UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________________
FORM 10-K
(Mark One)
x
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 2019
or
¨
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File Number 000-30347
CURIS, INC.
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE
04-3505116
(State or other jurisdiction of
incorporation or organization)
(I.R.S. Employer
Identification No.)
4 Maguire Road
Lexington, Massachusetts 02421
(Address of principal executive offices) (Zip Code)
617-503-6500
(Registrant’s telephone number, including area code)
________________________________
Securities registered pursuant to Section 12(b) of the Act:
Title of Each Class
Trading Symbol(s)
Name of Each Exchange on Which Registered
Common Stock, $0.01 par value per share
CRIS
Nasdaq Global Market
Securities registered pursuant to Section 12(g) of the Act: None
Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.    Yes  ¨    No  x
Indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or Section 15(d) of the Act.    Yes  ¨    No  x
Indicate by check mark whether the registrant: (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.    x  Yes    ¨  No
Indicate by check mark whether the registrant has submitted electronically, every Interactive Data File required to be submitted pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit such files).    x  Yes    ¨  No
Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, a smaller reporting company, or an emerging growth company. See the definitions of “large accelerated filer,” “accelerated filer” and “smaller reporting company”, and “emerging growth company” in Rule 12b-2 of the Exchange Act.
Large accelerated filer ¨
Accelerated filer  ¨
Non-accelerated filer  x
Smaller reporting company    x
 
 
 
Emerging growth company    ¨
If an emerging growth company, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards provided pursuant to Section 13(a) of the Exchange Act. ¨
Indicate by check mark whether the registrant is a shell company (as defined in Rule 12b-2 of the Act).    Yes  ¨    No  x
The aggregate market value of the registrant’s common stock held by non-affiliates of the registrant (without admitting that any person whose shares are not included in such calculation is an affiliate) based on the last reported sale price of the common stock on June 28, 2019 was approximately $51.2 million. As of March 12, 2020, there were 36,582,309 shares of the registrant’s common stock outstanding.

DOCUMENTS INCORPORATED BY REFERENCE
Specified portions of the registrant’s proxy statement for the annual meeting of stockholders scheduled to be held on June 4, 2020, which are to be filed with the Commission not later than 120 days after the close of the Registrant’s fiscal year ended December 31, 2019 pursuant to Regulation 14A, have been incorporated by reference in Items 10-14 of Part III of this Annual Report on Form 10-K.
 


Table of Contents

CURIS, INC.
TABLE OF CONTENTS
Form 10-K
 
PART I
 
 
 
 
ITEM 1.
 
 
 
ITEM 1A.
 
 
 
ITEM 1B.
 
 
 
ITEM 2.
 
 
 
ITEM 3.
 
 
 
ITEM 4.
 
 
 
 
PART II
 
 
 
 
ITEM 5.
 
 
 
ITEM 6.
 
 
 
ITEM 7.
 
 
 
ITEM 7A.
 
 
 
ITEM 8.
 
 
 
ITEM 9.
 
 
 
ITEM 9A.
 
 
 
ITEM 9B.
 
 
 
 
PART III
 
 
 
 
ITEM 10.
 
 
 
ITEM 11.
 
 
 
ITEM 12.
 
 
 
ITEM 13.
 
 
 
ITEM 14.
 
 
 
 
PART IV
 
 
 
 
ITEM 15.
 
 
ITEM 16.
 
 

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PART I
Cautionary Note Regarding Forward-Looking Statements
This annual report on Form 10-K contains forward-looking statements within the meaning of the U.S. Private Securities Litigation Reform Act of 1995, which involve risks and uncertainties. All statements other than statements of historical fact contained in this report are statements that could be deemed forward-looking statements, including without limitation any expectations of revenue, expenses, earnings or losses from operations, or other financial results; statements with respect to the plans, strategies and objectives of management for future operations; statements concerning product research, development and commercialization plans, timelines and anticipated results; statements of expectation or belief; statements with respect to clinical trials and studies; statements with respect to royalties and milestones; statements with respect to the therapeutic potential of drug candidates; and statements of assumptions underlying any of the foregoing. Without limiting the foregoing, the words “anticipates”, “believes”, “could”, “estimates”, “expects”, “intends”, “may”, “plans”, “seeks”, “will”, “strategy”, “potential”, “should”, “would and other similar language, whether in the negative or affirmative, are intended to identify forward-looking statements, although not all forward-looking statements contain these identifying words. Because forward-looking statements relate to the future, they are subject to inherent uncertainties, risks and changes in circumstances that are difficult to predict. Our actual results could differ materially from those anticipated in these forward-looking statements as a result of various factors. These statements involve known and unknown risks, uncertainties and other factors that may cause our actual results, performance or achievements to be materially different from any future results, performance or achievements expressed or implied by the forward-looking statements. We therefore caution you against relying on any of these forward-looking statements. Important factors that could cause actual results to differ materially from those in these forward-looking statements are discussed, among other places, in Item 1A., “Risk Factors” of Part I and Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations” of Part II of this report and in our Securities and Exchange Commission reports filed after this report.
The forward-looking statements included in this annual report represent our estimates as of the filing date of this annual report. We specifically disclaim any obligation to update these forward-looking statements in the future. These forward-looking statements should not be relied upon as representing our estimates or views as of any date subsequent to the date of this annual report.
Other Information
Unless otherwise indicated, or unless the context of the discussion requires otherwise, we use the terms “we,” “us,” “our” and similar references to refer to Curis, Inc. and its subsidiaries, on a consolidated basis. We use the terms “Curis” to refer to Curis, Inc. on a stand-alone basis.
ITEM 1.
BUSINESS
Overview
We are a biotechnology company focused on the development of first-in-class and innovative therapeutics for the treatment of cancer. Our clinical stage drug candidates are:
CA-4948, which is being tested in a Phase 1 dose escalating clinical trial in patients with non-Hodgkin lymphomas, including those with Myeloid Differentiation Primary Response Protein 88, or MYD88 alterations. We reported preliminary clinical data from the study in December 2019. We are currently planning to initiate a separate Phase 1 trial for acute myeloid leukemia and myelodysplastic syndromes patients in the first half of 2020.
CI-8993, a monoclonal antibody designed to antagonize the V-domain Ig suppressor of T cell activation, or VISTA signaling pathway, which we plan to begin clinical testing in a Phase 1a/1b trial in 2020.
Fimepinostat, which is currently being explored in clinical studies in patients with MYC-altered diffuse large B-cell lymphoma, or DLBCL and solid tumors and has been granted Orphan Drug Designation and Fast Track Designation for the treatment of DLBCL by the U.S. Food and Drug Administration, or FDA in April 2015 and May 2018, respectively. We began enrollment in a Phase 1 combination study with venetoclax in DLBCL patients, including patients with translocations in both MYC and the BCL2 gene, also referred to as double-hit lymphoma, or high-grade B-cell lymphoma, or HGBL. We reported preliminary clinical data from this combination study in December 2019. In March 2020, we announced that although we observed no significant drug-drug interaction in our Phase 1 study of fimepinostat in combination with venetoclax, we did not see an efficacy signal that would warrant continuation of the study. Accordingly, no further patients will be enrolled in this study. We are currently evaluating future studies for fimepinostat.

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Our pipeline includes CA-170 for which we announced initial data from a clinical study in patients with mesothelioma in conjunction with the Society of lmmunotherapy of Cancer conference in November 2019. Based on this data, no further patients will be enrolled in the study. We are currently evaluating future studies for CA-170. In February 2020, we and Aurigene further amended our collaboration agreement. Under the terms of the amended agreement, Aurigene will fund and conduct a Phase 2b/3 randomized study evaluating CA-170, in combination with chemoradiation, in approximately 240 patients with non-squamous non-small cell lung cancer, or nsNSCLC. In turn, Aurigene receives rights to develop and commercialize CA-170 in Asia, in addition to its existing rights in India and Russia, based on the terms of the original agreement. We retain U.S., European Union, and rest of world rights to CA-170, and are entitled to receive royalty payments on potential future sales of CA-170 in Asia.
Our pipeline also includes CA-327, which is a pre-Investigational New Drug, or IND stage oncology drug candidate.
On January 18, 2015 we entered into a collaboration agreement with Aurigene Discovery Technologies Limited, or Aurigene, a specialized, discovery-stage biotechnology company and wholly owned subsidiary of Dr. Reddy’s Laboratories for the discovery, development and commercialization of small molecule compounds in the areas of immuno-oncology and precision oncology, which we refer to as the Aurigene agreement, which was amended in September 2016 and February 2020. As of December 31, 2019, we have licensed four programs under the Aurigene collaboration.
1.
IRAK4 Program - a precision oncology program of small molecule inhibitors of IRAK4. The development candidate is CA-4948, an orally available small molecule inhibitor of IRAK4.
2.
PD1/VISTA Program - an immuno-oncology program of small molecule antagonists of PD1 and VISTA immune checkpoint pathways. The development candidate is CA-170, an orally available small molecule antagonist of VISTA and PDL1.
3.
PD1/TIM3 Program - an immuno-oncology program of small molecule antagonists of PD1 and TIM3 immune checkpoint pathways. The development candidate is CA-327, an orally available small molecule antagonist of PDL1 and TIM3.
4.
In March 2018, we exercised our option to license a fourth program, which is an immuno-oncology program.
In addition, we are party to an option and license agreement with ImmuNext, Inc., or ImmuNext. Pursuant to the terms of the option and license agreement, we have an option, exercisable for a specified period as set forth in the option and license agreement, to obtain an exclusive license to develop and commercialize certain VISTA antagonizing compounds, including ImmuNext's lead compound, CI-8993, and products containing these compounds in the field of oncology.
We are also party to a collaboration with Genentech Inc., or Genentech, a member of the Roche Group, under which Genentech and F. Hoffmann-La Roche Ltd, or Roche are commercializing Erivedge® (vismodegib), a first-in-class orally-administered small molecule signaling pathway inhibitor. Erivedge is approved for the treatment of advanced basal cell carcinoma, or BCC.
Based on our clinical development plans for our pipeline, we intend to predominantly focus our available resources on the continued development of CA-4948, in collaboration with Aurigene, and CI-8993, in collaboration with ImmuNext, in the near term.

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Product Development Programs
We are seeking to develop and commercialize innovative drug candidates to treat cancer. Our product development initiatives, described in the table below, are being pursued using our internal resources or through our collaborations.
 Since our inception in 2000, substantially all of our revenues have been derived from collaborations and other agreements with third-parties. For both of the years ended December 31, 2019 and 2018, milestone and royalty payments from Genentech accounted for $10.0 million and $10.4 million, or 100%, respectively, of revenues, all of which was related to the development and commercialization of Erivedge.
CA-4948
CA-4948 is an oral small molecule drug candidate that is designed to inhibit the IRAK4 kinase, which is an important transducer of toll-like receptor or certain interleukin receptor signaling pathways. These signaling pathways are shown to be involved in certain human cancers and inflammatory diseases.
CA-4948 is a potent inhibitor of IRAK4 in biochemical and cell based assays, as well as in an in vivo tumor model of diffuse large B cell lymphoma that harbors mutation in the IRAK4 pathway. Lead compounds from this program were also shown to be effective in an in vivo preclinical model of acute inflammation, suggesting that CA-4948 and other program compounds have the potential for use in the treatment of cancer and inflammatory diseases. CA-4948 has been shown to be
active in in vivo xenograft models of human lymphoma, and demonstrates activity in ex-vivo models of acute myeloid leukemia, or AML, and myelodysplastic syndromes, or MDS. In January 2018 we initiated a Phase 1 dose escalating clinical trial in patients with non-Hodgkin lymphomas including those with MYD88 alterations. We reported preliminary clinical data from the study in the fourth quarter of 2019. We are currently planning to initiate a separate Phase 1 trial for acute myeloid leukemia and myelodysplastic syndromes patients in the first half of 2020.
CI-8993
CI-8993 is a human IgG1 kappa monoclonal antibody directed against the VISTA protein. VISTA shares homology with other immune checkpoint proteins, including PD-1 and PD-L1, and is an important negative regulator in the immune suppression induced by cancer. Recent studies suggest VISTA is strongly upregulated in response to treatment with other cancer immunotherapy agents. VISTA is strongly expressed in several tumor types including pancreatic cancer, mesothelioma, and prostate cancer. VISTA creates an immune blocking signal that is independent of, and complementary to, PD-1 and CTLA-4.
CI-8993 was originally developed as part of a license and collaboration agreement between ImmuNext and Janssen Biotech, Inc., or Janssen. In 2016, Janssen initiated clinical development of CI-8993 in a Phase 1 study evaluating safety, pharmacokinetics and pharmacodynamics of ascending doses of CI-8993 in patients with advanced solid tumors. The study

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enrolled 12 patients, in which one patient experienced dose-limiting side effects related to cytokine release syndrome. Janssen opted to close the study and ImmuNext regained control of the asset.
In January 2020, we announced plans to develop CI-8993, leveraging our clinical and non-clinical experience with a VISTA-focused program (CA-170).
Fimepinostat
Fimepinostat was invented by our scientists and is an oral, dual inhibitor of HDAC and PI3K enzymes. Specifically, fimepinostat inhibits HDACs 1, 2, 3, 6 and 10 and PI3K-alpha, delta and beta isoforms. Inhibitors of HDAC enzymes can affect a number of cell functions and cancer cell viability by regulating the acetylation of both histone and non-histone substrates. Multiple inhibitors of HDACs have been approved by the FDA for treatment of hematologic malignancies. PI3 kinases are frequently activated through mutations or by receptor tyrosine kinases in many cancer types. Two PI3K inhibitors are currently approved by the FDA for treatment of patients with B cell malignancies. Fimepinostat has shown potent antitumor activity in a variety of hematologic tumor models such as non-Hodgkin’s lymphoma, including some with alterations in MYC oncogene, and multiple myeloma.
Non-clinical results indicate that at the mechanistic level, fimepinostat effectively downregulates MYC protein levels in MYC-altered and MYC-dependent cells and tumor models, consistent with the roles of HDAC and PI3K in MYC regulation. These results provide a mechanistic rationale for the clinical development of fimepinostat in MYC-driven malignancies.
Clinical development of fimepinostat began in January 2013. Based on examination of multiple dose and schedules of administration in the Phase 1 trial, the recommended dose of fimepinostat was determined to be once daily oral administration of 60 mg dose using a 5 days “on”/2 days “off” schedule in 21-day cycles.  The most common drug related adverse events, or AEs reported in the Phase 1 trial were low grade, meaning Grade 1 and 2, diarrhea, fatigue and nausea.  Dose limiting toxicities, or DLTs have consisted of diarrhea and hyperglycemia, however no DLTs occurred at the recommended dose and schedule.  Other drug-related Grade 3 or Grade 4 AEs reported in three or more patients included thrombocytopenia and neutrophil decrease, which are hematologic AEs, as well as diarrhea, hyperglycemia and fatigue, which are non-hematologic AEs. In the expansion stage of the Phase 1 trial, fimepinostat was tested as monotherapy or in combination with rituximab in patients with relapsed or refractory DLBCL, a type of non-Hodgkin’s Lymphoma.
The Phase 2 study of monotherapy fimepinostat in patients with relapsed or refractory DLBCL, including those whose tumor harbors alterations of the MYC oncogene is ongoing, and is designed to enroll up to 100 patients with DLBCL with MYC alteration. Study objectives include measurement of objective response rate, progression-free survival, overall survival, duration of response, incidence and severity of adverse events and other safety parameters, and characterization of the pharmacokinetics of fimepinostat.
Data from the two clinical studies with fimepinostat have resulted in a number of patients with relapsed or refractory DLBCL (3rd line or later) achieving durable complete and partial responses. Overall, based on the combined results from a Phase 1 trial and interim analysis of the Phase 2 study, the objective response rate, or ORR in the MYC-altered patients was 14/60 (23.3%). These responses appear to be durable with a median duration of response of 13.6 months, with many of the patients currently continuing treatment. In comparison, based on the same combined results from the Phase 1 trial and Phase 2 interim analysis, the ORR was 3/22 (13.6%) with median duration of response of 8.8 months for MYC negative patients in these studies. An additional set of patients who had incomplete MYC testing, with only negative results if any, were considered MYC unknown had an ORR of 2/23 (8.7%) with response duration of 10.8 months.
The preponderance of data from historical non-Curis sponsored studies suggest that MYC-altered disease confers a negative prognosis in newly diagnosed patients with DLBCL as reflected by progression free survival and overall survival, or OS. Patients with relapse and MYC-altered disease have an inferior outcome to any chemotherapy and to stem cell transplant. This poor prognosis conferred by MYC alteration is relevant in front-line, relapsed and relapsed/refractory stage of treatment and even after stem cell transplantation. Based on the most recent published and largest dataset for relapsed/refractory stage MYC-altered DLBCL patients, the two-year OS of this population is 0% as compared to 29.9% in their non-MYC-altered counterparts.
In light of the substantial unmet need for more effective therapies, in April 2015 and May 2018, respectively the FDA granted fimepinostat orphan drug and fast track designations for the treatment of DLBCL.
We began enrollment in a Phase 1 combination study with venetoclax in DLBCL patients, including patients with translocations in both MYC and the BCL2 gene, also referred to as double-hit lymphoma, or high-grade B-cell lymphoma. We reported preliminary clinical data from this combination study in the fourth quarter of 2019. In March 2020, we announced that although we observed no significant drug-drug interaction in our Phase 1 study of fimepinostat in combination with venetoclax,

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we did not see an efficacy signal that would warrant continuation of the study. Accordingly, no further patients will be enrolled in this study. We are currently evaluating future studies for fimepinostat.
We are party to an agreement with The Leukemia and Lymphoma Society, or LLS, dated November 2011, and as amended in August 2015. We agreed to make up to $1.7 million in future payments to LLS, which equals the aggregate payments previously received from LLS under the November 2011 agreement, pursuant to the achievement of certain objectives, including a licensing, sale, or other similar transaction, as well as regulatory and commercial objectives, in each case related to the fimepinostat program in hematological malignancies. However, if fimepinostat does not continue to meet its clinical safety endpoints in ongoing and future clinical trials in the defined field, or fails to obtain necessary regulatory approvals, all funding provided to us by LLS will be considered a non-refundable grant.
CA-170
CA-170 is an oral small molecule drug candidate that is designed to selectively target VISTA and PDL1 immune checkpoint proteins, both of which independently function as negative regulators of immune activation. CA-170 is being developed by us under our collaboration with Aurigene.
CA-170 can potently rescue effector functions of T cells, such as cytokine secretion and proliferation, which are inhibited in the presence of VISTA and PDL1/L2 checkpoint proteins. CA-170 has demonstrated high selectivity, and is unable to rescue T cells functions in the presence of other checkpoint protein molecules such as TIM3, CTLA4, LAG-3 and BTLA. Additionally, in multiple syngeneic mouse tumor models (such as melanoma and colon cancer), oral administration of CA-170 was demonstrated to result in anti-tumor activity but no such activity was observed in immune deficient mice, suggesting that the in vivo anti-cancer effects of CA-170 require an intact immune system.
In June 2016, we dosed the first patient in a Phase 1 trial of CA-170 being conducted in patients with solid tumors and lymphomas. In November 2018, we presented preliminary clinical data from the ongoing dose escalation stage of CA-170's Phase 1 trial at the Society for Immunotherapy of Cancer, or SITC Meeting. The data demonstrated that CA-170 has a dose proportional and predictable PK profile in patients treated orally at various doses in the ongoing dose escalation stage of the study. Additionally, evaluation of patient blood samples demonstrated that CA-170 appears to be biologically active in modulating the immune system, with a several-fold increase in percentage of circulating CD8+ T cells expressing activation markers within 24 hours of oral dosing. As compared to pre-dosing, there was a marked increase in the population of CD8+ T cells detected in the post treatment tumor biopsy samples in multiple patients. The data presented also demonstrated that multiple patients experienced tumor shrinkages, including two patients each with non-small cell lung cancer and melanoma, and one patient each with follicular lymphoma, esophageal, squamous carcinoma of the head and neck, and Hodgkin lymphoma. CA-170 was well tolerated up to the highest dose tested, 1200 mg twice daily oral administration, as of December 2018. We announced initial data in conjunction with the Society for lmmunotherapy of Cancer conference in November 2019. Based on this data, no further patients will be enrolled in the study. We are currently evaluating future studies for CA-170.
Our collaboration partner, Aurigene, initiated a Phase 2 trial for CA-170 in India in the first quarter of 2018. In 2019, Aurigene presented clinical data from a Phase 2a basket study of CA-170 in patients with multiple tumor types, including those with non-squamous non-small cell lung cancer, or nsNSCLC. In the study, CA-170 demonstrated promising signs of safety and activity in nsNSCLC patients compared to various anti-PD-1/PD-L1 antibodies. In February 2020 we amended our collaboration, license and option agreement with Aurigene. Under the terms of the amended agreement, Aurigene will fund and conduct a Phase 2b/3 randomized study evaluating CA-170 in combination with chemoradiation, in approximately 240 patients with nsNSCLC. Aurigene has rights to develop and commercialize CA-170 in Asia, in addition to its existing rights in India and Russia, based on the terms of the original agreement. We are entitled to receive royalty payments on potential future sales of CA-170 in Asia, and we retain rights in the U.S., European Union and rest of the world.
CA-327
In October 2016, we exercised our option within the collaboration with Aurigene to license the PDL1/TIM3 program. CA-327 is an oral small molecule drug candidate that is designed to selectively target PDL1 and TIM3 immune checkpoint proteins, both of which independently function as negative regulators of immune activation. CA-327 has demonstrated anti-tumor activity in multiple syngeneic mouse tumor models in an immune-dependent manner.
For a further discussion of our collaboration agreement with Aurigene, see “Business—Our Collaborations and License Agreements—Aurigene.”

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Erivedge
Erivedge is an orally bioavailable small molecule which is designed to selectively inhibit the Hedgehog signaling pathway by targeting a protein called Smoothened. The Hedgehog signaling pathway is normally active during embryonic development and unregulated activation of the pathway is believed to play a central role in allowing the proliferation and survival of cancer cells and leading to formation and maintenance of certain cancers. Genetic mutations that lead to unregulated activation of Hedgehog signaling are found in BCC and medulloblastoma. Aberrant signaling in the Hedgehog signaling pathway is implicated in over 90% of BCC cases.
Erivedge is FDA approved for treatment of adults with metastatic basal cell carcinoma, or with locally advanced basal cell carcinoma that has recurred following surgery or who are not candidates for surgery, and who are not candidates for radiation and is being developed under a collaboration agreement with Genentech. Genentech and Roche are responsible for the clinical development and global commercialization of Erivedge. Erivedge is currently marketed and sold in the U.S. by Genentech and in the European Union, Australia and several other countries by Roche.
For a further discussion of our Hedgehog collaboration agreement with Genentech, see “Business—Our Collaborations and License Agreements —Genentech.”
Our Collaborations and License Agreements
Aurigene
In January 2015, we entered into an exclusive collaboration agreement with Aurigene for the discovery, development and commercialization of small molecule compounds in the areas of immuno-oncology and selected precision oncology targets. Under the collaboration agreement, Aurigene granted us an option to obtain exclusive, royalty-bearing licenses to relevant Aurigene technology to develop, manufacture and commercialize products containing certain of such compounds anywhere in the world, except for India and Russia, which are territories retained by Aurigene.
In connection with the collaboration agreement, we issued to Aurigene 3,424,026 shares of our common stock valued at $24.3 million at the time of issuance in partial consideration for the rights granted to us under the collaboration agreement which we recognized as expense during the year ended December 31, 2015. The shares were issued pursuant to a stock purchase agreement with Aurigene dated January 18, 2015.
In September 2016, we and Aurigene entered into an amendment to the collaboration agreement. Under the terms of the amendment, in exchange for the issuance by us to Aurigene of 2,041,666 shares of our common stock, Aurigene waived payment of up to a total of $24.5 million in potential milestones and other payments associated with the first four programs in the collaboration that may have become due from us under the collaboration agreement. To the extent any of these waived milestones or other payments are not payable by us, for example in the event one or more of the milestone events do not occur, we will have the right to deduct the unused waived amount from any one or more of the milestone payment obligations tied to achievement of commercial milestone events. The amendment also provides that, in the event supplemental program activities are performed by Aurigene, we will provide up to $2.0 million of additional funding for each of the third and fourth licensed program. The shares were issued pursuant to a stock purchase agreement with Aurigene dated September 7, 2016.
As of December 31, 2019, we have exercised our option to license the following four programs under the collaboration:
1.
IRAK4 Program - a precision oncology program of small molecule inhibitors of IRAK4. The development candidate is CA-4948, an orally available small molecule inhibitor of IRAK4.
2.
PD1/VISTA Program - an immuno-oncology program of small molecule antagonists of PD1 and VISTA immune checkpoint pathways. The development candidate is CA-170, an orally available small molecule antagonist of VISTA and PDL1.
3.
PD1/TIM3 Program - an immuno-oncology program of small molecule antagonists of PD1 and TIM3 immune checkpoint pathways. The development candidate is CA-327, an orally available small molecule antagonist of PDL1 and TIM3.
4.
In March 2018, we exercised our option to license a fourth program, which is an immuno-oncology program.
For each of our licensed programs (as described above) we are obligated to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize at least one product in each of the U.S., specified countries in the European Union and Japan, and Aurigene is obligated to use commercially reasonable efforts to perform its obligations under the development plan for such licensed program in an expeditious manner.
Subject to specified exceptions, we and Aurigene agreed to collaborate exclusively with each other on the discovery, research, development and commercialization of programs and compounds within immuno-oncology for an initial period of

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approximately two years from the effective date of the collaboration agreement. At our option, and subject to specified conditions, we may extend such exclusivity for up to three additional one-year periods by paying to Aurigene additional exclusivity option fees on an annual basis. We exercised the first one-year exclusivity option in the first quarter of 2017. The fee for this exclusivity option exercise was $7.5 million, which we paid in two equal installments in the first and third quarters of 2017. We have elected not to further exercise our exclusivity option and thus did not make the $10.0 million payment required for this additional exclusivity in 2018. As a result of our election to not further exercise our exclusivity option, we are no longer operating under the broad immuno-oncology exclusivity with Aurigene. We elected to exercise our option to extend exclusivity on a program-by-program, year-by-year, basis for the IRAK4 Program and the PD1/VISTA Program in 2018. In 2019, we elected not to further extend, on a program-by-program, year-by-year basis, exclusivity for the IRAK4 Program and the PD1/VISTA Program.
Since January 2015, we have paid $14.5 million in research payments, and have waived $19.5 million in milestones under the terms of the 2016 amendment.   
For each of the IRAK4, PD1/VISTA, PD1/TIM3 programs, and the fourth immuno-oncology program: we have remaining unpaid or unwaived payment obligations of $42.5 million per program, related to regulatory approval and commercial sales milestones, plus specified additional payments for approvals for additional indications, if any.
We have agreed to pay Aurigene tiered royalties on our and our affiliates’ annual net sales of products at percentage rates ranging from the high single digits up to 10%, subject to specified reductions.
We have agreed to make certain payments to Aurigene upon our entry into sublicense agreements on any program(s), including:
with respect to amounts that we and our affiliates receive from sublicensees under a licensed program in the U.S. or the European Union, a declining percentage of non-royalty sublicense revenues that is dependent on the stage of the most advanced product for such licensed program at the time the sublicense is granted, including, for example 25% of such amounts following our initiation of a Phase 2 clinical study and 15% of such amounts after initiation of the first pivotal study. This sharing will also extend to royalties that we receive from sublicensees, subject to minimum royalty percentage rates that we are obligated to pay to Aurigene, which generally range from mid-to-high single-digit royalty percentage rates up to 10%;
with respect to sublicensing revenues we and our affiliates receive from sublicensees under a licensed program in Asia, 50% of such sublicensing revenues, including both non-royalty sublicensee revenues and royalties that we receive from sublicensees; and
with respect to non-royalty sublicensing revenues we and our affiliates receive from sublicensees under a licensed program outside of the U.S., the European Union and Asia, a percentage of such non-royalty sublicense revenues ranging from 30% to 50%. We are also obligated to share 50% of royalties that we receive from sublicensees that we receive in these territories.
Our royalty payment obligations (including those on sales by sublicensees) under the collaboration agreement with respect to a product in a country will expire on a product-by-product and country-by-country basis on the later of: (i) expiration of the last-to-expire valid claim of the Aurigene patents covering the manufacture, use or sale of such product in such country; and (ii) 10 years from the first commercial sale of such product in such country.
The term of the collaboration agreement begins upon signing and, unless earlier terminated, will expire upon either: (i) 90 days after the completion by Aurigene of its obligations under all research plans if we have not exercised the option with respect to at least one program by such time; or (ii) expiration of the last-to-expire royalty term for any and all products. Upon expiration (but not on earlier termination) of the collaboration agreement, all licenses granted by Aurigene to us that were in effect immediately prior to such expiration shall survive on a non-exclusive, royalty-free, fully paid, irrevocable, perpetual basis.
The collaboration agreement may be terminated, either in its entirety or with respect to a particular program, by either Aurigene or us for uncured material breach by the other party, other than an uncured material breach by the other party of its diligence obligations with respect to a program or licensed program. If an uncured material breach other than a diligence breach relates to a particular program or licensed program, the non-breaching party may terminate the collaboration agreement only with respect to that program or licensed program. However, after initiation of the first pivotal clinical trial of a product for a licensed program, Aurigene may not terminate the collaboration agreement with respect to such licensed program for an uncured non-diligence breach by us, except in the case of our uncured material breach of our payment obligations with respect to such licensed program, but Aurigene may pursue any and all remedies that may be available to it at law or in equity as a result of such breach. Similarly, after initiation of the first pivotal clinical trial of a product for a licensed program, we may not

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terminate the collaboration agreement with respect to the license we have granted Aurigene for its territory of India and Russia for such licensed program for an uncured non-diligence breach by Aurigene, but we may pursue any and all remedies that may be available to us at law or in equity as a result of such breach.
On a program-by-program basis, we may terminate the collaboration agreement as it relates to a program or licensed program for an uncured breach by Aurigene with respect to such program or licensed program, and Aurigene may terminate the collaboration agreement as it relates to a licensed program for an uncured breach by us with respect to such licensed program.
In addition, we may terminate the collaboration agreement in its entirety or as it relates to a particular program or licensed program or on a country-by-country basis, for any reason or for no reason at any time upon 60 days’ prior written notice to Aurigene.
In the event of termination of the collaboration agreement in its entirety before we have exercised the option for any program, or termination of the collaboration agreement as it relates to any program prior to exercise of the option for such program, all rights and licenses granted by either Aurigene or us to the other party with respect to such program under the collaboration agreement (including the option for such program) will automatically terminate.
If the royalty term with respect to a product for any licensed program in any country has expired on or before any termination of the collaboration agreement in its entirety or as to such licensed program, the license granted by Aurigene to us with respect to such product in such country, as well as the corresponding license granted to Aurigene in its territory, shall survive such termination of the collaboration agreement.
Solely in the event of termination of the collaboration agreement by Aurigene for our uncured breach, or our termination of the collaboration agreement for convenience, the following will apply to any program that was a licensed program immediately prior to such termination:
our license with respect to any licensed program that is not a terminated program (defined below), either in our entire territory or in countries within our territory outside of the terminated region (defined below), as applicable, shall continue in full force and effect, subject to all terms and conditions of the collaboration agreement, including our payment obligations;
our license with respect to any terminated program, either in our entire territory or in the terminated region, as applicable, shall terminate and revert to Aurigene;
we will grant Aurigene a perpetual, royalty-free (except for pass-through royalties and milestone payments payable by us under licenses to third-party patent rights with respect to products developed or commercialized by or on behalf of Aurigene) license, with the right to sublicense, under our relevant patent rights and other technology solely to develop, manufacture and commercialize compounds and products for any terminated program, either in our entire territory or in the terminated region, as applicable. The foregoing license will be non-exclusive with respect to our patent rights and exclusive with respect to our other technology;
we will grant to Aurigene a right of first negotiation, exercisable within 90 days after termination, to obtain an exclusive, royalty-bearing license, with the right to sublicense, under our relevant patent rights solely to develop, manufacture and commercialize compounds and products for any terminated program, either in our entire territory or in the terminated region, as applicable, upon commercially reasonable terms and conditions to be negotiated in good faith by the parties;
we will perform other specified activities and actions reasonably necessary for Aurigene to develop, manufacture and commercialize compounds and products for any terminated program, either in our entire territory or in the terminated region, as applicable; and
the applicable license to Aurigene will survive termination.
For purposes of the foregoing, “terminated program” means: (i) in the case of termination of the collaboration agreement in its entirety by Aurigene for our uncured non-diligence breach, any program that was a licensed program immediately prior to such termination, but excluding, except in the case of our uncured material breach of our payment obligations with respect to such licensed program, any such licensed program for which initiation of the first pivotal clinical trial of a product has occurred prior to such termination; (ii) in the case of any termination of the collaboration agreement as to a particular licensed program by Aurigene either for our uncured non diligence breach (to the extent termination as to such licensed program is permitted) or our uncured diligence breach, such licensed program; (iii) in the case of our termination of the collaboration agreement in its entirety for convenience, any program that was a licensed program immediately prior to such termination; or (iv) in the case of our termination of the collaboration agreement as to a particular licensed program for convenience, such licensed program; provided, however, that, in the case of the preceding clauses (iii) and (iv), if our termination of the collaboration agreement in

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its entirety or as to a particular licensed program for convenience was with respect only to a particular country or subset of countries within the entire territory as applicable, a terminated region, the applicable licensed program(s) shall be considered “terminated program(s)” only in the terminated region but shall remain licensed program(s) in the rest of our territory.
ImmuNext
In January 2020, we entered into an option and license agreement with ImmuNext, or the ImmuNext Agreement Under the terms of the ImmuNext Agreement, we agreed to engage in a collaborative effort with ImmuNext, and to conduct a Phase 1a/1b clinical trial of CI-8993. In exchange, ImmuNext granted us an exclusive option, exercisable until the earlier of (a) four years after January 6, 2020 and (b) 90 days after database lock for the first Phase 1a/1b trial in which the endpoints are satisfied, or the Option Period, to obtain an exclusive, worldwide license to develop and commercialize certain VISTA antagonizing compounds and products containing these compounds in the field of oncology.
A joint steering committee composed of representatives from each of the parties will manage the non-clinical and clinical
development of the VISTA compounds and products during the Option Period, including, but not limited to, the approval of
the plan for the Phase 1a/1b trial.
During the Option Period, we will conduct the Phase 1a/1b trial and ImmuNext will conduct certain agreed upon non-clinical research activities to support the Phase 1a/1b trial. During the Option Period, we will assign to ImmuNext all right, title and interest in and to, inventions made by us alone or jointly with ImmuNext in conducting clinical and non-clinical activities under the ImmuNext Agreement during the Option Period and any patent rights covering those inventions. Effective as of the option exercise date (if any), ImmuNext will assign to us (i) all such inventions that were made solely by us and any patent rights covering those inventions that were assigned by us to ImmuNext during the Option Period and (ii) a joint ownership interest in all such inventions that were made jointly by us and ImmuNext and patent rights covering those inventions that we assigned to ImmuNext during the option period, except for any of those inventions that relates to compounds as to which ImmuNext has retained exclusive rights.
In January 2020, we paid $1.3 million in an upfront fee to ImmuNext. In addition, if we exercise the option, we will pay ImmuNext an option exercise fee of $20.0 million. ImmuNext will be eligible to receive up to $4.6 million in potential development milestones, up to $84.3 million in potential regulatory approval milestones, and up to $125.0 million in potential sales milestone payments from us. ImmuNext is also eligible to receive tiered royalties on annual net sales on a product-by-product and country-by-country basis, at percentage rates ranging from high single digits to low double digits, subject to specified adjustments.
Our royalty payment obligations under the ImmuNext Agreement with respect to a product in a country will expire on the later of (i) expiration of the last-to-expire valid claim of the ImmuNext patents or jointly owned patents covering the manufacture, use or sale of such product in such country, (ii) the expiration of all regulatory exclusivity for such product in such country, and (iii) 10 years from the first commercial sale of such product in such country.
In partial consideration for drug substance, technical advice, and maintenance of ImmuNext’s existing IND and access to ImmuNext’s technology during the Option Period, we will make semi-annual maintenance fee payments of $0.4 million to ImmuNext. In addition, we will reimburse ImmuNext for certain documented external costs and expenses incurred by ImmuNext in carrying out non-clinical research activities approved by the joint steering committee, up to $0.3 million per calendar year, unless otherwise agreed to by both parties in writing.
We have agreed to pay ImmuNext a low double-digit percentage of sublicense revenue received by us or our Affiliates.
The term of the ImmuNext Agreement began on January 6, 2020, and, unless earlier terminated, will expire upon either: (a) expiration of the Option Period if we have not exercised the Option; or (b) expiration of all royalty payment obligations for any and all products. Upon expiration (but not on earlier termination) of the ImmuNext Agreement after exercise of the option, the license granted by ImmuNext to us shall automatically become fully paid-up, royalty-free, irrevocable and perpetual.
The ImmuNext Agreement may be terminated by either us or ImmuNext for an uncured material breach by the other party or if the other party files for bankruptcy or insolvency. ImmuNext may terminate the ImmuNext Agreement if we or any of our affiliates or sublicensees challenges any ImmuNext patents licensed to us or if we cease all research, development, manufacturing and commercialization activities for the products for a specified continuous period of time. We may terminate the ImmuNext Agreement for convenience, in its entirety or on a product-by-product basis.
In the event we terminate the ImmuNext Agreement for convenience or ImmuNext terminates the ImmuNext Agreement for uncured material breach, patent challenge, cessation of product-related activities or filing of bankruptcy or insolvency by us, then all rights and licenses granted to us will terminate, and, subject to specified royalty payment obligations of ImmuNext, we will grant ImmuNext (i) an exclusive, perpetual, nontransferable, worldwide license under patents controlled by us and (ii) a non-exclusive license under any know-how controlled by us, in each case, that are necessary or reasonably useful for the

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exploitation of the ImmuNext compounds antagonizing VISTA or products we were developing or commercializing under the ImmuNext Agreement, and solely to exploit such compounds and products.
In the event we terminate the ImmuNext Agreement for uncured material breach or filing of bankruptcy or insolvency by ImmuNext after exercising the option, then the licenses granted by ImmuNext shall survive in perpetuity, subject to our obligation to pay milestone payments and royalties to ImmuNext in accordance with the ImmuNext Agreement.
Genentech
In 2003, we entered into a collaborative research, development and license agreement with Genentech, which we refer to as the collaboration agreement.
Under the terms of our collaboration agreement with Genentech, we granted Genentech an exclusive, global, royalty-bearing license, with the right to sublicense, to make, use, sell and import molecules capable of inhibiting the Hedgehog signaling pathway (including small molecules, proteins and antibodies) for human therapeutic applications, including cancer therapy. Genentech subsequently granted a sublicense to Roche for non-U.S. rights to Erivedge other than in Japan where such rights are held by Chugai. Genentech and Roche are responsible for worldwide clinical development, regulatory affairs, manufacturing and supply, formulation, and sales and marketing.
We are eligible to receive up to an aggregate of $115.0 million in contingent cash milestone payments, exclusive of royalty payments, in connection with the development of Erivedge or another small molecule Hedgehog pathway inhibitor, assuming the successful achievement by Genentech and Roche of specified clinical development and regulatory objectives. Of this amount, we have received $59.0 million to date.
In addition to the contingent cash milestone payments, our wholly owned subsidiary, Curis Royalty, LLC, or Curis Royalty, is entitled to a royalty on net sales of Erivedge that ranges from 5% to 7.5% based upon global Erivedge sales by Roche and Genentech. The royalty rate applicable to Erivedge may be decreased by 2% on a country-by-country basis in certain specified circumstances, including when a competing product that binds to the same molecular target as Erivedge is approved by the applicable country’s regulatory authority in another country and is being sold in such country by a third-party for use in the same indication as Erivedge, or, when there is no issued intellectual property covering Erivedge in a territory in which sales are recorded. During the third quarter of 2015, the FDA and the European Medicine Agency’s Committee for Medicinal Products for Human Use, or CHMP approved another Hedgehog signaling pathway inhibitor, Odomzo® (sonidegib), which is marketed by Sun Pharmaceutical Industries Ltd., for use in locally advanced BCC. Accordingly, Genentech reduced royalties to Curis Royalty on its net sales in the United States of Erivedge by 2% since the fourth quarter of 2015, and we anticipate that Genentech will reduce by 2% royalties on net sales of Erivedge outside of the United States on a country-by-country basis to the extent that sonidegib is approved by the applicable country’s regulatory authority and is being sold in such country. However, pursuant to the Oberland Purchase Agreement described below, we have retained our rights with respect to the 2% of royalties that are subject to such reduction in countries where such reduction may or has occurred, subject to the terms and conditions of the Oberland Purchase Agreement, which we refer to as the “Retained Royalty Amounts”.
As a result of our licensing agreements with various universities, we are also obligated to make payments to university licensors on royalties that Curis Royalty earns in all territories (other than Australia) in an amount that is equal to 5% of the royalty payments received from Genentech. This obligation endures on a country-by-country basis for a period of 10 years from the first commercial sale of Erivedge, which occurred in February 2012 in the U.S. For royalties that we earn from Roche’s sales of Erivedge in Australia, we were obligated to make payments to university licensors of 2% of Roche’s direct net sales in Australia until the expiration of the Australian patent in April 2019, after which the amount has decreased to 5% of the royalty payments that we receive from Genentech for the remainder of the period ending 10 years from the first commercial sale of Erivedge.
Unless terminated earlier, the collaboration agreement will expire six months after the later of the expiration of Genentech’s obligation to pay royalties to us under the agreement or such time as no activities have occurred under the agreement for a period of twelve months. The collaboration agreement may be terminated earlier by either party for cause upon sixty days prior written notice. In addition, Genentech may terminate the agreement, either in whole or in part, without cause, upon six months prior written notice. In the event of any termination where specific license grants survive, we will continue to have the right to receive clinical development and regulatory approval milestones and royalties on product sales for such licensed compound, if any. If we terminate the agreement for cause or Genentech terminates the agreement without cause, all licenses granted to Genentech automatically terminate and revert to us. In addition, Genentech has agreed that it will no longer conduct any development or commercialization activities on any compounds identified in the course of conducting activities under the research plan for the agreement for so long as such compounds continue to be covered by valid patent claims.

