16.3 million, and $ 11.5 million for the years ended December 31, 2021, 2020 and 2019 respectively. The stock options outstanding and exercisable by exercise price at December 31, 2021 are as follows: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Stock Options Outstanding ​ Stock Options Exercisable ​ ​ ​ ​ Weighted- ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Average ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Remaining Weighted- ​ Weighted- Range of ​ ​ ​ Contractual ​ Average ​ ​ ​ Average Exercise ​ Number of ​ Term ​ Exercise Price ​ Number of ​ Exercise Price Prices ​ Shares ​ (in years) ​ Per Share ​ Shares ​ Per Share $ 4.25 – $ 10.28 151,488 1.68 ​ $ 4.29 151,488 ​ $ 4.29 ​ $ 10.52 – $ 15.78 1,508,709 3.33 ​ $ 13.15 1,507,724 ​ $ 13.15 ​ $ 15.91 – $ 23.87 1,777,216 5.52 ​ $ 22.77 1,756,016 ​ $ 22.76 ​ $ 23.96 – $ 35.94 ​ 2,312,270 ​ 7.91 ​ $ 32.08 ​ 1,168,530 ​ $ 31.65 ​ $ 35.99 – $ 53.99 ​ 2,926,646 ​ 8.31 ​ $ 40.12 ​ 992,672 ​ $ 37.52 ​ ​ 8,676,329 6.65 ​ $ 29.11 5,576,430 ​ $ 24.15 ​ ​ We estimated the fair value of employee and non-employee awards using the Black-Scholes valuation model. The fair value of employee stock options is being amortized on a straight-line basis over the requisite service period of the awards. Management estimates the probability of non-employee awards being vested based upon an evaluation of the non-employee achieving their specific performance goals. Options are issued at the fair market value of our stock on the date of grant. 98 Table of Contents The fair value of employee stock options was estimated using the following weighted average assumptions for the years ended December 31, 2021, 2020 and 2019: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Options ​ ​ 2021 2020 2019 Common stock fair value per share ​ $ 30.65 - 49.47 ​ $ 20.69 - 45.91 ​ $ 29.96 - 44.19 ​ Expected volatility ​ 53.91 % - 56.82 % ​ 52.93 % - 58.95 % ​ 60.67 % - 61.33 % ​ Risk-free interest rate ​ 0.47 % - 1.33 % ​ 0.29 % - 1.71 % ​ 1.37 % - 2.60 % ​ Expected dividend yield ​ — ​ — ​ — ​ Expected term (in years) ​ 6.00 - 7.65 ​ 5.23 - 7.65 ​ 5.23 - 6.59 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ESPP ​ ​ 2021 2020 2019 ​ Expected term (years) 0.5 - 2.0 0.5 - 2.0 0.5 - 2.0 ​ Expected volatility ​ 46.08 % - 66.37 % ​ 50.77 % - 66.37 % ​ 50.77 % - 71.37 % ​ Risk-free interest rate 0.04 % - 1.65 % ​ 0.09 % - 1.65 % ​ 1.47 % - 2.70 % ​ Expected dividend yield ​ — ​ — ​ — ​ ​ The expected term of stock options represents the average period the stock options are expected to remain outstanding. 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. 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. The risk-free interest rate assumption is based on the U.S. Treasury instruments, for which the term was consistent with the expected term of our stock options. The expected dividend assumption is based on our history and expectation of dividend payouts. We have not paid dividends and did not have any dividend payout at December 31, 2021. The following table summarizes RSU activity for the years ended December 31, 2021: ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Weighted- ​ ​ ​ ​ Average ​ ​ ​ ​ Grant Date ​ ​ Number of ​ Fair Value ​ ​ Shares ​ (Per Unit) Unvested at December 31, 2019 90,006 ​ $ 34.66 Granted 348,288 ​ ​ 32.51 Vested ( 62,355 ) ​ ​ 32.61 Forfeited ​ ( 17,114 ) ​ ​ 32.33 Unvested at December 31, 2020 358,825 ​ $ 33.04 Granted 670,700 ​ ​ 39.11 Vested ( 151,555 ) ​ ​ 32.76 Forfeited ​ ( 51,822 ) ​ ​ 36.68 Unvested at December 31, 2021 826,148 ​ $ 37.79 ​ 99 Table of Contents As of December 31, 2021 and 2020, the unamortized compensation expense related to unvested stock options was $ 54.5 million and $ 48.9 million, respectively. The remaining unamortized compensation expense will be recognized over the next 2.62 years. At December 31, 2021 and 2020, the unamortized compensation expense was $ 2.3 million and $ 0.9 million respectively under our ESPP. The remaining unamortized expense will be recognized over the next 1.94 years. At December 31, 2021 and 2020, the unamortized compensation expense related to unvested restricted stock units was $ 24.8 million and $ 8.5 million, respectively. The remaining unamortized compensation expense will be recognized over the next 1.95 years. 8. 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. 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. 