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In November 2012, we formed a wholly owned subsidiary, Curis Royalty, which received a $30.0 million loan at an annual interest rate of 12.25% pursuant to a credit agreement between Curis Royalty and BioPharma Secured Debt Fund II Sub, S. à r. l., a Luxembourg limited liability company managed by Pharmakon Advisors, or BioPharma-II. In connection with the loan, we transferred to Curis Royalty our rights to receive royalty and royalty related payments on the commercial sales of Erivedge that we receive from Genentech, and any payment made by Genentech to us pursuant to Genentech’s indemnification obligations under the collaboration agreement. The loan and accrued interest was being repaid by Curis Royalty using such royalty and royalty related payments. The loan constituted an obligation of Curis Royalty and was non-recourse to Curis.
Under the terms of the credit agreement, with BioPharma-II, quarterly royalty and royalty-related payments from Genentech were first applied to pay interest and second, principal on the loan from BioPharma-II. As a result of the loan received from BioPharma-II, we continued to record royalty revenue from Genentech but expect such revenues would have been used to pay down such loan until it is repaid in full. Curis Royalty retained the right to royalty payments related to sales of Erivedge following repayment of the loan.
In March 2017, we and Curis Royalty entered into a new credit agreement with HealthCare Royalty Partners III, L.P., or HealthCare Royalty, for the purpose of refinancing and terminating the loan from BioPharma-II. HealthCare Royalty made a $45.0 million loan at an interest rate of 9.95% to Curis Royalty, which was used, in part, to pay off $18.4 million in remaining loan obligations to BioPharma-II under the prior loan, with the residual proceeds of $26.6 million distributed to us as sole equity member of Curis Royalty. On March 22, 2019 we terminated the loan with HealthCare Royalty, and repaid in full all amounts outstanding under the credit agreement.
In connection with our repayment and termination of the credit agreement with HealthCare Royalty, on March 22, 2019, we and Curis Royalty entered into a royalty interest purchase agreement, referred to as the Oberland Purchase Agreement, with TPC Investments I LP and TPC Investments II LP, referred to as the Purchasers, each of which is a Delaware limited partnership managed by Oberland Capital Management, LLC, and Lind SA LLC, referred to as the Agent, a Delaware limited liability company managed by Oberland Capital Management, LLC, as collateral agent for the Purchasers, for the purpose of providing operating cash flow and extinguishing the credit agreement with HealthCare Royalty. In connection with entering in the Oberland Purchase Agreement, Curis Royalty and the Agent also entered into a security agreement, we and the Agent entered into a pledge agreement and we and Curis Royalty entered into a consent and payment direction letter agreement with Genentech.
Pursuant to the Oberland Purchase Agreement, the Purchasers acquired the rights to a portion of certain royalty and royalty-related payments excluding a portion of non-US royalties retained by Curis Royalty, referred to as the Purchased Receivables, owed by Genentech under our collaboration agreement with Genentech. Upon closing of the Oberland Purchase Agreement, Curis Royalty received an upfront purchase price of $65.0 million from the Purchasers, approximately $33.8 million of which was used to pay off the remaining loan principal under the credit agreement with HealthCare Royalty, and $3.7 million of which was used to pay transaction costs, including $3.4 million to HealthCare Royalty in accrued and unpaid interest and prepayment fees under the credit agreement, resulting in net proceeds of $27.5 million. Curis Royalty will also be entitled to receive milestone payments of (i) $17.2 million if the Purchasers and Curis Royalty receive aggregate royalty payments as described in clauses (4) and (5) of the following paragraph pursuant to the Oberland Purchase Agreement in excess of $18.0 million during the calendar year 2021 and (ii) $53.5 million if the Purchasers receive payments pursuant to the Oberland Purchase Agreement in excess of $117.0 million on or prior to December 31, 2026, which milestone payments may each be paid, at the option of the Purchasers, in a lump sum in cash or out of the Purchaser’s portion of future payments under the Oberland Purchase Agreement.
Pursuant to the terms of the Oberland Purchase Agreement, so long as an event of default by Curis Royalty has not occurred under the security agreement, royalty and royalty-related payments owed by Genentech under the Genentech collaboration agreement in each calendar year shall be allocated in the following order: (1) Curis Royalty shall receive payments reflecting the Retained Royalty Amounts (as defined above) to the extent actually paid by Genentech under the Genentech collaboration agreement, (2) Curis Royalty shall receive payments to satisfy Curis’ royalty obligations to certain academic institutions subject to a specified percentage cap and/or a specified period of time, (3) Curis Royalty shall receive a fixed amount of payments to reimburse intellectual property and other enforcement costs, whether or not actually incurred by us, (4) the Purchasers shall receive 100.0% of all payments up to $13.2 million in the aggregate in such calendar year, and (5) any additional payments in such calendar year shall be paid 65.0% to Curis Royalty and 35.0% to the Purchasers.
The Oberland Purchase Agreement also provides that, so long as an event of default by Curis Royalty has not occurred under the security agreement, if Curis Royalty recovers any monetary award or settlement or any other non-ordinary course lump sum payment made in respect of the royalty and royalty-related payments owed by Genentech under the Genentech collaboration agreement that does not specifically relate to any calendar period, then such payment or other recovery shall be allocated in the following order: (1) Curis Royalty shall receive payments to satisfy Curis’ royalty obligations to certain academic institutions up to a specified percentage cap, (2) the Purchasers shall receive 100.0% of all such payments up to an

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amount equal to the product of $13.2 million and the number of full calendar years, and any fraction thereof, in the period beginning on the first day of the calendar quarter in which such payment or other recovery is received and ending on December 31, 2028, subject to certain exceptions, and (3) any additional payment shall be paid 65.0% to Curis Royalty and 35.0% to the Purchasers. Following an event of default under the security agreement, the Agent has the right to stop all allocations of payments that would have otherwise been allocated to Curis Royalty pursuant to the foregoing two paragraphs and instead retain all such payments.
In addition, the Oberland Purchase Agreement provides that after the occurrence of an event of default by Curis Royalty under the security agreement, as described below, the Purchasers shall have the option, for a period of 180 days, to require Curis Royalty to repurchase the Purchased Receivables at a price, referred to as the Put/Call Price, equal to a percentage, beginning at a low triple digit percentage and increasing over time up to a low-mid triple digit percentage of the sum of the upfront purchase price and any portion of the milestone payments paid in a lump sum by the Purchasers, if any, minus certain payments previously received by the Purchasers with respect to the Purchased Receivables. Additionally, Curis Royalty shall have the option at any time to repurchase the Purchased Receivables at the Put/Call Price as of the date of such repurchase.
The Oberland Purchase Agreement will terminate upon the earlier to occur of (i) the date on which Curis Royalty’s rights to receive the Purchased Receivables owed by Genentech under the Genentech collaboration agreement have terminated in their entirety and (ii) the date on which payment in full of the Put/Call Price is received by the Purchasers pursuant to the Purchasers’ exercise of their put option or Curis Royalty’s exercise of its call right as described above.
Pursuant to the security agreement, Curis Royalty granted to the Agent a first priority lien and security interest in all of its assets and all real, intangible and personal property, including all of its right, title and interest in and to the Erivedge royalty payments pursuant to a security agreement. The security interest secures the obligations of Curis Royalty arising under the Oberland Purchase Agreement, the security agreement or otherwise with respect to the due and prompt payment of (i) an amount equal to the Put/Call Price and (ii) all fees, costs, expenses, indemnities and other payments of Curis Royalty under or in respect of the Oberland Purchase Agreement and the security agreement. Additionally, in connection with the transaction, Curis granted to the Agent a first priority lien and security interest of Curis’ equity interest in Curis Royalty pursuant to a pledge agreement.
Corporate Information
We were organized as a Delaware corporation in February 2000. We began our operations in July 2000 upon the completion of the merger of Creative BioMolecules, Inc., Ontogeny, Inc. and Reprogenesis, Inc. Our principal executive office is located at 4 Maguire Road, Lexington, MA 02421 and our telephone number is (617) 503-6500.
Curis® and the Curis logo are trademarks or registered trademarks of Curis, and Erivedge® is a trademark of Genentech. This annual report on Form 10-K may also contain trademarks and trade names of others.
Website Access to Reports
We maintain a website with the address www.curis.com. We are not including the information contained in our website as part of, or incorporating it by reference into, this annual report on Form 10-K. Our website address is included in this annual report on Form 10-K as an inactive textual reference only. We make available free of charge through our website our annual reports on Form 10-K, our quarterly reports on Form 10-Q, our current reports on Form 8-K and any such amendments to those reports as soon as reasonably practicable after we electronically file such material with, or furnish such material to, the Securities and Exchange Commission, or SEC. The SEC maintains a website, www.sec.gov, that contains reports, proxy and information statements and other information regarding issuers that file electronically with the SEC. The public may read and copy any materials we file with the Securities and Exchange Commission at the SEC’s Public Reference Room at 100 F Street, N.E., Washington, D.C. 20549. The public may obtain information on the operation of the public reference room by calling 1-800-SEC-0330. In addition, we provide paper copies of our filings free of charge upon request. We also make available on our website our corporate governance guidelines, the charters for our audit committee, compensation committee and nominating and corporate governance committee, and our code of business conduct and ethics, and such information is available in print to any stockholder of Curis who requests it.
Intellectual Property
Our policy is to obtain and enforce the patents and proprietary technology rights that are key to our business. We intend to continue to file U.S. and foreign patent applications to protect technology, inventions and improvements that are considered important to the development of our business. We will be able to protect our proprietary technologies from unauthorized use by third-parties only to the extent that our proprietary rights are covered by valid and enforceable patents or are effectively maintained as trade secrets.

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In the U.S., as of December 31, 2019, we have 71 issued or allowed patents expiring on various dates between 2020 and 2036 as well as numerous pending patent applications. We have foreign counterpart patent filings for most of our U.S. issued patents and patent applications. These patents and patent applications are directed to various inventions including compositions of matter, methods of making and using these compositions for multiple applications, methods for drug screening and discovery, developmental biological processes, and patents which relate to our proprietary technologies.
Fimepinostat and other Targeted Drug Candidates.    As of December 31, 2019, we have 26 issued or allowed U.S. patents that expire on various dates between 2027 and 2032, including patents covering the composition of matter for fimepinostat, which expires in 2032. We also have several U.S. and foreign utility patent applications directed to our novel small molecules. Our patents and patent applications cover compositions of matter, methods of manufacturing these molecules, formulations, and methods of using these molecules to treat a variety of therapeutic indications. We intend to continue to file additional U.S. and foreign applications as the programs progress.
CA-170, CA-4948, CA-327 and Aurigene Collaboration Programs.    In conjunction with the October 2015 exercise of options to license the PDL1/VISTA and IRAK-4 programs, the October 2016 exercise of our option to license the PDL1/TIM3 program under this collaboration, and the March 2018 exercise of our option to the fourth program in immuno-oncology, we obtained world-wide (except for India and Russia) exclusive licenses to the Aurigene intellectual property relevant to the program. The portfolio consists of filings which cover various genera of compounds from each program and methods of use thereof. As of December 31, 2019, there are 14 issued or allowed U.S. patents included in such filings.
Erivedge and the Hedgehog Signaling Pathway.    As of December 31, 2019, we have 31 issued U.S. patents expiring on various dates between 2020 and 2036, which relate to the Hedgehog signaling pathway, including patents covering Erivedge’s composition of matter, which expires in 2028. Our patents and patent applications cover proteins, and certain small molecule agonists and inhibitors of the Hedgehog signaling pathway, drug screening and discovery methods, as well as methods of using Hedgehog proteins, antibodies or small molecules to activate or inhibit the Hedgehog signaling pathway for a variety of therapeutic indications or diagnostic uses. In addition, we have filed foreign patent applications corresponding to many of the aforementioned U.S. filings that could provide additional patent protection for products that activate or inhibit the Hedgehog signaling pathway.
Our academic and research institution collaborators have certain rights to publish data and information regarding their discoveries to which we have rights. While we believe that the prepublication access to the data developed by our collaborators pursuant to our collaboration agreements will be sufficient to permit us to apply for patent protection in the areas in which we are interested in pursuing further research, there is considerable pressure on such institutions to rapidly publish discoveries arising from their efforts. This may affect our ability to obtain patent protection in the areas in which we may have an interest. In addition, these collaboration agreements typically contain provisions that provide us with, at a minimum, an option to license the institution’s rights to intellectual property arising from the collaboration.
We are party to various license agreements that give us rights to commercialize various technologies, particularly our Hedgehog signaling pathway technologies, and to use technologies in our research and development processes. The consideration payable in exchange for these licenses includes up-front fees, issuances of shares of common stock, annual royalties, milestone payments and royalties on net sales by our sub-licensees and us. The licensors may terminate these agreements if we fail to meet certain diligence requirements, fail to make payments or otherwise commit a material breach that is not cured after notice.
In addition, we depend upon trade secrets, know-how and continuing technological advances to develop and maintain our competitive position. To maintain the confidentiality of trade secrets and proprietary information, we require our employees, scientific advisors, consultants and collaborators, upon commencement of a relationship with us, to execute confidentiality agreements and, in the case of parties other than our research and development collaborators, to agree to assign their inventions to us. These agreements are designed to protect our proprietary information and to grant us ownership of technologies that are developed in connection with their relationship to us.
Research and Development Program
As of December 31, 2019, our research and development group consisted of 17 employees, including medical doctors, molecular biologists, cell biologists, and other clinical or scientific disciplines who seek to identify and develop new applications for our existing proprietary portfolio.
Government Regulation and Product Approvals
Government authorities in the United States, at the federal, state and local level, and in other countries and jurisdictions, including the European Union, extensively regulate, among other things, the research, development, testing, manufacture,

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quality control, approval, packaging, storage, recordkeeping, labeling, advertising, promotion, distribution, marketing, pricing, post approval monitoring and reporting, and import and export of pharmaceutical products. The processes for obtaining regulatory approvals in the United States and in foreign countries and jurisdictions, along with subsequent compliance with applicable statutes and regulations and other regulatory authorities, require the expenditure of substantial time and financial resources.
Review and Approval of Drugs in the United States
In the United States, the FDA approves and regulates drug products under the Federal Food, Drug, and Cosmetic Act, or FDCA, and implementing regulations. The failure to comply with applicable requirements under the FDCA and other applicable laws at any time during the product development process, approval process or after approval may subject an applicant and/or sponsor to a variety of administrative or judicial sanctions, including refusal by the FDA to approve pending applications, withdrawal of an approval, imposition of a clinical hold, issuance of warning letters and other types of letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, refusals of government contracts, restitution, disgorgement of profits, or civil or criminal investigations and penalties brought by the FDA and the Department of Justice or other governmental entities.
An applicant seeking approval to market and distribute a new drug product in the United States must typically undertake the following:
completion of preclinical laboratory tests, animal studies and formulation studies in compliance with the FDA’s good laboratory practice, or GLP, regulations;
submission to the FDA of an IND, which must take effect before human clinical trials may begin;
approval by an independent institutional review board, or IRB, representing each clinical site before each clinical trial may be initiated;
performance of adequate and well-controlled human clinical trials in accordance with good clinical practices, or GCP, to establish the safety and efficacy of the proposed drug product for each indication;
preparation and submission to the FDA of a new drug application, or NDA, requesting marketing for one or more proposed indications;
review of the candidate product by an FDA advisory committee, where appropriate or if applicable;
satisfactory completion of one or more FDA inspections of the manufacturing facility or facilities at which the product, or components thereof, are produced to assess compliance with current good manufacturing practices, or cGMP, requirements and to assure that the facilities, methods and controls are adequate to preserve the product’s identity, strength, quality and purity;
satisfactory completion of FDA audits of clinical trial sites to assure compliance with GCPs and the integrity of the clinical data;
payment of user fees and securing FDA approval of the NDA; and
compliance with any post approval requirements, including the potential requirement to implement a Risk Evaluation and Mitigation Strategy, or REMS, and the potential requirement to conduct post approval studies required by the FDA.
Preclinical Studies
Before an applicant begins testing a compound with potential therapeutic value in humans, the drug candidate enters the preclinical testing stage. Preclinical studies include laboratory evaluation of product chemistry, toxicity and formulation, and the purity and stability of the drug substance, as well as in vitro and animal studies to assess the potential safety and activity of the drug for initial testing in humans and to establish a rationale for therapeutic use. The conduct of preclinical studies is subject to federal regulations and requirements, including GLP regulations. The results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, are submitted to the FDA as part of an IND. Some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, may continue after the IND is submitted.
Applicants usually must complete some long-term preclinical testing, such as animal tests of reproductive adverse events and carcinogenicity, and must also develop additional information about the chemistry and physical characteristics of the drug and finalize a process for manufacturing the drug in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality and purity of the final drug product.

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Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.
The IND and IRB Processes
Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their voluntary informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the inclusion and exclusion criteria, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND.
An IND is an exemption from the FDCA that allows an unapproved drug to be shipped in interstate commerce for use in an investigational clinical trial and a request for FDA authorization to administer an investigational drug to humans. Such authorization must be secured prior to interstate shipment and administration of any new drug that is not the subject of an approved NDA. In support of a request for an IND, applicants must submit a protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND. In addition, the results of the preclinical tests, together with manufacturing information, analytical data, any available clinical data or literature and plans for clinical trials, among other things, are submitted to the FDA as part of an IND. The FDA requires a 30-day waiting period after the filing of each IND before clinical trials may begin. This waiting period is designed to allow the FDA to review the IND to determine whether human research subjects will be exposed to unreasonable health risks. At any time during this 30-day period, the FDA may raise concerns or questions about the conduct of the trials as outlined in the IND and impose a clinical hold. In this case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trials can begin.
Following commencement of a clinical trial under an IND, the FDA may also place a clinical hold or partial clinical hold on that trial. A clinical hold is an order issued by the FDA to the sponsor to delay a proposed clinical investigation or to suspend an ongoing investigation. A partial clinical hold is a delay or suspension of only part of the clinical work requested under the IND. For example, a specific protocol or part of a protocol is not allowed to proceed, while other protocols may do so. No more than 30 days after imposition of a clinical hold or partial clinical hold, the FDA will provide the sponsor a written explanation of the basis for the hold. Following issuance of a clinical hold or partial clinical hold, an investigation may only resume after the FDA has notified the sponsor that the investigation may proceed. The FDA will base that determination on information provided by the sponsor correcting the deficiencies previously cited or otherwise satisfying the FDA that the investigation can proceed.
A sponsor may choose, but is not required, to conduct a foreign clinical study under an IND. When a foreign clinical study is conducted under an IND, all FDA IND requirements must be met unless waived. When the foreign clinical study is not conducted under an IND, the sponsor must ensure that the study complies with FDA certain regulatory requirements in order to use the study as support for an IND or application for marketing approval. Specifically, on April 28, 2008, the FDA amended its regulations governing the acceptance of foreign clinical studies not conducted under an investigational new drug application as support for an IND or a new drug application. The final rule provides that such studies must be conducted in accordance with GCP, including review and approval by an independent ethics committee, or IEC, and informed consent from subjects. The GCP requirements in the final rule encompass both ethical and data integrity standards for clinical studies. The FDA’s regulations are intended to help ensure the protection of human subjects enrolled in non-IND foreign clinical studies, as well as the quality and integrity of the resulting data. They further help ensure that non-IND foreign studies are conducted in a manner comparable to that required for IND studies.
In addition to the foregoing IND requirements, an IRB representing each institution participating in the clinical trial must review and approve the plan for any clinical trial before it commences at that institution, and the IRB must conduct a continuing review and reapprove the study at least annually. The IRB must review and approve, among other things, the study protocol and informed consent information to be provided to study subjects. An IRB must operate in compliance with FDA regulations. An IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the product candidate has been associated with unexpected serious harm to patients.
Additionally, some trials are overseen by an independent group of qualified experts organized by the trial sponsor, known as a data safety monitoring board or committee or DSMB. This group provides authorization for whether or not a trial may move forward at designated check points based on access that only the group maintains to available data from the study. Suspension or termination of development during any phase of clinical trials can occur if it is determined that the participants or patients are being exposed to an unacceptable health risk. Other reasons for suspension or termination may be made by us based on evolving business objectives and/or competitive climate.

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Information about certain clinical trials must be submitted within specific timeframes to the National Institutes of Health, or NIH, for public dissemination on its ClinicalTrials.gov website.
Expanded Access to an Investigational Drug for Treatment Use
Expanded access, sometimes called “compassionate use,” is the use of investigational new drug products outside of clinical trials to treat patients with serious or immediately life-threatening diseases or conditions when there are no comparable or satisfactory alternative treatment options. The rules and regulations related to expanded access are intended to improve access to investigational drugs for patients who may benefit from investigational therapies. FDA regulations allow access to investigational drugs under an IND by the company or the treating physician for treatment purposes on a case-by-case basis for: individual patients (single-patient IND applications for treatment in emergency settings and non-emergency settings); intermediate-size patient populations; and larger populations for use of the drug under a treatment protocol or Treatment IND Application.
When considering an IND application for expanded access to an investigational product with the purpose of treating a patient or a group of patients, the sponsor and treating physicians or investigators will determine suitability when all of the following criteria apply: patient(s) have a serious or immediately life-threatening disease or condition, and there is no comparable or satisfactory alternative therapy to diagnose, monitor, or treat the disease or condition; the potential patient benefit justifies the potential risks of the treatment and the potential risks are not unreasonable in the context or condition to be treated; and the expanded use of the investigational drug for the requested treatment will not interfere with the initiation, conduct, or completion of clinical investigations that could support marketing approval of the product or otherwise compromise the potential development of the product.
On December 13, 2016, the 21st Century Cures Act established (and the 2017 Food and Drug Administration Reauthorization Act later amended) a requirement that sponsors of one or more investigational drugs for the treatment of a serious disease(s) or condition(s) make publicly available their policy for evaluating and responding to requests for expanded access for individual patients. Although these requirements were rolled out over time, they have now come into full effect. This provision requires drug and biologic companies to make publicly available their policies for expanded access for individual patient access to products intended for serious diseases. Sponsors are required to make such policies publicly available upon the earlier of initiation of a Phase 2 or Phase 3 study; or 15 days after the drug or biologic receives designation as a breakthrough therapy, fast track product, or regenerative medicine advanced therapy. 
In addition, on May 30, 2018, the Right to Try Act, was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a Phase I clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA permission under the FDA expanded access program. There is no obligation for a drug manufacturer to make its drug products available to eligible patients as a result of the Right to Try Act, but the manufacturer must develop an internal policy and respond to patient requests according to that policy.

Human Clinical Trials in Support of an NDA

Clinical trials involve the administration of the investigational product to human subjects under the supervision of qualified investigators in accordance with GCP requirements, which include, among other things, the requirement that all research subjects provide their voluntary informed consent in writing before their participation in any clinical trial. Clinical trials are conducted under written study protocols detailing, among other things, the inclusion and exclusion criteria, the objectives of the study, the parameters to be used in monitoring safety and the effectiveness criteria to be evaluated. A protocol for each clinical trial and any subsequent protocol amendments must be submitted to the FDA as part of the IND.
Human clinical trials are typically conducted in four sequential phases, which may overlap or be combined:
Phase 1.    The drug is initially introduced into a small number of healthy human subjects or, in certain indications such as cancer, patients with the target disease or condition (e.g., cancer) and tested for safety, dosage tolerance, absorption, distribution, metabolism, excretion and, if possible, to gain an early indication of its effectiveness and to determine optimal dosage.
Phase 2.    The drug is administered to a limited patient population to identify possible adverse effects and safety risks, to preliminarily evaluate the efficacy of the product for specific targeted diseases and to determine dosage tolerance and optimal dosage, and regimen.
Phase 3.    These clinical trials are commonly referred to as “pivotal” studies, which denotes a study which presents the data that the FDA or other relevant regulatory agency will use to determine whether or not to approve a drug. The drug is administered to an expanded patient population, generally at geographically dispersed clinical trial sites, in

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well-controlled clinical trials to generate enough data to statistically evaluate the efficacy and safety of the product for approval, to establish the overall risk-benefit profile of the product and to provide adequate information for the labeling of the product.
Phase 4.    Post approval studies may be required after initial marketing approval. These studies are used to gain additional experience from the treatment of patients in the intended therapeutic indication.
Progress reports detailing the results of the clinical trials must be submitted at least annually to the FDA and more frequently if serious adverse events occur. In addition, IND safety reports must be submitted to the FDA for any of the following: serious and unexpected suspected adverse reactions; findings from other studies or animal or in vitro testing that suggest a significant risk in humans exposed to the drug; and any clinically important increase in the case of a serious suspected adverse reaction over that listed in the protocol or investigator brochure. The FDA or the sponsor or the data monitoring committee may suspend or terminate a clinical trial at any time on various grounds, including a finding that the research subjects are being exposed to an unacceptable health risk. Similarly, an IRB can suspend or terminate approval of a clinical trial at its institution, or an institution it represents, if the clinical trial is not being conducted in accordance with the IRB’s requirements or if the drug has been associated with unexpected serious harm to patients. The FDA will typically inspect one or more clinical sites to assure compliance with GCP and the integrity of the clinical data submitted.
Concurrent with clinical trials, companies often complete additional animal studies and must also develop additional information about the chemistry and physical characteristics of the drug as well as finalize a process for manufacturing the product in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the drug candidate and, among other things, must develop methods for testing the identity, strength, quality, purity, and potency of the final drug. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate that the drug candidate does not undergo unacceptable deterioration over its shelf life.
Submission of an NDA to the FDA
Assuming successful completion of required clinical testing and other requirements, the results of the preclinical studies and clinical trials, together with detailed information relating to the product’s chemistry, manufacture, controls and proposed labeling, among other things, are submitted to the FDA as part of an NDA requesting approval to market the drug product for one or more indications. Under federal law, the submission of most NDAs is subject to an application user fee, which for federal fiscal year 2020 is $2.9 million for an application requiring clinical data. The sponsor of an approved NDA is also subject to an annual program fee, which for fiscal year 2020 is $0.3 million. Certain exceptions and waivers are available for some of these fees, such as an exception from the application fee for drugs with orphan designation and a waiver for certain small businesses.
The FDA conducts a preliminary review of an NDA within 60 days of its receipt and strives to inform the sponsor by the 74th day after the FDA’s receipt of the submission to determine whether the application is sufficiently complete to permit substantive review. The FDA may request additional information rather than accept an NDA for filing. In this event, the application must be resubmitted with the additional information. The resubmitted application is also subject to review before the FDA accepts it for filing. Once the submission is accepted for filing, the FDA begins an in-depth substantive review. The FDA has agreed to certain performance goals in the review process of NDAs. Most such applications are meant to be reviewed within ten months from the date of filing, and most applications for NMEs for “priority review” products are meant to be reviewed within six months of filing. The review process may be extended by the FDA for three additional months to consider new information or clarification provided by the applicant to address an outstanding deficiency identified by the FDA following the original submission.
Before approving an NDA, the FDA typically will inspect the facility or facilities where the product is or will be manufactured. These pre-approval inspections may cover all facilities associated with an NDA submission, including drug component manufacturing, such as active pharmaceutical ingredients), finished drug product manufacturing, and control testing laboratories. The FDA will not approve an application unless it determines that the manufacturing processes and facilities are in compliance with cGMP requirements and adequate to assure consistent production of the product within required specifications. Additionally, before approving an NDA, the FDA will typically inspect one or more clinical sites to assure compliance with GCP. The FDA must implement a protocol to expedite review of responses to inspection reports
pertaining to certain drug applications, including applications for drugs in a shortage or drugs for which approval is
dependent on remediation of conditions identified in the inspection report.
In addition, as a condition of approval, the FDA may require an applicant to develop a REMS. REMS use risk minimization strategies beyond the professional labeling to ensure that the benefits of the product outweigh the potential risks. To determine whether a REMS is needed, the FDA will consider the size of the population likely to use the product, seriousness

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of the disease, expected benefit of the product, expected duration of treatment, seriousness of known or potential adverse events, and whether the product is a new molecular entity. REMS can include medication guides, physician communication plans for healthcare professionals, and elements to assure safe use, or ETASU. ETASU may include, but are not limited to, special training or certification for prescribing or dispensing, dispensing only under certain circumstances, special monitoring, and the use of patient registries. The FDA may require a REMS before approval or post approval if it becomes aware of a serious risk associated with use of the product. The requirement for a REMS can materially affect the potential market and profitability of a product.
The FDA may refer an application for a novel drug to an advisory committee or explain why such referral was not made. Typically, an advisory committee is a panel of independent experts, including clinicians and other scientific experts, that reviews, evaluates and provides a recommendation as to whether the application should be approved and under what conditions. The FDA is not bound by the recommendations of an advisory committee, but it considers such recommendations carefully when making decisions.
Fast Track, Breakthrough Therapy, and Priority Review
The FDA is authorized to designate certain products with special designations designed to expedite development and/or review if they are intended to address an unmet medical need in the treatment of a serious or life-threatening disease or condition. These programs are referred to as fast track designation, breakthrough therapy designation and priority review designation.
Specifically, the FDA may designate a product for Fast Track review if it is intended, whether alone or in combination with one or more other products, for the treatment of a serious or life-threatening disease or condition, and it demonstrates the potential to address unmet medical needs for such a disease or condition. For Fast Track products, sponsors may have greater interactions with the FDA and the FDA may initiate review of sections of a Fast Track product’s application before the application is complete. This rolling review may be available if the FDA determines, after preliminary evaluation of clinical data submitted by the sponsor, that a Fast Track product may be effective. The sponsor must also provide, and the FDA must approve, a schedule for the submission of the remaining information and the sponsor must pay applicable user fees. However, the FDA’s time period goal for reviewing a Fast Track application does not begin until the last section of the application is submitted. In addition, the Fast Track designation may be withdrawn by the FDA if the FDA believes that the designation is no longer supported by data emerging in the clinical trial process.
Second, a product may be designated as a Breakthrough Therapy if it is intended, either alone or in combination with one or more other products, to treat a serious or life-threatening disease or condition and preliminary clinical evidence indicates that the product may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. The FDA may take certain actions with respect to Breakthrough Therapies, including holding meetings with the sponsor throughout the development process; providing timely advice to the product sponsor regarding development and approval; involving more senior staff in the review process; assigning a cross-disciplinary project lead for the review team; and taking other steps to design the clinical trials in an efficient manner.
Lastly, the FDA may designate a product for priority review if it is a product that treats a serious condition and, if approved, would provide a significant improvement in safety or effectiveness. The FDA determines, on a case- by-case basis, whether the proposed product represents a significant improvement when compared with other available therapies. Significant improvement may be illustrated by evidence of increased effectiveness in the treatment of a condition, elimination or substantial reduction of a treatment-limiting product reaction, documented enhancement of patient compliance that may lead to improvement in serious outcomes, and evidence of safety and effectiveness in a new subpopulation. A priority designation is intended to direct overall attention and resources to the evaluation of such applications, and to shorten the FDA’s goal for taking action on a marketing application from ten months to six months.
Accelerated Approval Pathway
The FDA may grant accelerated approval to a product for a serious or life-threatening condition that provides meaningful therapeutic advantage to patients over existing treatments based upon a determination that the product has an effect on a surrogate endpoint that is reasonably likely to predict clinical benefit. The FDA may also grant accelerated approval for such a condition when the product has an effect on an intermediate clinical endpoint that can be measured earlier than an effect on irreversible morbidity or mortality, or IMM, and that is reasonably likely to predict an effect on IMM or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments. Products granted accelerated approval must meet the same statutory standards for safety and effectiveness as those granted traditional approval.
For the purposes of accelerated approval, a surrogate endpoint is a marker, such as a laboratory measurement, radiographic image, physical sign, or other measure that is thought to predict clinical benefit, but is not itself a measure of

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clinical benefit. Surrogate endpoints can often be measured more easily or more rapidly than clinical endpoints. An intermediate clinical endpoint is a measurement of a therapeutic effect that is considered reasonably likely to predict the clinical benefit of a product, such as an effect on IMM. The FDA has limited experience with accelerated approvals based on intermediate clinical endpoints, but has indicated that such endpoints generally may support accelerated approval where the therapeutic effect measured by the endpoint is not itself a clinical benefit and basis for traditional approval, if there is a basis for concluding that the therapeutic effect is reasonably likely to predict the ultimate clinical benefit of a product.
The accelerated approval pathway is most often used in settings in which the course of a disease is long and an extended period of time is required to measure the intended clinical benefit of a product, even if the effect on the surrogate or intermediate clinical endpoint occurs rapidly. Thus, accelerated approval has been used extensively in the development and approval of products for treatment of a variety of cancers in which the goal of therapy is generally to improve survival or decrease morbidity and the duration of the typical disease course requires lengthy and sometimes large trials to demonstrate a clinical or survival benefit.
The accelerated approval pathway is usually contingent on a sponsor’s agreement to conduct, in a diligent manner, additional post approval confirmatory studies to verify and describe the product’s clinical benefit. As a result, a drug candidate approved on this basis is subject to rigorous post marketing compliance requirements, including the completion of Phase 4 or post approval clinical trials to confirm the effect on the clinical endpoint. Failure to conduct required post approval studies, or confirm a clinical benefit during post marketing studies, would allow the FDA to withdraw the product from the market on an expedited basis. All promotional materials for drug candidates approved under accelerated regulations are subject to prior review by the FDA.
The FDA’s Decision on an NDA
On the basis of the FDA’s evaluation of the NDA and accompanying information, including the results of the inspection of the manufacturing facilities, the FDA may issue an approval letter or a complete response letter. An approval letter authorizes commercial marketing of the product with specific prescribing information for specific indications. A complete response letter generally outlines the deficiencies in the submission and may require substantial additional testing or information in order for the FDA to reconsider the application. If and when those deficiencies have been addressed to the FDA’s satisfaction in a resubmission of the NDA, the FDA will issue an approval letter. The FDA has committed to reviewing such resubmissions in two or six months depending on the type of information included. Even with submission of this additional information, the FDA ultimately may decide that the application does not satisfy the regulatory criteria for approval.
If the FDA approves a product, it may limit the approved indications for use for the product, require that contraindications, warnings or precautions be included in the product labeling, require that post approval studies, including Phase 4 clinical trials, be conducted to further assess the drug’s safety after approval, require testing and surveillance programs to monitor the product after commercialization, or impose other conditions, including distribution restrictions or other risk management mechanisms, including REMS, which can materially affect the potential market and profitability of the product. The FDA may prevent or limit further marketing of a product based on the results of post market studies or surveillance programs. After approval, many types of changes to the approved product, such as adding new indications, manufacturing changes and additional labeling claims, are subject to further testing requirements and FDA review and approval.
Post Approval Requirements
Drugs manufactured or distributed pursuant to FDA approvals are subject to pervasive and continuing regulation by the FDA, including, among other things, requirements relating to recordkeeping, periodic reporting, product sampling and distribution, advertising and promotion and reporting of adverse experiences with the product. After approval, most changes to the approved product, such as adding new indications or other labeling claims, are subject to prior FDA review and approval. There also are continuing, annual user fee requirements for any marketed products and the establishments at which such products are manufactured, as well as new application fees for supplemental applications with clinical data.
In addition, drug manufacturers and other entities involved in the manufacture and distribution of approved drugs are required to register their establishments with the FDA and state agencies, and are subject to periodic unannounced inspections by the FDA and these state agencies for compliance with cGMP requirements. Changes to the manufacturing process are strictly regulated and often require prior FDA approval before being implemented. FDA regulations also require investigation and correction of any deviations from cGMP and impose reporting and documentation requirements upon the sponsor and any third-party manufacturers that the sponsor may decide to use. Accordingly, manufacturers must continue to expend time, money, and effort in the area of production and quality control to maintain cGMP compliance.
Once an approval is granted, the FDA may withdraw the approval if compliance with regulatory requirements and standards is not maintained or if problems occur after the product reaches the market. Later discovery of previously unknown problems with a product, including adverse events of unanticipated severity or frequency, or with manufacturing processes, or

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failure to comply with regulatory requirements, may result in revisions to the approved labeling to add new safety information; imposition of post market studies or clinical trials to assess new safety risks; or imposition of distribution or other restrictions under a REMS program. Other potential consequences include, among other things:
restrictions on the marketing or manufacturing of the product, suspension of the approval, or complete withdrawal of the product from the market or product recalls;
fines, warning letters or holds on post approval clinical trials;
refusal of the FDA to approve pending NDAs or supplements to approved NDAs, or suspension or revocation of product license approvals;
product seizure or detention, or refusal to permit the import or export of products; or
injunctions or the imposition of civil or criminal penalties.
The FDA strictly regulates the marketing, labeling, advertising and promotion of prescription drug products placed on the market. This regulation includes, among other things, standards and regulations for direct-to-consumer advertising, communications regarding unapproved uses, industry sponsored scientific and educational activities, and promotional activities involving the Internet and social media. Promotional claims about a drug’s safety or effectiveness are prohibited before the drug is approved. After approval, a drug product generally may not be promoted for uses that are not approved by the FDA, as reflected in the product’s prescribing information. In the United States, healthcare professionals are generally permitted to prescribe drugs for such uses not described in the drug’s labeling, known as off label uses, because the FDA does not regulate the practice of medicine. However, FDA regulations impose rigorous restrictions on manufacturers’ communications, prohibiting the promotion of off label uses. It may be permissible, under very specific, narrow conditions, for a manufacturer to engage in nonpromotional, non-misleading communication regarding off label information, such as distributing scientific or medical journal information. If a company is found to have promoted off label uses, it may become subject to adverse public relations and administrative and judicial enforcement by the FDA, the Department of Justice, or the Office of the Inspector General of the Department of Health and Human Services, as well as state authorities. This could subject a company to a range of penalties that could have a significant commercial impact, including civil and criminal fines and agreements that materially restrict the manner in which a company promotes or distributes drug products. The federal government has levied large civil and criminal fines against companies for alleged improper promotion, and has also requested that companies enter into consent decrees or permanent injunctions under which specified promotional conduct is changed or curtailed.
In addition, the distribution of prescription pharmaceutical products is subject to the Prescription Drug Marketing Act, or PDMA, and its implementation regulations, as well as the Drug Supply Chain Security Act, or DSCSA, which regulates the distribution of and tracing of prescription drugs and prescription drug samples at the federal level, and sets minimum standards for the regulation of drug distributors by the states. The PDMA, its implementing regulations and state laws limit the distribution of prescription pharmaceutical product samples, and the DSCSA imposes requirements to ensure accountability in distribution and to identify and remove counterfeit and other illegitimate products from the market.

505(b)(2) NDAs

NDAs for most new drug products are based on two full clinical studies which must contain substantial evidence of the safety and efficacy of the proposed new product. These applications are submitted under Section 505(b)(1) of the FDCA. The FDA is, however, authorized to approve an alternative type of NDA under Section 505(b)(2) of the FDCA. This type of application allows the applicant to rely, in part, on the FDA’s previous findings of safety and efficacy for a similar product, or published literature. Specifically, Section 505(b)(2) applies to NDAs for a drug for which the investigations made to show whether or not the drug is safe for use and effective in use and relied upon by the applicant for approval of the application “were not conducted by or for the applicant and for which the applicant has not obtained a right of reference or use from the person by or for whom the investigations were conducted.”

Thus, Section 505(b)(2) authorizes the FDA to approve an NDA based on safety and effectiveness data that were not developed by the applicant. NDAs filed under Section 505(b)(2) may provide an alternate and potentially more expeditious pathway to FDA approval for new or improved formulations or new uses of previously approved products. If the Section 505(b)(2) applicant can establish that reliance on the FDA’s previous approval is scientifically appropriate, the applicant may eliminate the need to conduct certain preclinical or clinical studies of the new product. The FDA may also require companies to perform additional studies or measurements to support the change from the approved product. The FDA may then approve the new drug candidate for all or some of the label indications for which the referenced product has been approved, as well as for any new indication sought by the Section 505(b)(2) applicant.