100 Table of Contents 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): ​ ​ ​ ​ Years ending December 31, ​ ​ 2022 ​ $ 2,097 2023 ​ ​ 5,566 2024 ​ ​ 5,713 2025 ​ ​ 5,817 2026 ​ ​ 5,279 Thereafter ​ ​ 52,117 Total undiscounted lease payments ​ ​ 76,589 Less: Tenant allowance ​ ​ ( 17,032 ) Less: Imputed interest ​ ​ ( 25,588 ) Present value of lease payments ​ $ 33,969 ​ ​ ​ ​ Lease liabilities - long-term ​ $ 33,969 ​ The following table summarizes lease costs, cash, and other disclosures for the years ended December 31, 2021, 2020, and 2019 (in thousands): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2021 2020 2019 ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Operating lease cost ​ $ 4,342 ​ $ 2,503 ​ $ 2,596 Variable lease cost ​ ​ 58 ​ ​ 150 ​ ​ 80 Total lease costs ​ $ 4,400 ​ $ 2,653 ​ $ 2,676 Cash paid for amounts included in ​ ​ ​ ​ ​ ​ ​ ​ ​ the measurement of lease liabilities ​ $ 2,773 ​ $ 2,233 ​ $ 1,929 Weighted-average remaining lease term ​ ​ ​ ​ ​ ​ ​ ​ ​ —operating leases (in years) ​ ​ 12.3 ​ ​ 7.4 ​ ​ 5.5 Weighted-average discount rate ​ ​ ​ ​ ​ ​ ​ ​ ​ —operating leases ​ ​ 5.8 % ​ ​ 5.5 % ​ ​ 5.5 % ​ ​ 9. Commitments and Contingencies 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. We are 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 our balance sheet. We have also entered into agreements with third party vendors which will require us to make future payments upon the delivery of goods and services in future periods. 101 Table of Contents Guarantees In the normal course of business, we indemnify certain employees and other parties, such as collaboration partners and other parties that perform certain work on behalf of, or for the Company or take licenses to our technologies. We have agreed to hold these parties harmless against losses arising from our breach of representations or covenants, intellectual property infringement or other claims made against these parties in performance of their work with us. These agreements typically limit the time within which the party may seek indemnification by us and the amount of the claim. It is not possible to prospectively determine the maximum potential amount of liability under these indemnification agreements since we have not had any prior indemnification claims on which to base the calculation. Further, each potential claim would be based on the unique facts and circumstances of the claim and the particular provisions of each agreement. We are not aware of any potential claims and we did not record a liability as of December 31, 2021 and 2020. 10. Collaboration and Licensing Agreements Following is a summary description of the material revenue arrangements, including arrangements that generated revenue in the period ended December 31, 2021, 2020, and 2019. The revenue reported for each agreement has been adjusted to reflect the adoption of ASC 606 for each period presented. Aimmune Therapeutics, Inc. On February 4, 2020, the Company entered into a License, Development and Commercialization Agreement (the Aimmune Agreement) with Aimmune Therapeutics, Inc. (Aimmune) pursuant to which the Company granted Aimmune an exclusive worldwide license to XmAb7195, which was renamed AIMab7195. Under the Aimmune Agreement, Aimmune will be responsible for all further development and commercialization activities for XmAb7195. 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 include $ 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. Under the Aimmune Agreement, Aimmune received exclusive worldwide rights to manufacture, develop and commercialize XmAb7195. They also received the rights to all data, information and research materials related to the XmAb7195 program. The Company evaluated the Aimmune Agreement under the revenue recognition standard ASC 606 and identified the following performance obligations that it deemed to be distinct at the inception of the contract: ● license to the rights to the XmAb7195 drug candidate; and ● rights to material, data, and information that the Company had accumulated in connection with manufacturing, testing, and conducting clinical trials for the XmAb7195 program and intellectual property filings and information (XmAb7195 data). The Company considered the licenses as functional intellectual property as Aimmune has the right to use XmAb7195 at the time that the Company transfers such rights. The rights to the XmAb7195 data are not considered to be separate from the license to XmAb7195 as Aimmune cannot benefit from the license without the supporting data and documentation. The Company determined the transaction price at inception is $ 9.6 million which consists of the $ 5.0 million upfront payment and the 156,238 shares of Aimmune common stock which had a value of $ 4.6 million on the closing date. 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 102 Table of Contents success factors for the XmAb7195 program. The Company used the “most likely amount” method to determine the variable consideration. None of the development, regulatory or sales milestones or royalties were included in the transaction price. The Company will re-evaluate the transaction price in each reporting period as uncertain events are resolved or other changes in circumstances occur. The Company determined the transaction price at inception of the Aimmune Agreement and allocated it to the performance obligation, delivery of the XmAb7195 license. The Company completed delivery of its performance obligations in March 2020. 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. (Alexion). 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. 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. 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. 103 Table of Contents 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. 104 Table of Contents 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. and F. Hoffman-La Roche Ltd (collectively, Genentech) for the development and commercialization of novel IL-15 collaboration products (Collaboration Products), including XmAb306, the Company’s IL-15/IL15Rα-Fc candidate. Under the terms of the Genentech Agreement, Genentech received an exclusive worldwide license to XmAb306 and other Collaboration Products, including any new IL-15 programs identified during the joint research collaboration. 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. The Company is also eligible to receive 45 % share of net profits for sales of XmAb306 and other Collaboration Products, while also sharing in net losses at the same percentage rate. The parties will jointly share in development and commercialization costs for all programs designated as a development program under the Genentech Agreement at the same percentage rate, while Genentech will bear launch costs entirely. The initial 45 % profit-cost share percentage is subject to a one-time downward adjustment at the Company’s discretion and convertible to a royalty under certain circumstances. 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. The Company evaluated the Genentech Agreement under the provisions of ASU No. 2014-09, Revenue from Contracts with Customers and all related amendments (collectively, ASC 606) as well as ASC 808, Collaborative Arrangements . Certain provisions of the Genentech Agreement including the cost-sharing of development programs are governed by ASC 808. We have determined that Genentech is a customer for purposes of the delivery of specific performance obligations under the Genentech Agreement and applied the provisions of ASC 606 to the transaction. 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, 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 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 105 Table of Contents 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 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. 106 Table of Contents 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 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. 107 Table of Contents 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 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. 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. In November 2021, the Company completed its performance obligations under the research activities and delivered CD28 bispecific antibodies to Janssen. In December 2021, Janssen selected a bispecific CD28 candidate for further development, and we received a milestone of $ 5.0 million. For the year ended December 31, 2021 the Company recognized as revenue the $ 50.0 million transaction price in connection with the completion of the research activities and the $ 5.0 million milestone for selection of an antibody candidate by Janssen. Second 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 108 Table of Contents contain one or more of such discovered antibodies (CD28 Licensed Antibodies). The Agreement became effective on November 5, 2021. Pursuant to the Second Janssen Agreement, the Company received an upfront payment of $ 100.0 million and is eligible to receive up to $ 1,187.5 million in milestones which include $ 289.4 million in development milestones, $ 378.1 million in regulatory milestones and $ 520.0 million in sales milestones. Under the terms of the Stock Purchase Agreement, Johnson & Johnson Innovation, JJDC, Inc. (JJDC), agreed to 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 Company issued JJDC 748,062 shares of its common stock which had a fair market value of $ 28.9 million when the shares were transferred. The Company will collaborate with Janssen on further clinical development of plamotamab with Janssen and share development costs with Janssen paying 80 % and the Company paying 20 % of certain development costs. 