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Abbreviated New Drug Applications for Generic Drugs
In 1984, with passage of the Drug Price Competition, Patent Term Restoration Act of 1984, or the Hatch-Waxman Amendments to the FDCA, Congress established an abbreviated regulatory scheme authorizing the FDA to approve generic drugs that are shown to contain the same active ingredients as, and to be bioequivalent to, drugs previously approved by the FDA pursuant to NDAs. To obtain approval of a generic drug, an applicant must submit an abbreviated new drug application, or ANDA, to the agency. An ANDA is a comprehensive submission that contains, among other things, data and information pertaining to the active pharmaceutical ingredient, bioequivalence, drug product formulation, specifications and stability of the generic drug, as well as analytical methods, manufacturing process validation data and quality control procedures. ANDAs are “abbreviated” because they generally do not include preclinical and clinical data to demonstrate safety and effectiveness. Instead, in support of such applications, a generic manufacturer may rely on the preclinical and clinical testing previously conducted for a drug product previously approved under an NDA, known as the reference-listed drug, or RLD.
Specifically, in order for an ANDA to be approved, the FDA must find that the generic version is identical to the RLD with respect to the active ingredients, the route of administration, the dosage form, the strength of the drug and the conditions of use of the drug. At the same time, the FDA must also determine that the generic drug is “bioequivalent” to the innovator drug. Under the statute, a generic drug is bioequivalent to a RLD if “the rate and extent of absorption of the drug do not show a significant difference from the rate and extent of absorption of the listed drug...”
Upon approval of an ANDA, the FDA indicates whether the generic product is “therapeutically equivalent” to the RLD in its publication “Approved Drug Products with Therapeutic Equivalence Evaluations,” also referred to as the “Orange Book.” Physicians and pharmacists consider a therapeutic equivalent generic drug to be fully substitutable for the RLD. In addition, by operation of certain state laws and numerous health insurance programs, the FDA’s designation of therapeutic equivalence often results in substitution of the generic drug without the knowledge or consent of either the prescribing physician or patient.
Under the Hatch-Waxman Amendments, the FDA may not approve an ANDA until any applicable period of non-patent exclusivity for the RLD has expired. The FDCA provides a period of five years of non-patent data exclusivity for a new drug containing a new chemical entity. For the purposes of this provision, a new chemical entity, or NCE, is a drug that contains no active moiety that has previously been approved by the FDA in any other NDA. An active moiety is the molecule or ion responsible for the physiological or pharmacological action of the drug substance. In cases where such NCE exclusivity has been granted, an ANDA may not be filed with the FDA until the expiration of five years unless the submission is accompanied by a Paragraph IV certification, in which case the applicant may submit its application four years following the original product approval.
The FDCA also provides for a period of three years of exclusivity if the NDA includes reports of one or more new clinical investigations, other than bioavailability or bioequivalence studies, that were conducted by or for the applicant and are essential to the approval of the application. This three-year exclusivity period often protects changes to a previously approved drug product, such as a new dosage form, route of administration, combination or indication. Three-year exclusivity would be available for a drug product that contains a previously approved active moiety, provided the statutory requirement for a new clinical investigation is satisfied. Unlike five-year NCE exclusivity, an award of three-year exclusivity does not block the FDA from accepting ANDAs seeking approval for generic versions of the drug as of the date of approval of the original drug product. The FDA typically makes decisions about awards of data exclusivity shortly before a product is approved.
The FDA must establish a priority review track for certain generic drugs, requiring the FDA to review a drug application within eight (8) months for a drug that has three (3) or fewer approved drugs listed in the Orange Book and is no longer protected by any patent or regulatory exclusivities, or is on the FDA’s drug shortage list. The new legislation also authorizes FDA to expedite review of ‘‘competitor generic therapies’’ or drugs with inadequate generic competition, including holding meetings with or providing advice to the drug sponsor prior to submission of the application.
Hatch-Waxman Patent Certification and the 30-Month Stay
Upon approval of an NDA or a supplement thereto, NDA sponsors are required to list with the FDA each patent with claims that cover the applicant’s product or an approved method of using the product. Each of the patents listed by the NDA sponsor is published in the Orange Book. When an ANDA applicant files its application with the FDA, the applicant is required to certify to the FDA concerning any patents listed for the reference product in the Orange Book, except for patents covering methods of use for which the ANDA applicant is not seeking approval. To the extent that the Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would.
Specifically, the applicant must certify with respect to each patent that:
the required patent information has not been filed;

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the listed patent has expired;
the listed patent has not expired, but will expire on a particular date and approval is sought after patent expiration; or
the listed patent is invalid, unenforceable or will not be infringed by the new product.
A certification that the new product will not infringe the already approved product’s listed patents or that such patents are invalid or unenforceable is called a Paragraph IV certification. If the applicant does not challenge the listed patents or indicates that it is not seeking approval of a patented method of use, the application will not be approved until all the listed patents claiming the referenced product have expired (other than method of use patents involving indications for which the applicant is not seeking approval).
If the ANDA applicant has provided a Paragraph IV certification to the FDA, the applicant must also send notice of the Paragraph IV certification to the NDA and patent holders once the ANDA has been accepted for filing by the FDA. The NDA and patent holders may then initiate a patent infringement lawsuit in response to the notice of the Paragraph IV certification. The filing of a patent infringement lawsuit within 45 days after the receipt of a Paragraph IV certification automatically prevents the FDA from approving the ANDA until the earlier of 30 months after the receipt of the Paragraph IV notice, expiration of the patent, or a decision in the infringement case that is favorable to the ANDA applicant.
To the extent that the Section 505(b)(2) applicant is relying on studies conducted for an already approved product, the applicant is required to certify to the FDA concerning any patents listed for the approved product in the Orange Book to the same extent that an ANDA applicant would. As a result, approval of a Section 505(b)(2) NDA can be stalled until all the listed patents claiming the referenced product have expired, until any non-patent exclusivity, such as exclusivity for obtaining approval of a new chemical entity, listed in the Orange Book for the referenced product has expired, and, in the case of a Paragraph IV certification and subsequent patent infringement suit, until the earlier of 30 months, settlement of the lawsuit or a decision in the infringement case that is favorable to the Section 505(b)(2) applicant.
Pediatric Studies and Exclusivity
Under the Pediatric Research Equity Act of 2003, an NDA or supplement thereto must contain data that are adequate to assess the safety and effectiveness of the drug product for the claimed indications in all relevant pediatric subpopulations, and to support dosing and administration for each pediatric subpopulation for which the product is safe and effective. With enactment of the Food and Drug Administration Safety and Innovation Act or FDASIA, in 2012, sponsors must also submit pediatric study plans prior to the assessment data. Those plans must contain an outline of the proposed pediatric study or studies the applicant plans to conduct, including study objectives and design, any deferral or waiver requests, and other information required by regulation. The applicant, the FDA, and the FDA’s internal review committee must then review the information submitted, consult with each other, and agree upon a final plan. The FDA or the applicant may request an amendment to the plan at any time. For drugs intended to treat a serious or life-threatening disease or condition, the FDA must, upon the request of an applicant, meet to discuss preparation of the initial pediatric study plan or to discuss deferral or waiver of pediatric assessments. In addition, FDA will meet early in the development process to discuss pediatric study plans with drug sponsors. The legislation requires FDA to meet with drug sponsors by no later than the end-of-phase 1 meeting for serious or life-threatening diseases and by no later than ninety (90) days after FDA’s receipt of the study plan.
The FDA may, on its own initiative or at the request of the applicant, grant deferrals for submission of some or all pediatric data until after approval of the product for use in adults, or full or partial waivers from the pediatric data requirements. Additional requirements and procedures relating to deferral requests and requests for extension of deferrals are contained in FDASIA. Unless and until FDA promulgates a regulation stating otherwise, the pediatric data requirements do not apply to products with orphan designation.
The FDA Reauthorization Act of 2017 established new requirements to govern certain molecularly targeted cancer indications. Any company that submits an NDA three years after the date of enactment of that statute must submit pediatric assessments with the NDA if the drug is intended for the treatment of an adult cancer and is directed at a molecular target that FDA determines to be substantially relevant to the growth or progression of a pediatric cancer unless the required investigations are waived or deferred. The investigation must be designed to yield clinically meaningful pediatric study data regarding the dosing, safety and preliminary efficacy to inform pediatric labeling for the product.
Pediatric exclusivity is another type of non-patent marketing exclusivity in the United States and, if granted, provides for the attachment of an additional six months of marketing protection to the term of any existing regulatory exclusivity, including the non-patent and orphan exclusivity. This six-month exclusivity may be granted if an NDA sponsor submits pediatric data that fairly respond to a written request from the FDA for such data. The data do not need to show the product to be effective in the pediatric population studied; rather, if the clinical trial is deemed to fairly respond to the FDA’s request, the additional protection is granted. If reports of requested pediatric studies are submitted to and accepted by the FDA within the statutory

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time limits, whatever statutory or regulatory periods of exclusivity or patent protection cover the product, are extended by six months. This is not a patent term extension, but it effectively extends the regulatory period during which the FDA cannot approve another application. With regard to patents, the six-month pediatric exclusivity period will not attach to any patents for which an ANDA or 505(b)(2) applicant submitted a paragraph IV patent certification, unless the NDA sponsor or patent owner first obtains a court determination that the patent is valid and infringed by the proposed product.
Orphan Drug Designation and Exclusivity
Under the Orphan Drug Act of 1983, the FDA may designate a drug product as an “orphan drug” if it is intended to treat a rare disease or condition (generally meaning that it affects fewer than 200,000 individuals in the United States, or more in cases in which there is no reasonable expectation that the cost of developing and making a drug product available in the United States for treatment of the disease or condition will be recovered from sales of the product.) A company must request orphan product designation before submitting an NDA. If the request is granted, the FDA will disclose the identity of the therapeutic agent and its potential use. Orphan product designation does not convey any advantage in or shorten the duration of the regulatory review and approval process.
If a product with orphan status receives the first FDA approval for the disease or condition for which it has such designation or for a select indication or use within the rare disease or condition for which it was designated, the product generally will be receiving orphan product exclusivity. Orphan product exclusivity means that the FDA may not approve any other applications for the same product for the same indication for seven years, except in certain limited circumstances. Competitors may receive approval of different products for the indication for which the orphan product has exclusivity and may obtain approval for the same product but for a different indication. If a drug or drug product designated as an orphan product ultimately receives marketing approval for an indication broader than what was designated in its orphan product application, it may not be entitled to exclusivity.
Orphan drug exclusivity will not bar approval of another orphan drug under certain circumstances, including if a subsequent product with the same drug for the same indication is shown to be clinically superior to the approved product on the basis of greater efficacy or safety, or providing a major contribution to patient care, or if the company with orphan drug exclusivity is not able to meet market demand. The new legislation reverses prior precedent holding that the Orphan Drug Act
unambiguously required the FDA to recognize orphan exclusivity regardless of a showing of clinical superiority.
Patent Term Restoration and Extension
A patent claiming a new drug product of use may be eligible for a limited patent term extension under the Hatch-Waxman Act, which permits a patent restoration of up to five years for patent term lost during product development and the FDA regulatory review. The restoration period granted is typically one-half the time between the effective date of an IND and the submission date of an NDA, plus the time between the submission date of an NDA and the ultimate approval date. Patent term restoration cannot be used to extend the remaining term of a patent past a total of 14 years from the product’s approval date. Only one patent applicable to an approved drug product is eligible for the extension, and the application for the extension must be submitted prior to the expiration of the patent in question. A patent that covers multiple drugs for which approval is sought can only be extended in connection with one of the approvals. The U.S. Patent and Trademark Office reviews and approves the application for any patent term extension or restoration in consultation with the FDA.
Review and Approval of Drugs in Europe and other Foreign Jurisdictions
In addition to regulations in the United States, a manufacturer is subject to a variety of regulations in foreign jurisdictions to the extent the manufacturer chooses to sell any drug products in those foreign countries. Even if a manufacturer obtains FDA approval of a product, it must still obtain the requisite approvals from regulatory authorities in foreign countries prior to the commencement of clinical trials or marketing of the product in those countries. To obtain regulatory approval of an investigational drug or biological product in the European Union, or EU, a manufacturer must submit a marketing authorization application to the European Medicines Agency, or EMA. For other countries outside of the European Union, such as countries in Eastern Europe, Latin America or Asia, the requirements governing the conduct of clinical trials, product licensing, pricing and reimbursement vary from country to country. In all cases, clinical trials are to be conducted in accordance with GCP and the applicable regulatory requirements and the ethical principles that have their origin in the Declaration of Helsinki. The time required to obtain approval in other countries and jurisdictions might differ from and be longer than that required to obtain FDA approval. Regulatory approval in one country or jurisdiction does not ensure regulatory approval in another, but a failure or delay in obtaining regulatory approval in one country or jurisdiction may negatively impact the regulatory process in others.
Clinical Trial Approval in the EU
Requirements for the conduct of clinical trials in the European Union including GCP are set forth in the Clinical Trials Directive 2001/20/EC and the GCP Directive 2005/28/EC. Pursuant to Directive 2001/20/EC and Directive 2005/28/EC, as

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amended, a system for the approval of clinical trials in the European Union has been implemented through national legislation of the E.U. member states. Under this system, approval must be obtained from the competent national authority of each E.U. member state in which a study is planned to be conducted. To this end, a CTA is submitted, which must be supported by an investigational medicinal product dossier, or IMPD, and further supporting information prescribed by Directive 2001/20/EC and Directive 2005/28/EC and other applicable guidance documents. Furthermore, a clinical trial may only be started after a competent ethics committee has issued a favorable opinion on the clinical trial application in that country.
In April 2014, the E.U. passed the new Clinical Trials Regulation (EU) No 536/2014, which will replace the current Clinical Trials Directive 2001/20/EC. To ensure that the rules for clinical trials are identical throughout the European Union, the new E.U. clinical trials legislation was passed as a regulation that is directly applicable in all E.U. member states. All clinical trials performed in the European Union are required to be conducted in accordance with the Clinical Trials Directive 2001/20/EC until the new Clinical Trials Regulation (EU) No 536/2014 becomes applicable. As of January 1, 2020, the website of the European Commission reported that the implementation of the new Clinical Trials Regulation was dependent on the development of a fully functional clinical trials portal and database, which would be confirmed by an independent audit, and that the new legislation would come into effect six months after the European Commission publishes a notice of this confirmation. The website indicated that the audit was expected to commence in December 2020.The Clinical Trials Directive 2001/20/EC will, however, still apply three years from the date of entry into application of the Clinical Trials Regulation to (i) clinical trials applications submitted before the entry into application and (ii) clinical trials applications submitted within one year after the entry into application if the sponsor opts for old system.
The new Clinical Trials Regulation aims to simplify and streamline the approval of clinical trial in the European Union. The main characteristics of the regulation include: a streamlined application procedure via a single entry point, the E.U. portal; a single set of documents to be prepared and submitted for the application as well as simplified reporting procedures that will spare sponsors from submitting broadly identical information separately to various bodies and different member states; a harmonized procedure for the assessment of applications for clinical trials, which is divided in two parts (Part I is assessed jointly by all member states concerned, and Part II is assessed separately by each member state concerned); strictly defined deadlines for the assessment of clinical trial applications; and the involvement of the ethics committees in the assessment procedure in accordance with the national law of the member state concerned but within the overall timelines defined by the Clinical Trials Regulation.
PRIME Designation in the EU
In March 2016, EMA launched an initiative to facilitate development of product candidates in indications, often rare, for which few or no therapies currently exist. The Priority Medicines, or PRIME, scheme is intended to encourage drug development in areas of unmet medical need and provides accelerated assessment of products representing substantial innovation reviewed under the centralized procedure. Products from small- and medium-sized enterprises, or SME, may qualify for earlier entry into the PRIME scheme than larger companies. Many benefits accrue to sponsors of product candidates with PRIME designation, including but not limited to, early and proactive regulatory dialogue with the EMA, frequent discussions on clinical trial designs and other development program elements, and accelerated marketing authorization application assessment once a dossier has been submitted. Importantly, a dedicated Agency contact and rapporteur from the CHMP or Committee for Advanced Therapies, or CAT, are appointed early in PRIME scheme facilitating increased understanding of the product at EMA’s Committee level. A kick-off meeting initiates these relationships and includes a team of multidisciplinary experts at the EMA to provide guidance on the overall development and regulatory strategies.
Marketing Authorization
To obtain marketing approval of a product under European Union regulatory systems, an applicant must submit a marketing authorization application, or MAA, either under a centralized or decentralized procedure. The centralized procedure provides for the grant of a single marketing authorization by the European Commission that is valid for all European Union member states. The centralized procedure is compulsory for specific products, including for medicines produced by certain biotechnological processes, products designated as orphan medicinal products, advanced therapy products and products with a new active substance indicated for the treatment of certain diseases. For products with a new active substance indicated for the treatment of other diseases and products that are highly innovative or for which a centralized process is in the interest of patients, the centralized procedure may be optional.
Under the centralized procedure, the CHMP, established at the EMA, is responsible for conducting the initial assessment of a product. The CHMP is also responsible for several post authorization and maintenance activities, such as the assessment of modifications or extensions to an existing marketing authorization. Under the centralized procedure in the European Union, the maximum timeframe for the evaluation of an MAA is 210 days, excluding clock stops, when additional information or written or oral explanation is to be provided by the applicant in response to questions of the CHMP. Accelerated evaluation might be granted by the CHMP in exceptional cases, when a medicinal product is of major interest from the point of view of public

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health and in particular from the viewpoint of therapeutic innovation. In this circumstance, the EMA ensures that the opinion of the CHMP is given within 150 days. The CHMP sends its recommendation to the European Commission, which makes a legally binding decision within 67 days of receipt whether to approve or deny marketing authorization.
The decentralized procedure is available to applicants who wish to market a product in various European Union member
states where such product has not received marketing approval in any European Union member states before. The decentralized procedure provides for approval by one or more other, or concerned member states of an assessment of an application performed by one member state designated by the applicant, known as the reference member state. Under this procedure, an applicant submits an application based on identical dossiers and related materials, including a draft summary of product characteristics, and draft labeling and package leaflet, to the reference member state and concerned member states. The reference member state prepares a draft assessment report and drafts of the related materials within 210 days after receipt of a valid application. Within 90 days of receiving the reference member state’s assessment report and related materials, each concerned member state must decide whether to approve the assessment report and related materials.

If a member state cannot approve the assessment report and related materials on the grounds of potential serious risk to public health, the disputed points are subject to a dispute resolution mechanism and may eventually be referred to the European Commission, whose decision is binding on all member states.
Within this framework, manufacturers may seek approval of hybrid medicinal products under Article 10(3) of Directive 2001/83/EC. Hybrid applications rely, in part, on information and data from a reference product and new data from appropriate pre-clinical tests and clinical trials. Such applications are necessary when the proposed product does not meet the strict definition of a generic medicinal product, or bioavailability studies cannot be used to demonstrate bioequivalence, or there are changes in the active substance(s), therapeutic indications, strength, pharmaceutical form or route of administration of the generic product compared to the reference medicinal product. In such cases the results of tests and trials must be consistent with the data content standards required in the Annex to the Directive 2001/83/EC, as amended by Directive 2003/63/EC.
Hybrid medicinal product applications have automatic access to the centralized procedure when the reference product was authorized for marketing via that procedure. Where the reference product was authorized via the decentralized procedure, a hybrid application may be accepted for consideration under the centralized procedure if the applicant shows that the medicinal product constitutes a significant therapeutic, scientific or technical innovation, or the granting of a community authorization for the medicinal product is in the interest of patients at the community level.
A marketing authorization may be granted only to an applicant established in the EU. Regulation No. 1901/2006 provides that prior to obtaining a marketing authorization in the EU, an applicant must demonstrate compliance with all measures included in a Pediatric Investigation Plan, or PIP, by the Pediatric Committee of the EMA, covering all subsets of the pediatric population, unless the EMA has granted a product-specific waiver, class waiver, or a deferral for one or more of the measures included in the PIP.
Regulatory Data Exclusivity in the European Union
In the European Union, innovative medicinal products authorized in the EU on the basis of a full marketing authorization application (as opposed to an application for marketing authorization that relies on data available in the marketing authorization dossier for another, previously approved, medicinal product) are entitled to eight years of data exclusivity . During this period, applicants for authorization of generics of these innovative products cannot rely on data contained in the marketing authorization dossier submitted for the innovative medicinal product. Innovative medicinal products are also entitled to ten years’ market exclusivity. During this ten-year period no generic of this medicinal product can be placed on the EU market. The overall ten-year period will be extended to a maximum of eleven years if, during the first eight years of those ten years, the marketing authorization holder obtains an authorization for one or more new therapeutic indications which, during the scientific evaluation prior to authorization, is held to bring a significant clinical benefit in comparison with existing therapies. Even if a compound is considered to be a new chemical entity so that the innovator gains the prescribed period of data exclusivity, another company may market another version of the product if such company obtained marketing authorization based on an MAA with a complete independent data package of pharmaceutical tests, preclinical tests and clinical trials.
Periods of Authorization and Renewals in the EU
A marketing authorization is valid for five years, in principle, and it may be renewed after five years on the basis of a reevaluation of the risk-benefit balance by the EMA or by the competent authority of the relevant EU Member State. To that end, the marketing authorization holder must provide the EMA or the relevant competent authority of the EU Member State with a consolidated version of the file in respect of quality, safety and efficacy, including all variations introduced since the marketing authorization was granted, at least six months before the marketing authorization ceases to be valid. Once renewed, the marketing authorization is valid for an unlimited period, unless the European Commission or the relevant competent authority of the EU Member State decides, on justified grounds relating to pharmacovigilance, to proceed with one additional

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five-year renewal period. Any marketing authorization that is not followed by the marketing of the medicinal product on the EU market (in the case of the centralized procedure) or on the market of the EU Member State which delivered the marketing authorization within three years after authorization ceases to be valid.
Regulatory Requirements after Marketing Authorization
Similar to the U.S., both marketing authorization holders and manufacturers of medicinal products are subject to comprehensive regulatory oversight by the EMA and the competent authorities of the individual EU Member States both before and after grant of the manufacturing and marketing authorizations.
The holder of an EU marketing authorization for a medicinal product must also comply with EU pharmacovigilance legislation and its related regulations and guidelines which entail many requirements for conducting pharmacovigilance, or the assessment and monitoring of the safety of medicinal products. These rules can impose on central marketing authorization holders for medicinal products the obligation to conduct a labor-intensive collection of data regarding the risks and benefits of marketed products and to engage in ongoing assessments of those risks and benefits, including the possible requirement to conduct additional clinical studies.
The manufacturing process for medicinal products in the EU is highly regulated and regulators may shut down manufacturing facilities that they believe do not comply with regulations. Manufacturing requires a manufacturing authorization, and the manufacturing authorization holder must comply with various requirements set out in the applicable EU laws, regulations and guidance, including Directive 2001/83/EC, Directive 2003/94/EC, Regulation (EC) No 726/2004 and the European Commission Guidelines for Good Manufacturing Practice. These requirements include compliance with EU cGMP standards when manufacturing medicinal products and active pharmaceutical ingredients, including the manufacture of active pharmaceutical ingredients outside of the EU with the intention to import the active pharmaceutical ingredients into the EU. Similarly, the distribution of medicinal products into and within the EU is subject to compliance with the applicable EU laws, regulations and guidelines, including the requirement to hold appropriate authorizations for distribution granted by the competent authorities of the EU Member States.
In the EU, the advertising and promotion of our products are subject to EU Member States’ laws governing promotion of medicinal products, interactions with physicians, misleading and comparative advertising and unfair commercial practices. In addition, other legislation adopted by individual EU Member States may apply to the advertising and promotion of medicinal products. These laws require that promotional materials and advertising in relation to medicinal products comply with the product’s Summary of Product Characteristics, or SmPC, as approved by the competent authorities. Promotion of a medicinal product that does not comply with the SmPC is considered to constitute off label promotion. The off label promotion of medicinal products is prohibited in the EU. The applicable laws at EU level and in the individual EU Member States also prohibit the direct-to-consumer advertising of prescription-only medicinal products. These laws may further limit or restrict the advertising and promotion of our products to the general public and may also impose limitations on our promotional activities with health care professionals.
Pediatric Studies and Exclusivity
Prior to obtaining a marketing authorization in the European Union, applicants must demonstrate compliance with all measures included in an EMA‑approved PIP covering all subsets of the pediatric population, unless the EMA has granted a product‑specific waiver, a class waiver, or a deferral for one or more of the measures included in the PIP. The respective requirements for all marketing authorization procedures are laid down in Regulation (EC) No 1901/2006, the so‑called Pediatric Regulation. This requirement also applies when a company wants to add a new indication, pharmaceutical form or route of administration for a medicine that is already authorized. The Pediatric Committee of the EMA, or PDCO, may grant deferrals for some medicines, allowing a company to delay development of the medicine for children until there is enough information to demonstrate its effectiveness and safety in adults. The PDCO may also grant waivers when development of a medicine for children is not needed or is not appropriate, such as for diseases that only affect the elderly population. Before an MAA can be filed, or an existing marketing authorization can be amended, the EMA determines that companies actually comply with the agreed studies and measures listed in each relevant PIP. If an applicant obtains a marketing authorization in all EU Member States, or a marketing authorization granted in the Centralized Procedure by the European Commission, and the study results for the pediatric population are included in the product information, even when negative, the medicine is then eligible for an additional six month period of qualifying patent protection through extension of the term of the Supplementary Protection Certificate, or SPC.
Orphan Drug Designation and Exclusivity in the EU
Regulation (EC) No 141/2000 and Regulation (EC) No. 847/2000 provide that a product can be designated an orphan medicinal product by the European Commission if its sponsor can establish: that the product is intended for the diagnosis,

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prevention or treatment of (1) a life-threatening or chronically debilitating condition affecting not more than five in ten thousand persons in the EU when the application is made, or (2) a life-threatening, seriously debilitating or serious and chronic condition in the EU and that without incentives the medicinal product is unlikely to be developed. For either of these conditions, the applicant must demonstrate that there exists no satisfactory method of diagnosis, prevention or treatment of the condition in question that has been authorized in the EU or, if such method exists, the medicinal product will be of significant benefit to those affected by that condition. Once authorized, orphan medicinal products are entitled to ten years of market exclusivity in all EU Member States and in addition a range of other benefits during the development and regulatory review process including scientific assistance for study protocols, authorization through the centralized marketing authorization procedure covering all member countries and a reduction or elimination of registration and marketing authorization fees. However, marketing authorization may be granted to a similar medicinal product with the same orphan indication during the ten-year period with the consent of the marketing authorization holder for the original orphan medicinal product or if the manufacturer of the original orphan medicinal product is unable to supply sufficient quantities. Marketing authorization may also be granted to a similar medicinal product with the same orphan indication if this product is safer, more effective or otherwise clinically superior to the original orphan medicinal product. The period of market exclusivity may, in addition, be reduced to six years if it can be demonstrated on the basis of available evidence that the original orphan medicinal product is sufficiently profitable not to justify maintenance of market exclusivity.
Brexit and the Regulatory Framework in the United Kingdom
On June 23, 2016, the electorate in the United Kingdom, or UK, voted in favor of leaving the European Union commonly referred to as Brexit. Following protracted negotiations, the United Kingdom left the European Union on January 31, 2020. Discussions between the United Kingdom and the European Union have so far mainly focused on finalizing withdrawal issues and transition agreements but have been extremely difficult. To date, only an outline of a trade agreement has been reached. Much remains open, but the Prime Minister has indicated that the United Kingdom will not seek to extend the transition period beyond the end of 2020. If no trade agreement has been reached before the end of the transition period, there may be significant market and economic disruption. The Prime Minister has also indicated that the UK will not accept high regulatory alignment with the EU.
Since the regulatory framework for pharmaceutical products in the U.K. covering quality, safety and efficacy of pharmaceutical products, clinical trials, marketing authorization, commercial sales and distribution of pharmaceutical products is derived from European Union directives and regulations, Brexit could materially impact the future regulatory regime that applies to products and the approval of product candidates in the U.K.
General Data Protection Regulation
The collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the EU, including personal health data, is subject to the EU General Data Protection Regulation, or GDPR, which became effective on May 25, 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors. The GDPR also imposes strict rules on the transfer of personal data to countries outside the EU, including the U.S., and permits data protection authorities to impose large penalties for violations of the GDPR, including potential fines of up to €20 million or 4% of annual global revenues, whichever is greater. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR. Compliance with the GDPR will be a rigorous and time-intensive process that may increase the cost of doing business or require companies to change their business practices to ensure full compliance.
Pharmaceutical Coverage, Pricing and Reimbursement
In the United States and markets in other countries, patients who are prescribed treatments for their conditions and providers performing the prescribed services generally rely on third-party payors to reimburse all or part of the associated healthcare costs. Patients are unlikely to use our products unless coverage is provided, and reimbursement is adequate to cover a significant portion of the cost of our products. Significant uncertainty exists as to the coverage and reimbursement status of products approved by the FDA and other government authorities. Even if our drug candidate is approved, sales of our products will depend, in part, on the extent to which third-party payors, including government health programs in the United States such as Medicare and Medicaid, commercial health insurers and managed care organizations, provide coverage, and establish adequate reimbursement levels for, such products. The process for determining whether a payor will provide coverage for a product may be separate from the process for setting the price or reimbursement rate that the payor will pay for the product once coverage is approved. Third-party payors are increasingly challenging the prices charged, examining the medical

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necessity, and reviewing the cost-effectiveness of medical products and services and imposing controls to manage costs. Third-party payors may limit coverage to specific products on an approved list, also known as a formulary, which might not include all of the approved products for a particular indication.
In order to secure coverage and reimbursement for any product that might be approved for sale, a company may need to conduct expensive pharmacoeconomic studies in order to demonstrate the medical necessity and cost-effectiveness of the product, in addition to the costs required to obtain FDA or other comparable marketing approvals. Nonetheless, drug candidates may not be considered medically necessary or cost-effective. A decision by a third-party payor not to cover our drug candidate could reduce physician utilization of our products once approved and have a material adverse effect on our sales, results of operations and financial condition. Additionally, a payor’s decision to provide coverage for a product does not imply that an adequate reimbursement rate will be approved. Further, one payor’s determination to provide coverage for a drug product does not assure that other payors will also provide coverage and reimbursement for the product, and the level of coverage and reimbursement can differ significantly from payor to payor. Third-party reimbursement and coverage may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.
The containment of healthcare costs also has become a priority of federal, state and foreign governments and the prices of drugs have been a focus in this effort. Governments have shown significant interest in implementing cost-containment programs, including price controls, restrictions on reimbursement and requirements for substitution of generic products. Adoption of price controls and cost-containment measures, and adoption of more restrictive policies in jurisdictions with existing controls and measures, could further limit a company’s revenue generated from the sale of any approved products. Coverage policies and third-party reimbursement rates may change at any time. Even if favorable coverage and reimbursement status is attained for one or more products for which a company or its collaborators receive marketing approval, less favorable coverage policies and reimbursement rates may be implemented in the future.
For example, there have been several recent U.S. congressional inquiries and proposed federal and proposed and enacted state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products. At the federal level, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. For example, on May 11, 2018, the Administration issued a plan to lower drug prices. Under this blueprint for action, the Administration indicated that the Department of Health and Human Services, or HHS, will: take steps to end the gaming of regulatory and patent processes by drug makers to unfairly protect monopolies; advance biosimilars and generics to boost price competition; evaluate the inclusion of prices in drug makers’ ads to enhance price competition; speed access to and lower the cost of new drugs by clarifying policies for sharing information between insurers and drug makers; avoid excessive pricing by relying more on value based pricing by expanding outcome based payments in Medicare and Medicaid; work to give Part D plan sponsors more negotiation power with drug makers; examine which Medicare Part B drugs could be negotiated for a lower price by Part D plans, and improving the design of the Part B Competitive Acquisition Program; update Medicare’s drug-pricing dashboard to increase transparency; prohibit Part D contracts that include “gag rules” that prevent pharmacists from informing patients when they could pay less out-of-pocket by not using insurance; and require that Part D plan members be provided with an annual statement of plan payments, out-of-pocket spending, and drug price increases.
At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs. These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.
Outside the United States, ensuring adequate coverage and payment for our drug candidate will face challenges. Pricing of prescription pharmaceuticals is subject to governmental control in many countries. Pricing negotiations with governmental authorities can extend well beyond the receipt of regulatory marketing approval for a product and may require us to conduct a clinical trial that compares the cost-effectiveness of our drug candidate or products to other available therapies. The conduct of such a clinical trial could be expensive and result in delays in our commercialization efforts.
In the European Union, pricing and reimbursement schemes vary widely from country to country. Some countries provide that products may be marketed only after a reimbursement price has been agreed. Some countries may require the completion

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of additional studies that compare the cost-effectiveness of a particular drug candidate to currently available therapies or so-called health technology assessments, in order to obtain reimbursement or pricing approval. For example, the European Union provides options for its member states to restrict the range of products for which their national health insurance systems provide reimbursement and to control the prices of medicinal products for human use. European Union member states may approve a specific price for a product or it may instead adopt a system of direct or indirect controls on the profitability of the company placing the product on the market. Other member states allow companies to fix their own prices for products, but monitor and control prescription volumes and issue guidance to physicians to limit prescriptions.
Recently, many countries in the European Union have increased the amount of discounts required on pharmaceuticals and these efforts could continue as countries attempt to manage healthcare expenditures, especially in light of the severe fiscal and debt crises experienced by many countries in the European Union. The downward pressure on health care costs in general, particularly prescription drugs, has become intense. As a result, increasingly high barriers are being erected to the entry of new products. Political, economic and regulatory developments may further complicate pricing negotiations, and pricing negotiations may continue after reimbursement has been obtained. Reference pricing used by various European Union member states, and parallel trade, i.e., arbitrage between low-priced and high-priced member states, can further reduce prices. There can be no assurance that any country that has price controls or reimbursement limitations for pharmaceutical products will allow favorable reimbursement and pricing arrangements for any of our products, if approved in those countries.
Healthcare Law and Regulation
Healthcare providers and third-party payors play a primary role in the recommendation and prescription of drug products that are granted regulatory approval. Arrangements with providers, consultants, third-party payors and customers are subject to broadly applicable fraud and abuse laws and regulations and other healthcare laws and regulations that may constrain our business and/or financial arrangements. Such restrictions under applicable federal and state healthcare laws and regulations, include the following:

the federal Anti-Kickback Statute, which prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, paying, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare and Medicaid;
the federal civil and criminal false claims laws, including the civil False Claims Act, and civil monetary penalties laws, which prohibit individuals or entities from, among other things, knowingly presenting, or causing to be presented, to the federal government, claims for payment that are false, fictitious or fraudulent or knowingly making, using or causing to made or used a false record or statement to avoid, decrease or conceal an obligation to pay money to the federal government;
the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, which created additional federal criminal laws that prohibit, among other things, knowingly and willfully executing, or attempting to execute, a scheme to defraud any healthcare benefit program or making false statements relating to healthcare matters;
HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, and their respective implementing regulations, including the Final Omnibus Rule published in January 2013, which impose obligations, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
the federal false statements statute prohibits knowingly and willfully falsifying, concealing ·or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;
the Foreign Corrupt Practices Act, or FCPA, which prohibits companies and their intermediaries from making, or offering or promising to make improper payments to non-U.S. officials for the purpose of obtaining or retaining business or otherwise seeking favorable treatment; and
the federal transparency requirements known as the federal Physician Payments Sunshine Act, under the Patient Protection and Affordable Care Act, as amended by the Health Care Education Reconciliation Act, or the Affordable Care Act, or ACA, which requires certain manufacturers of drugs, devices, biologics and medical supplies to report annually to the Centers for Medicare & Medicaid Services, or CMS, within the United States Department of Health and Human Services, information related to payments and other transfers of value made by that entity to physicians and teaching hospitals, as well as ownership and investment interests held by physicians and their immediate family members; and analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws,

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which may apply to healthcare items or services that are reimbursed by non-governmental third-party payors, including private insurers.
Some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government in addition to requiring drug manufacturers to report information related to payments to physicians and other health care providers or marketing expenditures. State and foreign laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.
Healthcare Reform
A primary trend in the United States healthcare industry and elsewhere is cost containment. There have been a number of federal and state proposals during the last few years regarding the pricing of pharmaceutical and biopharmaceutical products, limiting coverage and reimbursement for drugs and other medical products, government control and other changes to the healthcare system in the United States.
By way of example, the United States and state governments continue to propose and pass legislation designed to reduce the cost of healthcare. In March 2010, the United States Congress enacted the ACA, which, among other things, includes changes to the coverage and payment for products under government health care programs. Among the provisions of the ACA of importance to our potential drug candidates are:
an annual, nondeductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents, apportioned among these entities according to their market share in certain government healthcare programs, although this fee would not apply to sales of certain products approved exclusively for orphan indications;
expansion of eligibility criteria for Medicaid programs by, among other things, allowing states to offer Medicaid coverage to certain individuals with income at or below 133% of the federal poverty level, thereby potentially increasing a manufacturer’s Medicaid rebate liability;
expanded manufacturers’ rebate liability under the Medicaid Drug Rebate Program by increasing the minimum rebate for both branded and generic drugs and revising the definition of “average manufacturer price,” or AMP, for calculating and reporting Medicaid drug rebates on outpatient prescription drug prices and extending rebate liability to prescriptions for individuals enrolled in Medicare Advantage plans;
addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for drugs that are inhaled, infused, instilled, implanted or injected;
expanded the types of entities eligible for the 340B drug discount program;
established the Medicare Part D coverage gap discount program by requiring manufacturers to provide a 50% point-of-sale-discount off the negotiated price of applicable brand drugs to eligible beneficiaries during their coverage gap period as a condition for the manufacturers’ outpatient drugs to be covered under Medicare Part D;
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research;
the Independent Payment Advisory Board, or IPAB, which has authority to recommend certain changes to the Medicare program to reduce expenditures by the program that could result in reduced payments for prescription drugs. However, the IPAB implementation has been not been clearly defined. The ACA provided that under certain circumstances, IPAB recommendations will become law unless Congress enacts legislation that will achieve the same or greater Medicare cost savings; and
established the Center for Medicare and Medicaid Innovation within CMS to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending. Funding has been allocated to support the mission of the Center for Medicare and Medicaid Innovation from 2011 to 2019.
Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include the Budget Control Act of 2011, which, among other things, led to aggregate reductions to Medicare payments to providers of up to 2% per fiscal year that started in 2013 and will stay in effect through 2024 unless additional Congressional action is taken, and the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with

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which any such product candidate is prescribed or used. Further, there have been several recent U.S. congressional inquiries and proposed state and federal legislation designed to, among other things, bring more transparency to drug pricing, review the
relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products.
Since enactment of the ACA, there have been numerous legal challenges and Congressional actions to repeal and replace provisions of the law. For example, with enactment of the Tax Cuts and Jobs Act of 2017, which was signed by the President on December 22, 2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, will become effective in 2019. According to the Congressional Budget Office, the repeal of the individual mandate will cause 13 million fewer Americans to be insured in 2027 and premiums in insurance markets may rise. Additionally, on January 22, 2018, President Trump signed a continuing resolution on appropriations for fiscal year 2018 that delayed the implementation of certain ACA-mandated fees, including the so-called “Cadillac” tax on certain high cost employer-sponsored insurance plans, the annual fee imposed on certain health insurance providers based on market share, and the medical device excise tax on non-exempt medical devices. Further, the Bipartisan Budget Act of 2018, among other things, amends the ACA, effective January 1, 2019, to increase from 50 percent to 70 percent the point-of-sale discount that is owed by pharmaceutical manufacturers who participate in Medicare Part D and to close the coverage gap in most Medicare drug plans, commonly referred to as the “donut hole”. The Congress will likely consider other legislation to replace elements of the ACA, during the next Congressional session.
The Trump Administration has also taken executive actions to undermine or delay implementation of the ACA. Since January 2017, President Trump has signed two Executive Orders designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. One Executive Order directs federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. The second Executive Order terminates the cost-sharing subsidies that reimburse insurers under the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. In addition, CMS has recently proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. Further, on June 14, 2018, U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments to third-party payors who argued were owed to them. The effects of this gap in reimbursement on third-party payors, the viability of the ACA marketplace, providers, and potentially our business, are not yet known.
In addition, on December 14, 2018, a U.S. District Court judge in the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable feature of the ACA, and therefore because the mandate was repealed as part of the Tax Cuts and Jobs Act, the remaining provisions of the ACA are invalid as well. The Trump administration and CMS have both stated that the ruling will have no immediate effect, and on December 30, 2018 the same judge issued an order staying the judgment pending appeal. The Trump Administration recently represented to the Court of Appeals considering this judgment that it does not oppose the lower court’s ruling. On July 10, 2019, the Court of Appeals for the Fifth Circuit heard oral argument in this case. On December 18, 2019, that court affirmed the lower court’s ruling that the individual mandate portion of the ACA is unconstitutional and it remanded the case to the district court for reconsideration of the severability question and additional analysis of the provisions of the ACA. On January 21, 2020, the U.S Supreme Court declined to review this decision on an expedited basis. Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results.
There have been several recent U.S. congressional inquiries and proposed federal and proposed and enacted state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products. At the federal level, Congress and the Trump administration, or Administration, have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. For example, on May 11, 2018, the Administration issued a plan to lower drug prices. Under this blueprint for action, the Administration indicated that the Department of Health and Human Services, or HHS, will: take steps to end the gaming of regulatory and patent processes by drug makers to unfairly protect monopolies; advance biosimilars and generics to boost price competition; evaluate the inclusion of prices in drug makers’ advertisements to enhance price competition; speed access to and lower the cost of new drugs by clarifying policies for sharing information between insurers and drug makers; avoid excessive pricing by relying more on value-based pricing by expanding outcome-based payments in Medicare and Medicaid; work to give Part D plan sponsors more negotiation power with drug makers; examine which Medicare Part B drugs could be negotiated for a lower price by Part D plans, and improving the design of the Part B Competitive Acquisition Program; update Medicare’s drug pricing dashboard to increase transparency; prohibit Part D contracts that include “gag rules” that prevent pharmacists from

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informing patients when they could pay less out-of-pocket by not using insurance; and require that Part D plan members be provided with an annual statement of plan payments, out-of-pocket spending, and drug price increases. In addition, on December 23, 2019, the Trump Administration published a proposed rulemaking that, if finalized, would allow states or certain other non-federal government entities to submit importation program proposals to FDA for review and approval. Applicants would be required to demonstrate their importation plans pose no additional risk to public health and safety and will result in significant cost savings for consumers. At the same time, FDA issued draft guidance that would allow manufacturers to import their own FDA-approved drugs that are authorized for sale in other countries (multi-market approved products).
Competition
Our drug candidates, if approved, will compete with existing and new products being developed by others for treatment of the same indications. Competition in the development of human therapeutics and, in particular, human therapeutics that target signaling pathways to treat cancers, is intense and rapidly evolving. Our competitors include large pharmaceutical and biopharmaceutical companies, as well as specialized biotechnology firms, that are developing cancer therapies in the same indications as we are. Many competitors have substantially greater research, development, manufacturing, marketing, and financial capabilities, than we do. Successful development and commercialization of products depends on the ability to differentiate the benefits of our products (e.g. efficacy, safety, dosing, route of administration, convenience, and cost-effectiveness) over competing drug or biologic therapies.
There are several companies developing drug candidates that target the same molecular targets and signaling pathways, and in some cases the same cancer indications, that are being pursued by us and our collaborators. We believe our primary competitors by molecular target are as follows:
Fimepinostat:    We are not aware of other molecules in clinical testing that are designed as one chemical entity to target both HDAC and PI3K. However, there are commercially available drugs that individually target HDAC or PI3K. For example, commercially available HDAC inhibitors include Farydak™ (panobinostat) which is produced by Novartis International AG, Zolinza™ (vorinostat), which is produced by Merck & Co., Istodax™ (romidepsin), which is produced by Celgene Corporation, Beleodaq™ (belinostat) which is produced by Spectrum Pharmaceuticals and Depakine™ (valproate sodium), which is produced by Sanofi. In addition, there are several companies testing novel HDAC inhibitors in clinical trials, including among others, Mirati Therapeutics (mocetinostat), Regenacy Pharmaceuticals, LLC (ricolinostat), Italfarmaco S.p.A. (givinostat), Celleron Therapeutics (CXD101), HUYA Bioscience International (HBI-8000), Xynomic Pharmaceuticals, AbbVie, Servier (abexinostat), Celleron, Nuance Biotech (AZD-9468), Apollomics (CG-200745), Cherrykukess (CYK-ß-1.0), 4SC (domatinostat), Syndax, NovaMedica, EOC Pharma, Kyowa Kirin, Eddingpharm (entinostat), HitGen (HG-146), Mirati Therpeutics and Otsuka Holdings (mocetinostat), Formosa Pharmaceuticals (MPT0E-028), 4D Pharma (MRx-1299), Viracta Therapeutics, NantWorks, Shenzhen Salubris Pharmaceutical (nanatinostat), OnKure (OKI-179), MEI Pharma, Helsinn, Menarini, Endo International, Blanver Farmoquímica (pracinostat), Recursion Pharmaceuticals (REC-2282), 4SC, Yakult Honsha, Menarini (resminostat), Mundipharma EDO (tinostamustine) and Oncolys BioPharma (YM-753). There are multiple companies testing various PI3K inhibitors, both isoform specific and pan-PI3K inhibitors, which are in various stages of clinical development. There are currently four approved isoform specific PI3K inhibitors on the market, Zydelig™ (idelalisib), which is marketed by Gilead Sciences, Aliqopa® (copanlisib), which is marketed by Bayer AG, Copiktra™ (duvelisib), which is marketed by Verastem, Oncology, and PIQRAY® (alpelisib), which is marketed by Novartis. Other companies developing PI3K inhibitors include Adlai Nortye (buparlisib), Genentech / Roche (RG6114/GDC-0077), GlaxoSmithKline plc (GSK2636771), Sanofi (voxtalisib), TG Therapeutics, (umbralisib/TGR-1202), Incyte Corporation and Innovent Biologics (parsaclisib), Arcus Biosciences (AB-610), SciClone Pharmaceuticals (ABTL-0812), AstraZeneca (ACP-319), Advenchen (AL-58922), Asana BioSciences (ASN-003), Applied Therapeutics (AT-104), AUM Biosciences (AUM-302), Guangzhou BeBetter Medicine (BEBT-908), Pierre Fabre (bimiralisib), Boryung (BR-101801), BioMed Valley Discoveries (BVD-723), Tactical Therapeutics (carboxyamidotriazole orotate), Cleveland BioLabs (CBLC-137), CMG Pharma (CMG-002), Celon Pharma (CPL-302215), Restorbio (dactolisib), Beijing Foreland Pharma (FP-208), Shanghai HaiHe Biopharma (HH-CYH33), Hutchison China MediTech (HMPL-689), Inflection Biosciences (IBL-200 and IBL-202), iOnctura (IOA-244), Takeda (IPI-549), Karus Therapeutics (KA-2237), Shanghai YingLi Pharmaceutical (linperlisib), Lynkcell (LYN-00101), MEI Pharma, Kyowa Kirin (ME-401), Menarini (MEN-1611), Daiichi Sankyo (miransertib), MEKanistic Therapeutics (MTX-211), China Medical System (namodenoson), SymBio Pharmaceuticals, Pint Pharma, Baxter International, Takeda, HanX Biopharmaceuticals, Knight Therapeutics, Specialised Therapeutics (Novonex), Microbio Group (OB-318), Onconova (ON-146040), Diffusion Pharmaceuticals (Palomid-529), Kazia Therapeutics (paxalisib), Petra Pharma (Petra-03), Piqur (PQR-530), Shanghai Fosun Pharma (SAF-248), Petra Pharma (serabelisib), SignalRx (SF-1126), Nanjing Sanhome Pharmaceutical (SHC-014748M), Rhizen Pharmaceuticals (tenalisib), Sumitomo Dainippon Pharma (TP-3654), Shanghai Jiatan Pharmatech (WXFL-10030390), and Ohara Pharmaceutical (ZSTK-474).
Licensed Programs Under Aurigene Collaboration.    We are aware of multiple other companies that are developing IRAK4 inhibitors for oncology indications, including: Nimbus Therapeutics/Roche, TG Therapeutics, Inc./Ligand

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Pharmaceuticals, Incorporated, Rigel Pharmaceuticals, Inc., Noxopharm Ltd., Kymera Therapeutics Inc., and Bayer AG. VISTA (V-domain Ig Suppressor of T-cell Activation) is a novel immuno-oncology target which we are not aware of any other active clinical-stage programs. In addition, there are multiple approved drugs that target PD1/ PDL1 interactions, including Bristol-Myers Squibb Company's Opdivo™, Merck & Co., Inc.’s Keytruda™, Roche’s Tecentriq™, Merck & Co., Inc. and Pfizer Inc.'s, Bavencio™ and AstraZeneca plc's Imfinzi™, Regeneron Pharmaceuticals, Inc./Sanofi S.A.'s Libtayo™, and a number of drug candidates in various stages of development (by Novartis AG, TESARO Inc., and others). We are also aware of multiple other companies developing drugs to target TIM3, including Novartis AG, Incyte Corporation, TESARO, Inc., Bristol-Myers Squibb Company, Eli Lilly and Company, and others.
Licensed Programs Under ImmuNext Collaboration.    VISTA (V-domain Ig Suppressor of T-cell Activation) is a novel immuno-oncology target for which we are not aware of any other active clinical-stage programs.
Erivedge.   In 2015, Sun Pharmaceuticals Industries Ltd's sonidegib (Odomzo®), a Hedgehog signaling pathway inhibitor indicated for the treatment of adult patients with locally advanced BCC that has recurred following surgery or radiation, or those who are not candidates for surgery or radiation, received regulatory approvals in the United States and European Union. Other commercially available Hedgehog pathway inhibitors include Pfizer Inc.'s glasdegib (Daurismo™). We are aware of several other biotechnology and pharmaceutical companies that have drug development programs relating to compounds that modulate the Hedgehog signaling pathway, including: Exelixis, Inc./Bristol-Myers Squibb Company (BMS-833923 / XL139), PellePharm Inc. (patidegib), and Senhwa Biosciences Inc. (silmitasertib / CX-4945). Furthermore, glasdegib (Daurismo™) is marketed by Pfizer Inc. for the treatment of newly diagnosed adult AML patients for whom intensive chemotherapy is not an option, and, sonidegib (Odomzo™) is marketed by Sun Pharmaceutical, for the treatment of adults with locally advanced BCC.
Many competing companies have financial, marketing and human resource capacities that are substantially greater than our own, which may provide these competitors with significant advantages over us. Others have extensive experience in undertaking clinical trials, in obtaining regulatory approval to market products, in manufacturing products on a large scale and in effectively promoting products to healthcare providers, health plans and consumers which may enhance their competitive position relative to ours. In addition to competing with pharmaceutical and biotechnology companies, the products that we are developing would also compete with those being developed by academic and research institutions, government agencies and other public organizations. Any of these organizations may discover new therapies, seek patent protection or establish collaborative arrangements for products and technologies that compete with our products and technologies.
The technologies underlying the development of human therapeutic products are expected to continue to undergo rapid and significant advancement and unpredictable changes. Accordingly, our technological and commercial success will be based, among other things, on our ability to develop proprietary positions in key scientific areas and efficiently evaluate potential product opportunities.
The timing of a product’s introduction may be a major factor in determining eventual commercial success and profitability. Early entry may have important advantages in gaining product acceptance and market share. Accordingly, we believe the relative speed with which we or any current or future collaborator(s) can complete preclinical and clinical testing, obtain regulatory approvals, and supply commercial quantities of a product will have an important impact on our competitive position, both in the U.S. and abroad. Other companies may succeed in developing similar products that are introduced earlier, are more effective, or are produced and marketed more effectively, or at a minimum obtain a portion of the market share. For example, our competitors may discover, characterize and develop important targeted cancer molecules before we do, which could have a material adverse effect on any of our related research programs. If research and development by others renders any of our products obsolete or noncompetitive, then our potential for success and profitability may be adversely affected.
For some of our programs, we rely on, or intend to rely on, strategic collaborators for support in our research programs and for preclinical evaluation and clinical development of our potential products and manufacturing and marketing of any products. Our strategic collaborators may conduct multiple product development efforts within each disease area that is the subject of our strategic collaboration with them. Our strategic collaboration agreements may not restrict the strategic collaborator from pursuing competing internal development efforts. Any of our drug candidates, therefore, may be subject to competition with a drug candidate under development by a strategic collaborator.
Manufacturing and Supply
We do not have our own manufacturing capabilities. We currently rely on collaborators or subcontractors, and we have no plans to develop our own manufacturing capability. Instead, we plan to continue to rely on corporate collaborators or subcontractors to manufacture products. If any of our current or planned collaborators or subcontractors encounters regulatory compliance problems or enforcement actions for their own or a collaborative product, it could have a material adverse effect on our business prospects.