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. Under the Second Janssen Agreement, the Company granted Janssen an exclusive worldwide right to its plamotamab program and the Company will conduct research activities and apply its CD28 bispecific Fc technology to antibodies targeting B-cells. Upon completion of the research activities Janssen will have options to advance up to four identified candidates 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. 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 Second Janssen Agreement under the provisions of ASC 606. We have determined that Janssen is a customer for purposes of the delivery of specific performance obligations under the Second Janssen Agreement and applied the provisions of ASC 606 to the transaction. The Company identified the following performance obligations under the Second Janssen Agreement: (i) the license to the plamotamab program, and (ii) research services during a two-year period to create up to four CD28 bispecific candidates targeting B-cell antigens. The Company determined that the license and the research services are separate performance obligations because they are capable of being distinct and are distinct in the context of the Second Janssen Agreement. The license to plamotamab has standalone functionality as Janssen has exclusive worldwide rights to the program, including the right to sublicense to third parties. Janssen has significant experience and capabilities in developing and commercializing drug candidates similar to plamotamab, and Janssen is capable of performing these activities without the Company’s involvement. Upon the transfer of the license of plamotamab and the related data and materials, Janssen could develop and commercialize plamotamab without further assistance from the Company. The Company determined that the research services for potential CD28 candidates was a separate standalone performance obligation. The Second Janssen 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 plamotamab. The Company determined the standalone selling price of the license to be $ 58.5 million using the adjusted market assessment approach considering similar collaboration and license agreements and transactions. The standalone selling price for the research services to be performed during the research term was determined to be $ 37.6 million using the market approach which was derived from the Company’s experience and information from providing similar research services. 109 Table of Contents The Company determined that the transaction price of the Second Janssen Agreement at inception was $ 96.1 million consisting of the $ 100.0 million upfront payment reduced by the $ 3.9 million discount on the proceeds received from the sale of Company common stock to Janssen. 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 each of the separate performance obligations using the relative standalone selling price with $ 58.5 million allocated to the license to the plamotamab program and $ 37.6 allocated to the research services. The Company recognized the $ 58.5 million allocated to the license when it satisfied its performance obligation and transferred the license to Janssen in November 2021. The license was transferred upon the effective date of the Second Janssen Agreement and when the Company subsequently transferred certain data related to the program to Janssen. The $ 37.6 million allocated to the research services is being recognized over a period of time through the end of the research term that services are rendered as we determine that the input method is the appropriate approach to recognize income for such services. A total of $ 0.3 million of revenue related to the research services was recognized in the year ended December 31, 2021. The Company recognized $ 113.8 million of revenue related to the two Janssen agreements for the year ended December 31, 2021. No revenue was recognized under this arrangement for the year ended December 31, 2020. There is $ 37.3 million in deferred revenue as of December 31, 2021 related to our obligation to complete research activities and deliver CD28 bispecific antibodies under the Second Janssen Agreement. MorphoSys AG In June 2010, the Company entered into a Collaboration and License Agreement with MorphoSys AG (MorphoSys), which was subsequently amended in March 2012 and in 2020. The agreement provides MorphoSys with an exclusive worldwide license to the Company’s patents and know-how to research, develop, and commercialize the Company’s 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. The Company recognized a total of $ 12.5 million of milestone revenue related to clinical studies and $ 5.9 million of royalty revenue on net sales of Monjuvi for the year ended December 31, 2021. The Company recognized a total of $ 37.5 million of milestone revenue related to regulatory submission and approval of Monjuvi in the U.S, and royalties of $ 1.5 million on net sales of Monjuvi for the year ended December 31, 2020. There was no revenue recognized under this arrangement for the year ended December 31, 2019. As of December 31, 2021, the Company has no deferred revenue related to this agreement and has recorded a receivable of $ 1.9 million for royalties due. Novartis Institute for Biomedical Research, Inc. In June 2016, the Company entered into a Collaboration and License Agreement (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 granted Novartis certain exclusive rights to research, develop and commercialize XmAb14045 (vibecotamab) and XmAb13676 (plamotamab), two development stage products that incorporate the Company’s bispecific Fc technology; ● The Company will apply its bispecific technology in up to four target pair antibodies identified by Novartis (each a Global Discovery Program); and 110 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. In December 2018, Novartis notified the Company it was terminating its rights with respect to the plamotamab program, which became effective June 2019. Under the Novartis Agreement, Novartis is responsible to fund its share of plamotamab development costs through June 2020. In November 2019, the Company and Novartis amended the Agreement, and Novartis paid the Company $ 1.4 million in settlement of its projected remaining cost-sharing due for the plamotamab program. 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 vibecotamab development costs through August 2022. We completed delivery of two Global Discovery Programs under the Agreement. In December 2019, Novartis dosed a patient in a Phase 1 study with an undisclosed bispecific antibody that is a Global Discovery Program, and we received a $ 10.0 million milestone payment. Novartis will assume full responsibility for development and commercialization of this Global Discovery Program. Under ASC 606, revenue is recognized at the time that the Company’s performance obligation for each Global Discovery is completed upon delivery of each discovery program to Novartis. The Company delivered two discovery programs to Novartis and recognized $ 40.1 million of revenue in the period that each program was delivered. In the third quarter of 2019, we received a $ 10.0 million milestone related to development activity for a Global Discovery Program, and we recognized $ 10.0 million of revenue. The Company’s obligations to provide research services under the Agreement for additional Global Discovery Programs expired in 2021, and we recognized $ 40.1 million of research revenue from deferred revenue. 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 year-ended December 31, 2021, Novartis advanced the Fc candidate into development and initiated clinical studies and the Company recognized $ 3.0 million of revenue related to the milestones. During the year ended December 31, 2021 and 2019, the Company recognized $ 43.1 million and $ 10.0 million of revenue, respectively. No revenue was recognized during the year ended December 31, 2020. There is a receivable of $ 0.6 million as of December 31, 2021 related to the arrangement, and there is no deferred revenue as of December 31, 2021 related to the arrangement. Omeros Corporation In August 2020, the Company entered into a Technology License Agreement (the Omeros Agreement) with Omeros Corporation (Omeros), in which the Company provided Omeros a non-exclusive license to its Xtend Fc technology, an exclusive license to apply its Xtend technology to an initial identified antibody and options to apply its Xtend technology to three additional antibodies. Omeros is responsible for all development and commercialization activities for all target candidates. The Company received an upfront payment of $ 5.0 million and is eligible to receive up to $ 65.0 million in milestones, which include $ 15.0 million in development milestones, $ 25.0 million in regulatory milestones and $ 25.0 million in sales milestones for each product incorporating the antibodies selected. In addition, the Company is eligible to receive royalties in the mid-single digit percentage range on net sales of approved products. The Company recognized $ 5.0 million of revenue related to the Omeros Agreement for the year ended December 31, 2020. There was no revenue recognized for the year ended December 31, 2021. There is no deferred revenue as of December 31, 2021 related to this agreement. 