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We employ a material sourcing strategy that complies with regulatory requirements for building increasing amounts of quality into the product, beginning with raw materials and following through to packaged drug product for clinical use. Starting materials for the drug substance are typically sourced from qualified suppliers, and their production is conducted under our supervision. Where appropriate, redundant suppliers are added to ensure availability of key materials
Drug substance and product production, and subsequent packaging, labeling and distribution for all of our development candidates are conducted in the various locations under GMP controls.
Sales and Marketing
We have no sales, marketing or distribution experience or infrastructure and we have no current plans to develop such capabilities. We currently plan to rely on corporate collaborators for product sales, marketing and distribution.
Employees
As of December 31, 2019, we had 28 full-time employees, of whom seven hold a Ph.D. or other advanced scientific or medical degree. Of our employees, 17 are currently involved in research and development. None of our employees is a party to a collective bargaining agreement, and we consider our relations with our employees to be good.
Segment Reporting
We are engaged solely in the discovery and development of innovative drug candidates for the treatment of human cancers. Accordingly, we have determined that we operate in one operating segment.

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Information about our Executive Officers
Our executive officers as of March 19, 2020 are as follows:
Name
 
Age
 
Position
James Dentzer
 
53
 
President and Chief Executive Officer
Robert Martell, M.D., Ph.D.
 
57
 
Head of Research and Development
William Steinkrauss
 
34
 
Chief Financial Officer
James Dentzer
 
Mr. Dentzer has served on our board of directors and as our President, Chief Executive Officer, Secretary and Treasurer since September 2018. From March 2018 to September 2018, Mr. Dentzer served as our Chief Operating Officer, Chief Financial Officer, Secretary, and Treasurer. Mr. Dentzer joined the Company in March 2016 as Chief Administrative Officer, Chief Financial Officer, Secretary, and Treasurer. From December 2013 to December 2015, Mr. Dentzer served as Chief Financial Officer of Dicerna Pharmaceuticals, Inc., an RNA interference based biopharmaceutical company. From March 2010 to December 2013, Mr. Dentzer was the Chief Financial Officer of Valeritas, Inc., a commercial-stage medical technology company. From October 2006 to October 2009, Mr. Dentzer was the Chief Financial Officer of Amicus Therapeutics, Inc., a biotechnology company. In prior positions, Mr. Dentzer spent six years as corporate controller of Biogen and six years in various senior financial roles at E.I. du Pont de Nemours and Company in the U.S. and Asia. Mr. Dentzer holds a B.A. in philosophy from Boston College and an M.B.A. from the University of Chicago.
Robert Martell, M.D., Ph.D.
 
Dr. Martell, M.D., Ph.D. served on our Board of Directors from 2011 to 2018, and as Head of Research and Development from 2018 to present. He is also co-founder of Epi-Cure Pharmaceuticals, a privately held early-stage biotechnology company, and served as its president and member of board of directors from 2016 to 2018. Dr. Martell served as Chief Medical Officer of Tesaro, Inc., a biopharmaceutical company developing Zejula and Varubi from 2012 to 2015; as Chief Medical Officer at MethylGene, a publicly traded biopharmaceutical company focused on cancer therapeutics from 2005 to 2009; as Director of Oncology Global Clinical Research at Bristol-Myers Squibb, a biopharmaceutical company developing Sprycel, Erbitux and Ixempra from 2002 to 2005; and as Associate/Deputy Director at Bayer Corporation Pharmaceutical Division developing Nexavar from 2000 to 2002. In addition, Dr. Martell has held a number of academic positions, including at Tufts Medical Center since 2009, where he has served in various roles including Associate Chief in the Division of Hematology/Oncology, Director of the Neely Center for Clinical Cancer Research, Leader of the Cancer Center’s Program in Experimental Therapeutics and Attending Physician; at Yale University School of Medicine as Assistant Clinical Professor of Oncology from 2001 to 2005; and as Assistant Professor at Duke Medical Center from 1998 to 2000. Dr. Martell received a B.A. in chemistry from Kalamazoo College, a Ph.D. in Pharmacology from University of Michigan and an M.D. from Wayne State University. He completed his Internal Medicine internship and residency at Duke University Medical Center, and his Fellowship in Medical Oncology also at Duke.
William Steinkrauss
 
Mr. Steinkrauss has served as our Chief Financial Officer since September 2019. Prior to that, Mr. Steinkrauss served as vice president, treasurer and assistant secretary from January 2019 to September 2019, and prior to that served as our corporate controller, senior director of finance and assistant treasurer from August 2016 until January 2019. Mr. Steinkrauss previously served as director of technical accounting and reporting of Ovascience, Inc., a biotechnology company focused on infertility, from June 2015 to August 2016. Prior to that, he was senior manager of technical accounting at Cubist Pharmaceuticals, Inc., a biopharmaceutical company, from November 2012 to May 2015. Prior to joining Cubist Pharmaceuticals, Inc., Mr. Steinkrauss worked within the transaction services and assurance practices at PricewaterhouseCoopers, LLP. Mr. Steinkrauss holds a B.S. in accounting and finance and a M.S. in accounting from Boston College. Mr. Steinkrauss is a certified public accountant.
ITEM 1A.
RISK FACTORS
You should carefully consider the following risk factors, in addition to other information included in this annual report on Form 10-K. The risks and uncertainties described below are not the only risks and uncertainties we face. Additional risks and uncertainties not presently known to us or that we presently deem less significant may also impair our business operations. Please see page 4 of this annual report on Form 10-K for a discussion of some of the forward-looking statements that are qualified by these risk factors. If any of the following risks occurs, our business, financial condition, and results of operations and future growth prospects could be materially and adversely affected.

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RISKS RELATING TO OUR FINANCIAL RESULTS AND NEED FOR FINANCING
We have identified conditions and events that raise substantial doubt about our ability to continue as a going concern.
As of December 31, 2019, we had $20.5 million in existing cash, cash equivalents and short-term investments. We expect these available cash resources to fund our operating expenses and capital expenditure requirements into the second half of 2020. We have based this assessment on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. Based on our available cash resources, we do not have sufficient cash on hand to support current operations within the next 12 months from the date of filing this Annual Report on Form 10-K. If we are unable to obtain sufficient funding, we will be forced to delay, reduce in scope or eliminate some of our research and development programs, including related clinical trials and operating expenses, potentially delaying the time to market for, or preventing the marketing of, any of our product candidates, which could adversely affect our business prospects and our ability to continue operations, and would have a negative impact on our financial condition and our ability to pursue our business strategies. If we are unable to continue as a going concern, we may have to liquidate our assets and may receive less than the value at which those assets are carried on our audited financial statements, and it is likely that investors will lose all or a part of their investment. The report from our independent registered public accounting firm issued in connection with this annual report on Form 10-K contains, and future reports may contain, statements expressing substantial doubt about our ability to continue as a going concern. If we seek additional financing to fund our business activities in the future and there remains substantial doubt about our ability to continue as a going concern, investors or other financing sources may be unwilling to provide funding to us on commercially reasonable terms, if at all.
We will require substantial additional capital, which may be difficult to obtain, and if we are unable to raise capital when needed, we could be forced to delay, reduce or eliminate our drug development programs or commercialization efforts.
We will require substantial funds to continue our research and development programs and to fulfill our planned operating goals. Our planned operating and capital requirements currently include the support of our current and future research and development activities for CA-4948, CI-8993 and fimepinostat as well as development candidates we have and may continue to license under our collaboration with Aurigene. We will require substantial additional capital to fund the further development of these programs, as well as to fund our general and administrative costs and expenses. Moreover, our agreements with collaborators impose significant potential financial obligations on us. For example, under our collaboration, license and option agreement with Aurigene, we are required to make milestone, royalty and option fee payments for discovery, research and preclinical development programs that will be performed by Aurigene, which impose significant potential financial obligations on us. The collaboration includes multiple programs, and we have the option to exclusively license compounds once a development candidate is nominated within each respective program. In addition, if we choose to exercise our option under the option and license agreement with ImmuNext, or the ImmuNext Agreement, we will be required to make milestone, royalty, and option fee payments in connection with the development of CI-8993.
Based upon our current operating plan, we believe that our existing cash, cash equivalents and short-term investments of $20.5 million as of December 31, 2019, should enable us to fund our operating expenses and capital expenditure requirements into the second half of 2020. Based on our available cash resources, we do not have sufficient cash on hand to support current operations within the next 12 months from the date of filing this Annual Report on Form 10-K. Our ability to raise additional funds will depend on financial, economic and market conditions, many of which are outside of our control, and we may be unable to raise financing when needed, or on terms favorable to us. We may be unable to obtain additional funding on acceptable terms, or at all.
In February 2020, we entered into a common stock purchase agreement with Aspire Capital Fund, LLC, or Aspire Capital, which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $30.0 million of shares of our common stock over the 30-month term of the Purchase Agreement. To date, we have received gross proceeds of $3.0 million from our upfront sale of common stock to Aspire Capital in connection with execution of the purchase agreement. The extent to which we utilize the purchase agreement with Aspire Capital as a source of funding will depend on a number of factors, including the prevailing market price of our common stock, the volume of trading in our common stock and the extent to which we are able to secure funds from other sources. The number of shares that we may sell to Aspire Capital under the purchase agreement on any given day and during the term of the agreement is subject to certain limitations and restrictions. These limits and restrictions include among others, limits on the number of shares we can sell to Aspire Capital on any one trading day and specified Nasdaq limitations. Accordingly, we may not be able to sell shares under the agreement at prices or amounts that we deem acceptable, and there can be no assurance that we will be able to sell the remaining $27.0 million of common stock contemplated under the purchase agreement. See “Management’s Discussion and Analysis of Financial Condition and Results of Operations-Liquidity and Capital Resources-Common Stock Purchase Agreement” for additional information. Additionally, we and Aspire Capital may

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not effect any sales of shares of our common stock under the purchase agreement during the continuance of an event of default. Even if we are able to access the full remaining $27.0 million under the purchase agreement, we will still need additional capital to fully implement our business, operating and development plans.
In addition, in March 2020, we entered into a sales agreement with JonesTrading Institutional Services LLC, or JonesTrading, pursuant to which, from time to time, we may offer and sell through JonesTrading up to $30.0 million of the common stock registered under our universal shelf registration statement on Form S-3 pursuant to one or more “at the market” offerings. To date, we have not made any sales of common stock pursuant to the sales agreement. The extent to which we utilize the sales agreement with JonesTrading as a source of funding will depend on a number of factors, including the prevailing market price of our common stock, general market conditions, the extent to which we are able to secure funds from other sources, and restrictions on our ability to sell common stock pursuant to the sales agreement to the extent we are then subject to restrictions on our ability to utilize the Form S-3 shelf registration statement to sell more than one-third of the market value of our public float, meaning the aggregate market value of voting and non-voting common stock held by non-affiliates shares held by non-affiliates, in any trailing 12-month period. Accordingly, we may not be able to sell shares under the agreement at prices or amounts that we deem acceptable, and there can be no assurance that we will be able to sell the $30.0 million of common stock contemplated under the sales agreement.
Furthermore, there are a number of factors that may affect our future capital requirements and further accelerate our need for additional working capital, many of which are outside our control, including the following:
unanticipated costs in our research and development programs;
the timing and cost of obtaining regulatory approvals for our drug candidates and maintaining compliance with
regulatory requirements;
the timing and amount of option exercise fees, milestone payments, royalties and other payments, including payments
due to licensors, including Aurigene and ImmuNext if we exercise our option under the ImmuNext Agreement, for
patent rights and technology used in our drug development programs;
the costs of commercialization activities for any of our drug candidates that receive marketing approval, to the extent
such costs are our responsibility, including the costs and timing of establishing drug sales, marketing, distribution and
manufacturing capabilities;
unplanned costs to prepare, file, prosecute, defend and enforce patent claims and other patent-related costs, including
litigation costs and technology license fees; and
unexpected losses in our cash investments or an inability to otherwise liquidate our cash investments due to
unfavorable conditions in the capital markets.
our ability to continue as a going concern.
We have incurred substantial losses, expect to continue to incur substantial losses for the foreseeable future and may never generate significant revenue or achieve profitability.
We have incurred significant annual net operating losses in every year since our inception. We expect to continue to incur significant and increasing net operating losses for at least the next several years. Our net losses were $32.1 million and $32.6 million for the years ended December 31, 2019 and 2018, respectively. As of December 31, 2019, we had an accumulated deficit of $1.0 billion. As noted below, we have identified conditions and events that raise substantial doubt about our ability to continue as a going concern. We have not completed the development of any drug candidate on our own. Other than Erivedge®, which is being commercialized and further developed by Genentech and Roche under our June 2003 collaboration with Genentech, we may never have a drug candidate approved for commercialization. We have financed our operations to date primarily through public offerings and private placements of our common stock, other debt financings, and amounts received through various licensing and collaboration agreements. We have devoted substantially all of our financial resources and efforts to research and development and general and administrative expense to support such research and development. Our net losses may fluctuate significantly from quarter to quarter and year to year. Net losses and negative cash flows have had, and will continue to have, an adverse effect on our stockholders’ (deficit) equity and working capital.
We anticipate that our expenses will increase substantially if and as we:

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continue to develop and conduct clinical trials with respect to drug candidates;
seek to identify and develop additional drug candidates;
acquire or in-license other drug candidates or technologies;
seek regulatory and marketing approvals for our drug candidates that successfully complete clinical trials, if any;
establish sales, marketing, distribution and other commercial infrastructure in the future to commercialize various drugs for which we may obtain marketing approval, if any;
require the manufacture of larger quantities of drug candidates for clinical development and, potentially, commercialization;
maintain, expand, and protect our intellectual property portfolio;
hire and retain additional personnel, such as clinical, quality control and scientific personnel; and
add equipment and physical infrastructure as may be required to support our research and development programs.
Our ability to become and remain profitable depends on our ability to generate significant revenue. Our only current source of revenues comprises licensing and royalty revenues that we earn under our collaboration with Genentech related to the development and commercialization of Erivedge. In addition, a portion of our royalty and royalty related revenues under our collaboration with Genentech will be paid to TPC Investments I LP and TPC Investments II LP, or the Purchasers, pursuant to the royalty interest purchase agreement we and Curis Royalty entered into with the Purchasers and Lind SA LLC, or Agent, on March 22, 2019, or the Oberland Purchase Agreement.
We do not expect to generate significant revenues other than those related to Erivedge unless and until we are, or any collaborator is, able to obtain marketing approval for, and successfully commercialize, one or more of our drug candidates other than Erivedge. Successful commercialization will require achievement of key milestones, including initiating and successfully completing clinical trials of our drug candidates, obtaining marketing approval for these drug candidates, manufacturing, marketing, and selling those drugs for which we, or any of our collaborators, may obtain marketing approval, satisfying any post marketing requirements and obtaining reimbursement for our drugs from private insurance or government payors. Because of the uncertainties and risks associated with these activities, we are unable to accurately predict the timing and amount of revenues and whether or when we might achieve profitability. We and any collaborators may never succeed in these activities and, even if we do, or any collaborators do, we may never generate revenues that are large enough for us to achieve profitability. Even if we do achieve profitability, we may not be able to sustain or increase profitability. Our failure to become and remain profitable would decrease the value of our company and could impair our ability to raise capital, expand our business, maintain our research and development efforts, diversify our pipeline of drug candidates, or continue our operations and cause a decline in the value of our common stock.
In connection with the Oberland Purchase Agreement, we transferred and encumbered certain royalty and royalty related payments on commercial sales of Erivedge, Curis Royalty granted a first priority lien and security interest in all of its assets, including its rights to the Erivedge royalty payments, and we granted the Purchasers a first priority lien and security interest in our equity interest in Curis Royalty. As a result, in the event of a default by us or Curis Royalty we could lose all retained rights to future royalty and royalty related payments, we could be required to repurchase the Purchased Receivables at a price that is a multiple of the payments we have received, and our ability to enter into future arrangements may be inhibited, all of which could have a material adverse effect on our business, financial condition and stock price.

Pursuant to the Oberland Purchase Agreement, the Purchasers acquired the rights to a portion of certain royalty and royalty related payments excluding a portion of non-U.S. royalties retained by Curis Royalty, referred to as the Purchased Receivables, owed by Genentech under our collaboration agreement with Genentech. In connection with entering into the Oberland Purchase Agreement, Curis Royalty and the Agent entered into a security agreement and Curis and the Purchasers entered into a pledge agreement.

Following an event of default under the security agreement entered into between Curis Royalty and the Agent in connection with the transaction, the Agent has the right to stop all allocations of payments that would have otherwise been allocated to Curis Royalty pursuant to the Oberland Purchase Agreement and instead retain all such payments. In addition, the Oberland Purchase Agreement provides that after the occurrence of an event of default by Curis Royalty under the security agreement, as described below, the Purchasers shall have the option, for a period of 180 days, to require Curis Royalty to repurchase the Purchased Receivables at a price, referred to as the Put/Call Price, equal to a percentage, beginning at a low triple digit percentage and increasing over time up to a low-mid triple digit percentage, of the sum of the upfront purchase price

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and any portion of the milestone payments paid in a lump sum by the Purchasers, if any, minus certain payments previously received by the Purchasers with respect to the Purchased Receivables.

Pursuant to the security agreement, Curis Royalty granted to the Agent a first priority lien and security interest in all of its assets and all real, intangible and personal property, including all of its right, title and interest in and to the Erivedge royalty payments. The security interest secures the obligations of Curis Royalty arising under the Oberland Purchase Agreement, the security agreement or otherwise with respect to the due and prompt payment of (i) an amount equal to the Put/Call Price and (ii) all fees, costs, expenses, indemnities and other payments of Curis Royalty under or in respect of the Oberland Purchase Agreement and the security agreement.

The obligations of Curis Royalty under the Oberland Purchase Agreement may be accelerated upon the occurrence of an event of default under the security agreement (subject to certain cure periods), which events of default include:

any royalty and royalty related payments to be remitted into a certain Curis Royalty designated account controlled by the Agent pursuant to a control agreement, referred to as the royalty account, into which all royalty and royalty related payments must be paid by Curis or Curis Royalty are not so remitted in accordance with the Oberland Purchase Agreement;
any representation or warranty made by Curis or Curis Royalty in the Oberland Purchase Agreement or any other transaction document proves to be incorrect or misleading in any material respect when made;
a default by Curis or Curis Royalty in the performance of affirmative and negative covenants set forth in the Oberland Purchase Agreement or any other transaction document;
a default by Curis in the performance or observance of its indemnity obligations under the Oberland Purchase Agreement;
the failure by Genentech to pay material amounts owed under the Genentech collaboration agreement because of an actual breach or default by Curis under the Genentech collaboration agreement;
the failure of the security agreement to create a valid and perfected first priority security interest in any of the collateral;
a material breach or default by Curis under our agreement with Curis Royalty pursuant to which we transferred our rights to the royalty revenues under the Genentech collaboration agreement to Curis Royalty;
the voluntary or involuntary commencement of bankruptcy proceedings by either Curis or Curis Royalty and other insolvency related events;
any materially adverse effect on the binding nature of any of the Oberland Purchase Agreement, Security Agreement, Pledge Agreement or other transaction documents, the Genentech collaboration agreement or our agreement with Curis Royalty;
any person shall be designated as an independent director of Curis Royalty other than in accordance with Curis Royalty’s limited liability company operating agreement; or
Curis shall at any time cease to own, of record and beneficially, 100% of the equity interests in Curis Royalty.
Upon the occurrence and continuance of an event of default under the security agreement, the Agent may exercise its rights and remedies under the security agreement with respect to Curis Royalty and to the collateral pledged thereunder, including, among other things, acceleration of the obligations under the security agreement, the sale or other realization of the collateral and performance of Curis Royalty’s obligations under the purchase and sale agreement. Additionally, Curis granted to the Agent a first priority lien and security interest of Curis’ equity interest in Curis Royalty pursuant to a pledge agreement. Upon the occurrence and continuance of an event of default under the security agreement, the Agent may exercise its rights and remedies under the pledge agreement with respect to the equity interests, including, among other things, the rights to receive distributions and exercise voting rights with respect to the equity interests and to sell or otherwise realize upon the collateral in satisfaction of the obligations. The exercise by the Agent of the foregoing rights shall be deemed to constitute an exercise by the Purchasers of their put option under the Oberland Purchase Agreement.

If any of the above events of default were to occur, Curis Royalty may not have sufficient funds to pay the Put/Call price and the Agent could foreclose on the secured royalty and royalty related payment stream and/or our equity interests in Curis Royalty. In such an event, we could lose our right to royalty and royalty related payments not transferred to the Purchasers pursuant to the Oberland Purchase Agreement and we could lose our rights in Curis Royalty. In addition, in the event Genentech exercises its set-off rights against royalty payments to Curis Royalty pursuant to our collaboration agreement with

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Genentech, we may be required to satisfy our royalty-sharing obligations to the Purchasers with amounts from our working capital.  The Oberland Purchase Agreement also contains exculpation and indemnification obligations of Curis and Curis Royalty on behalf of the Agent and the Purchasers. Further, the encumbrance of all of Curis Royalty’s assets, including the right to royalties from sales of Erivedge, and our equity interests in Curis Royalty pursuant to the security agreement and pledge agreement, respectively, may inhibit us from raising additional funds or entering into other strategic arrangements. Any of these consequences of an event of default could have a material adverse effect on our business, financial condition and stock price.
The amount of royalty revenue we received from sales of Erivedge has been adversely affected by a competing drug, and may further be affected in the future.
Pursuant to the terms of our collaboration agreement with Genentech, our subsidiary Curis Royalty is entitled to receive royalties on net sales of Erivedge that range from 5% to 7.5% based upon global Erivedge sales by Roche and Genentech. The royalty rate applicable to Erivedge may be decreased in certain specified circumstances, including when a competing drug product that binds to the same molecular target as Erivedge is approved by the applicable country’s regulatory authority and is being sold in such country by a third-party for use in the same indication as Erivedge, or when there is no issued intellectual property covering Erivedge in a territory in which sales are recorded. During the third quarter of 2015, the U.S. Food and Drug Administration, or FDA and the Committee for Medicinal Products for Human Use, or CHMP, approved an additional Hedgehog signaling pathway inhibitor marketed by Sun Pharmaceutical Industries Ltd., or Sun Pharmaceutical, sonidegib (Odomzo®), for the treatment of adults with locally advanced basal cell carcinoma, or BCC.
Sales of sonidegib (Odomzo) were first recorded in the U.S. during the fourth quarter of 2015 and, accordingly, Genentech has reduced royalties on its net sales in the U.S. of Erivedge from 5-7.5% to 3-5.5%. Furthermore, we anticipate that Genentech will reduce by 2% royalties on net sales of Erivedge outside of the United States on a country-by-country basis to the extent that sonidegib is approved by the applicable country’s regulatory authority and is being sold in such country. We also believe that sales of sonidegib have, and are likely to continue to, adversely affect sales of Erivedge, including those in the U.S. and ex-U.S. countries, which would adversely affect the resulting revenue we may receive from Genentech. A decrease in sales of Erivedge, or in the royalty rate that we receive for sales of Erivedge could adversely affect our operating results.
Fluctuations in our quarterly and annual operating results could adversely affect the price of our common stock.
Our quarterly and annual operating results may fluctuate significantly. Some of the factors that may cause our operating results to fluctuate on a period-to-period basis include:
payments we may be required to make to collaborators such as Aurigene and ImmuNext to exercise license rights and satisfy milestones and royalty obligations;
the status of, and level of expenses incurred in connection with, our programs, including development costs relating to CA-4948, CI-8993, and fimepinostat as well as funding programs that we have licensed or may in the future license and develop under our collaborations with Aurigene and ImmuNext;
fluctuations in sales of Erivedge and related royalty and milestone payments, including fluctuations resulting from the sales of competing drug products such as sonidegib, which is approved in the U.S. and Europe for the treatment of locally advanced BCC and is now being marketed and sold by Sun Pharmaceuticals;
any intellectual property infringement lawsuit or other litigation in which we may become involved;
the implementation of restructuring and cost-savings strategies;
the occurrence of an event of default under the Oberland Purchase Agreement;
the implementation or termination of collaboration, licensing, manufacturing or other material agreements with third-parties, and non-recurring revenue or expenses under any such agreement; and
compliance with regulatory requirements.
We face risks related to health epidemics and other widespread outbreaks of contagious disease, including the novel coronavirus, COVID-19, which could significantly disrupt our operations and impact our financial results.

Significant outbreaks of contagious diseases, and other adverse public health developments, could have a material impact on our business operations and operating results. In December 2019, an outbreak of respiratory illness caused by a strain of novel coronavirus, COVID-19, began in China. As of March 2020, that outbreak has led to numerous confirmed cases worldwide, including in the Unites States and other countries where we are conducting clinical trials or activities in support thereof. The World Health Organization declared the outbreak a global public health emergency on January 30, 2020. In

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addition to those who have been directly affected, millions more have been affected by governmental efforts around the world to slow the spread of the outbreak. The outbreak and government measures taken in response have also had a significant impact, both direct and indirect, on businesses and commerce. The future progression of the outbreak and its effects on our business and operations are uncertain.
We and our third-party contract manufacturers, contract research organizations and clinical sites may experience disruptions in supply of product candidates and/or procuring items that are essential for our research and development activities, including, for example, raw materials used in the manufacturing of our product candidates, medical and laboratory supplies used in our clinical trials or preclinical studies or animals that are used for preclinical testing, in each case, for which there may be shortages because of ongoing efforts to address the outbreak. While we believe that we currently have sufficient supply of our product candidates to continue our ongoing clinical trials, some of our product candidates, or materials contained therein, may come from facilities located in areas impacted by COVID-19, including India, China, and Europe. In addition, any disruptions could impact the supply, manufacturing or distribution of Erivedge, which could negatively impact the amount and timing of any royalty revenue we may receive from Genentech related to Erivedge. There is no guarantee that the recent COVID-19, or any potential future, outbreak would not impact our future supply chain, which could have a material adverse impact on our clinical trial plans and business operations.
Additionally, we have enrolled, and will seek to enroll, cancer patients in our clinical trials at sites located both in the United States and internationally. Some of our clinical trial sites are outside of the United States, including in areas recently noted as being impacted by COVID-19, such as Germany. In the event that clinical trial sites are slowed down or closed to enrollment in our trials, this could have a material adverse impact on our clinical trial plans and timelines. We may face difficulties recruiting or retaining patients in our ongoing and planned clinical trials if patients are affected by the virus or are fearful of visiting or traveling to our clinical trial sites because of the outbreak.
Any negative impact that the outbreak has the ability of our suppliers to provide materials for our product candidates or on recruiting or retaining patients in our clinical trials could cause costly delays to clinical trial activities, which could adversely affect our ability to obtain regulatory approval for and to commercialize our product candidates, increase our operating expenses, and have a material adverse effect on our financial results.
If the estimates we make and the assumptions on which we rely in preparing our financial statements prove inaccurate, our actual results may vary significantly.
Our financial statements have been prepared in accordance with GAAP. The preparation of these financial statements requires us to make estimates and judgments that affect the reported amounts of our assets, liabilities, revenues and expenses, the amounts of charges taken by us, and disclosures related thereto. Such estimates and judgments include the carrying value of our property, the value of equipment and intangible assets, revenue recognition, and the value of certain liabilities, the repayment term of our loan from HealthCare Royalty, for periods prior to its termination, and stock-based compensation expense. We base our estimates and judgments on historical experience and on various other assumptions that we believe to be reasonable under the circumstances. However, these estimates and judgments, and their underlying assumptions, may change over time. Accordingly, our actual financial results may vary significantly from the estimates contained in our financial statements.
For a further discussion of the estimates and judgments that we make and the critical accounting policies that affect these estimates and judgments, see “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Estimates” set forth in this report.
RISKS RELATING TO THE DEVELOPMENT AND COMMERCIALIZATION OF OUR DRUGS
We depend heavily on the success of our most advanced drug candidates. All of our drug candidates are still in early clinical or preclinical development. Preclinical studies and clinical trials of our drug candidates may not be successful. If we are unable to commercialize our drug candidates or experience significant delays in doing so, our business will be materially harmed.
Our ability to generate drug candidate(s) and/or drug product revenues, which we do not expect will occur for many years, if ever, will depend heavily on the successful development and eventual commercialization of our most advanced drug candidates, including CA-4948, CI-8993, and fimepinostat. Due to preliminary efficacy data and current market conditions, we have determined that no further patients will be enrolled in our Phase 1 combination study of fimepinostat with venetoclax. While we are currently evaluating potential future studies for fimepinostat, our success depends heavily on our ongoing and future clinical trials of CA-4948 and CI-8993, both of which are in early stage clinical development.

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The success of our drug candidates will depend on many factors, including the following:

successful enrollment in, and completion of, ongoing and future clinical trials of CA-4948 and CI-8993 and other compounds that we may develop under our collaboration and license agreements with Aurigene and ImmuNext;
Aurigene’s ability to successfully discover and preclinically develop other drug candidates under the collaboration agreement;
a safety, tolerability and efficacy profile that is satisfactory to the FDA or any comparable foreign regulatory authority for marketing approval;
receipt of requisite marketing approvals from applicable regulatory authorities;
the extent of any required post marketing approval commitments to applicable regulatory authorities;
establishment of supply arrangements with third-party raw materials suppliers and manufacturers;
establishment of arrangements with third-party manufacturers to obtain finished drug products that is appropriately packaged for sale;
adequate ongoing availability of raw materials and drug products for clinical development and any commercial sales;
obtaining and maintaining patent, trade secret protection and regulatory exclusivity, both in the U.S. and internationally;
protection of the rights in our intellectual property portfolio;
successful launch of commercial sales following any marketing approval;
a continued acceptable safety profile following any marketing approval;
commercial acceptance by patients, the medical community and third-party payors; and
our ability to compete with other therapies.
If we do not achieve one or more of these factors in a timely manner or at all, we could experience significant delays or an inability to successfully market, commercialize, or distribute our most advanced drug candidate, which would materially harm our business.
The therapeutic efficacy of our drug candidates is unproven in humans, and we may not be able to successfully develop and commercialize drug candidates pursuant to these programs.

Our drug candidates, including CA-4948, CI-8993, fimepinostat, and CA-170, are novel chemical entities and their potential benefit as therapeutic cancer drugs is unproven. Our ability to generate revenues from these drug candidates, which we do not expect will occur in the short-term, if ever, will depend heavily on their successful development and commercialization, which is subject to many potential risks. For example, our drug candidates may not prove to be effective inhibitors of the molecular targets they are being designed to act against, and may not demonstrate in patients any or all of the pharmacological benefits that may have been demonstrated in preclinical studies. These drug candidates may interact with human biological systems in unforeseen, ineffective or harmful ways. If the FDA determines that any of our drug candidates are associated with significant side effects or have characteristics that are unexpected, we may need to delay or abandon their development or limit development to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk benefit perspective. Moreover, we may determine after conducting clinical trials or related studies that certain of our drug candidates do not possess the anticipated therapeutic characteristics, and we may decide to abandon or discontinue any one of our clinical studies. For example, in the fourth quarter of 2019, we announced initial data from a clinical study of CA-170 in patients with mesothelioma in conjunction with the Society of Immunotherapy of Cancer conference and based on this data, we decided no further patients will be enrolled in this study. In March 2020, we announced that although we observed no significant drug-drug interaction in our Phase 1 study of fimepinostat in combination with venetoclax, we did not see an efficacy signal that would warrant continuation of the study. Accordingly, no further patients will be enrolled in this study. We are currently evaluating future studies for fimepinostat.
Moreover, many drug candidates that initially showed promise in early stage testing for treating cancer have later been found to cause side effects that prevented further development of the compound or resulted in their removal from the market. As a result of these and other risks described herein that are inherent in the development and commercialization of novel therapeutic agents, we may not successfully maintain third-party licensing or collaboration transactions with respect to, or

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successfully commercialize, our drug candidates, in which case we will not achieve profitability and the value of our stock may decline.
If clinical trials of any future drug candidates that we, or any collaborators, may develop fail to satisfactorily demonstrate safety and efficacy to the FDA and other regulators, we, or any collaborators, may incur additional costs or experience delays in completing, or ultimately be unable to complete, the development and commercialization of these drug candidates.
We, and any collaborators, are not permitted to commercialize, market, promote or sell any drug candidate in the U.S. without obtaining marketing approval from the FDA. Foreign regulatory authorities, such as the European Medicines Agency, or EMA, impose similar requirements. We, and any collaborators, must complete extensive preclinical development and clinical trials to demonstrate the safety and efficacy of our drug candidates in humans before we will be able to obtain these approvals.
Clinical testing is expensive, is difficult to design and implement, can take many years to complete and is inherently uncertain as to outcome. We cannot guarantee that any clinical trials will be conducted as planned or completed on schedule, if at all. The clinical development of our drug candidates is susceptible to the risk of failure inherent at any stage of drug development, including failure to demonstrate a favorable pharmacodynamic and pharmacokinetic profile, efficacy in a clinical trial or across a broad population of patients, the occurrence of adverse events or undesirable side effects that are severe or medically or commercially unacceptable, failure to comply with protocols or applicable regulatory requirements and determination by the FDA or any comparable foreign regulatory authority that a drug candidate may not continue development or is not approvable. It is possible that even if one or more of our drug candidates has a beneficial effect, that effect will not be detected during clinical evaluation as a result of one or more of a variety of factors, including the size, duration, design, measurements, conduct or analysis of our clinical trials. Conversely, as a result of the same factors, our clinical trials may indicate an apparent positive effect of a drug candidate that is greater than the actual positive effect, if any. Similarly, in our clinical trials we may fail to detect toxicity or intolerability caused by our drug candidates, or we may mistakenly believe that our drug candidates are toxic or not well tolerated when that is not in fact the case.
Any inability to successfully complete preclinical and clinical development could result in additional costs to us, or any collaborators, and impair our ability to generate revenues from drug sales, regulatory and commercialization milestones and royalties. Moreover, if we, or any collaborators, are required to conduct additional clinical trials or other testing of our drug candidates beyond the trials and testing that we or they contemplate, if we, or they, are unable to successfully complete clinical trials of our drug candidates or other testing, or the results of these trials or tests are unfavorable, uncertain or are only modestly favorable, or there are unacceptable safety concerns associated with our drug candidates, we, or any future collaborators, may:
incur additional unplanned costs;
be delayed in obtaining marketing approval for our drug candidates;
not obtain marketing approval at all;
obtain approval for indications or patient populations that are not as broad as intended or desired;
obtain approval with labeling that includes significant use or distribution restrictions or significant safety warnings, including boxed warnings;
be subject to additional post marketing testing or other requirements; or
be required to remove the drug from the market after obtaining marketing approval.
Our failure to successfully initiate and complete clinical trials of our drug candidates and to demonstrate the efficacy and safety necessary to obtain regulatory approval to market any of our drug candidates would significantly harm our business.
Adverse events or undesirable side effects caused by, or other unexpected properties of, drug candidates that we develop may be identified during development and could delay or prevent their marketing approval or limit their use.
Adverse events or undesirable side effects caused by, or other unexpected properties of, any drug candidates that we may develop could cause us, any collaborators, an institutional review board or regulatory authorities to interrupt, delay or halt clinical trials of one or more of our drug candidates and could result in a more restrictive label or the delay or denial of marketing approval by the FDA or comparable foreign regulatory authorities. If any of our drug candidates is associated with adverse events or undesirable side effects or has properties that are unexpected, we, or any collaborators, may need to abandon development or limit development of that drug candidate to certain uses or subpopulations in which the undesirable side effects or other characteristics are less prevalent, less severe or more acceptable from a risk-benefit perspective. Many compounds that initially showed promise in clinical or earlier stage testing have later been found to cause undesirable or unexpected side effects

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that prevented further development of the compound. For example, CI-8993 was originally developed as part of a license and collaboration agreement between ImmuNext and Janssen Biotech, Inc., or Janssen. In 2016, Janssen initiated clinical development of CI-8993 in a Phase 1 Study evaluating safety, pharmacokinetics and pharmacodynamics of ascending doses of CI-8993 in patients with advanced solid tumors. The study enrolled 12 patients, in which one patient experienced dose-limiting side effects related to cytokine release syndrome. Janssen opted to close the study.
If we, or any collaborators, experience any of a number of possible unforeseen events in connection with clinical trials of our drug candidates, potential clinical development, marketing approval or commercialization of our drug candidates could be delayed or prevented.
We, or any collaborators, may experience numerous unforeseen events during, or as a result of, clinical trials that could delay or prevent clinical development, marketing approval or commercialization of our current drug candidates or any future drug candidates that we, or any collaborators, may develop, including:
regulators or institutional review boards may not authorize us, any collaborators or our or their investigators to commence a clinical trial or conduct a clinical trial at a prospective trial site;
we, or any collaborators, may have delays in reaching or fail to reach agreement on acceptable clinical trial contracts or clinical trial protocols with prospective trial sites;
clinical trials of our drug candidates may produce unfavorable or inconclusive results, including with respect to the safety, tolerability, efficacy, or pharmacodynamic and pharmacokinetic profile of the drug candidate;
we, or any collaborators, may decide, or regulators may require us or them, to conduct additional clinical trials or abandon drug development programs;
the number of patients required for clinical trials of our drug candidates may be larger than we, or any collaborators, anticipate, patient enrollment in these clinical trials may be slower than we, or any collaborators, anticipate or participants may drop out of these clinical trials at a higher rate than we, or any collaborators, anticipate;
our estimates of the patient populations available for study may be higher than actual patient numbers and result in our inability to sufficiently enroll our trials;
the cost of planned clinical trials of our drug candidates may be greater than we anticipate;
our third-party contractors or those of any collaborators, including those manufacturing our drug candidates or components or ingredients thereof or conducting clinical trials on our behalf or on behalf of any collaborators, may fail to comply with regulatory requirements or meet their contractual obligations to us or any collaborators in a timely manner or at all;
patients that enroll in a clinical trial may misrepresent their eligibility to do so or may otherwise not comply with the clinical trial protocol, resulting in the need to drop the patients from the clinical trial, increase the needed enrollment size for the clinical trial or extend the clinical trial’s duration;
we, or any collaborators, may have to delay, suspend or terminate clinical trials of our drug candidates for various reasons, including a finding that the participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of the drug candidate such as an unfavorable pharmacodynamic or pharmacokinetic profile;
regulators or institutional review boards may require that we, or any collaborators, or our or their investigators suspend or terminate clinical research for various reasons, including noncompliance with regulatory requirements or their standards of conduct, a finding that the participants are being exposed to unacceptable health risks, undesirable side effects or other unexpected characteristics of the drug candidate or findings of undesirable effects caused by a chemically or mechanistically similar drug or drug candidate;
the FDA or comparable foreign regulatory authorities may disagree with our, or any collaborators’, clinical trial designs or our or their interpretation of data from preclinical studies and clinical trials;
the FDA or comparable foreign regulatory authorities may fail to approve or subsequently find fault with the manufacturing processes or facilities of third-party manufacturers with which we, or any collaborators, enter into agreements for clinical and commercial supplies;
the supply or quality of raw materials or manufactured drug candidates or other materials necessary to conduct clinical trials of our drug candidates may be insufficient, inadequate or not available at an acceptable cost, or we may experience interruptions in supply; and

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the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient to obtain marketing approval.
Drug development costs for us, or any collaborators, will increase if we, or they, experience delays in testing or pursuing marketing approvals and we, or they, may be required to obtain additional funds to complete clinical trials and prepare for possible commercialization of our drug candidates. We do not know whether any preclinical tests or clinical trials will begin as planned, will need to be restructured, or will be completed on schedule or at all. Significant preclinical study or clinical trial delays also could shorten any periods during which we, or any collaborators, may have the exclusive right to commercialize our drug candidates or allow our competitors, or the competitors of any collaborators, to bring drugs to market before we, or any collaborators, do and impair our ability, or the ability of any collaborators, to successfully commercialize our drug candidates and may harm our business and results of operations. In addition, many of the factors that lead to clinical trial delays may ultimately lead to the denial of marketing approval of any of our drug candidates.
If we experience delays in the enrollment of patients in our clinical trials, our receipt of necessary regulatory approvals could be delayed or prevented.
We may not be able to initiate or continue clinical trials for our drug candidates if we are unable to locate and enroll a sufficient number of eligible patients to participate in these trials. Patient enrollment is a significant factor in the timing of clinical trials, and is affected by many factors, including:
the size and nature of the patient population;
the severity of the disease under investigation;
the availability of approved therapeutics for the relevant disease;
the proximity of patients to clinical sites;
the eligibility criteria and design for the trial;
efforts to facilitate timely enrollment;
competing clinical trials; and
clinicians’ and patients’ perceptions as to the potential advantages and risks of the drug being studied in relation to other available therapies, including any new drugs that may be approved for the indications we are investigating.
In addition, many of our competitors have ongoing clinical trials for drug candidates that could be competitive with our drug candidates. Patients who would otherwise be eligible for our clinical trials may instead enroll in clinical trials of our competitors’ drug candidates or rely upon treatment with existing therapies that may preclude them from eligibility for our clinical trials.
Our inability, or the inability of any future collaborators, to enroll a sufficient number of patients for our, or their, clinical trials could result in significant delays or may require us or them to abandon one or more clinical trials altogether. Enrollment delays in our clinical trials, including for clinical trials of CA-4948, CI-8993, and fimepinostat, may result in increased development costs for our drug candidates, which could cause the value of our stock price to decline.
Results of preclinical studies and early clinical trials may not be predictive of results of future late stage clinical trials.
We cannot assure you that we will be able to replicate in human clinical trials the results we observed in animal models. Moreover, the outcome of preclinical studies and early clinical trials may not be predictive of the success of later clinical trials, and interim results of clinical trials do not necessarily predict success in future clinical trials. Many companies in the pharmaceutical and biotechnology industries have suffered significant setbacks in late stage clinical trials after achieving positive results in earlier development, and we could face similar setbacks. The design of a clinical trial can determine whether its results will support approval of a drug and flaws in the design of a clinical trial may not become apparent until the clinical trial is well advanced. We have limited experience in designing clinical trials and may be unable to design and execute a clinical trial to support marketing approval. In addition, preclinical and clinical data are often susceptible to varying interpretations and analyses. Many companies that believed their drug candidates performed satisfactorily in preclinical studies and clinical trials have nonetheless failed to obtain marketing approval for the drug candidates. Even if we, or any collaborators, believe that the results of clinical trials for our drug candidates warrant marketing approval, the FDA or comparable foreign regulatory authorities may disagree and may not grant marketing approval of our drug candidates.
In some instances, there can be significant variability in safety or efficacy results between different clinical trials of the same drug candidate due to numerous factors, including changes in trial procedures set forth in protocols, differences in the size

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and type of the patient populations, changes in and adherence to the dosing regimen and other clinical trial protocols and the rate of dropout among clinical trial participants. If we fail to receive positive results in clinical trials of our drug candidates, the development timeline and regulatory approval and commercialization prospects for our most advanced drug candidates, and, correspondingly, our business and financial prospects would be negatively impacted.
Interim, “top-line,” initial, and preliminary data from our clinical trials that we announce or publish from time to time may change as more patient data become available or as additional analyses are conducted, and audit and verification procedures could result in material changes to the final data.
From time to time, we publish interim, “top-line,” initial, or preliminary data from our clinical studies. Interim data from clinical trials that we may complete are subject to the risk that one or more of the clinical outcomes may materially change as patient enrollment continues and more patient data become available. Initial, preliminary or “top-line” data also remain subject to audit and verification procedures that may result in the final data being materially different from the data we previously published. As a result, interim, “top-line,” initial, and preliminary data should be viewed with caution until the final data are available. Material adverse changes between such data and final published data could significantly harm our business prospects.
We have never obtained marketing approval for a drug candidate and we may be unable to obtain, or may be delayed in obtaining, marketing approval for any of our current drug candidates or any future drug candidates that we, or any future collaborators, may develop.
We have never obtained marketing approval for a drug candidate. It is possible that the FDA may refuse to accept for substantive review any new drug applications, or NDAs, that we submit for our drug candidates or may conclude after review of our data that our application is insufficient to obtain marketing approval of our drug candidates. If the FDA does not accept or approve our NDAs for any of our drug candidates, it may require that we conduct additional clinical trials, preclinical studies or manufacturing validation studies and submit that data before it will reconsider our applications. Depending on the extent of these or any other FDA-required trials or studies, approval of any NDA or application that we submit may be delayed by several years, or may require us to expend more resources than we have available. It is also possible that additional trials or studies, if performed and completed, may not be considered sufficient by the FDA to approve our NDAs. Any delay in obtaining, or an inability to obtain, marketing approvals would prevent us from commercializing our drug candidates or any companion diagnostics, generating revenues and achieving and sustaining profitability. If any of these outcomes occur, we may be forced to abandon our development efforts for our drug candidates, which could significantly harm our business.
Even if any drug candidates that we, or any collaborators, may develop receive marketing approval, we or others may later discover that the drug is less effective than previously believed or causes undesirable side effects that were not previously identified, which could compromise our ability, or that of any collaborators, to market the drug.
Clinical trials of any drug candidates we may develop will be conducted in carefully defined subsets of patients who have agreed to enter into clinical trials. Consequently, it is possible that our clinical trials, or those of any collaborator, may indicate an apparent positive effect of a drug candidate that is greater than the actual positive effect, if any, or alternatively fail to identify undesirable side effects. If, following approval of a drug candidate, we, or others, discover that the drug is less effective than previously believed or causes undesirable side effects that were not previously identified, any of the following adverse events could occur:
regulatory authorities may withdraw their approval of the drug or seize the drug;
we, or any future collaborators, may be required to recall the drug, change the way the drug is administered or conduct additional clinical trials;
additional restrictions may be imposed on the marketing of, or the manufacturing processes for, the particular drug;
we may be subject to fines, injunctions or the imposition of civil or criminal penalties;
regulatory authorities may require the addition of labeling statements, such as a “black box” warning or a contraindication;
we, or any future collaborators, may be required to create a Medication Guide outlining the risks of the previously unidentified side effects for distribution to patients;
we, or any future collaborators, could be sued and held liable for harm caused to patients;
the drug may become less competitive; and
our reputation may suffer.
Any of these events could harm our business and operations, and could negatively impact our stock price.