111 Table of Contents Vir Biotechnology, Inc. In 2019, the Company entered into a Patent License Agreement (the Vir Agreement) with Vir Biotechnology (Vir) pursuant to which the Company provided a non-exclusive license to its Xtend technology for up to two targets. Under the terms of the Vir Agreement, the Company received a total of $ 1.5 million in upfront and milestone payments and is eligible to receive additional milestones of $ 154.5 million which include $ 4.5 million of development milestones, $ 30.0 million of regulatory milestones and $ 120.0 million of sales milestones. In addition, the Company is eligible to receive royalties on the net sales of approved products in the low-single digits. Vir initiated a Phase 1 study with a licensed antibody in 2019, and in the second quarter of 2020, it initiated a Phase 1 study with a second licensed antibody. 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 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 antibody, 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 adult and pediatric patients. In December 2021, the European Union, and several other countries authorized sotrovimab for the treatment of mild-to-moderate COVID-19 in high-risk adult and pediatric patients. Vir and its marketing partner, GSK, began recording sales for sotrovimab beginning in June 2021. In 2021, we recognized royalty revenue of $ 52.2 million related to this agreement. 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. The Company recognized $ 52.7 million, $ 0.3 million, and $ 0.8 million of revenues related to the agreement for the years ended December 31, 2021, 2020, and 2019, respectively. There is no deferred revenue as of December 31, 2021 related to this agreement. As of December 31, 2021, the Company has recorded a receivable of $ 45.0 million for royalties due related to this agreement. Viridian Therapeutics, Inc. In December 2020, we entered into a Technology License Agreement (Viridian Agreement) with Viridian Therapeutics, Inc. (Viridian), in which we provided Viridian a non-exclusive license to our Xtend Fc technology and an exclusive license to apply our Xtend Fc technology to antibodies targeting IGF-1R. Viridian is responsible for all development and commercialization activities. We received an upfront payment of 322,407 shares of Viridian common stock valued at $ 6.0 million and are eligible to receive up to $ 55.0 million in milestones, which include $ 10.0 million in development milestones, $ 20.0 million in regulatory milestones and $ 25.0 million in sales milestones. We are also 112 Table of Contents eligible to receive royalties in the mid-single digit percentage range on net sales of approved products. The Company evaluated the Viridian Agreement under the revenue recognition standard ASC 606 and identified the following performance obligation that it deemed to be distinct at the inception of the contract: ● non-exclusive license to its Xtend Fc technologies The Company considered the license as functional intellectual property as Viridian has the right to use the technology at the time that the Company transfers such rights. The total transaction price is $ 6.0 million, which includes the upfront payment of 322,407 Viridian shares at their fair value at the date of the Agreement. The milestone payments are variable consideration to which the Company applied the “most likely amount” method and concluded at inception of the Viridian 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. The Company allocated $ 6.0 million of the transaction price to the licenses to the Xtend Fc technology and recognized income for the licenses at inception of the arrangement when Viridian began benefiting access to it. In December 2021, we entered into a second Technology License Agreement (Second Viridian Agreement) with Viridian for a non-exclusive license to certain antibody libraries developed by us. Under the Second Viridian Agreement, Viridian received a one-year research license to review the antibodies and the right to select up to three antibodies for further development. Viridian is responsible for all further development of the selected antibodies. We received an upfront payment of 394,737 shares of Viridian common stock valued at $ 7.5 million and are eligible to receive up to $ 24.75 million in milestones, which include $ 1.75 million in development milestones, $ 3.0 million in regulatory milestones and $ 20.0 million in sales milestones in addition to royalties on net sales of approved products under the Second Viridian Agreement. The Company evaluated the Second Viridian Agreement under the revenue recognition standard ASC 606 and identified the following performance obligation that it deemed to be distinct at the inception of the contract: ● non-exclusive license to certain antibody libraries created by the Company The Company considered the license as functional intellectual property as Viridian has the right to use the materials and license at the time that the Company transfers such rights. The total transaction price is $ 7.5 million, which includes the upfront payment of 394,737 Viridian shares at their fair value at the date of the Agreement. The milestone payments are variable consideration to which the Company applied the “most likely amount” method and concluded at inception of the Viridian 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. The Company allocated $ 7.5 million of the transaction price to the licenses to the antibody libraries and recognized income for the licenses at inception of the arrangement when Viridian received the materials and began accessing them. The Company recognized $ 7.5 million and $ 6.0 million of revenue related to the Viridian Agreement for the year ended December 31, 2021 and 2020, respectively. There is no deferred revenue as of December 31, 2021 related to this agreement. Zenas BioPharma Limited In November 2020, the Company entered into a License Agreement (Zenas Agreement) with Zenas BioPharma Limited (Zenas) pursuant to which the Company granted Zenas exclusive worldwide rights to develop and 113 Table of Contents commercialize to 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 XmAb6755, Xpro9523, and XmAb10171. 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. Under the Zenas Agreement, Zenas received exclusive worldwide rights to manufacture, develop and commercialize XmAb6755, Xpro9523, and XmAb10171. Zenas also received the rights to all data, information, and research materials related to the three preclinical stage programs. The Company evaluated the Zenas Agreement under the revenue recognition standard ASC 606 and identified the following performance obligations that it deemed to be distinct at the inception of the contract: ● exclusive license to the XmAb6755, Xpro9523, and XmAb10171 drug candidates; and ● rights to material, data, and information that the Company had accumulated in connection with conducting preclinical activities for each of the three programs and intellectual property filings and information. The Company considered the licenses as functional intellectual property as Zenas has the right to use each of XmAb6755, Xpro9523 and XmAb10171 at the time that the Company transfers such rights. The rights to the preclinical programs’ data are not considered to be separate from the license to programs as Zenas cannot benefit from the license without the supporting data and documentation. The total transaction price is $ 16.1 million, which includes the upfront payment of 15 % of the equity of Zenas at its fair value at the date of the Zenas Agreement. The Zenas Agreement includes variable consideration for potential future royalties that were contingent on future success factors for the licensed programs. The Company used the “most likely amount” method to determine the variable consideration. None of the royalties were included in the transaction price. The Company will re-evaluate the transaction price in each reporting period as uncertain events are resolved or other changes in circumstances occur. The Company determined the transaction price at inception of the Zenas Agreement and allocated it to the performance obligation, delivery of the XmAb6755, Xpro9523, and XmAb10171 licenses. The Company completed delivery of its performance obligations in December 2020. The licenses to XmAb6755, Xpro9523, and XmAb10171 were transferred to Zenas at inception of the Zenas Agreement, and the related research data and documentation was transferred to Zenas in December 2020. In November 2021, the Company entered into a second License Agreement (Second Zenas Agreement) with Zenas, in which we licensed the exclusive worldwide rights to develop and commercialize the Company’s obexelimab (XmAb5871) drug candidate. Under the Second Zenas Agreement, Zenas will be responsible for all further development and commercialization activities for obexelimab. The Company received a warrant to acquire additional equity in Zenas with a fair value of $ 14.9 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. We are also eligible to receive up to $ 470.0 million based on the achievement of certain clinical development, regulatory and commercialization milestones and are eligible to receive tiered, mid-single digit to mid-teen percent royalties upon commercialization of obexelimab, dependent on geography. Zenas will have sole responsibility for advancing the research, development, regulatory and commercial activities of obexelimab worldwide. The Company evaluated the Second Zenas Agreement under the revenue recognition standard ASC 606 and identified the following performance obligations that it deemed to be distinct at the inception of the contract: ● exclusive license to the obexelimab drug candidate; and ● rights to material, data, and information that the Company had accumulated in connection with conducting clinical activities for the program and intellectual property filings and information. 