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Even if our drug candidates receive marketing approval, they may fail to achieve the degree of market acceptance by physicians, patients, third-party payors and others in the medical community necessary for commercial success, in which case we may not generate significant revenues or become profitable.
We have never commercialized a drug, and even if one of our drug candidates is approved by the appropriate regulatory authorities for marketing and sale, it may nonetheless fail to gain sufficient market acceptance by physicians, patients, third-party payors and others in the medical community. Physicians are often reluctant to switch their patients from existing therapies even when new and potentially more effective or convenient treatments enter the market. Further, patients often acclimate to the therapy that they are currently taking and do not want to switch unless their physicians recommend switching drugs or they are required to switch therapies due to lack of reimbursement for existing therapies.
Efforts to educate the medical community and third-party payors on the benefits of our drug candidates may require significant resources and may not be successful. If any of our drug candidates is approved but does not achieve an adequate level of market acceptance, we may not generate significant revenues and we may not become profitable. The degree of market acceptance of our drug candidates, if approved for commercial sale, will depend on a number of factors, including:
the efficacy and safety of the drug;
the potential advantages of the drug compared to competitive therapies;
the prevalence and severity of any side effects;
whether the drug is designated under physician treatment guidelines as a first-, second- or third-line therapy;
our ability, or the ability of any future collaborators, to offer the drug for sale at competitive prices;
the drug’s convenience and ease of administration compared to alternative treatments;
the willingness of the target patient population to try, and of physicians to prescribe, the drug and patient adherence to the drug’s dosing regimen once prescribed;
limitations or warnings, including distribution or use restrictions, contained in the drug’s approved labeling;
the strength of sales, marketing and distribution support;
changes in the standard of care for the targeted indications for the drug; and
availability and amount of coverage and reimbursement from government payors, managed care plans and other third-party payors.
We may expend our limited resources to pursue a particular drug candidate or indication and fail to capitalize on drug candidates or indications that may be more profitable or for which there is a greater likelihood of success.
Because we have limited financial and managerial resources, we focus on research programs and drug candidates that we believe may have the best potential in certain specific indications. As a result, we may delay or forgo pursuit of certain opportunities with our other drug candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial drugs or profitable market opportunities. Our spending on current and future proprietary research and development programs and drug candidates for specific indications may not yield any commercially viable drug candidates. If we do not accurately evaluate the commercial potential or target market for a particular drug candidate, we may relinquish valuable rights to that drug candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights to such drug candidate. For example, in the fourth quarter of 2019, we announced initial data from a clinical study of CA-170 in patients with mesothelioma in conjunction with the Society of Immunotherapy of Cancer conference. Based on this data, we decided no further patients will be enrolled in the study.
We have no sales, marketing, or distribution experience and, as such, plan to rely primarily on third-parties who may not successfully market or sell any drugs we develop.
We have no sales, marketing, or drug distribution experience or capabilities. If we receive required regulatory approvals to commercialize any of our drug candidates, we plan to rely primarily on sales, marketing and distribution arrangements with third-parties, including our collaborative partners. For example, as part of our agreements with Genentech, we have granted Genentech the exclusive rights to distribute drugs resulting from such collaboration, and Genentech is currently commercializing Erivedge. We may have to enter into additional marketing and/or sales arrangements in the future and we may not be able to enter into these additional arrangements on terms that are favorable to us, if at all. In addition, we may have limited or no control over the sales, marketing, and distribution activities of these third-parties, and sales through these third-parties could be less profitable for us than direct sales. These third-parties could sell competing drugs and may devote

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insufficient sales efforts or resources to our drugs. Our future revenues will be materially dependent upon the successful efforts of these third-parties.
We may seek to independently market and sell drugs that are not already subject to agreements with other parties. If we undertake to perform sales, marketing and distribution functions ourselves, we could face a number of additional risks, including:

we may not be able to attract and build a significant and skilled marketing staff or sales force;
the cost of establishing a marketing staff or sales force may not be justifiable in light of the revenues generated by any particular drug; and
our direct sales and marketing efforts may not be successful.
We face substantial competition, and our competitors may discover, develop or commercialize drugs before or more successfully than we do.
Our drug candidates face competition from existing and new technologies and drugs being developed by biotechnology, medical device, and pharmaceutical companies, as well as universities and other research institutions. For example, there are several companies developing drug candidates that target the same molecular targets that we are targeting or that are testing drug candidates in the same cancer indications that we are testing. For example, while we are not aware of other molecules in clinical testing that are designed as one chemical entity to inhibit both PI3K and HDAC that targets MYC, there are commercially available drugs that individually target PI3K or HDAC and there are multiple companies testing PI3K or HDAC inhibitors that are in various stages of clinical development.
We are aware of multiple other companies in pre-clinical development of IRAK4 inhibitors for oncology indications, including Pfizer, Inc., Nimbus Discovery, Inc./Genentech, TG Therapeutics, Inc./Ligand Pharmaceuticals, Incorporated., Rigel Pharmaceuticals, Inc., Noxopharm Ltd., Kymera Therapeutics Inc., and Bayer AG. VISTA (V-domain Ig Suppressor of T-cell Activation) is a novel immuno-oncology target which we are not aware of any other active clinical-stage programs. In addition, there are multiple approved products on the market that inhibit PD1/PDL1, including Bristol-Myers Squibb Company’s Opdivo, Merck & Co., Inc.'s Keytruda, Roche Holding AG's Tecentriq, Merck & Co., Inc., KGaA / Pfizer Inc.'s Bavencio, AstraZeneca plc’s Imfinzi™, Regeneron Pharmaceuticals, Inc./Sanofi S.A.'s Libtayo™, and a number of drug candidates in various stages of development (by Novartis AG, TESARO Inc., and others). We are also aware of multiple other companies developing drugs to target TIM3, including Novartis AG, Incyte Corporation, TESARO, Inc., Bristol-Myers Squibb Company, Eli Lilly and Company, and others.
We are aware of several companies that have clinical development programs relating to compounds that modulate the Hedgehog signaling pathway and may compete with Erivedge, including: Exelixis, Inc./Bristol-Myers Squibb Company (BMS-833923 / XL139), PellePharm, Inc. (patidegib), and Cyclene Pharmaceuticals Inc./Senhwa Biosciences Inc. (silmitasertib / CX-4945). Furthermore, glasdegib (Daurismo™) is marketed by Pfizer Inc. for the treatment of newly diagnosed adult AML patients for whom intensive chemotherapy is not an option, and, sonidegib (Odomzo™) is marketed by Sun Pharmaceutical, for the treatment of adults with locally advanced BCC. Under the terms of our collaboration agreement with Genentech, our royalty on sales of Erivedge has been reduced as a result of sales of sonidegib.
Many of our competitors have substantially greater capital resources, research and development staffs and facilities, and more extensive experience than we have. As a result, efforts by other biotechnology, medical device and pharmaceutical companies could render our programs or drugs uneconomical or result in therapies superior to those that we develop alone or with a collaborator. For those programs that we have selected for internal development, we face competition from companies that are more experienced in drug development and commercialization, obtaining regulatory approvals and drug manufacturing. Mergers and acquisitions in the pharmaceutical and biotechnology industries may result in even more resources being concentrated among a smaller number of our competitors. Other smaller companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These third-parties compete with us in recruiting and retaining qualified scientific and management personnel, establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs. As a result, any of these companies may be more successful in obtaining collaboration agreements or other monetary support, approval and commercialization of their drugs and/or may develop competing drugs more rapidly and/or at a lower cost.
If we are not able to compete effectively, then we may not be able, either alone or with others, to advance the development and commercialization of our drug candidates, which would adversely affect our ability to grow our business and become profitable.

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For a list of commercially available-drugs that individually target PI3K or HDAC and a list of companies testing PI3K or HDAC inhibitors in various stages of development, see “Business - Competition.”  
Even if we, or any collaborators, are able to commercialize any drug candidate that we, or they, develop, the drug may become subject to unfavorable pricing regulations, third-party payor reimbursement practices or healthcare reform initiatives, any of which could harm our business.
The commercial success of our drug candidates will depend substantially, both domestically and abroad, on the extent to which the costs of our drug candidates will be paid by third-party payors, including government health care programs and private health insurers. If coverage is not available, or reimbursement is limited, we, or any collaborators, may not be able to successfully commercialize our drug candidates. Even if coverage is provided, the approved reimbursement amount may not be high enough to allow us, or any collaborators, to establish or maintain pricing sufficient to realize a sufficient return on our or their investments. In the U.S., no uniform policy of coverage and reimbursement for drugs exists among third-party payors and coverage and reimbursement levels for drugs can differ significantly from payor to payor. As a result, the coverage determination process is often a time consuming and costly process that may require us to provide scientific and clinical support for the use of our drugs to each payor separately, with no assurance that coverage and adequate reimbursement will be applied consistently or obtained in the first instance.
There is significant uncertainty related to third-party payor coverage and reimbursement of newly approved drugs. Marketing approvals, pricing and reimbursement for new drug products vary widely from country to country. Some countries require approval of the sale price of a drug before it can be marketed. In many countries, the pricing review period begins after marketing or drug licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. As a result, we, or any future collaborators, might obtain marketing approval for a drug in a particular country, but then be subject to price regulations that delay commercial launch of the drug, possibly for lengthy time periods, which may negatively impact the revenues we are able to generate from the sale of the drug in that country. Adverse pricing limitations may hinder our ability or the ability of any future collaborators to recoup our or their investment in one or more drug candidates, even if our drug candidates obtain marketing approval.
Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Therefore, our ability, and the ability of any future collaborators, to commercialize successfully any of our drug candidates will depend in part on the extent to which coverage and adequate reimbursement for these drugs and related treatments will be available from third-party payors. Third-party payors decide which medications they will cover and establish reimbursement levels. The healthcare industry is acutely focused on cost containment, both in the U.S. and elsewhere. Government authorities and other third-party payors have attempted to control costs by limiting coverage and the amount of reimbursement for particular medications, which could affect our ability or that of any future collaborators to sell our drug candidates profitably. These payors may not view our drugs, if any, as cost-effective, and coverage and reimbursement may not be available to our customers, or those of any future collaborators, or may not be sufficient to allow our drugs, if any, to be marketed on a competitive basis. Cost-control initiatives could cause us, or any future collaborators, to decrease the price we, or they, might establish for drugs, which could result in lower than anticipated drug revenues. If the prices for our drugs, if any, decrease or if governmental and other third-party payors do not provide coverage or adequate reimbursement, our prospects for revenue and profitability will suffer.
There may also be delays in obtaining coverage and reimbursement for newly approved drugs, and coverage may be more limited than the indications for which the drug is approved by the FDA or comparable foreign regulatory authorities. Moreover, eligibility for reimbursement does not imply that any drug will be paid for in all cases or at a rate that covers our costs, including research, development, manufacture, sale and distribution. Reimbursement rates may vary, by way of example, according to the use of the drug and the clinical setting in which it is used. Reimbursement rates may also be based on reimbursement levels already set for lower cost drugs or may be incorporated into existing payments for other services.
In addition, increasingly, third-party payors are requiring higher levels of evidence of the benefits and clinical outcomes of new technologies and are challenging the prices charged. Further, the net reimbursement for drug products may be subject to additional reductions if there are changes to laws that presently restrict imports of drugs from countries where they may be sold at lower prices than in the U.S. An inability to promptly obtain coverage and adequate payment rates from both government-funded and private payors for any of our drug candidates for which we, or any future collaborator, obtain marketing approval could significantly harm our operating results, our ability to raise capital needed to commercialize drugs and our overall financial condition.

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Product liability lawsuits against us could divert our resources, cause us to incur substantial liabilities and limit commercialization of any drugs that we may develop.
Product liability claims are inherent in the process of researching, developing and commercializing human healthcare drugs and could expose us to significant liabilities and prevent or interfere with the development or commercialization of our drug candidates. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the drug, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our drug candidates. Regardless of their merit or eventual outcome, such liability claims would require us to spend significant time, money and other resources to defend such claims, and could result in:

decreased demand for our drug candidates or drugs that we may develop;
injury to our reputation and significant negative media attention;
withdrawal of clinical trial participants;
significant costs to defend resulting litigation;
substantial monetary awards to trial participants or patients;
loss of revenue;
reduced resources of our management to pursue our business strategy; and
the reduced ability or inability to commercialize any drugs that we may develop.
Although we currently have product liability insurance for our clinical trials, this insurance is subject to deductibles and coverage limitations and may not be adequate in scope to protect us in the event of a successful drug liability claim. The cost of any product liability litigation or other proceeding, even if resolved in our favor, could be substantial. We will need to increase our insurance coverage if and when we commercialize any drug that receives marketing approval. In addition, insurance coverage is becoming increasingly expensive. If we are unable to obtain or maintain sufficient insurance coverage at an acceptable cost or to otherwise protect against potential product liability claims, it could prevent or inhibit the development and commercial production and sale of our drug candidates, which could harm our business, financial condition, results of operations and prospects.
RISKS RELATING TO OUR DEPENDENCE ON THIRD-PARTIES
We are reliant on Genentech and Roche for the successful development and commercialization of Erivedge. If Genentech and Roche do not successfully commercialize Erivedge for advanced BCC or develop Erivedge for other indications, our future prospects may be substantially harmed.
Erivedge is FDA-approved for people with advanced BCC in the U.S. Erivedge is also approved in over 60 foreign countries. Genentech and/or Roche have filed regulatory submissions seeking approval to commercialize Erivedge for this same indication. Our levels of revenue in each period and our near-term prospects substantially depend upon Genentech’s ability to successfully continue to commercialize Erivedge for patients with advanced BCC and to demonstrate its superiority over existing therapies and standards of care. The further development and commercialization of Erivedge could be unsuccessful if:
Erivedge becomes no longer accepted as safe, efficacious, cost-effective and preferable for the treatment of advanced BCC to current therapies in the medical community and by third-party payors;
Genentech and/or Roche fail to continue to apply the necessary financial resources and expertise to manufacturing, marketing and selling Erivedge for advanced BCC, and to regulatory approvals for this indication outside of the U.S.;
Genentech and/or Roche do not continue to develop and implement effective marketing, sales and distribution strategies and operations for development and commercialization of Erivedge for advanced BCC;
Genentech and/or Roche do not continue to develop, validate and maintain a commercially viable manufacturing process for Erivedge that is compliant with current good manufacturing practices;
Genentech and/or Roche do not successfully obtain third-party reimbursement and generate commercial demand that results in sales of Erivedge for advanced BCC in any geographic areas where requisite approvals have been, or may be, obtained;

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we, Genentech, or Roche encounter third-party patent interference, derivation, inter partes review, post grant review, reexamination or patent infringement claims with respect to Erivedge;
Genentech and/or Roche do not comply with regulatory and legal requirements applicable to the sale of Erivedge for advanced BCC;
competing drug products are approved for the same indications as Erivedge, such as is the case with sonidegib, which is being marketed and sold by Sun Pharmaceutical, both in the U.S. and abroad for the treatment of adults with locally advanced BCC;
new safety risks are identified;
Erivedge does not demonstrate acceptable safety and efficacy in current or future clinical trials, or otherwise does not meet applicable regulatory standards for approval in indications other than advanced BCC;
Genentech and/or Roche determine to reprioritize Genentech’s commercial or development programs and reduce or terminate Genentech’s efforts on the development or commercialization of Erivedge; or
Genentech does not exercise its first right to maintain or defend intellectual property rights associated with Erivedge.
In addition, pursuant to the terms of the Oberland Purchase Agreement, a portion of our royalty and royalty related revenues under our collaboration with Genentech will be paid to the Purchasers.
We depend on third-parties for the research and, as applicable, development and commercialization of certain programs. If one or more of our collaborators fails or delays in developing or, as applicable, commercializing drug candidates based upon our technologies, our business prospects and operating results would suffer and our stock price would likely decline.
Pursuant to our collaboration with Genentech, we have granted to Genentech exclusive rights to develop and commercialize drugs based upon our Hedgehog signaling pathway technologies. Collaborations involving our drug candidates, including our collaborations with Aurigene, Genentech and ImmuNext, pose the following risks to us:
Our collaborators each have significant discretion in determining the efforts and resources that they will apply to their respective collaboration with us. If a collaborator fails to allocate sufficient time, attention and resources to our collaboration, the successful development and commercialization of drug candidates under such collaboration is likely to be adversely affected. For example, we are dependent on ImmuNext to conduct certain non-clinical research activities to support our expected Phase 1 clinical trial of CI-8993.
Our collaborators may develop and commercialize, either alone or with others, drugs that are similar to or competitive with the drug candidates that are the subject of our respective collaborations. For example, Genentech and Roche are involved in the commercialization of many cancer medicines and are seeking to develop several other cancer drug therapies, and Aurigene has other active cancer-focused discovery programs and has also entered into license agreements with other companies that focus on cancer therapies.
Our collaborators may change the focus of their development and commercialization efforts or pursue higher-priority programs.
Our collaborators may enter into one or more transactions with third-parties, including a merger, consolidation, reorganization, sale of substantial assets, sale of substantial stock or change of control. Any such transaction could divert the attention of our collaborative partner’s management and adversely affect its ability to retain and motivate key personnel who are important to the continued development of the programs under such collaboration. In addition, an acquirer could determine to reprioritize our collaborator’s development programs such that our collaborator ceases to diligently pursue the development of our programs, and/or terminates our collaboration.
Our collaborators may, under specified circumstances, terminate their collaborations with us on short notice and for circumstances outside of our control, which could make it difficult for us to attract new collaborators or adversely affect how we are perceived in the scientific, biotech, pharma and financial communities.
Our collaborators may utilize our intellectual property rights in such a way as to invite litigation that could jeopardize or invalidate our intellectual property rights, or expose us to potential liability.
Disputes may arise between collaborators and us regarding ownership of or other rights in the intellectual property generated in the course of the collaborations.
If any of our collaborators were to breach or terminate its arrangement with us, the development and commercialization of the affected drug candidate or program could be delayed, curtailed or terminated.

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If Genentech and other third-parties are not successful in commercializing products that reach successful development, our revenues and business will suffer.
As development of certain of our drug candidates advance, we must begin to plan for their launch and commercial distribution. Potential competitors may have substantially greater financial and other resources and may be able to expend more funds and effort than Genentech or other third-parties engaged by us in marketing competing products. There can be no assurance that Genentech or other third-parties will succeed in commercializing our products, or that the pricing of our products will allow us to generate significant revenues. There can be no assurance that Genentech or other third-parties engaged to commercialize our products will devote sufficient resources to marketing and commercialization of our products. Genentech’s or other third-party’s failure to successfully commercialize our products will have a material adverse effect on our business and financial condition.
We may not be successful in establishing additional strategic collaborations, which could adversely affect our ability to develop and commercialize drug candidates.
We intend to seek corporate collaborators or licensees for the further development and commercialization of one or more of our drug candidates in one or more geographic territories, particularly in territories outside of the U.S. We do not currently have the resources or capacity to advance these programs into later stage clinical development (i.e., Phase 3) or commercialization on our own, but we are seeking to build such a capacity to enable us to retain development and certain commercial rights to most of our programs in at least the U.S., should we elect to do so. Our success will depend, in part, on either our ability to build such capacity, or our ability to enter into one or more collaborations for our drug candidates. We face significant competition in seeking appropriate collaborators and a number of recent business combinations in the biotechnology and pharmaceutical industry may result in a reduced number of potential future collaborators. In addition, collaborations are complex and time-consuming to negotiate and document. We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay its development program or one or more of our other development programs, delay its potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our own expense. Moreover, we may not be successful in our efforts to establish a collaboration or other alternative arrangements because our research and development pipeline may be insufficient, our programs may be deemed to be at too early of a stage of development for collaborative effort and/or third-parties may not view our drug candidates and programs as having the requisite potential to demonstrate safety and efficacy or as sufficiently differentiated compared to existing or emerging treatments. We are also restricted under the terms of certain of our existing collaboration agreements from entering into collaborations regarding or otherwise developing drug candidates that are similar to the drug candidates that are subject to those agreements, such as developing drug candidates that inhibit the same molecular target. In addition, collaboration agreements that we enter into in the future may contain further restrictions on our ability to enter into potential collaborations or to otherwise develop specified drug candidates. Even if we are successful in our efforts to establish new collaborations, the terms that we agree upon may not be favorable to us and such collaboration agreements may not lead to development or commercialization of drug candidates in the most efficient manner, or at all.
Moreover, if we fail to establish and maintain additional collaborations related to our drug candidates:
the development of certain of our current or future drug candidates may be terminated or delayed;
our cash expenditures related to development of certain of our current or future drug candidates would increase significantly and we may need to seek additional financing;
we may be required to hire additional employees or otherwise develop additional expertise, such as clinical, regulatory, sales and marketing expertise, for which we have not budgeted;
we will have to bear all of the risk related to the development of any such drug candidates; and
our future prospects may be adversely affected and our stock price could decline.
We rely in part on third-parties to conduct clinical trials of our internally-developed drug candidates, and if such third-parties perform inadequately, including failing to meet deadlines for the completion of such trials, research or testing, then we will not be able to successfully develop and commercialize drug candidates and grow our business.
We rely heavily on third-parties such as consultants, clinical investigators, contract research organizations and other similar entities to complete certain aspects of our preclinical testing and clinical trials and provide services in connection with such clinical trials, and expect to continue to do so for the foreseeable future. Despite having contractual remedies available to us under our agreements with such contractors, we cannot control whether or not they devote sufficient time, skill and resources to our ongoing development programs. Furthermore, these third-parties may also have relationships with other entities, some of which may be our competitors. These third-parties may not complete activities on schedule, or at all, or may

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not conduct our clinical trials in accordance with the established clinical trial protocol or design. In addition, the FDA and its foreign equivalents require us to comply with certain standards, referred to as “good clinical practices,” and applicable regulatory requirements, for conducting, recording and reporting the results of clinical trials. These requirements assure that data and reported results are credible and accurate and that the rights, integrity and confidentiality of trial participants are protected. Our reliance on third-parties does not relieve us of these responsibilities and requirements. If any of our third-party contractors do not comply with good clinical practices or other applicable regulatory requirements, we may not be able to use the data and reported results from the applicable trial. Any failure by a third-party to conduct our clinical trials as planned or in accordance with regulatory requirements could delay or otherwise adversely affect our efforts to obtain regulatory approvals for and commercialize our drug candidates.
We depend on third-parties to produce our drug candidates, and if these third-parties do not successfully formulate or manufacture these drug candidates, our business will be harmed.
We have no internal manufacturing experience or capabilities, and therefore cannot manufacture any of our drug candidates on either a clinical or commercial scale. In order to continue to develop drug candidates, apply for regulatory approvals, and commercialize drugs, we or any collaborators must be able to manufacture drug candidates in adequate clinical and commercial quantities, in compliance with regulatory requirements, including those related to quality control and quality assurance, at acceptable costs and in a timely manner. The manufacture of our drug candidates may be complex, difficult to accomplish and difficult to scale-up when large-scale production is required. Manufacture may be subject to delays, inefficiencies and low yields of quality drugs. The cost of manufacturing some of our drug candidates may make them prohibitively expensive.
To the extent that we or any collaborators seek to enter into manufacturing arrangements with third-parties, we and such collaborators will depend upon these third-parties to perform their obligations in a timely and effective manner and in accordance with government regulations. We may be unable to establish any agreements with contract manufacturers or to
do so on acceptable terms. Contract manufacturers may breach their manufacturing agreements because of factors beyond our and our collaborators’ control or may terminate or fail to renew a manufacturing agreement based on their own business priorities, becoming costly and/or inconvenient for us and our collaborators. Even if we are able to establish agreements with
contract manufacturers, reliance on contract manufacturers entails additional risks, including:

manufacturing delays if our third-party contractors give greater priority to the supply of other products over our product candidates or otherwise do not satisfactorily perform according to the terms of the agreements between us and them, or if unforeseen events in the manufacturing process arise;
the failure of third-party contractors to comply with applicable regulatory requirements;
the possible mislabeling of clinical supplies, potentially resulting in the wrong dose amounts being supplied or active drug or placebo not being properly identified;
the possibility of clinical supplies not being delivered to clinical sites on time, leading to clinical trial interruptions, or of drug supplies not being distributed to commercial vendors in a timely manner, resulting in lost sales; and
the possible misappropriation of our proprietary information, including our trade secrets and know-how.
Any manufacturing problem, the loss of a contract manufacturer or any loss of storage could be disruptive to our operations, delay our clinical trials and, if our products are approved for sale, result in lost sales.
Any contract manufacturers with whom we or our collaborators enter into manufacturing arrangements will be subject to ongoing periodic, unannounced inspection by the FDA and state and foreign agencies or their designees to ensure strict compliance with current good manufacturing practices and other governmental regulations and corresponding foreign standards. Any failure by contract manufacturers, collaborators, or us to comply with applicable regulations could result in sanctions being imposed, including fines, injunctions, civil penalties, denial by regulatory authorities of marketing approval for drug candidates, delays, suspension or withdrawal of approvals, imposition of clinical holds, seizures or recalls of drug candidates, operating restrictions and criminal prosecutions, any of which could significantly and adversely affect our business. If we or a collaborator need to change manufacturers, the FDA and corresponding foreign regulatory agencies must approve any new manufacturers in advance. This would involve testing and pre-approval inspections to ensure compliance with FDA and foreign regulations and standards.
If third-party manufacturers fail to perform their obligations, our competitive position and ability to generate revenue may be adversely affected in a number of ways, including;
we, and any collaborators, may not be able to initiate or continue certain preclinical and/or clinical trials of our drug candidates under development;

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we, and any collaborators, may be delayed in submitting applications for regulatory approvals for our drug candidates; and
we, and any collaborators, may not be able to meet commercial demand for any approved drug products.
Because we rely on a limited number of suppliers for the raw materials used in our drug candidates, any delay or interruption in the supply of such raw materials could lead to delays in the manufacture and supply of our drug candidates.
We rely on third-parties to supply certain raw materials necessary to produce our drug candidates for preclinical studies and clinical trials. There are a small number of suppliers for certain raw materials that we use to manufacture our drug candidates. We purchase these materials from our suppliers on a purchase order basis and do not have long-term supply agreements in place. Any reliance on suppliers may involve several risks, including a potential inability to obtain critical materials and reduced control over production costs, delivery schedules, reliability and quality. Any unanticipated disruption to our contract manufacturing caused by problems at suppliers could delay shipment of our product candidates, increase our cost of goods sold and result in lost sales with respect to any approved products. Although we generally do not begin a preclinical study or clinical trial unless we believe we have a sufficient supply of a drug candidate to complete such study or trial, any significant delay in the supply of raw materials for our drug candidates for a preclinical study or an ongoing clinical trial due to the need to replace a third-party supplier could considerably delay completion of certain preclinical studies and/or clinical trials. Moreover, if we are unable to purchase sufficient raw materials after regulatory approval for our drug candidates, the commercial launch of our drug candidates could be delayed, or there could be a supply shortage, each of which would impair our ability to generate revenues from their sale.
Any contamination in our manufacturing process, shortages of raw materials or failure of any of our key suppliers to deliver necessary components could result in delays in our clinical development or marketing schedules.
Any contamination could materially adversely affect our ability to produce drug candidates on schedule and could, therefore, harm our results of operations and cause reputational damage. A material shortage, contamination, recall or restriction on the use of substances in the manufacture of our drug candidates, or the failure of any of our key suppliers to deliver necessary components required for the manufacture of our drug candidates, could adversely impact or disrupt the commercial manufacture or the production of clinical material, which could materially and adversely affect our development timelines and our business, financial condition, results of operations, and future prospects.
RISKS RELATING TO EMPLOYEE MATTERS AND MANAGING GROWTH
If we are not able to attract and retain key management and scientific personnel and advisors, we may not successfully develop our drug candidates or achieve our other business objectives.
We depend upon our senior management team. The loss of the service of any of the key members of our senior management may significantly delay or prevent the achievement of drug development and other business objectives. Our officers all serve pursuant to “at will” employment arrangements and can terminate their employment with us at any time. We do not maintain “key person” insurance for any of our executives or other employees. In the future, we may be dependent on other members of our management, scientific and development team.
Our ability to compete in the biotechnology and pharmaceuticals industries depends upon our ability to attract and retain highly qualified managerial, scientific and medical personnel. Our industry has experienced a high rate of turnover of management personnel in recent years. If we lose one or more of our executive officers or other key employees, our ability to successfully implement our business strategy could be seriously harmed. Furthermore, replacing executive officers or other key employees may be difficult and take an extended period of time because of the limited number of individuals in our industry with the breadth of skills and experience required to develop, market and commercialize drugs successfully. Competition to hire from this limited pool is intense, and we may be unable to hire, train, retain or motivate these additional key employees on acceptable terms given the competition among numerous pharmaceutical and biotechnology companies for similarly qualified personnel. We also experience competition for the hiring of scientific and clinical personnel from universities and research institutions.
We rely on consultants and advisors, including scientific and clinical advisors, to assist us in formulating our research and development and commercialization strategy. Our consultants and advisors may be employed by other entities and may have commitments under consulting or advisory contracts with those entities that may limit their availability to us. If we are unable to continue to attract and retain highly qualified personnel, our ability to develop and commercialize our drug candidates will be limited.

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We may seek to acquire complementary businesses and technologies or otherwise seek to expand our operations and grow our business, which may divert management resources and adversely affect our financial condition and operating results.
We may seek to expand our operations, including through internal growth and/or the acquisition of businesses and technologies that we believe are a strategic complement to our business model. We may not be able to identify suitable acquisition candidates or expansion strategies and successfully complete such acquisitions or successfully execute any such other expansion strategies. We may never realize the anticipated benefits of any efforts to expand our business. Furthermore, the expansion of our business, either through internal growth or through acquisitions, poses significant risks to our existing operations, financial condition and operating results, including:
a diversion of management attention from our existing operations;
increased operating complexity of our business, requiring greater personnel and resources;
significant additional cash expenditures to expand our operations and acquire and integrate new businesses and technologies;
unanticipated expenses and potential delays related to integration of the operations, technology and other resources of any acquired companies;
uncertainty related to the value, benefits or legitimacy of intellectual property or technologies acquired;
retaining and assimilating key personnel and the potential impairment of relationships with our employees;
incurrence of debt, other liabilities and contingent liabilities, including potentially unknown contingent liabilities; and
dilutive stock issuances.
RISKS RELATING TO OUR INTELLECTUAL PROPERTY
We may not be able to obtain and maintain patent protection for our technologies and drugs, our licensors may not be able to obtain and maintain patent protection for the technology or drugs that we license from them, and the patent protection we or they do obtain may not be sufficient to stop our competitors from using similar technology.
The long-term success of our business depends in significant part on our ability to:
obtain patents to protect our technologies and discoveries;
protect trade secrets from disclosure to competitors;
operate without infringing upon the proprietary rights of others; and
prevent others from infringing on our proprietary rights.
The patent positions of pharmaceutical and life science companies, including ours, are generally uncertain and involve complex legal, scientific and factual questions. The laws, procedures and standards that the U.S. Patent and Trademark Office and various foreign intellectual property offices use to grant and maintain patents, and the standards that courts use to interpret patents, are not always applied predictably or uniformly and have changed in significant ways and are expected to continue to change. In addition, the laws of foreign countries may not protect our rights to the same extent or in the same manner as the laws of the U.S. For example, European patent law restricts the patentability of methods of treatment of the human body more than U.S. law does. Consequently, the level of protection, if any, that will be obtained and provided by our patents if we attempt to enforce them, and they are challenged, is uncertain.
Patents may not issue from any of the patent applications that we own or license. If patents do issue, the type and extent of patent claims issued to us may not be sufficient to protect our technology from exploitation by our competitors. Our patents also may not afford us protection against competitors with similar technology. Assuming the other requirements for patentability are met, currently, the first to file a patent application is generally entitled to the patent. Prior to March 16, 2013, in the U.S., patent applications were subject to a “first to invent” rule of law. Applications filed on or after March 16, 2013 (with the exception of certain applications claiming priority to applications filed prior to March 16, 2013, such as continuations and divisionals) are subject to new laws including a “first to file” rule of law. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications in the U.S. and other jurisdictions are typically not published until 18 months after filing, or in some cases not at all. Additionally, how the U.S. Patent & Trademark Office and U.S. courts will interpret the new laws remains significantly uncertain at this time. We cannot be certain that any existing or future application will be subject to the “first to file” or “first to invent” rule of law, that we were the first to make the

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inventions claimed in our existing patents or pending patent applications subject to the prior laws, or that we were the first to file for patent protection of such inventions subject to the new laws.
We may not have rights under patents that may cover one or more of our drug candidates. Patents of others may overlap with our own patents regarding one or more of our drug candidates. In some cases, these patents may be owned or controlled by third-party competitors and may prevent or impair our ability to exploit our technology. As a result, we or our current or potential future collaborative partners may be required to obtain licenses under third-party patents to develop and commercialize some of our drug candidates. If we are unable to secure licenses to such patented technology on acceptable terms, we or our collaborative partners may not be able to develop and commercialize the affected drug candidate or candidates.
It is also possible that we will fail to identify patentable aspects of our research and development output before it is too late to obtain patent protection. Moreover, in some circumstances, we do not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology or drugs that we license from third-parties and are reliant on our licensors. For example, while under our collaboration with Aurigene we have established a joint patent team to coordinate efforts on patent filing, prosecution, maintenance and other patent matters, we do not control the patent process until we have exercised our option to obtain an exclusive license on a program-by-program basis. If we do not control the filing, prosecution of certain patent rights, we cannot be certain that these patents and applications will be prosecuted and enforced in a manner consistent with the best interests of our business.
The issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, and our owned and licensed patents may be challenged in courts or patent offices in the U.S. and abroad. Such challenges may result in loss of exclusivity or in patent claims being narrowed, invalidated or held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and drugs, or limit the duration of the patent protection of our technology and drugs. Given the amount of time required for the development, testing, and regulatory review of new drug candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing drugs similar or identical to ours.
We may become involved in expensive and unpredictable patent litigation or other contentious intellectual property proceedings, which could result in liability for damages or require us to cease our development and commercialization efforts.
There are substantial threats of litigation and other adversarial opposition proceedings regarding patent and other intellectual property rights in the pharmaceutical and life science industries. We may become a party to patent litigation or other proceedings regarding intellectual property rights.
Situations that may give rise to patent litigation or other disputes over the use of our intellectual property include:
initiation of litigation or other proceedings against third-parties to enforce our patent rights, to seek to invalidate the patents held by third-parties or to obtain a judgment that our drug candidates do not infringe such third-parties’ patents;
participation in interference and/or derivation proceedings to determine the priority of invention if our competitors file U.S. patent applications that claim technology also claimed by us;
initiation of opposition, reexamination, post grant review or inter partes review proceedings by third-parties that seek to limit or eliminate the scope of our patent protection;
initiation of litigation by third-parties claiming that our processes or drug candidates or the intended use of our drug candidates infringes their patent or other intellectual property rights; and
initiation of litigation by us or third-parties seeking to enforce contract rights relating to intellectual property that may be important to our business.
Any patent litigation or other proceeding, even if resolved favorably, will likely require us to incur substantial costs and be a distraction to management. Some of our competitors may be able to sustain the cost of such litigation or other proceedings more effectively than we can because of their substantially greater financial resources. In addition, our collaborators and licensors may have rights to file and prosecute claims of infringement of certain of our intellectual property, and we are reliant on them. If a patent litigation or other intellectual property proceeding is resolved unfavorably, we or any collaborative partners may be enjoined from manufacturing or selling our future drugs without a license from the other party and be held liable for significant damages. Moreover, we may not be able to obtain required licenses on commercially acceptable terms or any terms at all. In addition, we could be held liable for lost profits if we are found to have infringed a valid patent, or liable for treble

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damages if we are found to have willfully infringed a valid patent. Litigation results are highly unpredictable, and we or any collaborative partner may not prevail in any patent litigation or other proceeding in which we may become involved. Any changes in, or unexpected interpretations of, the patent laws may adversely affect our ability to enforce our patent position. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could damage our ability to compete in the marketplace.
We face risks relating to the enforcement of our intellectual property rights in China and India that could adversely affect our business.
We have conducted chemical development work through contract research agreements with contract research organizations, or CROs, in China and India. We seek to protect our intellectual property rights under this arrangement through, among other things, non-disclosure and assignment of invention covenants. Enforcement of intellectual property rights and confidentiality protections in China may not be as effective as in the U.S. or other countries. Policing unauthorized use of proprietary technology is difficult and expensive, and we might need to resort to litigation to enforce or defend patents issued to us or to determine the enforceability, scope and validity of our proprietary rights or those of others. The experience and capabilities of Chinese courts in handling intellectual property litigation vary, and outcomes are unpredictable. Further, such litigation may require significant expenditure of cash and management efforts and could harm our business, financial condition and results of operations. An adverse determination in any such litigation will impair our intellectual property rights and may harm our business, prospects and reputation.
In addition, we collaborate with Aurigene, an Indian company, in the development of new therapeutic compounds. Some or all of the intellectual property arising from this collaboration may be developed by Aurigene’s employees, consultants, and third-party contractors, and we have an option right under the collaboration agreement to obtain exclusive licenses to Aurigene’s rights in this intellectual property. Accordingly, our rights depend in part on Aurigene’s contracts with its employees and contractors and Aurigene’s ability to protect its trade secrets and other confidential information in India, both before and after we exercise our option to obtain exclusive license rights on a program-by-program basis. Enforcement of intellectual property rights and confidentiality protections in India may not be as effective as in the U.S. or other countries. Policing unauthorized use of proprietary technology is difficult and expensive, and we or Aurigene might need to resort to litigation to protect our trade secrets and confidential information. The experience and capabilities of Indian courts in handling intellectual property litigation vary, and outcomes are unpredictable. Further, such litigation may require significant expenditure of cash and management efforts and could harm our business, financial condition and results of operations. An adverse determination in any such litigation would impair our intellectual property rights and may harm our business, prospects and reputation.
If we are unable to keep our trade secrets confidential, our technology and proprietary information may be used by competitors.
We rely heavily on trade secrets, including unpatented know-how, technology and other proprietary information, to maintain our competitive position. We seek to protect this information through confidentiality and intellectual property license or assignment provisions in agreements with our employees, consultants and other third-party contractors, including our contract research agreements with CROs in China and India, as well as through other security measures. Similarly, our agreements with Aurigene and ImmuNext require each collaborator to enter into such agreements with its employees, consultants, and other third-party contractors. The confidentiality and intellectual property provisions of our agreements and security measures may be breached, and we or they may not have adequate remedies for any such breach. In addition, our trade secrets may otherwise become known or be independently developed by competitors.
We have agreements under which we license rights to technology from third-parties, and we could lose license rights to intellectual property that are important to our business under certain circumstances.
We are party to agreements that provide us licenses of intellectual property or sharing of rights to intellectual property that is important to our business, and we may enter into additional agreements in the future that provide us licenses to valuable technology. These licenses, including our agreements with Aurigene and ImmuNext, impose, and future licenses may impose, various commercialization, milestone and other obligations on us, including the obligation to terminate our use of licensed subject matter under certain contingencies. If a licensor becomes entitled to, and exercises, termination rights under a license, we would lose valuable rights and could lose our ability to develop our drugs. We may need to license other intellectual property to commercialize future drugs. Our business may suffer if any current or future licenses terminate, if the licensors fail to abide by the terms of the license or fail to prevent infringement by third-parties, if the licensed patents or other rights are found to be invalid, or if we are unable to enter into necessary licenses on acceptable terms. In addition, during the option period under our agreement with ImmuNext, we are obligated to assign to ImmuNext all rights to inventions made by Curis alone or jointly with ImmuNext in conducting clinical and non-clinical activities under the agreement during such period and any related patent rights. In the event we exercise our option under the agreement, such rights would be assigned to Curis, in the case of inventions made by Curis alone, or joint ownership to Curis and ImmuNext, in the case of inventions made jointly

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by Curis and ImmuNext, upon the option exercise date. In the event we do not exercise our option under the agreement with ImmuNext, we will lose all rights to any inventions made by Curis alone or jointly with ImmuNext in conducting clinical and non-clinical activities under the agreement upon expiration of the option period.
We may be subject to claims that our employees have wrongfully used or disclosed alleged trade secrets of their former employers.
As is common in the biotechnology and pharmaceutical industry, we employ individuals who were previously employed at other biotechnology or pharmaceutical companies, including our current and potential competitors. Although no claims against us are currently pending, we may be subject to claims that such employees, or as a result, we, have inadvertently or otherwise used or disclosed trade secrets or other proprietary information of their former employers. Litigation may be necessary to defend against these claims. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.
RISKS RELATING TO REGULATORY APPROVAL AND MARKETING OF OUR DRUG CANDIDATES AND OTHER LEGAL COMPLIANCE MATTERS
Even if we complete the necessary preclinical studies and clinical trials, the marketing approval process is expensive, time consuming and uncertain and may prevent us or any future collaborators from obtaining approvals for the commercialization of some or all of our drug candidates. As a result, we cannot predict when or if, and in which territories, we, or any future collaborators, will obtain marketing approval to commercialize a drug candidate.
The research, testing, manufacturing, labeling, approval, selling, marketing, promotion and distribution of drugs are subject to extensive regulation by the FDA and comparable foreign regulatory authorities. We, and any future collaborators, are not permitted to market our drug candidates in the U.S. or in other countries until we, or they, receive approval of an NDA from the FDA or marketing approval from applicable regulatory authorities outside the U.S. Our drug candidates are in various stages of development and are subject to the risks of failure inherent in drug development. We have not submitted an application for or received marketing approval for any of our drug candidates in the U.S. or in any other jurisdiction. We have limited experience in conducting and managing the clinical trials necessary to obtain marketing approvals, including FDA approval of an NDA.
The process of obtaining marketing approvals, both in the U.S. and abroad, is lengthy, expensive and uncertain. It may take many years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the drug candidates involved. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the drug candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the drug manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. The FDA or other regulatory authorities may determine that our drug candidates are not safe and effective, only moderately effective or have undesirable or unintended side effects, toxicities or other characteristics that preclude our obtaining marketing approval or prevent or limit commercial use. Moreover, the FDA or other regulatory authorities may fail to approve the companion diagnostics we contemplate developing with partners. Any marketing approval we ultimately obtain may be limited or subject to restrictions or post approval commitments that render the approved drug not commercially viable.
In addition, changes in marketing approval policies during the development period, changes in or the enactment or promulgation of additional statutes, regulations or guidance or changes in regulatory review for each submitted drug application, may cause delays in the approval or rejection of an application. Regulatory authorities have substantial discretion in the approval process and may refuse to accept any application or may decide that our data are insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a drug candidate. Any marketing approval we, or any future collaborators, ultimately obtain may be limited or subject to restrictions or post approval commitments that render the approved drug not commercially viable.
Any delay in obtaining or failure to obtain required approvals could negatively affect our ability or that of any future collaborator to generate revenue from the particular drug candidate, which likely would result in significant harm to our financial position and adversely impact our stock price.

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Failure to obtain marketing approval in foreign jurisdictions would prevent our drug candidates from being marketed abroad. Any approval we are granted for our drug candidates in the U.S. would not assure approval of our drug candidates in foreign jurisdictions.
In order to market and sell our drugs in the European Union and other foreign jurisdictions, we, and any future collaborators, must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time required to obtain approval may differ substantially from that required to obtain FDA approval. The marketing approval process outside the U.S. generally includes all of the risks associated with obtaining FDA approval. In addition, in many countries outside the U.S., a drug must be approved for reimbursement before the drug can be approved for sale in that country. We, and any future collaborators, may not obtain approvals from regulatory authorities outside the U.S. on a timely basis, if at all. Approval by the FDA does not ensure approval by regulatory authorities in other countries or jurisdictions, and approval by one regulatory authority outside the U.S. does not ensure approval by regulatory authorities in other countries or jurisdictions or by the FDA. We may file for marketing approvals but not receive the necessary approvals to commercialize our drugs in any market.
Additionally, on June 23, 2016, the electorate in the United Kingdom voted in favor of leaving the European Union, commonly referred to as Brexit. Following protracted negotiations, the United Kingdom left the European Union on January 31, 2020. Under the withdrawal agreement, there is a transitional period until December 31, 2020 (extendable up to two years). Discussions between the United Kingdom and the European Union have so far mainly focused on finalizing withdrawal issues and transition agreements, but have been extremely difficult. To date, only an outline of a trade agreement has been reached. Much remains open but the Prime Minister has indicated that the United Kingdom will not seek to extend the transitional period beyond the end of 2020. If no trade agreement has been reached before the end of the transitional period, there may be significant market and economic disruption. The Prime Minister has also indicated that the UK will not accept high regulatory alignment with the EU.
Since a significant proportion of the regulatory framework in the United Kingdom is derived from European Union directives and regulations, the referendum could materially impact the regulatory regime with respect to the approval of our product candidates in the United Kingdom or the European Union. Any delay in obtaining, or an inability to obtain, any marketing approvals, as a result of Brexit or otherwise, would prevent us from commercializing our product candidates in the United Kingdom and/or the European Union and restrict our ability to generate revenue and achieve and sustain profitability. If any of these outcomes occur, we may be forced to restrict or delay efforts to seek regulatory approval in the United Kingdom and/or European Union for our product candidates, which could significantly and materially harm our business.
We, or any future collaborators, may not be able to obtain orphan drug designation or orphan drug exclusivity for our drug candidates and, even if we do, that exclusivity may not prevent the FDA or the EMA from approving competing drugs.
Regulatory authorities in some jurisdictions, including the U.S. and Europe, may designate drugs for relatively small patient populations as orphan drugs. Under the Orphan Drug Act of 1983, the FDA may designate a drug as an orphan drug if it is a drug intended to treat a rare disease or condition, which is generally defined as a patient population of fewer than 200,000 individuals annually in the U.S. We, or any future collaborators, may seek orphan drug designations for drug candidates and may be unable to obtain such designations.
Even if we, or any future collaborators, obtain orphan drug designation for a drug candidate, we, or they, may not be able to obtain orphan drug exclusivity for that drug candidate. Generally, a drug with orphan drug designation only becomes entitled to orphan drug exclusivity if it receives the first marketing approval for the indication for which it has such designation, in which case the FDA or the EMA will be precluded from approving another marketing application for the same drug for that indication for the applicable exclusivity period. The applicable exclusivity period is seven years in the U.S. and ten years in Europe. The European exclusivity period can be reduced to six years if a drug no longer meets the criteria for orphan drug designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified. Orphan drug exclusivity may be lost if the FDA or the EMA determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantity of the drug to meet the needs of patients with the rare disease or condition.
Even if we, or any future collaborators, obtain orphan drug exclusivity for a drug, that exclusivity may not effectively protect the drug from competition because different drugs can be approved for the same condition and the same drug can be approved for different conditions. Even after an orphan drug is approved, the FDA can subsequently approve the same drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to be safer, more effective or makes a major contribution to patient care.
On August 3, 2017, Congress passed the FDA Reauthorization Act of 2017, or FDARA. FDARA, among other things, codified the FDA’s pre-existing regulatory interpretation, to require that a drug sponsor demonstrate the clinical superiority of an orphan drug that is otherwise the same as a previously approved drug for the same rare disease in order to receive orphan

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drug exclusivity. The new legislation reverses prior precedent holding that the Orphan Drug Act unambiguously requires that the FDA recognize the orphan exclusivity period regardless of a showing of clinical superiority. The FDA may further reevaluate the Orphan Drug Act and its regulations and policies. We do not know if, when, or how the FDA may change the orphan drug regulations and policies in the future, and it is uncertain how any changes might affect our business. Depending on what changes the FDA may make to its orphan drug regulations and policies, our business could be adversely impacted.
Even if we, or any future collaborators, obtain marketing approvals for our drug candidates, the terms of approvals and ongoing regulation of our drugs may limit how we manufacture and market our drugs, which could impair our ability to generate revenue.
Once marketing approval has been granted, an approved drug and its manufacturer and marketer are subject to ongoing review and extensive regulation. We, and any future collaborators, must therefore comply with requirements concerning advertising and promotion for any of our drug candidates for which we or they obtain marketing approval. Promotional communications with respect to prescription drugs are subject to a variety of legal and regulatory restrictions and must be consistent with the information in the drug’s approved labeling. Thus, we and any future collaborators will not be able to promote any drugs we develop for indications or uses for which they are not approved.
In addition, manufacturers of approved drugs and those manufacturers’ facilities are required to comply with extensive FDA requirements, including ensuring that quality control and manufacturing procedures conform to cGMPs, which include requirements relating to quality control and quality assurance as well as the corresponding maintenance of records and documentation and reporting requirements. We, our contract manufacturers, any future collaborators and their contract manufacturers could be subject to periodic unannounced inspections by the FDA to monitor and ensure compliance with cGMPs.
Accordingly, assuming we, or any future collaborators, receive marketing approval for one or more of our drug candidates, we, and any future collaborators, and our and their contract manufacturers will continue to expend time, money and effort in all areas of regulatory compliance, including manufacturing, production, drug surveillance and quality control.
If we, and any future collaborators, are not able to comply with post approval regulatory requirements, we, and any future collaborators, could have the marketing approvals for our drugs withdrawn by regulatory authorities and our, or any future collaborators’, ability to market any future drugs could be limited, which could adversely affect our ability to achieve or sustain profitability. Further, the cost of compliance with post approval regulations may have a negative effect on our operating results and financial condition.
Any of our drug candidates for which we, or any future collaborators, obtain marketing approval in the future could be subject to post marketing restrictions or withdrawal from the market and we, or any future collaborators, may be subject to substantial penalties if we, or they, fail to comply with regulatory requirements or if we, or they, experience unanticipated problems with our drugs following approval.
Any of our drug candidates for which we, or any future collaborators, obtain marketing approval, as well as the manufacturing processes, post approval studies and measures, labeling, advertising and promotional activities for such drug, among other things, will be subject to ongoing requirements of and review by the FDA and other regulatory authorities. These requirements include submissions of safety and other post marketing information and reports, registration and listing requirements, requirements relating to manufacturing, quality control, quality assurance and corresponding maintenance of records and documents, requirements regarding the distribution of samples to physicians and recordkeeping. Even if marketing approval of a drug candidate is granted, the approval may be subject to limitations on the indicated uses for which the drug may be marketed or to the conditions of approval, including the requirement to implement an FDA-sanctioned Risk Evaluation and Mitigation Strategy.
The FDA may also impose requirements for costly post marketing studies or clinical trials and surveillance to monitor the safety or efficacy of a drug. The FDA and other agencies, including the Department of Justice, closely regulate and monitor the post approval marketing and promotion of drugs to ensure that they are manufactured, marketed and distributed only for the approved indications and in accordance with the provisions of the approved labeling. The FDA imposes stringent restrictions on manufacturers’ communications regarding off label use and if we, or any future collaborators, do not market any of our drug candidates for which we, or they, receive marketing approval for only their approved indications, we, or they, may be subject to warnings or enforcement action for off label marketing. Violation of the U.S. Federal Food, Drug, and Cosmetic Act and other statutes, including the False Claims Act, relating to the promotion and advertising of prescription drugs may lead to investigations or allegations of violations of federal and state healthcare fraud and abuse laws and state consumer protection laws.

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In addition, later discovery of previously unknown adverse events or other problems with our drugs or their manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may yield various results, including:
restrictions on such drugs, manufacturers or manufacturing processes;
restrictions on the labeling or marketing of a drug;
restrictions on drug distribution or use;
requirements to conduct post marketing studies or clinical trials;
warning letters or untitled letters;
withdrawal of the drugs from the market;
refusal to approve pending applications or supplements to approved applications that we submit;
recall of drugs;
restrictions on coverage by third-party payors;
fines, restitution or disgorgement of profits or revenues;
suspension or withdrawal of marketing approvals;
refusal to permit the import or export of drugs;
drug seizure; or
injunctions or the imposition of civil or criminal penalties.
We may seek a Breakthrough Therapy designation for one or more of our drug candidates, but we might not receive such designation, and even if we do, such designation may not lead to a faster development or regulatory review or approval process.
We may seek a Breakthrough Therapy designation for one or more of our drug candidates. A Breakthrough Therapy is defined as a drug that is intended, alone or in combination with one or more other drugs, to treat a serious condition, and preliminary clinical evidence indicates that the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development. For drug candidates that have been designated Breakthrough Therapies, interaction and communication between the FDA and the sponsor of the trial can help to identify the most efficient path for clinical development while minimizing the number of patients placed in ineffective control regimens. Drugs designated Breakthrough Therapies by the FDA may also be eligible for priority review if supported by clinical data at the time the NDA is submitted to the FDA.
Designation as a Breakthrough Therapy is within the discretion of the FDA. Accordingly, even if we believe that one of our drug candidates meets the criteria for designation as a Breakthrough Therapy, the FDA may disagree and instead determine not to make such designation. Even if we receive Breakthrough Therapy designation, the receipt of such designation for a drug candidate may not result in a faster development or regulatory review or approval process compared to drugs considered for approval under conventional FDA procedures and does not assure ultimate approval by the FDA. In addition, even if one or more of our drug candidates qualify as Breakthrough Therapies, the FDA may later decide that the drug candidates no longer meet the conditions for qualification or decide that the time period for FDA review or approval will not be shortened.
Receipt of Fast Track designation for one or more of our drug candidates, such as fimepinostat, may not actually lead to a faster development or regulatory review or approval process.
If a drug is intended for the treatment of a serious condition and nonclinical or clinical data demonstrate the potential to address unmet medical need for this condition, a drug sponsor may apply for FDA Fast Track designation. We have received Fast Track designation for the development of fimepinostat in adult patients with relapsed or refractory, or R/R, diffuse large B-cell lymphoma, or DLBCL, after two or more lines of systemic therapy. However, Fast Track designation does not ensure that we will receive marketing approval or that approval will be granted within any particular timeframe for fimepinostat or any other product candidate that may receive Fast Track designation. We may not experience a faster development or regulatory review or approval process with Fast Track designation compared to conventional FDA procedures. The FDA may withdraw Fast Track designation for fimepinostat or any other product candidate that may receive Fast Track designation if it believes that the designation is no longer supported by data from our clinical development program. Fast Track designation alone for fimepinostat or any other product candidate does not guarantee qualification for the FDA’s priority review procedures.

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Under the CURES Act and the Trump Administration’s regulatory reform initiatives, the FDA’s policies, regulations and guidance may be revised or revoked and that could prevent, limit or delay regulatory approval of our product candidates, which would impact our ability to generate revenue.
In December 2016, the 21st Century Cures Act, or Cures Act, was signed into law. The Cures Act, among other things, is intended to modernize the regulation of drugs and spur innovation, but its ultimate implementation is unclear. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained and we may not achieve or sustain profitability, which would adversely affect our business, prospects, financial condition and results of operations.
We also cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative or executive action, either in the U.S. or abroad. For example, certain policies of the Trump Administration may impact our business and industry. Namely, the Trump Administration has taken several executive actions, including the issuance of a number of Executive Orders, that could impose significant burdens on, or otherwise materially delay, the FDA’s ability to engage in routine regulatory and oversight activities such as implementing statutes through rulemaking, issuance of guidance, and review and approval of marketing applications. An under-staffed FDA could result in delays in the FDA’s responsiveness or in its ability to review submissions or applications, issue regulations or guidance, or implement or enforce regulatory requirements in a timely fashion or at all. Moreover, on January 30, 2017, President Trump issued an Executive Order, applicable to all executive agencies, including the FDA, which requires that for each notice of proposed rulemaking or final regulation to be issued in fiscal year 2017, the agency shall identify at least two existing regulations to be repealed, unless prohibited by law. These requirements are referred to as the “two-for-one” provisions. This Executive Order includes a budget neutrality provision that requires the total incremental cost of all new regulations in the 2017 fiscal year, including repealed regulations, to be no greater than zero, except in limited circumstances. For fiscal years 2018 and beyond, the Executive Order requires agencies to identify regulations to offset any incremental cost of a new regulation and approximate the total costs or savings associated with each new regulation or repealed regulation. In interim guidance issued by the Office of Information and Regulatory Affairs within the Office of Management and Budget on February 2, 2017, the administration indicates that the “two-for-one” provisions may apply not only to agency regulations, but also to significant agency guidance documents. In addition, on February 24, 2017, President Trump issued an executive order directing each affected agency to designate an agency official as a “Regulatory Reform Officer” and establish a “Regulatory Reform Task Force” to implement the two-for-one provisions and other previously issued executive orders relating to the review of federal regulations. However, it is difficult to predict how these requirements will be implemented, and the extent to which they will impact the FDA’s ability to exercise its regulatory authority. If these executive actions impose constraints on the FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

Inadequate funding for the FDA, the SEC and other government agencies could hinder their ability to hire and retain
key leadership and other personnel, prevent new products and services from being developed or commercialized in a
timely manner or otherwise prevent those agencies from performing normal business functions on which the operation of our business may rely, which could negatively impact our business.
The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, ability to hire and retain key personnel and accept the payment of user fees, and statutory, regulatory, and policy changes. Average review times at the agency have fluctuated in recent years as a result. In addition, government funding of the SEC and other government agencies on which our operations may rely, including those that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable.
Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our business. For example, over the last several years, including the 35-day period between December 22, 2018 and January 25, 2019, the U.S. government has shut down several times and certain regulatory agencies, such as the FDA and the SEC, have had to furlough critical FDA, SEC and other government employees and stop critical activities. If a prolonged government shutdown occurs again, it could significantly impact the ability of the FDA to timely review and process our regulatory submissions, which could have a material adverse effect on our business. Further, in our operations as a public company, future government shutdowns could impact our ability to access the public markets and obtain necessary capital in order to properly capitalize and continue our operations.
Current and future legislation may increase the difficulty and cost for us and any future collaborators to obtain marketing approval and commercialize our drug candidates and affect the prices we, or they, may obtain.
In the U.S. and some foreign jurisdictions, there have been a number of legislative and regulatory changes and proposed changes regarding the healthcare system that could, among other things, prevent or delay marketing approval of our drug candidates, restrict or regulate post approval activities and affect our ability, or the ability of any future collaborators, to profitably sell any drugs for which we, or they, obtain marketing approval. We expect that current laws, as well as other

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healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we, or any future collaborators, may receive for any approved drugs.
Among the provisions of the Patient Protection and Affordable Care Act, or ACA, of potential importance to our business and our drug candidates are the following:
an annual, non-deductible fee on any entity that manufactures or imports specified branded prescription drugs and biologic agents;
an increase in the statutory minimum rebates a manufacturer must pay under the Medicaid Drug Rebate Program;
expansion of healthcare fraud and abuse laws, including the civil False Claims Act and the federal Anti-Kickback Statute, new government investigative powers and enhanced penalties for noncompliance;
a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices to eligible beneficiaries during their coverage gap period, as a condition for a manufacturer’s outpatient drugs to be covered under Medicare Part D;
extension of manufacturers’ Medicaid rebate liability;
expansion of eligibility criteria for Medicaid programs;
expansion of the entities eligible for discounts under the Public Health Service pharmaceutical pricing program;
new requirements to report certain financial arrangements with physicians and teaching hospitals;
a new requirement to annually report drug samples that manufacturers and distributors provide to physicians; and
a new Patient-Centered Outcomes Research Institute to oversee, identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research.
Other legislative changes have been proposed and adopted since the ACA was enacted. These changes include the Budget Control Act of 2011, which, among other things, led to aggregate reductions to Medicare payments to providers of up to 2% per fiscal year that started in 2013 and will stay in effect through 2024 unless additional Congressional action is taken, and the American Taxpayer Relief Act of 2012, which, among other things, reduced Medicare payments to several types of providers and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other healthcare funding and otherwise affect the prices we may obtain for any of our product candidates for which we may obtain regulatory approval or the frequency with which any such product candidate is prescribed or used. Further, there have been several recent U.S. congressional inquiries and proposed state and federal legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products.
We will continue to evaluate the effect that the ACA and its possible repeal and replacement could have on our business. It is possible that repeal and replacement initiatives, if enacted into law, could ultimately result in fewer individuals having health insurance coverage or in individuals having insurance coverage with less generous benefits. While the timing and scope of any potential future legislation to repeal and replace ACA provisions is uncertain in many respects, it is also possible that some of the ACA provisions that generally are not favorable for the research based pharmaceutical industry could also be repealed along with ACA coverage expansion provisions. Accordingly, such reforms, if enacted, could have an adverse effect on anticipated revenue from product candidates that we may successfully develop and for which we may obtain marketing approval and may affect our overall financial condition and ability to develop commercialize product candidates.
Since enactment of the ACA, there have been numerous legal challenges and Congressional actions to repeal and replace provisions of the law. For example, with enactment of the Tax Cuts and Jobs Act of 2017, which was signed by the President on December 22, 2017, Congress repealed the “individual mandate.” The repeal of this provision, which requires most Americans to carry a minimal level of health insurance, became effective in 2019. According to the Congressional Budget Office, the repeal of the individual mandate will cause 13 million fewer Americans to be insured in 2027 and premiums in insurance markets may rise.
The Trump Administration has also taken executive actions to undermine or delay implementation of the ACA. Since January 2017, President Trump has signed two Executive Orders designed to delay the implementation of certain provisions of the ACA or otherwise circumvent some of the requirements for health insurance mandated by the ACA. One Executive Order directs federal agencies with authorities and responsibilities under the ACA to waive, defer, grant exemptions from, or delay the implementation of any provision of the ACA that would impose a fiscal or regulatory burden on states, individuals, healthcare providers, health insurers, or manufacturers of pharmaceuticals or medical devices. The second Executive Order terminates the

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cost-sharing subsidies that reimburse insurers under the ACA. Several state Attorneys General filed suit to stop the administration from terminating the subsidies, but their request for a restraining order was denied by a federal judge in California on October 25, 2017. In addition, the Centers for Medicare & Medicaid Services, or CMS, has recently proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. Further, on June 14, 2018, the U.S. Court of Appeals for the Federal Circuit ruled that the federal government was not required to pay more than $12 billion in ACA risk corridor payments to third-party payors who argued were owed to them. The effects of this gap in reimbursement on third-party payors, the viability of the ACA marketplace, providers, and potentially our business, are not yet known.
In addition, CMS has proposed regulations that would give states greater flexibility in setting benchmarks for insurers in the individual and small group marketplaces, which may have the effect of relaxing the essential health benefits required under the ACA for plans sold through such marketplaces. On November 30, 2018, CMS announced a proposed rule that would amend the Medicare Advantage and Medicare Part D prescription drug benefit regulations to reduce out of pocket costs for plan enrollees and allow Medicare plans to negotiate lower rates for certain drugs. Among other things, the proposed rule changes would allow Medicare Advantage plans to use pre authorization, or PA, and step therapy, or ST, for six protected classes of drugs, with certain exceptions, permit plans to implement PA and ST in Medicare Part B drugs; and change the definition of “negotiated prices” while a definition of “price concession” in the regulations. It is unclear whether these proposed changes we be accepted, and if so, what effect such changes will have on our business. Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results.
Further, on December 14, 2018, a U.S. District Court judge in the Northern District of Texas ruled that the individual mandate portion of the ACA is an essential and inseverable feature of the ACA, and therefore because the mandate was repealed as part of the Tax Cuts and Jobs Act, the remaining provisions of the ACA are invalid as well. The current administration and CMS have both stated that the ruling will have no immediate effect, and on December 30, 2018 the same judge issued an order staying the judgment pending appeal. The current Administration has recently represented to the court of appeals considering this judgment that it does not oppose the lower court’s ruling. On July 10, 2019, the Court of Appeals for the Fifth Circuit heard oral argument in this case. In those arguments, the current administration argued in support of upholding the lower court decision. However, in a subsequent filing, the U.S. Department of Justice contended that the ACA should be invalidated only in the states that are suing, rather than all states. On December 18, 2019, that court affirmed the lower court’s ruling that the individual mandate portion of the ACA is unconstitutional and it remanded the case to the district court for reconsideration of the severability question and additional analysis of the provisions of the ACA. On January 21, 2020, the U.S. Supreme Court declined to review the decision of the Court of Appeals on an expedited basis. Litigation and legislation over the ACA are likely to continue, with unpredictable and uncertain results.
The costs of prescription pharmaceuticals in the U.S. has also been the subject of considerable discussion in the U.S., and members of Congress and the Administration have stated that they will address such costs through new legislative and administrative measures. The pricing of prescription pharmaceuticals is also subject to governmental control outside the U.S. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to conduct a clinical trial that compares the cost-effectiveness of our product candidates to other available therapies. If reimbursement of our products is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our ability to generate revenues and become profitable could be impaired. In the European Union, similar political, economic and regulatory developments may affect our ability to profitably commercialize our products. In addition to continuing pressure on prices and cost containment measures, legislative developments at the European Union or member state level may result in significant additional requirements or obstacles that may increase our operating costs.
Specifically, there have been several recent U.S. congressional inquiries and proposed federal and proposed and enacted state legislation designed to, among other things, bring more transparency to drug pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare and reform government program reimbursement methodologies for drug products. At the federal level, Congress and the Trump administration have each indicated that it will continue to seek new legislative and/or administrative measures to control drug costs. For example, on May 11, 2018, the Administration issued a plan to lower drug prices. Under this blueprint for action, the Administration indicated that the Department of Health and Human Services, or HHS will: take steps to end the gaming of regulatory and patent processes by drug makers to unfairly protect monopolies; advance biosimilars and generics to boost price competition; evaluate the inclusion of prices in drug makers’ ads to enhance price competition; speed access to and lower the cost of new drugs by clarifying policies for sharing information between insurers and drug makers; avoid excessive pricing by relying more on value based pricing by expanding outcome based payments in Medicare and Medicaid; work to give Part D plan sponsors more negotiation power with drug makers; examine which Medicare Part B drugs could be negotiated for a lower price by Part D plans, and improving the design of the Part B Competitive Acquisition Program; update Medicare’s drug-pricing dashboard

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to increase transparency; prohibit Part D contracts that include “gag rules” that prevent pharmacists from informing patients when they could pay less out-of-pocket by not using insurance; and require that Part D plan members be provided with an annual statement of plan payments, out-of-pocket spending, and drug price increases. In addition, on December 23, 2019, the Trump Administration published a proposed rulemaking that, if finalized, would allow states or certain other non-federal government entities to submit importation program proposals FDA for review and approval. Applicants would be required to demonstrate their importation plans pose no additional risk to public health and safety and will result in significant cost savings for consumers. At the same time, FDA issued draft guidance that would allow manufacturers to import their own FDA-approved drugs that are authorized for sale in other countries (multimarket approved products).
At the state level, individual states are increasingly aggressive in passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. In addition, regional health care authorities and individual hospitals are increasingly using bidding procedures to determine what pharmaceutical products and which suppliers will be included in their prescription drug and other health care programs. These measures could reduce the ultimate demand for our products, once approved, or put pressure on our product pricing. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or additional pricing pressures.
Moreover, legislative and regulatory proposals have also been made to expand post approval requirements and restrict sales and promotional activities for pharmaceutical drugs. We cannot be sure whether additional legislative changes will be enacted, or whether the FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the marketing approvals of our drug candidates, if any, may be. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent marketing approval, as well as subject us and any future collaborators to more stringent drug labeling and post marketing testing and other requirements.
Governments outside the U.S. tend to impose strict price controls, which may adversely affect our revenues, if any.
In some countries, such as the countries of the European Union, the pricing of prescription pharmaceuticals is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of marketing approval for a drug. To obtain reimbursement or pricing approval in some countries, we, or any future collaborators, may be required to conduct a clinical trial that compares the cost-effectiveness of our drug to other available therapies. If reimbursement of our drugs is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business could be harmed.
We may be subject to certain healthcare laws and regulations, which could expose us to criminal sanctions, civil penalties, contractual damages, reputational harm, fines, disgorgement, exclusion from participation in government healthcare programs, curtailment or restricting of our operations, and diminished profits and future earnings.
Healthcare providers, third-party payors and others will play a primary role in the recommendation and prescription of any drugs for which we obtain marketing approval. Our future arrangements with healthcare providers and third-party payors will expose us to broadly applicable fraud and abuse and other healthcare laws and regulations that may constrain the business or financial arrangements and relationships through which we market, sell and distribute any drugs for which we obtain marketing approval. Potentially applicable U.S. federal and state healthcare laws and regulations include the following:
Anti-Kickback Statute. The federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may be made under federal healthcare programs such as Medicare and Medicaid;
False Claims Laws. The federal false claims laws, including the civil False Claims Act, impose criminal and civil penalties, including those from civil whistleblower or qui tam actions against individuals or entities for knowingly presenting, or causing to be presented to the federal government claims for payment that are false or fraudulent or making a false statement to avoid, decrease or conceal an obligation to pay money to the federal government;
HIPAA. The federal Health Insurance Portability and Accountability Act of 1996, or HIPPA, imposes criminal and civil liability for executing or attempting to execute a scheme to defraud any healthcare benefit program;

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HIPAA and HITECH. HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH Act, also imposes obligations on certain types of individuals and entities, including mandatory contractual terms, with respect to safeguarding the privacy, security and transmission of individually identifiable health information;
False Statements Statute. The federal false statements statute prohibits knowingly and willfully falsifying, concealing or covering up a material fact or making any materially false statement in connection with the delivery of or payment for healthcare benefits, items or services;
Transparency Requirements. The federal Physician Payments Sunshine Act requires certain manufacturers of drugs, devices, biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, with specific exceptions, to report annually to the U.S. Department of Health and Human Services information related to physician payments and other transfers of value and physician ownership and investment interests; and
Analogous State and Foreign Laws. Analogous state laws and regulations, such as state anti-kickback and false claims laws, and transparency laws, may apply to sales or marketing arrangements, and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers, and some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government, in addition to requiring drug manufacturers to report information related to payments to physicians and other healthcare providers or marketing expenditures. Many state laws also govern the privacy and security of health information in some circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts. Foreign laws also govern the privacy and security of health information in many circumstances.
Efforts to ensure that our business arrangements with third-parties, and our business generally, will comply with applicable healthcare laws and regulations will involve substantial costs. It is possible that governmental authorities will conclude that our business practices may not comply with current or future statutes, regulations or case law involving applicable fraud and abuse or other healthcare laws and regulations. If our operations are found to be in violation of any of these laws or any other governmental regulations that may apply to us, we may be subject to significant civil, criminal and administrative penalties, damages, fines, imprisonment, exclusion of drugs from government funded healthcare programs, such as Medicare and Medicaid, disgorgement, contractual damages, and reputational harm, any of which could substantially disrupt our operations. If any of the physicians or other providers or entities with whom we expect to do business is found not to be in compliance with applicable laws, they may be subject to criminal, civil or administrative sanctions, including exclusions from government funded healthcare programs.
The provision of benefits or advantages to physicians to induce or encourage the prescription, recommendation, endorsement, purchase, supply, order or use of medicinal products is also prohibited in the European Union. The provision of benefits or advantages to physicians is governed by the national anti-bribery laws of European Union Member States, such as the U.K. Bribery Act 2010, or Bribery Act. Infringement of these laws could result in substantial fines and imprisonment.
Payments made to physicians in certain European Union Member States must be publicly disclosed. Moreover, agreements with physicians often must be the subject of prior notification and approval by the physician’s employer, his or her competent professional organization and/or the regulatory authorities of the individual European Union Member States. These requirements are provided in the national laws, industry codes or professional codes of conduct, applicable in the European Union Member States. Failure to comply with these requirements could result in reputational risk, public reprimands, administrative penalties, fines or imprisonment.
Compliance with global privacy and data security requirements could result in additional costs and liabilities to us or inhibit our ability to collect and process data globally, and the failure to comply with such requirements could have a material adverse effect on our business, financial condition or results of operations.
The regulatory framework for the collection, use, safeguarding, sharing, transfer and other processing of information worldwide is rapidly evolving and is likely to remain uncertain for the foreseeable future. Globally, virtually every jurisdiction in which we operate has established its own data security and privacy frameworks with which we must comply. For example, the collection, use, disclosure, transfer, or other processing of personal data regarding individuals in the EU, including personal health data, is subject to the EU General Data Protection Regulation, or GDPR, which became effective on May 25, 2018. The GDPR is wide-ranging in scope and imposes numerous requirements on companies that process personal data, including requirements relating to processing health and other sensitive data, obtaining consent of the individuals to whom the personal data relates, providing information to individuals regarding data processing activities, implementing safeguards to protect the security and confidentiality of personal data, providing notification of data breaches, and taking certain measures when engaging third-party processors. The GDPR also imposes strict rules on the transfer of personal data to countries outside the EU, including the U.S., and permits data protection authorities to impose large penalties for violations of the GDPR, including

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potential fines of up to €20 million or 4% of annual global revenues, whichever is greater. The GDPR also confers a private right of action on data subjects and consumer associations to lodge complaints with supervisory authorities, seek judicial remedies, and obtain compensation for damages resulting from violations of the GDPR.
Given the breadth and depth of changes in data protection obligations, preparing for and complying with the GDPR’s requirements has required and will continue to require significant time, resources and a review of our technologies, systems and practices, as well as those of any third-party collaborators, service providers, contractors or consultants that process or transfer personal data collected in the European Union. The GDPR and other changes in laws or regulations associated with the enhanced protection of certain types of sensitive data, such as healthcare data or other personal information from our clinical trials, could require us to change our business practices or lead to government enforcement actions, private litigation or significant penalties against us and could have a material adverse effect on our business, financial condition or results of operations.
We are subject to U.S. and foreign anti-corruption and anti-money laundering laws with respect to our operations and non-compliance with such laws can subject us to criminal and/or civil liability and harm our business.
We are subject to the U.S. Foreign Corrupt Practices Act of 1977, as amended, or FCPA, the U.S. domestic bribery statute contained in 18 U.S.C. § 201, the U.S. Travel Act, the USA PATRIOT Act, and possibly other state and national anti-bribery and anti-money laundering laws in countries in which we conduct activities. Anti-corruption laws are interpreted broadly and prohibit companies and their employees, agents, third-party intermediaries, joint venture partners and collaborators from authorizing, promising, offering, or providing, directly or indirectly, improper payments or benefits to recipients in the public or private sector. We may have direct or indirect interactions with officials and employees of government agencies or government-affiliated hospitals, universities, and other organizations. In addition, we may engage third-party intermediaries to promote our clinical research activities abroad and/or to obtain necessary permits, licenses, and other regulatory approvals. We can be held liable for the corrupt or other illegal activities of these third-party intermediaries, our employees, representatives, contractors, partners, and agents, even if we do not explicitly authorize or have actual knowledge of such activities.
We have adopted a Code of Business Conduct and Ethics. The Code of Business Conduct and Ethics mandates compliance with the FCPA and other anti-corruption laws applicable to our business throughout the world. However, we cannot assure you that our employees and third-party intermediaries will comply with this code or such anti-corruption laws. Noncompliance with anti-corruption and anti-money laundering laws could subject us to whistleblower complaints, investigations, sanctions, settlements, prosecution, other enforcement actions, disgorgement of profits, significant fines, damages, other civil and criminal penalties or injunctions, suspension and/or debarment from contracting with certain persons, the loss of export privileges, reputational harm, adverse media coverage, and other collateral consequences. If any subpoenas, investigations, or other enforcement actions are launched, or governmental or other sanctions are imposed, or if we do not prevail in any possible civil or criminal litigation, our business, results of operations and financial condition could be materially harmed. In addition, responding to any action will likely result in a materially significant diversion of management’s attention and resources and significant defense and compliance costs and other professional fees. In certain cases, enforcement authorities may even cause us to appoint an independent compliance monitor which can result in added costs and administrative burdens.
We are subject to governmental export and import controls that could impair our ability to compete in international markets due to licensing requirements and subject us to liability if we are not in compliance with applicable laws.
Our drug products and other materials are subject to export control and import laws and regulations, including the U.S. Export Administration Regulations, U.S. Customs regulations, and various economic and trade sanctions regulations administered by the U.S. Treasury Department’s Office of Foreign Assets Controls. Exports of our drugs and solutions outside of the U.S. must be made in compliance with these laws and regulations. If we fail to comply with these laws and regulations, we and certain of our employees could be subject to substantial civil or criminal penalties, including the possible loss of export or import privileges, fines, which may be imposed on us and responsible employees or managers, and, in extreme cases, the incarceration of responsible employees or managers.
In addition, changes in our drugs or solutions or changes in applicable export or import laws and regulations may create delays in the introduction, provision, or sale of our drugs and solutions in international markets, prevent customers from using our drugs and solutions or, in some cases, prevent the export or import of our drugs and solutions to certain countries, governments or persons altogether. Any limitation on our ability to export, provide, or sell our drugs and solutions could adversely affect our business, financial condition and results of operations.

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If we fail to comply with environmental, health and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.
We are subject to numerous environmental, health and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. From time to time and in the future, our operations may involve the use of hazardous and flammable materials, including chemicals and biological materials, and may also produce hazardous waste products. Even if we contract with third-parties for the disposal of these materials and waste products, we cannot completely eliminate the risk of contamination or injury resulting from these materials. In the event of contamination or injury resulting from the use or disposal of our hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.
We maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, but this insurance may not provide adequate coverage against potential liabilities. However, we do not maintain insurance for environmental liability or toxic tort claims that may be asserted against us.
In addition, we may incur substantial costs in order to comply with current or future environmental, health and safety laws and regulations. Current or future environmental laws and regulations may impair our research, development or production efforts. In addition, failure to comply with these laws and regulations may result in substantial fines, penalties or other sanctions.
Unfavorable global economic conditions could adversely affect our business, financial condition or results of operations.
Our results of operations could be adversely affected by general conditions in the global economy and in the global financial markets. The most recent global financial crisis caused extreme volatility and disruptions in the capital and credit markets. A severe or prolonged economic downturn, such as the most recent global financial crisis, could result in a variety of risks to our business, including weakened demand for our drug candidate and our ability to raise additional capital when needed on acceptable terms, if at all. This is particularly true in the European Union, which is undergoing a continued severe economic crisis. A weak or declining economy could strain our suppliers, possibly resulting in supply disruption, or cause delays in payments for our services by third-party payors or our collaborators. Any of the foregoing could harm our business and we cannot anticipate all of the ways in which the current economic climate and financial market conditions could adversely impact our business.
Our internal computer systems and information technology, or those of our collaborators or other contractors or consultants, may fail, suffer interruptions or suffer security breaches, which could result in a material disruption of our drug development programs and harm to our business.
Our internal computer systems and those of our current and any future collaborators and other contractors or consultants are vulnerable to damage from computer viruses, unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures.
In addition, we, and our collaborators, contractors or consultants, rely on information technology networks and systems, including the Internet, to process, transmit and store clinical trial data and other electronic information, and manage or support a variety of business processes, including operational and financial transactions and records, personal identifying information, payroll data and workforce scheduling information. We purchase some of our information technology from vendors, on whom our systems depend. We rely on commercially available systems, software, tools and monitoring to provide security for the processing, transmission and storage of company and customer information. Although we have taken steps to protect the security of our information systems and the data maintained in those systems, no such measures can eliminate the possibility of the systems' improper functioning or the improper access or disclosure of confidential or personally identifiable information such as in the event of cyber-attacks. Security breaches, whether through physical or electronic break-ins, computer viruses, ransomware, impersonation of authorized users, attacks by hackers or other means, can create system disruptions or shutdowns or the unauthorized disclosure of confidential information. Additionally, outside parties may attempt to fraudulently induce employees, collaborators, or other contractors or consultants to disclose sensitive information or take other actions, including making fraudulent payments or downloading malware, by using “spoofing” and “phishing” emails or other types of attacks. Our employees may be targeted by such fraudulent activities. Outside parties may also subject us to distributed denial of services attacks or introduce viruses or other malware through “trojan horse” programs to our users’ computers in order to gain access to our systems and the data stored therein. Because the techniques used to obtain unauthorized access, disable or degrade service, or sabotage systems change frequently and continuously become more sophisticated, often are not recognized until launched against a target and may be difficult to detect for a long time, we may be unable to anticipate these techniques or to implement adequate preventive or detective measures.