114 Table of Contents The Company considered the license as functional intellectual property as Zenas has the right to use obexelimab at the time that the Company transfers such rights. The rights to the obexelimab program data are not considered to be separate from the license to program as Zenas cannot benefit from the license without the supporting data and documentation. The total transaction price is $ 14.9 million, which includes the upfront payment of a warrant to acquire up to 15 % of the equity of Zenas in connection with a future financing at its fair value at the date of the Second Zenas Agreement. The Second Zenas Agreement includes variable consideration for potential future royalties that were contingent on future success factors for the licensed programs. The Company used the “most likely amount” method to determine the variable consideration. None of the royalties were included in the transaction price. The Company will re-evaluate the transaction price in each reporting period as uncertain events are resolved or other changes in circumstances occur. The Company determined the transaction price at inception of the Second Zenas Agreement and allocated it to the performance obligation, delivery of the obexelimab license. The Company completed delivery of its performance obligations in December 2021. The licenses to obexelimab were transferred to Zenas at inception of the Second Zenas Agreement, and the related research data and documentation was transferred to Zenas in December 2021. The Company recognized $ 14.9 million and $ 16.1 million of revenue related to the two Zenas Agreements for the years ended December 31, 2021 and 2020, respectively. There is no deferred revenue as of December 31, 2021 related to this agreement. Revenue Earned The $ 275.1 million, $ 122.7 million, and $ 156.7 million of revenue recorded for the years ended December 31, 2021, 2020, and 2019, respectively, were earned principally from the following licensees (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2021 ​ 2020 ​ 2019 Aimmune $ — $ 9.6 $ — ​ Alexion ​ ​ 22.2 ​ 26.2 ​ 13.0 ​ Amgen ​ ​ — ​ — ​ 5.0 ​ Astellas ​ ​ — ​ 3.5 ​ 14.0 ​ Genentech ​ ​ 2.5 ​ 3.5 ​ 113.9 ​ Gilead ​ ​ — ​ 13.5 ​ — ​ Janssen ​ ​ 113.8 ​ ​ — ​ ​ — ​ MorphoSys ​ ​ 18.4 ​ 39.0 ​ — ​ Novartis ​ ​ 43.1 ​ — ​ 10.0 ​ Omeros ​ ​ — ​ 5.0 ​ — ​ Vir ​ ​ 52.7 ​ 0.3 ​ 0.8 ​ Viridian ​ ​ 7.5 ​ 6.0 ​ — ​ Zenas ​ ​ 14.9 ​ 16.1 ​ — ​ Total ​ $ 275.1 ​ $ 122.7 ​ $ 156.7 ​ ​ 115 Table of Contents The table below summarizes the disaggregation of revenue recorded for the years ended December 31, 2021, 2020, and 2019 (in millions): ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ ​ Year Ended ​ ​ December 31, ​ ​ 2021 ​ 2020 ​ 2019 Research collaboration $ 93.0 $ 4.5 $ 16.3 Milestone ​ ​ 21.0 ​ 50.2 ​ 23.2 Licensing ​ ​ 80.8 ​ 50.2 ​ 112.2 Royalties ​ ​ 80.3 ​ 17.8 ​ 5.0 Total ​ $ 275.1 ​ $ 122.7 ​ $ 156.7 ​ Remaining Performance Obligations and Deferred Revenue The Company’s remaining performance obligation as of December 31, 2021 is conducting research activities pursuant to research plans under the Second Janssen Agreement. As of December 31, 2021 and 2020, we have deferred revenue of $ 37.3 million and $ 92.6 million, respectively. 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. All of the deferred revenue was classified as short term as of December 31, 2021 and 2020, respectively, as the Company’s obligations to perform research services are due on demand when requested by Novartis, Genentech, and Janssen under the respective Agreements. ​ 11. 401(k) Plan We have a 401(k) plan covering all full-time employees. Employees may make pre-tax contributions up to the maximum allowable by the Internal Revenue Code. Effective January 1, 2018, the Company contributes 100 % of the first 1 % of participating employees’ contribution and 50 % of the next 5 % of participating employees’ contribution, for a maximum of 3.5 % employer contribution. Effective March 31, 2020, the Company contributes 100 % of the first 1 % of participating employees’ contribution and 50 % of the next 6 % of participating employees’ contribution, for a maximum of 4.0 % of employer contribution. Participants are immediately vested in their employee contributions; employer contributions are vested over a three-year period with one -third for each year of a participating employee’s service. Employer contributions made for the years ended December 31, 2021, 2020, and 2019 were $ 1.1 million, $ 0.8 million, and $ 0.6 million, respectively. ​ ​ ​ ​ ​ ​ Item 9. Changes in and Disagreements with Accountants on Accounting and Financial Disclosure Not applicable.