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If company, clinical, personal or otherwise protected information is improperly accessed, tampered with or distributed, we may face significant financial exposure, including incurring significant costs to remediate possible injury to the affected parties. We may also be subject to sanctions and civil or criminal penalties if we are found to be in violation of the privacy or security rules under federal, state, or international laws protecting confidential information. While we have not experienced any such material system failure, accident, service interruption or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Any failure to maintain proper functionality and security of our internal computer and information systems could result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, interrupt our operations, damage our reputation, subject us to liability, claims or regulatory penalties, harm our competitive position and delay the further development and commercialization of our drug candidates.
Our employees may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements, which could cause significant liability for us and harm our reputation.
We are exposed to the risk of employee fraud or other misconduct, including intentional failures to comply with FDA regulations or similar regulations of comparable foreign regulatory authorities, provide accurate information to the FDA or comparable foreign regulatory authorities, comply with manufacturing standards we have established, comply with federal and state healthcare fraud and abuse laws and regulations and similar laws and regulations established and enforced by comparable foreign regulatory authorities, report financial information or data accurately or disclose unauthorized activities to us. Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions and serious harm to our reputation. It is not always possible to identify and deter employee misconduct, and the precautions we take to detect and prevent this activity may not be effective in controlling unknown or unmanaged risks or losses or in protecting us from governmental investigations or other actions or lawsuits stemming from a failure to be in compliance with such laws, standards or regulations. If any such actions are instituted against us, and we are not successful in defending ourselves or asserting our rights, those actions could have a significant impact on our business and results of operations, including the imposition of significant fines or other sanctions.
RISKS RELATING TO OUR COMMON STOCK
If we fail to meet the requirements for continued listing on the Nasdaq Global Market, our common stock could be delisted from trading, which would decrease the liquidity of our common stock and our ability to raise additional capital.
Our common stock is currently listed on the Nasdaq Global Market. We are required to meet specified requirements to maintain our listing on the Nasdaq Global Market, including a minimum market value of listed securities of $50.0 million, a minimum bid price of $1.00 per share for our common stock, and other continued listing requirements.
In the past we have, from time to time, received deficiency letters from Nasdaq as a consequence of our failure to satisfy such requirements. Since February 7, 2020, the market value of our listed securities has closed below the minimum $50.0 million requirement for continued listing on the Nasdaq Global Market and if the market value of our listed securities continues to close below the minimum $50.0 million, we expect to receive a deficiency letter from Nasdaq on or after March 23, 2020. Thereafter, we would expect to have 180 days to regain compliance. In order for us to regain compliance, the market value of our listed securities must close at $50.0 million or more for a minimum of ten consecutive business days. If we are unable to regain compliance within the 180 day period, our common stock will be subject to delisting from the Nasdaq Global Market. We may appeal the delisting determination or we may transfer the listing of our common stock to the Nasdaq Capital Market.
In addition, the bid price per share for our common stock has recently been below $1.00 per share and, if the bid price continues to be below $1.00 for 30 consecutive business days, we will receive a deficiency notice from Nasdaq advising us that we have 180 days to regain compliance by maintaining a minimum bid price of at least $1.00 for a minimum of ten consecutive business days. Under certain circumstances, Nasdaq could require that the minimum bid price exceed $1.00 for more than ten consecutive days before determining that a company complies.
Although we have been able to regain compliance with the listing requirements within the manner and time periods prescribed by Nasdaq in the past, there can be no assurance that in the future, we will be able to maintain compliance with the Nasdaq continued listing requirements. If we fail to satisfy the Nasdaq Global Market’s continued listing requirements, we may transfer to the Nasdaq Capital Market, which generally has lower financial requirements for initial listing, to avoid delisting, or, if we fail to meet its listing requirements, the OTC Bulletin Board. However, we may not be able to satisfy the initial listing requirements for the Nasdaq Capital Market. A transfer of our listing to the Nasdaq Capital Market or having our common

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stock trade on the OTC Bulletin Board could adversely affect the liquidity of our common stock. Any such event could make it more difficult to dispose of, or obtain accurate quotations for the price of, our common stock, and there also would likely be a reduction in our coverage by securities analysts and the news media, which could cause the price of our common stock to decline further. We may also face other material adverse consequences in such event, such as negative publicity, a decreased ability to obtain additional financing, diminished investor and/or employee confidence, and the loss of business development opportunities, some or all of which may contribute to a further decline in our stock price.
Our stock price may fluctuate significantly and the market price of our common stock could drop below the price paid by our investors.
The trading price of our common stock has been volatile and is likely to continue to be volatile in the future. For example, our stock traded within a range of a high price of $18.75 and a low price of $0.60 per share for the period January 1, 2014 through March 12, 2020. The stock market, particularly in recent years, has experienced significant volatility with respect to pharmaceutical and biotechnology company stocks. Prices for our stock will be determined in the marketplace and may be influenced by many factors, including:
the timing and result of clinical trials of our drug candidates;
the success of, and announcements regarding, existing and new technologies and/or drug candidates by us or our competitors;
regulatory actions with respect to our product candidates or our competitors’ products and product candidates;
market conditions in the biotechnology and pharmaceutical sectors;
rumors relating to us or our collaborators or competitors;
commencement or termination of collaborations for our development programs;
litigation or public concern about the safety of our drug candidates;
actual or anticipated variations in our quarterly operating results and any subsequent restatement of such results;
the amount and timing of any royalty revenue we receive from Genentech related to Erivedge;
actual or anticipated changes to our research and development plans;
deviations in our operating results from the estimates of securities analysts;
entering into new collaboration agreements or termination of existing collaboration agreements;
adverse results or delays in clinical trials being conducted by us or any collaborators;
any intellectual property disputes or other lawsuits involving us;
third-party sales of large blocks of our common stock;
sales of our common stock by our executive officers, directors or significant stockholders;
equity sales by us of our common stock to fund our operations;
the loss of any of our key scientific or management personnel;
FDA or international regulatory actions;
limited trading volume in our common stock;
general economic and market conditions, including recent adverse changes in the domestic and international financial markets; and
the other factors described in this “Risk Factors” section.
While we cannot predict the individual effect that these factors may have on the price of our common stock, these factors, either individually or in the aggregate, could result in significant variations in price during any given period of time.
In the past, securities class action litigation has often been instituted against companies following periods of volatility in their stock price. This type of litigation could result in substantial costs and divert our management’s attention and resources.

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We and our collaborators may not achieve projected research, development, commercialization and marketing goals in the time frames that we or they announce, which could have an adverse impact on our business and could cause our stock price to decline.
We set goals for, and make public statements regarding, the timing of certain accomplishments, such as the commencement and completion of preclinical studies, and clinical trials, and other developments and milestones relating to our business and our collaboration agreements. Our collaborators may also make public statements regarding their goals and expectations for their collaborations with us. The actual timing of any such events can vary dramatically due to a number of factors including delays or failures in our and our current and potential future collaborators’ preclinical studies or clinical trials, the amount of time, effort and resources committed to our programs by all parties, and the inherent uncertainties in the regulatory approval and commercialization process. As a result:
our or our collaborators’ preclinical studies and clinical trials may not advance or be completed in the time frames we or they announce or expect;
we or our collaborators may not make regulatory submissions, receive regulatory approvals or commercialize approved drugs as predicted; and
we or our collaborators may not be able to adhere to our or their current schedule for the achievement of key milestones under any programs.
If we or any collaborators fail to achieve research, development and commercialization goals as planned, our business could be materially adversely affected and the price of our common stock could decline.
Our ability to use our net operating loss carryforwards and certain other tax attributes may be limited.
Under Section 382 of the Internal Revenue Code of 1986, as amended, if a company undergoes an “ownership change,” generally defined as a greater than 50% change (by value) in its equity ownership over a three-year period, the corporation’s ability to use its pre-change net operating loss carryforwards and other pre-change tax attributes (such as research tax credits) to offset its post change taxable income or taxes may be limited. Changes in our stock ownership, some such changes being out of our control, may have resulted or could in the future result in an ownership change. The changes of ownership will result in net operating loss and research and development credit carryforwards that we expect to expire unutilized. If additional limitations were to apply, utilization of a portion of our net operating loss and tax credit carryforwards could be further limited in future periods and a portion of the carryforwards could expire before being available to reduce future income tax liabilities.
Our effective tax rate may fluctuate, and we may incur obligations in tax jurisdictions in excess of accrued amounts.
We are subject to taxation in numerous U.S. states and territories. As a result, our effective tax rate is derived from a combination of applicable tax rates in the various places that we operate. In preparing our financial statements, we estimate the amount of tax that will become payable in each of such places. Nevertheless, our effective tax rate may be different than experienced in the past due to numerous factors, including as a result of applying the provisions of the Tax Cuts and Jobs Act, or TCJA, (as such provisions may be elaborated on or further developed in guidance, regulations and technical corrections pertaining to the TCJA), changes in the mix of our profitability from state to state, the results of examinations and audits of our tax filings, our inability to secure or sustain acceptable agreements with tax authorities, changes in accounting for income taxes and changes in tax laws. Any of these factors could cause us to experience an effective tax rate significantly different from previous periods or our current expectations and may result in tax obligations in excess of amounts accrued in our financial statements.
Future sales of shares of our common stock, including by us, employees and large stockholders or pursuant to our common stock purchase agreement with Aspire Capital and sales agreement with JonesTrading or our universal shelf registration statement could result in dilution to our stockholders and negatively affect our stock price.
Most of our outstanding common stock can be traded without restriction at any time. As such, sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales, or the perception in the market that the holders of a large number of shares intend to sell such shares, could reduce the market price of our common stock.
As of December 31, 2019, Aurigene beneficially owned approximately 16.4% of our outstanding common stock. Subject to certain restrictions, Aurigene is able to sell its common shares in the public market from time to time without registering them, subject to certain limitations on the timing, amount and method of those sales imposed by Rule 144 under the Securities Act of 1933, as amended. Pursuant to our registration rights agreement with Aurigene, Aurigene has the right, subject to certain conditions and with certain exceptions, to require us to file registration statements covering the common shares it owns or to

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include those common shares in registration statements that we may file. Following their registration and sale under the applicable registration statement, those shares would become freely tradable. By exercising its registration rights and selling a large number of shares common stock, Aurigene could cause the price of our common stock to decline. In addition, the perception in the public markets that sales by Aurigene might occur could also adversely affect the market price of our common stock.
We have a significant number of shares that are subject to outstanding options and in the future, we may issue additional options, warrants or other derivative securities convertible into our common stock. The exercise of any such options, warrants or other derivative securities, and the subsequent sale of the underlying common stock, could cause a further decline in our stock price. These sales also might make it difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
We currently have on file with the SEC a “universal” shelf registration statement which allows us to offer and sell registered common stock, preferred stock, and warrants from time to time pursuant to one or more offerings at prices and terms to be determined at the time of sale.
In February 2020, we entered into a common stock purchase agreement with Aspire Capital, which provides that, upon the terms and subject to the conditions and limitations set forth therein, Aspire Capital is committed to purchase up to an aggregate of $30.0 million of shares of the Company’s common stock over the 30-month term of the Purchase Agreement. To date, we have received gross proceeds of $3.0 million of our common stock from our upfront sale of common stock to Aspire Capital in connection with execution of the purchase agreement and $27.0 million remains available for sale under the purchase agreement. In addition, as consideration for Aspire Capital’s obligation under the purchase agreement, we issued 646,551 shares of our common stock to Aspire Capital as a commitment fee in connection with entering in the agreement. Pursuant to the terms of the purchase agreement, we have registered for sale the shares we have already issued to Aspire Capital and the additional shares that we may in the future sell to Aspire Capital pursuant to our universal shelf registration statement on Form S-3. We also entered into a registration rights agreement with Aspire Capital in connection with entering into the agreement setting forth our obligation to maintain an effective registration statement covering any shares of common stock sold or to be sold to Aspire Capital, subject to the terms of the registration rights agreement.
The extent to which we utilize the purchase agreement with Aspire Capital as a source of funding will depend on a number of factors, including the prevailing market price of our common stock, the volume of trading in our common stock and the extent to which we are able to secure funds from other sources. Sales of shares of our common stock to Aspire Capital pursuant to the purchase agreement may result in dilution to the interests of other holders of our common stock. In addition, Aspire Capital may sell all, some or none of our shares that it holds or may come to hold under the purchase agreement. The sale of shares of our common stock by us to Aspire Capital or by Aspire Capital into the market, or anticipation of such sales, could cause the trading price of our common stock to decline or make it more difficult for us to sell equity or equity-related securities in the future at a time and at a price that we might otherwise desire.
In March 2020, we entered into a sales agreement with JonesTrading, pursuant to which, from time to time, we may offer and sell through JonesTrading up to $30.0 million of the common stock registered under our universal shelf registration statement on Form S-3 pursuant to one or more “at the market” offerings. In addition, with our prior written approval, JonesTrading may sell these shares of common stock by any other method permitted by law, including in privately negotiated transactions. To date, we have not made any sales of common stock pursuant to the sales agreement. The extent to which we
utilize the sales agreement with JonesTrading as a source of funding will depend on a number of factors, including the prevailing market price of our common stock, general market conditions, the extent to which we are able to secure funds from
other sources, and restrictions on our ability to sell common stock pursuant to the sales agreement to the extent we are then
subject to restrictions on our ability to utilize the Form S-3 shelf registration statement to sell more than one-third of the market
value of our public float, meaning the aggregate market value of voting and non-voting common stock held by non-affiliates
shares held by non-affiliates, in any trailing 12-month period.
Sales of substantial amounts of shares of our common stock or other securities by our employees and other stockholders, including pursuant to our purchase agreement with Aspire Capital or our sales agreement with JonesTrading pursuant, under our universal shelf registration statement or otherwise could dilute our stockholders, lower the market price of our common stock and impair our ability to raise capital through the sale of equity or equity-related securities.
If we are not able to maintain effective internal controls under Section 404 of the Sarbanes-Oxley Act, our business and stock price could be adversely affected.
Section 404 of the Sarbanes-Oxley Act of 2002 requires us, on an annual basis, to review and evaluate our internal controls, and requires our independent registered accounting firm to attest to the effectiveness of our internal controls. Any failure by us to maintain the effectiveness of our internal controls in accordance with the requirements of Section 404 of the

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Sarbanes-Oxley Act, as such requirements exist today or may be modified, supplemented or amended in the future, could have a material adverse effect on our business, operating results and stock price.
We do not intend to pay dividends on our common stock, and any return to investors will come, if at all, only from potential increases in the price of our common stock.
We have never declared nor paid cash dividends on our common stock. We currently plan to retain all of our future earnings, if any, to finance the operation, development and growth of our business. In addition, the terms of any future debt or credit agreements may preclude us from paying dividends. As a result, capital appreciation, if any, of our common stock will be your sole source of gain for the foreseeable future.
Insiders have substantial influence over us and could cause us to take actions that may not be, or refrain from taking actions that may be, in our best interest or in the best interest of our stockholders.
As of December 31, 2019, we believe that our directors, executive officers and principal stockholders, together with their affiliates, owned, in the aggregate, approximately 17.1% of our outstanding common stock including approximately 16.4% of our outstanding common stock owned by, Aurigene. As a result, if these stockholders were to choose to act together, they may be able to affect the outcome of matters submitted to our stockholders for approval, as well as our management and affairs, such as:
the composition of our board of directors;
the adoption of amendments to our certificate of incorporation and bylaws;
the approval of mergers or sales of substantially all of our assets;
our capital structure and financing; and
the approval of contracts between us and these stockholders or their affiliates, which could involve conflicts of interest.
This concentration of ownership could harm the market price of our common stock by:
delaying, deferring or preventing a change in control of our company and making some transactions more difficult or impossible without the support of these stockholders, even if such transactions are beneficial to other stockholders;
impeding a merger, consolidation, takeover or other business combination involving our company; or
entrenching our management or the board of directors.
Moreover, the interests of these stockholders may conflict with the interests of other stockholders, and we may be required to engage in transactions that may not be agreeable to or in the best interest of us or other stockholders.
If securities or industry analysts do not publish research or publish inaccurate or unfavorable research about our business, our share price and trading volume could decline.
The trading market for our common stock may depend in part on the research and reports that securities or industry analysts publish about us or our business. We do not have any control over these analysts. There can be no assurance that existing analysts will continue to cover us or that new analysts will begin to cover us. There is also no assurance that any covering analyst will provide favorable coverage. A lack of research coverage or adverse coverage may negatively impact the market price of our common stock. In addition, if one or more of our current or potential future analysts downgrade our stock or change their opinion of our stock, our share price would likely decline. In addition, if one or more of our current or potential future analysts cease coverage of our company or fail to regularly publish reports on us, we could lose visibility in the financial markets, which could cause our share price or trading volume to decline.
A decline in our stock price may affect future fundraising efforts.
We currently have no drug revenues, and depend entirely on funds raised through other sources. One source of such funding is future debt and/or equity offerings. Our ability to raise funds in this manner depends upon, among other things, our stock price, which may be affected by numerous factors including without limitation capital market conditions, evaluation of our stock by securities analysts, numerous factors including without limitation development programs, and the overall status of our business, finances and operations.

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We have anti-takeover defenses that could delay or prevent an acquisition that our stockholders may consider favorable, or prevent attempts by our stockholders to replace or remove current management, which could result in a decline in the price of our common stock.
Provisions of our certificate of incorporation, our bylaws, and Delaware law may deter unsolicited takeovers or delay or prevent changes in control of our management, including transactions in which our stockholders might otherwise receive a premium for their shares over then-current market prices. In addition, these provisions may limit the ability of stockholders to approve transactions that they may deem to be in their best interest. For example, we have divided our board of directors into three classes that serve staggered three-year terms, we may issue shares of our authorized “blank check” preferred stock, and our stockholders are limited in their ability to call special stockholder meetings.
In addition, we are subject to the anti-takeover provisions of Section 203 of the Delaware General Corporation Law, which prohibits a publicly-held Delaware corporation from engaging in a business combination with an interested stockholder, generally a person who together with his, her, or its affiliates owns, or within the last three years has owned, 15% of our voting stock, for a period of three years after the date of the transaction in which the person became an interested stockholder, unless the business combination is approved in a prescribed manner. These provisions could discourage, delay or prevent a change in control.
ITEM 1B.
UNRESOLVED STAFF COMMENTS
None.
ITEM 2.
PROPERTIES
We currently lease a facility for our administrative, research and development requirements located at 4 Maguire Road in Lexington, Massachusetts consisting of 24,529 square feet. On November 1, 2017, we entered into a second amendment to the lease agreement pursuant to which we extended the lease for an additional two-year period. The second amended lease expired on February 29, 2020, and we are exercising our hold over rights pursuant to the second amended lease until our new premises are completed.
On December 5, 2019, we entered into a new lease for our administrative, research and development requirements located at 128 Spring Street in Lexington, Massachusetts consisting of 21,772 square feet. The lease has an initial term of seven years from the commencement date which is expected in the second quarter of 2020. We received a notification from the landlord dated February 5, 2020 that the property was sold to 99 Hayden LLC, and that security or other deposits and any prepaid rents were transferred accordingly.
ITEM 3.
LEGAL PROCEEDINGS

We are currently not a party to any material legal proceedings.
ITEM 4.
MINE SAFETY DISCLOSURES
Not applicable.
PART II
ITEM 5.
MARKET FOR REGISTRANT’S COMMON EQUITY, RELATED STOCKHOLDERS MATTERS AND ISSUER PURCHASES OF EQUITY SECURITIES

Market Information.    Our common stock is traded on the Nasdaq Global Market under the trading symbol “CRIS.”
Holders.    On March 12, 2020 the last reported sale price of our common stock per share on the Nasdaq Global Market was $1.01 and there were 107 holders of record of our common stock. The number of record holders may not be representative of the number of beneficial owners because many of the shares of our common stock are held by depositories, brokers or other nominees.
Dividends.    We have never declared or paid any cash dividends on our common stock. We currently intend to retain earnings, if any, to support our business strategy and do not anticipate paying cash dividends in the foreseeable future. Payment of future dividends, if any, will be at the sole discretion of our board of directors after taking into account various factors, including our financial condition, operating results, capital requirements and any plans for expansion.
Issuer Purchases of Equity Securities.    None.

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Unregistered Sales of Equity Securities.    None.
Performance Graph.    Not required.
ITEM 6.
SELECTED FINANCIAL DATA
Not applicable.
ITEM 7.
MANAGEMENT’S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
The following discussion of our financial condition and results of operations should be read in conjunction with the consolidated financial statements and the related notes appearing elsewhere in this report. This discussion contains forward-looking statements, based on current expectations and related to future events and our future financial performance, that involve risks and uncertainties. Our actual results may differ materially from those anticipated in these forward-looking statements as a result of many important factors, including those set forth under Part I, Item 1A, “Risk Factors” and elsewhere in this report. As used throughout this report, the terms “the Company,” “we,” “us,” and “our” refer to the business of Curis, Inc. and its wholly owned subsidiaries, except where the context otherwise requires, and the term “Curis” refers to Curis, Inc. Unless otherwise indicated, all information in this Form 10-K gives effect to a 1-for-5 reverse stock split of Curis' common stock, that became effective on May 29, 2018. All common shares and per share amounts have been adjusted to reflect such reverse stock split.
Overview
We are a biotechnology company focused on the development of first-in-class and innovative therapeutics for the treatment of cancer.
We conduct our research and development programs both internally and through strategic collaborations. Our clinical stage drug candidates are CA-4948, CI-8993, and fimepinostat:
CA-4948, which is being tested in a dose escalating clinical trial in patients with non-Hodgkin lymphomas, including those with Myeloid Differentiation Primary Response Protein 88, or MYD88 alterations. We reported preliminary clinical data from the study in December 2019. We are currently planning to initiate a separate Phase 1 trial for acute myeloid leukemia and myelodysplastic syndromes patients in the first half of 2020.
CI-8993, a monoclonal antibody designed to antagonize the V-domain Ig suppressor of T cell activation, or VISTA signaling pathway, which we plan to begin clinical testing in a Phase 1a/1b trial in 2020.
Fimepinostat, which is currently being explored in clinical studies in patients with MYC-altered diffuse large B-cell lymphoma, or DLBCL and solid tumors and has been granted Orphan Drug Designation and Fast Track Designation for the treatment of DLBCL by the U.S. Food and Drug Administration, or FDA in April 2015 and May 2018, respectively. We began enrollment in a Phase 1 combination study with venetoclax in DLBCL patients, including patients with translocations in both MYC and the BCL2 gene, also referred to as double-hit lymphoma, or high-grade B-cell lymphoma, or HGBL. We reported preliminary clinical data from this combination study in December 2019. In March 2020, we announced that although we observed no significant drug-drug interaction in our Phase 1 study of fimepinostat in combination with venetoclax, we did not see an efficacy signal that would warrant continuation of the study. Accordingly, no further patients will be enrolled in this study. We are currently evaluating future studies for fimepinostat.
Our pipeline includes CA-170 for which we announced initial data from a clinical study in patients with mesothelioma in conjunction with the Society of lmmunotherapy of Cancer conference in November 2019. Based on this data, no further patients will be enrolled in the study. We are currently evaluating future studies for CA-170.
Our pipeline also includes CA-327, which is a pre-Investigational New Drug, or IND, stage oncology drug candidate.
We are party to a collaboration with Genentech Inc., or Genentech, a member of the Roche Group, under which F. Hoffmann-La Roche Ltd, or Roche and Genentech are commercializing Erivedge® (vismodegib), a first-in-class orally administered small molecule Hedgehog signaling pathway inhibitor. Erivedge is approved for the treatment of advanced basal cell carcinoma, or BCC.
In January 2015, we entered into a collaboration agreement focused on immuno-oncology and selected precision oncology targets with Aurigene Discovery Technologies Limited, or Aurigene, which was amended in September 2016 and February 2020.

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1.
IRAK4 Program - a precision oncology program of small molecule inhibitors of IRAK4. The development candidate is CA-4948, an orally available small molecule inhibitor of IRAK4.
2.
PD1/VISTA Program - an immuno-oncology program of small molecule antagonists of PD1 and VISTA immune checkpoint pathways. The development candidate is CA-170, an orally available small molecule antagonist of VISTA and PDL1.
3.
PD1/TIM3 Program - an immuno-oncology program of small molecule antagonists of PD1 and TIM3 immune checkpoint pathways. The development candidate is CA-327, an orally available small molecule antagonist of PDL1 and TIM3.
4.
In March 2018, we exercised our option to license a fourth program, which is an immuno-oncology program.
In addition, we are party to an option and license agreement with ImmuNext, Inc., or ImmuNext. Pursuant to the terms of the option and license agreement, we have an option, exercisable for a specified period as set forth in the option and license agreement to obtain an exclusive license to develop and commercialize certain VISTA antagonizing compounds, including ImmuNext's lead compound, CI-8993, and products containing these compounds in the field of oncology.
We are also party to a collaboration with Genentech Inc., or Genentech, a member of the Roche Group, under which Genentech and F. Hoffmann-La Roche Ltd, or Roche, are commercializing Erivedge® (vismodegib), a first-in-class orally-administered small molecule signaling pathway inhibitor. Erivedge is approved for the treatment of advanced basal cell carcinoma, or BCC.
Based on our clinical development plans for our pipeline, we intend to predominantly focus our available resources on the continued development of CA-4948, in collaboration with Aurigene, and CI-8993, in collaboration with ImmuNext, in the near term.
As of December 31, 2019, we believe our $20.5 million of existing cash, cash equivalents and investments should enable us to maintain our planned operations into the second half of 2020. We have based this assessment on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. Based on our available cash resources, recurring losses and cash outflows from operations since inception, an expectation of continuing operating losses and cash outflows from operations for the foreseeable future and the need to raise additional capital to finance our future operations, we concluded we do not have sufficient cash on hand to support current operations within the next 12 months from the date of filing this Annual Report on Form 10-K. These factors raise substantial doubt regarding our ability to continue as a going concern. We expect to finance our operations through our common stock purchase agreement with Aspire Capital Fund LLC, or Aspire Capital, and our at-the-market sales agreement with JonesTrading Institutional Services LLC, or JonesTrading or other potential equity financings, debt financings or other capital sources. However, we may not be successful in securing additional financing on acceptable terms, or at all. If sufficient funds are not available, we may have to delay, reduce the scope of, or eliminate some of our research and development programs, including related clinical trials and operating expenses, potentially delaying the time to market for or preventing the marketing of any of our product candidates, which could adversely affect our business prospects and our ability to continue our operations, and would have a negative impact on our financial condition and ability to pursue our business strategies.
Our Collaborations and License Agreements
Our current collaborations and license agreements are summarized as follows:
Aurigene
In January 2015, we entered into an exclusive collaboration agreement with Aurigene for the discovery, development and commercialization of small molecule compounds in the areas of immuno-oncology and selected precision oncology targets. Under the collaboration agreement, Aurigene granted us an option to obtain exclusive, royalty-bearing licenses to relevant Aurigene technology to develop, manufacture and commercialize products containing certain of such compounds anywhere in the world, except for India and Russia, which are territories retained by Aurigene.
In connection with the collaboration agreement, we issued to Aurigene 3,424,026 shares of our common stock, valued at $24.3 million at the time of issuance, in partial consideration for the rights granted to us under the collaboration agreement, which we recognized as expense during the year ended December 31, 2015. The shares were issued pursuant to a stock purchase agreement with Aurigene dated January 18, 2015.
In September 2016, we and Aurigene entered into an amendment to the collaboration agreement. Under the terms of the amendment, in exchange for the issuance by us to Aurigene of 2,041,666 shares of our common stock, Aurigene waived payment of up to a total of $24.5 million in potential milestones and other payments associated with the first four programs in the collaboration that may have become due from us under the collaboration agreement. To the extent any of these waived milestones or other payments are not payable by us, for example in the event one or more of the milestone events do not occur,

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we will have the right to deduct the unused waived amount from any one or more of the milestone payment obligations tied to achievement of commercial milestone events. The amendment also provides that, in the event supplemental program activities are performed by Aurigene, we will provide up to $2.0 million of additional funding for each of the third and fourth licensed program. The shares were issued pursuant to a stock purchase agreement with Aurigene dated September 7, 2016.
In February 2020, we and Aurigene further amended our collaboration agreement. Under the terms of the amended agreement, Aurigene will fund and conduct a Phase 2b/3 randomized study evaluating CA-170, in combination with chemoradiation, in approximately 240 patients with non-squamous non-small cell lung cancer, or nsNSCLC. In turn, Aurigene receives rights to develop and commercialize CA-170 in Asia, in addition to its existing rights in India and Russia, based on the terms of the original agreement. We retain U.S., European Union, and rest of world rights to CA-170, and are entitled to receive royalty payments on potential future sales of CA-170 in Asia.
As of December 31, 2019, we have exercised our option to license the following four programs under the collaboration:
1.
IRAK4 Program - a precision oncology program of small molecule inhibitors of IRAK4. The development candidate is CA-4948, an orally available small molecule inhibitor of IRAK4.
2.
PD1/VISTA Program - an immuno-oncology program of small molecule antagonists of PD1 and VISTA immune checkpoint pathways. The development candidate is CA-170, an orally available small molecule antagonist of VISTA and PDL1.
3.
PD1/TIM3 Program - an immuno-oncology program of small molecule antagonists of PD1 and TIM3 immune checkpoint pathways. The development candidate is CA-327, an orally available small molecule antagonist of PDL1 and TIM3.
4.
In March 2018, we exercised our option to license a fourth program, which is an immuno-oncology program.
For each of our licensed programs (as described above) we are obligated to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize at least one product in each of the U.S., specified countries in the European Union and Japan, and Aurigene is obligated to use commercially reasonable efforts to perform its obligations under the development plan for such licensed program in an expeditious manner.
Subject to specified exceptions, we and Aurigene agreed to collaborate exclusively with each other on the discovery, research, development and commercialization of programs and compounds within immuno-oncology for an initial period of approximately two years from the effective date of the collaboration agreement. At our option, and subject to specified conditions, we may extend such exclusivity for up to three additional one-year periods by paying to Aurigene additional exclusivity option fees on an annual basis. We exercised the first one-year exclusivity option in the first quarter of 2017. The fee for this exclusivity option exercise was $7.5 million, which we paid in two equal installments in the first and third quarters of 2017. We elected not to further exercise our exclusivity option and thus did not make the $10.0 million payment required for this additional exclusivity in 2018. As a result of our election to not further exercise our exclusivity option, we are no longer operating under the broad immuno-oncology exclusivity with Aurigene.
Since January 2015, we have paid $14.5 million in research payments, and have waived $19.5 million in milestones under the terms of the 2016 amendment.
For each of the IRAK4, PD1/VISTA, PD1/TIM3 programs, and the fourth immuno-oncology program, we have remaining unpaid or unwaived payment obligations of $42.5 million per program, related to regulatory approval and commercial sales milestones, plus specified additional payments for approvals for additional indications, if any.
We have agreed to pay Aurigene tiered royalties on our and our affiliates’ annual net sales of products at percentage rates ranging from the high single digits up to 10%, subject to specified reductions.
We have agreed to make certain payments to Aurigene upon our entry into sublicense agreements on any program(s), including:
with respect to amounts that we and our affiliates receive from sublicensees under a licensed program in the U.S. or the European Union, a declining percentage of non-royalty sublicense revenues that is dependent on the stage of the most advanced product for such licensed program at the time the sublicense is granted, including, for example 25% of such amounts following our initiation of a Phase 2 clinical study and 15% of such amounts after initiation of the first pivotal study. This sharing will also extend to royalties that we receive from sublicensees, subject to minimum royalty percentage rates that we are obligated to pay to Aurigene, which generally range from mid-to-high single-digit royalty percentage rates up to 10%;

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with respect to sublicensing revenues we and our affiliates receive from sublicensees under a licensed program in Asia, 50% of such sublicensing revenues, including both non-royalty sublicensee revenues and royalties that we receive from sublicensees; and
with respect to non-royalty sublicensing revenues we and our affiliates receive from sublicensees under a licensed program outside of the U.S., the European Union and Asia, a percentage of such non-royalty sublicense revenues ranging from 30% to 50%. We are also obligated to share 50% of royalties that we receive from sublicensees that we receive in these territories.
Our royalty payment obligations (including those on sales by sublicensees) under the collaboration agreement with respect to a product in a country will expire on a product-by-product and country-by-country basis on the later of: (i) expiration of the last-to-expire valid claim of the Aurigene patents covering the manufacture, use or sale of such product in such country; and (ii)10 years from the first commercial sale of such product in such country.
For additional information regarding the terms and termination provisions of this agreement, see “Business—Collaborations and License Agreements—Aurigene Agreement.”
ImmuNext License Agreement
In January 2020, we entered into an option and license agreement with ImmuNext, or the ImmuNext Agreement. Under the terms of the ImmuNext Agreement, we agreed to engage in a collaborative effort with ImmuNext, and to conduct a Phase 1a/1b clinical trial of an ImmuNext compound that antagonizes VISTA. We plan to conduct this Phase 1a/1b clinical trial with respect to CI-8993. In exchange, ImmuNext granted us an exclusive option, exercisable until the earlier of (a) four years after January 6, 2020 and (b) 90 days after database lock for the first Phase 1a/1b trial in which the endpoints are satisfied, or the Option Period, to obtain an exclusive, worldwide license to develop and commercialize certain VISTA antagonizing compounds and products containing these compounds in the field of oncology.
A joint steering committee composed of representatives from each of the parties will manage the non-clinical and clinical
development of the VISTA compounds and products during the Option Period, including, but not limited to, the approval of
the plan for the Phase 1a/1b trial.
During the Option Period, we will conduct the Phase 1a/1b trial and ImmuNext will conduct certain agreed upon non-clinical research activities to support the Phase 1a/1b trial. During the Option Period, we will assign to ImmuNext all right, title and interest in and to, inventions made by us alone or jointly with ImmuNext in conducting clinical and non-clinical activities under the ImmuNext Agreement during the Option Period and any patent rights covering those inventions. Effective as of the option exercise date (if any), ImmuNext will assign to us (i) all such inventions that were made solely by us and any patent rights covering those inventions that were assigned by us to ImmuNext during the Option Period and (ii) a joint ownership interest in all such inventions that were made jointly by us and ImmuNext and patent rights covering those inventions that we assigned to ImmuNext during the option period, except for any of those inventions that relates to compounds as to which ImmuNext has retained exclusive rights.
In January 2020, we paid $1.3 million as an upfront fee to ImmuNext. In addition, if we exercise the option, we will pay ImmuNext an option exercise fee of $20.0 million. ImmuNext will be eligible to receive up to $4.6 million in potential development milestones, up to $84.3 million in potential regulatory approval milestones, and up to $125.0 million in potential sales milestone payments from us. ImmuNext is also eligible to receive tiered royalties on annual net sales on a product-by-product and country-by-country basis, at percentage rates ranging from high single digits to low double digits, subject to specified adjustments.
Our royalty payment obligations under the Agreement with respect to a product in a country will expire on the later of (i) expiration of the last-to-expire valid claim of the ImmuNext patents or jointly owned patents covering the manufacture, use or sale of such product in such country, (ii) the expiration of all regulatory exclusivity for such product in such country, and (iii) 10 years from the first commercial sale of such product in such country.
In partial consideration for drug substance, technical advice, and maintenance of ImmuNext’s existing IND and access to ImmuNext’s technology during the Option Period, we will make semi-annual maintenance fee payments of $0.4 million to ImmuNext. In addition, we will reimburse ImmuNext for certain documented external costs and expenses incurred by ImmuNext in carrying out non-clinical research activities approved by the joint steering committee, up to $0.3 million per calendar year, unless otherwise agreed to by both parties in writing.
We have agreed to pay ImmuNext a low double-digit percentage of sublicense revenue received by us or our Affiliates.
The term of the Agreement began on January 6, 2020, and, unless earlier terminated, will expire upon either: (a) expiration of the Option Period if we have not exercised the Option; or (b) expiration of all royalty payment obligations for any

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and all products. Upon expiration (but not on earlier termination) of the ImmuNext Agreement after exercise of the option, the license granted by ImmuNext to us shall automatically become fully paid-up, royalty-free, irrevocable and perpetual.
The ImmuNext Agreement may be terminated by either us or ImmuNext for an uncured material breach by the other party or if the other party files for bankruptcy or insolvency. ImmuNext may terminate the ImmuNext Agreement if we or any of our affiliates or sublicensees challenges any ImmuNext patents licensed to us or if we cease all research, development, manufacturing and commercialization activities for the products for a specified continuous period of time. We may terminate the ImmuNext Agreement for convenience, in its entirety or on a product-by-product basis.
In the event we terminate the ImmuNext Agreement for convenience or ImmuNext terminates the ImmuNext Agreement for uncured material breach, patent challenge, cessation of product-related activities or filing of bankruptcy or insolvency by us, then all rights and licenses granted to us will terminate, and, subject to specified royalty payment obligations of ImmuNext, we will grant ImmuNext (i) an exclusive, perpetual, nontransferable, worldwide license under patents controlled by us and (ii) a non-exclusive license under any know-how controlled by us, in each case, that are necessary or reasonably useful for the exploitation of the ImmuNext compounds antagonizing VISTA or products we were developing or commercializing under the ImmuNext Agreement, and solely to exploit such compounds and products.
In the event we terminate the ImmuNext Agreement for uncured material breach or filing of bankruptcy or insolvency by ImmuNext after exercising the option, then the licenses granted by ImmuNext shall survive in perpetuity, subject to our obligation to pay milestone payments and royalties to ImmuNext in accordance with the ImmuNext Agreement.
Genentech Hedgehog Signaling Pathway Collaboration Agreement
In 2003, we entered into a collaborative research, development and license agreement with Genentech, which we refer to as the collaboration agreement.
Under the terms of our collaboration agreement with Genentech, we granted Genentech an exclusive, global, royalty-bearing license, with the right to sublicense, to make, use, sell and import molecules capable of inhibiting the Hedgehog signaling pathway (including small molecules, proteins and antibodies) for human therapeutic applications, including cancer therapy. Genentech subsequently granted a sublicense to Roche for non-U.S. rights to Erivedge, other than in Japan where such rights are held by Chugai. Genentech and Roche are responsible for worldwide clinical development, regulatory affairs, manufacturing and supply, formulation, and sales and marketing.
We are eligible to receive up to an aggregate of $115.0 million in contingent cash milestone payments, exclusive of royalty payments, in connection with the development of Erivedge or another small molecule Hedgehog pathway inhibitor, assuming the successful achievement by Genentech and Roche of specified clinical development and regulatory objectives. Of this amount, we have received $59.0 million to date.
In addition to the contingent cash milestone payments, our wholly owned subsidiary, Curis Royalty, is entitled to a royalty on net sales of Erivedge that ranges from 5% to 7.5% based upon global Erivedge sales by Roche and Genentech. The royalty rate applicable to Erivedge may be decreased by 2% on a country-by-country basis in certain specified circumstances, including when a competing product that binds to the same molecular target as Erivedge is approved by the applicable country’s regulatory authority in another country and is being sold in such country by a third-party for use in the same indication as Erivedge, or, when there is no issued intellectual property covering Erivedge in a territory in which sales are recorded. During the third quarter of 2015, the FDA and the CHMP, approved another Hedgehog signaling pathway inhibitor, Odomzo® (sonidegib), which is marketed by Sun Pharmaceutical Industries Ltd., for use in locally advanced BCC. Accordingly, Genentech reduced royalties to Curis Royalty on its net sales in the United States of Erivedge by 2% since the fourth quarter of 2015 and we anticipate that Genentech will reduce by 2% royalties on net sales of Erivedge outside of the United States on a country-by-country basis to the extent that sonidegib is approved by the applicable country's regulatory authority and is being sold in such country. However, pursuant to the Oberland Purchase Agreement, we have retained our rights with respect to the 2% of royalties that are subject to such reduction in countries where such reduction may or has occurred, subject to the terms and conditions of the Oberland Purchase Agreement, which we refer to as the “Retained Royalty Amounts”.
We recognized $10.4 million of royalty revenue from Genentech’s net sales of Erivedge during the year ended December 31, 2019, and have recognized an aggregate of $58.7 million in royalty revenues since Erivedge was approved.
As a result of our licensing agreements with various universities, we are obligated to make payments to university licensors on royalties that Curis Royalty earns in all territories (other than Australia) in an amount that is equal to 5% of the royalty payments received from Genentech. This obligation endures on a country-by-country basis for a period of 10 years from the first commercial sale of Erivedge, which occurred in February 2012 in the U.S. For royalties that we earn from Roche’s sales of Erivedge in Australia, we were obligated to make payments to university licensors of 2% of Roche’s direct net

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sales in Australia until the expiration of the Australian patent in April 2019, after which time the amount has decreased to 5% of the royalty payments that Curis Royalty receives from Genentech for the remainder of the period ending 10 years from the first commercial sale of Erivedge. Cost of royalty revenues were $0.5 million during the year ended December 31, 2019. As of December 31, 2019, we have paid an aggregate of $3.1 million to university licensors since Erivedge was approved.
In November 2012, we formed a wholly owned subsidiary, Curis Royalty, which received a $30.0 million loan at an annual interest rate of 12.25% pursuant to a credit agreement between Curis Royalty and BioPharma Secured Debt Fund II Sub, S. à r. l., a Luxembourg limited liability company managed by Pharmakon Advisors, or BioPharma II. In connection with the loan, we transferred to Curis Royalty our rights to receive royalty and royalty related payments on the commercial sales of Erivedge that we receive from Genentech, and any payment made by Genentech to us pursuant to Genentech’s indemnification obligations under the collaboration agreement. The loan and accrued interest was being repaid by Curis Royalty using such royalty and royalty related payments. The loan constituted an obligation of Curis Royalty and was non-recourse to Curis.
Under the terms of the credit agreement, quarterly royalty and royalty-related payments from Genentech were first applied to pay interest and second, principal on the loan from BioPharma-II. As a result of the loan received from BioPharma-II, we continued to record royalty revenue from Genentech but expect such revenues would have been used to pay down such loan until it is repaid in full. Curis Royalty retained the right to royalty payments related to sales of Erivedge following repayment of the loan.
In March 2017, we and Curis Royalty entered into a credit agreement with HealthCare Royalty Partners III, L.P., or HealthCare Royalty, for the purpose of refinancing the loan from BioPharma-II. HealthCare Royalty made a $45.0 million loan at an interest rate of 9.95% to Curis Royalty, which was used, in part, to pay off $18.4 million in remaining loan obligations to BioPharma-II under the prior loan with the residual proceeds of $26.6 million distributed to us as sole equity member of Curis Royalty. On March 22, 2019, we terminated, and repaid in full all amounts outstanding under, the loan with HealthCare Royalty.
The Leukemia & Lymphoma Society
In November 2011, we entered into an agreement with Leukemia and Lymphoma Society, or LLS, pursuant to which LLS agreed to provide us with up to $4.0 million in payments to support our ongoing development of fimepinostat, subject to the achievement of specified milestones.
In August 2015, we entered into an amendment of the November 2011 agreement with LLS. Under the amendment, LLS agreed to provide advisory services regarding both the fimepinostat and IRAK4 programs, and LLS is no longer obligated to make further milestone payments related to ongoing clinical development of fimepinostat.
We agreed to make up to $1.7 million in future payments to LLS, which represents the aggregate payments previously received from LLS under the November 2011 agreement, pursuant to achievement of certain objectives, including a licensing, sale, or other similar transaction, as well as regulatory and commercial objectives, in each case related to the fimepinostat program in hematological malignancies. However, if fimepinostat does not continue to meet its clinical safety endpoints in ongoing and future clinical trials in the defined field, or fails to obtain necessary regulatory approvals, all funding provided to us by LLS will be considered a non-refundable grant.
Liquidity
Since our inception, we have funded our operations primarily through private and public placements of our equity securities, license fees, contingent cash payments, research and development funding from our corporate collaborators, debt financings and the monetization of certain royalty rights. We have never been profitable on an annual basis, and have an accumulated deficit of $1.0 billion as of December 31, 2019. For the year ended December 31, 2019 we incurred a loss of $32.1 million and used $26.2 million of cash in operations. We expect that our cash, cash equivalents and short-term investments as of December 31, 2019 will enable us to fund our operating expenses and capital requirements, based upon our current operating plan, into the second half of 2020. We have based this assessment on assumptions that may prove to be wrong, and we could exhaust our available capital resources sooner than we expect. Based on our available cash resources, we do not have sufficient cash on hand to support current operations within the next 12 months from the date of filing this Annual Report on Form 10-K.
We will need to generate significant revenues to achieve profitability, and do not expect to achieve profitability in the foreseeable future, if at all. See “Funding Requirements” and Note 1 “Nature of Business” for a further discussion of our liquidity and the conditions and events that raise substantial doubt regarding our ability to continue as a going concern.

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Key Drivers
We believe that near term key drivers to our success will include:
our ability to successfully plan, finance and complete current and planned clinical trials for CA-4948, CI-8993, and fimepinostat as well as for such clinical trials to generate favorable data;
Aurigene’s ability to advance additional preclinical immuno-oncology, and precision oncology drug candidates, and our ability to license these programs from Aurigene and further progress them clinically; and
our ability to raise the substantial additional financing required to fund our operations through our common stock purchase agreement with Aspire Capital and our at-the-market sales agreement with JonesTrading Institutional Services LLC, or JonesTrading or other potential financing.
In the longer term, a key driver to our success will be our ability, and the ability of any current or future collaborator or licensee, to successfully develop and commercialize additional drug candidates.
Financial Operations Overview
General.    Our future operating results will largely depend on the progress of drug candidates currently in our research and development pipeline. The results of our operations will vary significantly from year to year and quarter to quarter and depend on, among other factors, the cost and outcome of any preclinical development or clinical trials then being conducted. For a discussion of our liquidity and funding requirements, see “Liquidity” and “Liquidity and Capital Resources - Funding Requirements.”
Debt.    In December 2012, Curis Royalty entered into a $30 million credit agreement with BioPharma-II, at an annual interest rate of 12.25% collateralized with certain future Erivedge royalty and royalty-related payment streams.

In March 2017, we and Curis Royalty, entered into a new credit agreement, referred to as the credit agreement, with HealthCare Royalty, a Delaware limited partnership managed by Healthcare Royalty Management, LLC, for the purpose of refinancing the prior credit agreement from BioPharma-II. On the effective date of the credit agreement with Healthcare Royalty, the prior credit agreement was terminated in its entirety.

Pursuant to the credit agreement, HealthCare Royalty made a $45.0 million loan at an annual interest rate of 9.95% to Curis Royalty, which was used to pay off the approximate $18.4 million in remaining loan obligations to BioPharma-II under the prior loan. The remaining proceeds of the loan of $26.6 million were distributed to us as sole equity holder of Curis Royalty. As of December 31, 2018, the outstanding principal and interest due under the loan was $35.8 million. On March 22, 2019, we terminated, and repaid in full all amounts outstanding under the loan with HealthCare Royalty. As of December 31, 2019, there is no debt outstanding.
Liability Related to the Sale of Future Royalties.   In connection with the termination and repayment in full of the loan with HealthCare Royalty, the Company and Curis Royalty entered into the Oberland Purchase Agreement. Upon closing of the Oberland Purchase Agreement, Curis Royalty received an upfront purchase price of $65.0 million from the Purchasers, approximately $33.8 million of which was used to pay off the remaining loan principal to HealthCare Royalty, and $3.7 million of which was used to pay transaction costs, including $3.4 million to HealthCare Royalty in accrued and unpaid interest and prepayment fees under the loan, resulting in net proceeds of $27.5 million. Curis Royalty will also be entitled to receive milestone payments of (i) $17.2 million if the Purchasers and Curis Royalty receive aggregate royalty payments pursuant to the Oberland Purchase Agreement in excess of $18.0 million during the calendar year 2021, subject to certain exceptions, and (ii) $53.5 million if the Purchasers receive payments pursuant to the Oberland Purchase Agreement in excess of $117.0 million on or prior to December 31, 2026, which milestone payments may each be paid, at the option of the Purchasers, in a lump sum in cash or out of the Purchaser’s portion of future payments under the Oberland Purchase Agreement.
Revenue.    We do not expect to generate any revenues from our direct sale of products for several years, if ever. Substantially all of our revenues to date have been derived from license fees, research and development payments, and other amounts that we have received from our strategic collaborators and licensees, including royalty payments. Since the first quarter of 2012, we have recognized royalty revenues related to Genentech’s sales of Erivedge and we expect to continue to recognize royalty revenue in future quarters from Genentech’s sales of Erivedge in the U.S. and Roche’s sales of Erivedge outside of the U.S. However, a portion of our royalty and royalty-related revenues under our collaboration with Genentech will be paid to the Purchasers, pursuant to the Oberland Purchase Agreement. The Oberland Purchase Agreement will terminate upon the earlier to occur of (i) the date on which Curis Royalty’s rights to receive the Purchased Receivables owed by Genentech under the Genentech collaboration agreement have terminated in their entirety and (ii) the date on which payment in

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full of the put/call price is received by the Purchasers pursuant to the Purchasers’ exercise of their put option or Curis Royalty’s exercise of its call right. For additional information regarding the terms and termination provisions of this agreement, see Note 8 “Liability Related to the Sale of Future Royalties.”
We could receive additional milestone payments from Genentech, provided that contractually specified development and regulatory objectives are met. Also, we could receive milestone payments from the Purchasers, provided that contractually specified royalty payment amounts are met within applicable time periods. Our only source of revenues and/or cash flows from operations for the foreseeable future will be royalty payments that are contingent upon the continued commercialization of Erivedge under this collaboration, and contingent cash payments for the achievement of clinical, development and regulatory objectives, if any, are met, under our existing collaboration with Genentech. Our receipt of additional payments under our existing collaboration with Genentech cannot be assured, nor can we predict the timing of any such payments, as the case may be.
Cost of Royalty Revenues.    Cost of royalty revenues consists of all expenses incurred that are associated with royalty revenues that we record as revenues in our consolidated statements of operations and comprehensive loss. These costs currently consist of payments we are obligated to make to university licensors on royalties that Curis Royalty receives from Genentech on net sales of Erivedge. In all territories other than Australia, our obligation is equal to 5% of the royalty payments that we receive from Genentech for a period of 10 years from the first commercial sale of Erivedge, which occurred in February 2012 in the U.S. In addition, for royalties that Curis Royalty receives from Roche’s sales of Erivedge in Australia, we were obligated to make payments to university licensors of 2% of Roche’s direct net sales in Australia until expiration of the patent which occurred in April 2019. Subsequent to April 2019, the amount we are obligated to pay in Australia decreased to 5% of the royalty payments that Curis Royalty receives from Genentech.
Research and Development.    Research and development expense consists of costs incurred to develop our drug candidates. These expenses consist primarily of:
salaries and related expenses for personnel, including stock-based compensation expense;
costs of conducting clinical trials, including amounts paid to clinical centers, clinical research organizations and consultants, among others;
other outside service costs including costs of contract manufacturing;
sublicense payments;
the costs of supplies and reagents;
occupancy and depreciation charges;
certain payments that we make to Aurigene under our collaboration agreement, including, for example, option exercise fees and milestone payments; and
payments that we are obligated to make to certain third-party university licensors upon our receipt of payments from Genentech related to the achievement of clinical development and regulatory objectives under our collaboration agreement.
We expense research and development costs as incurred. We are currently incurring research and development costs under our Hedgehog signaling pathway inhibitor collaboration with Genentech related to the maintenance of third-party licenses to certain background technologies.
Research and development activities are central to our business model. Product candidates in later stages of clinical development generally have higher development costs than those in earlier stages, primarily due to the increased size and duration of later-stage clinical trials. As a result, we expect that our research and development expenses will increase substantially over the next several years as we conduct our clinical trials of CA-4948, CI-8993, and fimepinostat; prepare regulatory filings for our product candidates; continue to develop additional product candidates; and potentially advance our product candidates into later stages of clinical development.
The successful development and commercialization of our product candidates is highly uncertain. At this time, we cannot reasonably estimate or know the nature, timing and costs of the efforts that will be necessary to complete the preclinical and clinical development of any of our product candidates. This uncertainty is due to the numerous risks and uncertainties associated with product development and commercialization, including the uncertainty of:


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the scope, quality of data, rate of progress and cost of clinical trials and other research and development activities undertaken by us or our collaborators;
the results of future preclinical studies and clinical trials;
the cost and timing of regulatory approvals and maintaining compliance with regulatory requirements;
the cost and timing of establishing sales, marketing and distribution capabilities;
the cost of establishing clinical and commercial supplies of our drug candidates and any products that we may develop;
the effect of competing technological and market developments; and
the cost and effectiveness of filing, prosecuting, defending and enforcing any patent claims and other intellectual property rights.
Any changes in the outcome of any of these variables with respect to the development of our product candidates could mean a significant change in the costs and timing associated with the development of these product candidates. For example, if the FDA or another regulatory authority were to delay our clinical trials or require us to conduct clinical trials or other testing beyond those that we currently expect, or if we experience significant delays in enrollment in any of our clinical trials, we could be required to expend significant additional financial resources and time to complete clinical development of that product candidate. We may never obtain regulatory approval for any of our product candidates. Drug commercialization will take several years and millions of dollars in development costs.
A further discussion of some of the risks and uncertainties associated with completing our research and development programs on schedule, or at all, and some consequences of failing to do so, are set forth under “Part I, Item 1A—Risk Factors.”
General and Administrative.    General and administrative expense consists primarily of salaries, stock-based compensation expense and other related costs for personnel in executive, finance, accounting, business development, legal, information technology, corporate communications and human resource functions. Other costs include facility costs not otherwise included in research and development expense, insurance, and professional fees for legal, patent and accounting services. Patent costs include certain patents covered under collaborations, a portion of which is reimbursed by collaborators and a portion of which is borne by us.
Critical Accounting Policies and Estimates
The preparation of our consolidated financial statements in conformity with accounting principles generally accepted in the United States requires that we make estimates and assumptions that affect the reported amounts and disclosure of certain assets and liabilities at our balance sheet date. Such estimates and judgments include the carrying value of property and equipment and intangible assets, revenue recognition, the value of certain liabilities, debt classification and stock-based compensation. We base our estimates on historical experience and on various other factors that we believe to be appropriate under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.
While our significant accounting policies are more fully described in Note 2 of our consolidated financial statements included in this report, we believe that the following accounting policies are critical to understanding the judgments and estimates we use in preparing our financial statements:
Revenue Recognition
Our business strategy includes entering into collaborative license and development agreements with biotechnology and pharmaceutical companies for the development and commercialization of our drug candidates. The terms of the agreements typically include non-refundable license fees, funding of research and development, payments based upon achievement of clinical development and regulatory objectives, and royalties on product sales. As of January 1, 2018 we adopted the provisions of the Financial Accounting Standards Board, or FASB, Codification Topic 606, Revenue from Contracts with Customers, or Topic 606. This guidance supersedes the provisions of FASB Codification Topic 605, Revenue Recognition.
We adopted Topic 606 using the modified retrospective method. Under the modified retrospective method, prior year financial statements would not need to be recast. Instead, a company applies the cumulative effect of initially applying the new standard as an adjustment to the opening retained earnings balance. We performed a detailed accounting assessment to quantify the effect of the transition from the former guidance to the new guidance and concluded that there was no material effect on our consolidated financial statements under the modified retrospective method.

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There are multiple options for the transition method under the new guidance, we elected to apply the guidance to only contracts that were not completed contracts as of January 1, 2018. Our only contract not completed as of January 1, 2018 was our collaboration agreement with Genentech (see Note 10 of the notes to our consolidated financial statements included elsewhere in this annual report on Form 10-K). We assessed the potential effects to the consolidated financial statements and retained earnings and have concluded that, upon adoption of the new standard, there was no material impact.
License Fees and Multiple Element Arrangements. If a license to our intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, we recognize revenues from non-refundable, up-front fees allocated to the license at such time as the license is transferred to the licensee and the licensee is able to use, and benefit from, the license. For licenses that are bundled with other promises, we utilize judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. We evaluate the measure of progress each reporting period and, if necessary, adjust the measure of performance and related revenue recognition.
If we are involved in a steering committee as part of a multiple element arrangement, we assess whether our involvement constitutes a performance obligation or a right to participate. Steering committee services that are not inconsequential or perfunctory and that are determined to be performance obligations are combined with other research services or performance obligations required under an arrangement, if any, in determining the level of effort required in an arrangement and the period over which we expect to complete our aggregate performance obligations.
Appropriate methods of measuring progress include output methods and input methods. In determining the appropriate method for measuring progress, we consider the nature of service that we promise to transfer to the customer. When we decide on a method of measurement, we will apply that single method of measuring progress for each performance obligation satisfied over time and will apply that method consistently to similar performance obligations and in similar circumstances.
If we cannot reasonably measure our progress toward complete satisfaction of a performance obligation because we lack reliable information that would be required to apply an appropriate method of measuring progress, but we can reasonably estimate when the performance obligation ceases or the remaining obligations become inconsequential and perfunctory, then revenue is not recognized until we can reasonably estimate when the performance obligation ceases or becomes inconsequential. Revenue is then recognized over the remaining estimated period of performance.
Significant management judgment is required in determining the level of effort required under an arrangement and the period over which we are expected to complete our performance obligations under an arrangement.
Contingent Research Milestone Payments. Under the new guidance, there exists a constraint on the amount of variable consideration included in the transaction price in that either all, or a portion, of an amount of variable consideration should be included in the transaction price. The variable consideration amount should be included only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The assessment of whether variable consideration should be constrained is largely a qualitative one that has two elements: the likelihood of a change in estimate, and the magnitude thereof. Variable consideration is not constrained if the potential reversal of cumulative revenue recognized is not significant, for example.
If the consideration in a contract includes a variable amount, a company will estimate the amount of consideration in exchange for transfer of promised goods or services. The consideration also can vary if a company’s entitlement to the consideration is contingent on the occurrence or nonoccurrence of a future event. We consider contingent research milestone payments to fall under the scope of variable consideration, which should be estimated for revenue recognition purposes at the inception of the contract and reassessed ongoing at the end of each reporting period.
We assess whether contingent research milestones should be considered variable consideration that should be constrained and thus not part of the transaction price. This includes an assessment of the probability that all or some of the milestone revenues could be reversed when the uncertainty around whether or not the achievement of each milestone is resolved, and the amount of reversal could be significant.
GAAP provides factors to consider when assessing whether variable consideration should be constrained. All of the factors should be considered, and no factor is determinative. We consider all relevant factors.
Reimbursement of Costs. Reimbursement of research and development costs by third-party collaborators is recognized as revenue over time provided we have determined that we transfer control (i.e. perform the services) of a service over time and, therefore, satisfy a performance obligation according to the provisions outlined in the ASC 606-10-25-27, Revenue Recognition.

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Royalty Revenue. Since the first quarter of 2012, we have recognized royalty revenues related to Genentech’s and Roche’s sales of Erivedge. For arrangements that include sales based royalties, including milestone payments based on the level of sales, and the license is deemed to be the predominant item to which the royalties relate, we recognize revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). We expect to continue recognizing royalty revenue from Genentech’s sales of Erivedge in the U.S. and in other markets where Genentech and Roche successfully obtain marketing approval, if any (see Note 3). However, a portion of Erivedge royalties will be paid to the Purchasers under the Oberland Purchase Agreement (see Note 16).
With respect to each of the foregoing areas of revenue recognition, we exercise significant judgment in determining whether an arrangement contains multiple elements, and, if so, how much revenue is allocable to each element. In addition, we exercise our judgment in determining when our significant obligations have been met under such agreements and the specific time periods over which we recognized revenue, such as non-refundable, up-front license fees. To the extent that actual facts and circumstances differ from our initial judgments, our revenue recognition with respect to such transactions would change accordingly and any such change could affect our reported financial results.
Stock-Based Compensation
We account for stock-based compensation transactions using a grant-date fair-value based method under FASB Codification Topic 718, Compensation—Stock Compensation.
We have recorded employee and director stock-based compensation expense of $2.7 million and $3.9 million for the years ended December 31, 2019 and 2018, respectively. We estimate that our stock-based compensation expense will increase in 2020 as we have granted, and expect that we may continue to grant options, in 2020 that could increase the amount of stock-based compensation ultimately recognized. The amount of the incremental employee stock-based compensation expense attributable to 2020 employee stock options to be granted will depend primarily on the number of stock options granted, the fair market value of our common stock at the respective grant dates, and the specific terms of the stock options.
We measure compensation cost for stock-based compensation at fair value, including our estimate of forfeitures, and recognize the expense as compensation expense over the period that the recipient is required to provide service in exchange for the award, which generally is the vesting period. We use the Black-Scholes option pricing model to measure the fair value of stock options. This model requires significant estimates related to the award’s expected life and future stock price volatility of the underlying equity security. In determining the amount of expense to be recorded, we estimate forfeiture rates for awards, based on the probability that employees will complete the required service period. We estimate the forfeiture rate based on historical experience. If actual forfeitures differ significantly from our estimates, additional adjustments to compensation expense may be required in future periods. Ultimately, the actual expense recognized over the vesting period will only be for those shares that vest.
Liability Related to the Sale of Future Royalties
As a result of the obligation to pay future royalties to Oberland, we recorded the proceeds from this transaction as a liability on our Consolidated Balance Sheet that will be accounted for using the interest method over the estimated life of the Oberland Purchase Agreement. As a result, we impute interest on the transaction and record imputed interest expense at the estimated interest rate. Our estimate of the interest rate under the agreement is based on the amount of royalty payments expected to be received by Oberland over the life of the arrangement. We periodically assess the expected royalty payments to Curis Royalty from Genentech using a combination of historical results and forecasts from market data sources. To the extent such payments are greater or less than the initial estimates or the timing of such payments is materially different than the original estimates, we will adjust the amortization of the liability.
Our discussion of our critical accounting policies is not intended to be a comprehensive discussion of all of our accounting policies. In many cases, the accounting treatment of a particular transaction is specifically dictated by generally accepted accounting principles, with no need for management’s judgment in their application. There are also areas in which management’s judgment in selecting any available alternative would not produce a materially different result.

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Results of Operations (all amounts rounded to the nearest thousand)
Years Ended December 31, 2019 and 2018

The following table summarizes our results of operations for the years ended December 31, 2019, and 2018:
 
For the Year Ended
December 31,
 
Percentage Increase/ (Decrease)
 
2019
 
2018
 
2019 v. 2018
Revenues
$
10,004

 
$
10,428

 
(4
)%
Cost of royalty revenues
503

 
563

 
(11
)%
Research and development
22,302

 
24,413

 
(9
)%
General and administrative
11,555

 
14,785

 
(22
)%
Total other expense, net
7,785

 
3,242

 
>100%

Net loss
$
(32,141
)
 
$
(32,575
)
 
1
 %
Revenues
Total revenues are summarized as follows:
 
For the Year Ended
December 31,
 
Percentage Increase/ (Decrease)
 
2019
 
2018
 
2019 v. 2018
Royalties
$
10,418

 
$
10,421

 
 %
Contra revenue, net
(414
)
 
7

 
<(100%)

Total revenues
$
10,004

 
$
10,428

 
(4
)%
Total revenues decreased by $0.4 million, or 4%, to $10.0 million for the year ended December 31, 2019 as compared to $10.4 million for the year ended December 31, 2018, primarily related to an increase in the reserve for contractual royalty reductions arising from Genentech and Roche’s net sales of Erivedge.
Cost of Royalty Revenues. Cost of royalty revenues decreased by approximately $0.1 million, to $0.5 million for the year ended December 31, 2019 as compared to $0.6 million for the year ended December 31, 2018The decrease reflects our obligation to make payments to two university licensors on royalties that Curis Royalty earns on Genentech’s net sales of Erivedge, which decreased in 2019 as compared to 2018.
Research and Development Expenses. Research and development expenses are summarized as follows:
 
For the Year Ended
December 31,
 
Percentage Increase/ (Decrease)
 
2019
 
2018
 
2019 v. 2018
Direct research and development expenses
$
14,719

 
$
10,941

 
35
 %
Employee-related expenses
5,921

 
11,378

 
(48
)%
Facilities, depreciation and other expenses
1,662

 
2,094

 
(21
)%
Total research and development expenses
$
22,302

 
$
24,413

 
(9
)%
Our total research and development expenses decreased by $2.1 million, or 9%, to $22.3 million for the year ended December 31, 2019, as compared to $24.4 million for the prior year. Direct research and development expenses increased $3.8 million for the year ended December 31, 2019 as compared to the prior year period. These costs included increased clinical site, patient, clinical research organization, manufacturing and consulting costs for our ongoing Phase 1 clinical trials. Employee-related expenses decreased $5.5 million for the year ended December 31, 2019 as compared to the prior year period, which was primarily due to a reduction in headcount which occurred in the fourth quarter of 2018.

We expect that a majority of our research and development expenses for the foreseeable future will be incurred in connection with our efforts to advance our programs, including clinical and preclinical development costs, manufacturing, option exercise fees, and potential payments upon achievement of certain milestones.

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General and Administrative Expenses. General and administrative expenses are summarized as follows:
 
For the Year Ended
December 31,
 
Percentage Increase/ (Decrease)
 
2019
 
2018
 
2019 v. 2018
Personnel
$
3,705

 
$
5,277

 
(30
)%
Occupancy and depreciation
580

 
553

 
5
 %
Legal services
2,020

 
2,906

 
(30
)%
Professional and consulting services
1,842

 
2,142

 
(14
)%
Insurance costs
453

 
409

 
11
 %
Stock-based compensation
2,083

 
2,630

 
(21
)%
Other general and administrative expenses
872

 
868

 
 %
Total general and administrative expenses
$
11,555

 
$
14,785

 
(22
)%
General and administrative expenses decreased by $3.2 million, or 22%, during the year ended December 31, 2019 as compared to the prior year. The decrease in general administrative expense was driven primarily by $1.6 million of lower personnel expense primarily attributable to the departure of personnel following a reduction in headcount announced in the fourth quarter of 2018 and the departure of our former Chief Executive Officer in the third quarter of 2018. Legal services decreased $0.9 million as compared to 2018 primarily due to a reduction in intellectual property following a portfolio review of non-essential patents. Stock-based compensation decreased by $0.5 million primarily due to a lower head count in 2019 as compared to 2018, and professional and consulting services decreased by $0.3 million, offset by other general and administrative expenses for the 2019 period.
Other Expense.
Other expense, net, was $7.8 million for the year ended December 31, 2019, as compared to $3.2 million for the same period in 2018. Interest expense related to debt was $0.8 million in the current year as compared to $3.9 million in 2018. This decrease was a direct result of the March 22, 2019 payment to HealthCare Royalty in full satisfaction of the debt held by Curis Royalty. In March 2019 we recorded a $3.5 million loss on extinguishment of debt in conjunction with the repayment of the loan obligation to BioPharma-II. Additionally, imputed interest of $4.1 million resulting from the previously announced sale of a portion of Erivedge royalties to Oberland Capital Management was also recorded. For the years ended December 31, 2019 and 2018, interest income was $0.6 million and $0.7 million, respectively.
Net Loss Applicable to Common Stockholders
As a result of the foregoing, we incurred a net loss applicable to common stockholders of $32.1 million for the year ended December 31, 2019 and $32.6 million for the year ended December 31, 2018.
Liquidity and Capital Resources
We have financed our operations primarily through private and public placements of our equity securities, license fees, contingent cash payments and research and development funding from our corporate collaborators, debt financings, and the monetization of certain royalty rights. See “Funding Requirements” and Note 1 “Nature of Business” for a further discussion of our liquidity and the conditions and events that raise substantial doubt regarding our ability to continue as a going concern.
All references to shares of common stock outstanding, average number of shares outstanding and per share amounts in these consolidated financial statements and notes to consolidated financial statements have been restated to reflect the reverse stock split on a retroactive basis.
Public Offering of Common Stock
On September 18, 2017, we entered into an underwriting agreement with Baird as underwriter, under which we issued and sold 4,000,000 shares of our common stock. The offering price to the public was $9.25 per share, and the underwriter agreed to purchase the shares from us pursuant to the underwriting agreement at a price of $8.90 per share. We received net proceeds from the sale of the shares, after deducting the underwriting discounts and commissions and estimated offering expenses, of $35.3 million. We incurred offering expenses of $0.3 million related to this transaction.

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Common Stock Purchase Agreement
In February 2020, we entered into a common stock purchase agreement of up to $30.0 million with Aspire Capital Fund, LLC, or Aspire Capital. Under the terms of the agreement, Aspire Capital made an initial investment of $3.0 million through the purchase of 2,693,965 shares of our common stock. In addition, Aspire Capital committed to purchase up to an additional $27.0 million in shares of our common stock, at our request from time to time during a 30-month period at prices based on the market price at the time of each sale, subject to specified terms and limitations. As consideration for Aspire Capital’s obligation under the agreement, we issued 646,551 shares of our common stock to Aspire Capital as a commitment fee. We also entered into a registration rights agreement with Aspire Capital in connection entering into the agreement setting forth our obligation to maintain an effective registration statement covering any shares of common stock sold or to be sold to Aspire Capital, subject to the terms of the registration rights agreement.
Under the terms of the purchase agreement, we have the right to sell up to 150,000 shares of common stock per day to Aspire Capital, which total may be increased by mutual agreement up to an additional 2,000,000 shares per day. The extent to which we rely on Aspire Capital as a source of funding will depend on a number of factors, including the prevailing market price of our common stock and the extent to which we are able to secure working capital from other sources. The aggregate number of shares that we can sell to Aspire Capital under the purchase agreement may in no case exceed 6,645,034 shares of our common stock (which is equal to approximately 19.9% of the common stock outstanding on the date of the purchase agreement), including the shares purchase by Aspire Capital and issued to Aspire Capital as consideration in connection with entering into the purchase agreement, or the Exchange Cap, unless (i) stockholder approval is obtained to issue more, in which case the Exchange Cap will not apply, or (ii) stockholder approval has not been obtained and at any time the Exchange Cap is reached and at all times thereafter the average price paid for all shares issued under the purchase agreement (including the shares issued as consideration to Aspire Capital in connection with entering into the agreement) is equal to or greater than $1.34, or the Minimum Price.
Pursuant to the purchase agreement, we will control the timing and amount of the further sale of our common stock to Aspire Capital. We plan to use the proceeds for general corporate purposes, including research and development, clinical trial activity and working capital. There are no restrictions on future financings and there are no financial covenants, participation rights, rights of first refusal, or penalties in the purchase agreement. We have the right to terminate the purchase agreement at any time without any additional cost or penalty.
Placement of Equity Securities
On July 2, 2015, we entered into a sales agreement with Cowen and Company, LLC, or Cowen, pursuant to which we could sell from time to time up to $30.0 million of our common stock through an “at-the-market” equity offering program, under which Cowen was to act as sales agent. As of December 31, 2019, we sold an aggregate of 420,796 shares of common stock pursuant to this sales agreement, for net proceeds of $6.2 million. We terminated this sales agreement in March 2020.
On March 4, 2020, we entered into a Capital on Demand™ Sales Agreement with JonesTrading Institutional Services LLC , or JonesTrading, to sell from time to time up to $30.0 million of our common stock through an “at the market offering” program under which JonesTrading will act as sales agent. Subject to the terms and conditions of the sales agreement, JonesTrading may sell the common stock by methods deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, including sales made directly on the Nasdaq Global Market, on any other existing trading market for the common stock, or to or through a market maker other than on an exchange. We are not obligated to sell any of the common stock under this sales agreement. Either JonesTrading or we may at any time suspend solicitations and offers under the sales agreement upon notice to the other party. The aggregate compensation payable to JonesTrading shall be equal to 3% of the gross proceeds from sales of the common stock sold by JonesTrading pursuant to the sales agreement. In addition, we agreed to reimburse a portion of the expenses of JonesTrading in connection with the offering up to a maximum of $30,000. The shares to be sold under the sales agreement, if any, may be issued and sold pursuant to the currently effective universal shelf registration statement on Form S-3, filed with the Securities and Exchange Commission, or SEC, on May 3, 2018. We have also filed with the SEC a prospectus supplement, dated March 6, 2020, related to the sales agreement with JonesTrading, and offerings of our common stock will only be made available by means of the prospectus supplement.

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Debt Financing
In March 2017, we and Curis Royalty entered into a credit agreement with HealthCare Royalty for the purpose of refinancing our and Curis Royalty’s existing royalty financing arrangement with BioPharma-II. On the effective date of the credit agreement with Healthcare Royalty, the prior loan was terminated in its entirety. Pursuant to the credit agreement, HealthCare Royalty made a $45.0 million loan at an annual interest rate of 9.95% to Curis Royalty, which was used to pay off the $18.4 million in remaining loan obligations to BioPharma-II under the prior loan. The residual proceeds of the loan were distributed to us as sole equity member of Curis Royalty. The final maturity date of the loan was the earlier of such date that the principal is paid in full, or Curis Royalty's right to receive royalties under the collaboration agreement with Genentech is terminated.
On March 22, 2019, we terminated, and repaid all amounts outstanding under the loan with HealthCare Royalty. For further discussion please refer to Note 11. Debt.
Royalty Interest Purchase Agreement
On March 22, 2019, we and Curis Royalty entered into the royalty interest purchase agreement, or Oberland Purchase Agreement with entities managed by Oberland Capital Management, LLC, or the Purchasers. We sold to the Purchasers a portion of our rights to receive royalties from Genentech on potential net sales of Erivedge.
As upfront consideration for the purchase of the royalty rights, at closing the Purchasers paid to Curis Royalty $65.0 million less certain transaction expenses. Curis Royalty will also be entitled to receive up to approximately $70.7 million in milestone payments based on sales of Erivedge as follows: (i) $17.2 million if the Purchasers and Curis Royalty receive aggregate royalty payments pursuant to the Oberland Purchase Agreement in excess of $18.0 million during the calendar year 2021, subject to certain exceptions and (ii) $53.5 million if the Purchasers receive payments pursuant to the Oberland Purchase Agreement in excess of $117.0 million on or prior to December 31, 2026. For further discussion please refer to Note 8. Liability Related to the Sale of Future Royalties.
Milestone Payments and Monetization of Royalty Rights
We have received aggregate milestone payments totaling $59.0 million under our collaboration with Genentech since 2012. In addition, we began receiving royalty revenues in 2012 in connection with Genentech’s sales of Erivedge in the U.S. and Roche’s sales of Erivedge outside of the U.S. Erivedge royalty revenues received after December 2012 have been used to repay Curis Royalty’s outstanding principal and interest under the loans due to BioPharma-II and HealthCare Royalty. A portion of Erivedge royalty and royalty-related revenue payments will be paid to the Purchasers pursuant to the Oberland Purchase Agreement. We also remain entitled to receive any contingent payments upon achievement of clinical development objectives and royalty payments related to sales of Erivedge pursuant to our collaboration agreement with Genentech and certain contingent payments upon achievement of contractually specified royalty revenue payment amounts related to sales of Erivedge pursuant to the Oberland Purchase Agreement. Upon receipt of any such payments, as well as on royalties received in any territory other than Australia, we are required to make payments to certain university licensors totaling 5% of these amounts. In addition, for royalties that Curis Royalty receives from Roche’s sales of Erivedge in Australia, we were obligated to make payments to university licensors of 2% of Roche’s direct net sales in Australia until the expiration of the patent in April 2019. After April 2019, the amount we were obligated to pay decreased to 5% of the royalty payments that Curis Royalty receives from Genentech.
At December 31, 2019, our principal sources of liquidity consisted of cash, cash equivalents, and investments of $20.5 million, excluding our restricted cash of $1.0 million. Our cash and cash equivalents are highly liquid investments with a maturity of three months or less at date of purchase, and consist of investments in money market funds with commercial banks and financial institutions, as well as short-term commercial paper and government obligations. We maintain cash balances with financial institutions in excess of insured limits.
Cash Flows
Cash flows for operations have primarily been used for salaries and wages for our employees, facility and facility-related costs for our office and laboratory, fees paid in connection with preclinical and clinical studies, laboratory supplies, consulting fees and legal fees. We expect that costs associated with clinical studies will increase in future periods.
Net cash used in operating activities of $26.2 million during the year ended December 31, 2019 was primarily the result of our net loss for the period of $32.1 million, partially offset by non-cash charges consisting of $2.7 million in stock-based compensation, $3.5 million related to the loss on extinguishment of debt, $1.0 million of non-cash lease expense, and $0.3 million of non-cash imputed interest expense related to the sale of future royalties. Accounts payable and accrued and other liabilities increased $0.1 million, accounts receivable increased $0.4 million related to an increase in fourth quarter Erivedge

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royalties, prepaid expenses and other assets increased $0.2 million and our operating lease liability reflected a decrease of $1.0 million following the adoption of ASC 842.
    
Net cash used in operating activities of $30.1 million during the year ended December 31, 2018 was primarily the result of our net loss for the period of $32.6 million, offset by non-cash charges consisting of stock-based compensation, amortization of debt issuance costs, and depreciation, totaling $4.0 million. Accounts payable and accrued and other liabilities increased $1.9 million, accounts receivable decreased $0.2 million related to a decrease in fourth quarter Erivedge royalties, and prepaid expenses and other assets increased $0.2 million.
We expect to continue to use cash in operations as we seek to advance our drug candidates and our programs under our collaboration agreements with Aurigene and ImmuNext. In addition, in the future we may owe royalties and other contingent payments to our licensors based on the achievement of developmental milestones, product sales and other specified objectives.
Investing activities used cash of $4.5 million for the year ended December 31, 2019 and conversely provided cash of $21.4 million for the year ended December 31, 2018 respectively. These changes primarily resulted from net investment activity from purchases and sales or maturities of investments for those respective periods. The decrease in purchases of investments during the year ended December 31, 2019 resulted from operational funding requirements in 2019.
Financing activities provided cash of $23.3 million for the year ended December 31, 2019. This was primarily due to the $65.0 million in gross proceeds we received from Oberland Capital (Note 8) which was partially offset by $37.2 million in payments made to terminate our credit agreement with HealthCare Royalty Partners. In addition, we made payments of $2.2 million related to the royalty interest purchase agreement with Oberland Capital and we made principal payments on Curis Royalty's loan with HealthCare Royalty of $1.8 million, and received $0.1 million in proceeds from the sale of common stock related to our stock-based compensation plans.
Financing activities used cash of $6.0 million for the year ended December 31, 2018. We made principal payments on Curis Royalty's loan to HealthCare Royalty of $6.1 million, and received $0.1 million in proceeds from the sale of common stock related to our stock-based compensation plans.
Funding Requirements
We have incurred significant losses since our inception. As of December 31, 2019, we had an accumulated deficit of approximately $1.0 billion. We will require substantial funds to continue our research and development programs and to fulfill our planned operating goals. In particular, our currently planned operating and capital requirements include the need for working capital to support our research and development activities for CA-4948, CI-8993, and fimepinostat, and other programs under our collaboration with Aurigene, and to fund our general and administrative costs and expenses. Based on our available cash resources, we do not have sufficient cash on hand to support current operations within the next 12 months from the date of filing this annual report on Form 10-K and anticipate that our $20.5 million of existing cash, cash equivalents and investments as of December 31, 2019, should enable us to maintain our planned operations into the second half of 2020. Our ability to raise additional funds will depend on financial, economic and market conditions, many of which are outside of our control, and we may be unable to raise financing when needed, or on terms favorable to us. We may be unable to obtain additional funding on acceptable terms, or at all. Factors that may affect our planned future capital requirements and accelerate our need for additional working capital include the following:
unanticipated costs in our research and development programs;
the timing and cost of obtaining regulatory approvals for our drug candidates and maintaining compliance with regulatory requirements;
the timing and amount of option exercise fees, milestone payments, royalties and other payments, including payments due to licensors, including Aurigene, for patent rights and technology used in our drug development programs;
the costs of commercialization activities for any of our drug candidates that receive marketing approval, to the extent such costs are our responsibility, including the costs and timing of establishing drug sales, marketing, distribution and manufacturing capabilities;
unplanned costs to prepare, file, prosecute, defend and enforce patent claims and other patent-related costs, including litigation costs and technology license fees; and
unexpected losses in our cash investments or an inability to otherwise liquidate our cash investments due to unfavorable conditions in the capital markets.
our ability to continue as a going concern.

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Subject to specified exceptions, we and Aurigene agreed to collaborate exclusively with each other on the discovery, research, development and commercialization of programs and compounds within immuno-oncology for an initial period of approximately two years from the effective date of the collaboration agreement. At our option, and subject to specified conditions, we may extend such exclusivity for up to three additional one-year periods by paying to Aurigene additional exclusivity option fees on an annual basis. We exercised the first one-year exclusivity option in 2017. The fee for this exclusivity option exercise was $7.5 million, which we paid in two equal installments in 2017. We elected not to exercise our exclusivity option in 2018 and did not make the $10.0 million payment required for this additional exclusivity in 2018. As a result of this election to not further exercise our exclusivity option, we no longer operate under the broad immuno-oncology exclusivity with Aurigene. In 2019 we elected not to further exercise our exclusivity option related to the IRAK4 and PD1/VISTA programs and thus did not make the $2.0 million payment required for this continued exclusivity.
We have historically derived a portion of our operating cash flow from our receipt of milestone payments under collaboration agreements with third-parties. However, we cannot predict whether we will receive additional milestone payments under existing or future collaborations or arrangements.
To become and remain profitable, we, either alone or with collaborators, must develop and eventually commercialize one or more drug candidates with significant market potential. This will require us to be successful in a range of challenging activities, including completing preclinical testing and clinical trials of our drug candidates, obtaining marketing approval for these drug candidates, manufacturing, marketing and selling those drugs for which we may obtain marketing approval and satisfying any post marketing requirements. We may never succeed in these activities and, even if we do, may never generate revenues that are significant or large enough to achieve profitability. Other than Erivedge, which is being commercialized by Genentech and Roche, our most advanced drug candidates are currently only in early clinical testing.
For the foreseeable future, we will need to spend significant capital in an effort to develop and commercialize products and we expect to incur substantial operating losses. Our failure to become and remain profitable would, among other things, depress the market price of our common stock and could impair our ability to raise capital, expand our business, diversify our research and development programs or continue our operations.
Contractual Obligations
As of December 31, 2019 we had contractual obligations and other commitments as follows:
 
Payment Due By Period (amounts in 000’s)
 
Total
 
Less than
One Year
 
One to
Three Years
 
Three to
Five Years
 
More than
Five Years
Operating lease obligations (1)
$
8,509

 
$
984

 
$
2,260

 
$
2,397

 
$
2,868

Outside service obligations (2)
779

 
434

 
345

 

 

Licensing obligations (3)
382

 
307

 
75

 

 

Total future obligations
$
9,670

 
$
1,725

 
$
2,680

 
$
2,397

 
$
2,868

 

(1)
We lease 24,529 square feet of property for office, research and laboratory space located at 4 Maguire Road in Lexington, Massachusetts. The term of the lease agreement commenced on December 1, 2010 and, pursuant to a second amendment to the lease agreement on November 1, 2017, expired on February 29, 2020. We are exercising our contractual right to holdover until our new facility is available for occupancy. The total remaining cash obligation for the base rent over the second amended term of the lease agreement was approximately $0.2 million at December 31, 2019. In addition to the base rent, we are responsible for our share of operating expenses and real estate taxes, in accordance with the terms of the lease agreement. Amounts include contractual rent payments as defined in the agreement. On December 5, 2019, we entered into a new lease for our administrative, research and development requirements located at 128 Spring Street in Lexington, Massachusetts consisting of 21,772 square feet. The lease will expire in seven years from the commencement date of the lease which we expect to occur in the second quarter of 2020. In addition to the base rent, we are responsible for our share of operating expenses and real estate taxes, in accordance with the terms of the lease agreement. Amounts include contractual rent payments as defined in the agreement.
(2)
Outside service obligations consist of agreements we have with outside labs, consultants and various other service organizations. Obligations to clinical research organizations, medical centers and hospitals conducting our clinical trials are included in our financial statements for costs incurred as of December 31, 2019. Our obligations under these types of arrangements are limited to actual costs incurred for services performed and do not include any contingent or milestone payments.
(3)
Licensing obligations include only obligations that are known to us as of December 31, 2019. In the future, we may owe royalties and other contingent payments to our licensors based on the achievement of developmental milestones,

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product sales, and other specified objectives. These future obligations, including those related to Aurigene, Genentech, Debiopharm and LLS, are not reflected in the table above as these payments are contingent upon achievement of developmental and commercial milestones, the likelihood and timing of which cannot be reasonably estimated at this time. These contingent obligations are further described under the “Our Collaborations and License Agreements” section.
Off-Balance Sheet Arrangements
We have no off-balance sheet arrangements as of December 31, 2019.
Inflation
We believe that inflation has not had a significant impact on our revenue and results of operations since inception.
New Accounting Pronouncements
See Note 2 to our consolidated financial statements included in Part II, Item 8, “Financial Statements and Supplementary Data,” of this annual report on Form 10-K for a description of recent accounting pronouncements applicable to our business.
ITEM 7A.
QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK

Not required.
ITEM 8.
FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA

Management’s Report on Internal Control Over Financial Reporting
Our management is responsible for establishing and maintaining adequate internal control over financial reporting. Internal control over financial reporting is defined in Rules 13a-15(f) or 15d-15(f) promulgated under the Securities Exchange Act of 1934, as amended, as a process designed by, or under the supervision of, our principal executive and principal financial officers and effected by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles and includes those policies and procedures that:
pertain to the maintenance of records that in reasonable detail accurately and fairly reflect the transactions and dispositions of our assets;
provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that our receipts and expenditures are being made only in accordance with authorizations of management and our board of directors; and
provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use or disposition of our 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 evaluations 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.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this assessment our management used the criteria established in Internal Control—Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission, or COSO.
Based on our assessment, management concluded that, as of December 31, 2019, our internal control over financial reporting is effective based on the criteria established in Internal Control—Integrated Framework (2013) issued by COSO.
The effectiveness of our internal control over financial reporting as of December 31, 2019 has been audited by PricewaterhouseCoopers LLP, an independent registered public accounting firm, who has issued an attestation report on our internal control over financial reporting that appears herein.

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Report of Independent Registered Public Accounting Firm
To the Board of Directors and Stockholders of Curis, Inc.

Opinions on the Financial Statements and Internal Control over Financial Reporting

We have audited the accompanying consolidated balance sheets of Curis, Inc. and its subsidiaries (the “Company”) as of December 31, 2019 and 2018, and the related consolidated statements of operations and comprehensive loss, of stockholders' equity (deficit) and of cash flows for the years then ended, including the related notes (collectively referred to as the “consolidated financial statements”). We also have audited the Company's internal control over financial reporting as of
December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the Committee of Sponsoring Organizations of the Treadway Commission (COSO).

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Company as of December 31, 2019 and 2018, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Also in our opinion, the Company maintained, in all material respects, effective internal control over financial reporting as of December 31, 2019, based on criteria established in Internal Control - Integrated Framework (2013) issued by the COSO.

Substantial Doubt About the Company’s Ability to Continue as a Going Concern 

The accompanying consolidated financial statements have been prepared assuming that the Company will continue as a going concern. As discussed in Note 1 to the consolidated financial statements, the Company incurred recurring losses and negative cash flows from operations since inception, has an accumulated deficit, and will require additional financing to fund future operations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 1. The consolidated financial statements do not include any adjustments that might result from the outcome of this uncertainty.

Basis for Opinions
The Company's management is responsible for these consolidated financial statements, for maintaining effective internal control over financial reporting, and for its assessment of the effectiveness of internal control over financial reporting, included in the accompanying Management’s Report on Internal Control Over Financial Reporting. Our responsibility is to express opinions on the Company’s consolidated financial statements and on the Company's internal control over financial reporting based on our audits. We are a public accounting firm registered with the Public Company Accounting Oversight Board (United States) (PCAOB) and are required to be independent with respect to the Company in accordance with the 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 consolidated financial statements are free of material misstatement, whether due to error or fraud, and whether effective internal control over financial reporting was maintained in all material respects.
Our audits of the consolidated financial statements included performing procedures to assess the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. Our audit of internal control over financial reporting 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 audits also included performing such other procedures as we considered necessary in the circumstances. We believe that our audits provide a reasonable basis for our opinions.

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 generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (i) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (ii) provide reasonable assurance that transactions are recorded as necessary to

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permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (iii) 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/ PricewaterhouseCoopers LLP
Boston, Massachusetts
March 19, 2020

We have served as the Company's auditor since 2002.

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CURIS, INC. AND SUBSIDIARIES
Consolidated Balance Sheets
(In thousands, except share and per share data)
 
December 31,
 
2019
 
2018
ASSETS
 
 
 
Current assets:
 
 
 
Cash and cash equivalents
$
15,430

 
$
23,636

Restricted cash
153

 

Investments
5,113

 
634

Accounts receivable
3,244

 
2,864

Prepaid expenses and other current assets
1,063

 
827

Total current assets
25,003

 
27,961

Property and equipment, net
154

 
267

Restricted cash
816

 
153

Operating lease right-of-use asset
149

 

Goodwill
8,982

 
8,982

Other assets
3

 
2

Total assets
$
35,107

 
$
37,365

LIABILITIES AND STOCKHOLDERS’ DEFICIT
 
 
 
Current liabilities:
 
 
 
Accounts payable
$
4,465

 
$
2,909

Accrued liabilities
1,910

 
3,457

Operating lease liability
166

 

Current portion of long-term debt, net

 
6,884

Total current liabilities
6,541

 
13,250

Long-term debt, net

 
28,600

Liability related to the sale of future royalties, net
62,477

 

Other long-term liabilities

 
11

Total liabilities
69,018

 
41,861

Stockholders’ deficit:
 
 
 
Common stock, $0.01 par value—101,250,000 shares authorized, 33,241,793 shares issued and outstanding at December 31, 2019; 67,500,000 shares authorized, 33,159,253 shares issued and outstanding at December 31, 2018
332

 
332

Additional paid-in capital
982,738

 
980,012

Accumulated deficit
(1,016,981
)
 
(984,840
)
Total stockholders’ deficit
(33,911
)
 
(4,496
)
Total liabilities and stockholders’ deficit
$
35,107

 
$
37,365


The accompanying notes are an integral part of these consolidated financial statements.

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CURIS, INC. AND SUBSIDIARIES
Consolidated Statements of Operations and Comprehensive Loss
(In thousands, except share and per share data)
 
Years Ended December 31,
 
2019
 
2018
Revenues, net:
 
 
 
Royalties
$
10,418

 
$
10,421

Contra revenue, net
(414
)
 
7

Total revenues, net
10,004

 
10,428

Costs and expenses:
 
 
 
Cost of royalties
503

 
563

Research and development
22,302

 
24,413

General and administrative
11,555

 
14,785

Total costs and expenses
34,360

 
39,761

Loss from operations
(24,356
)
 
(29,333
)
Other expense:
 
 
 
Loss on debt extinguishment
(3,495
)
 

Interest income
614

 
684

Imputed interest expense related to the sale of future royalties
(4,055
)
 

Interest expense, debt
(791
)
 
(3,926
)
Other income (expense), net
(58
)
 

Total other expense
(7,785
)
 
(3,242
)
Net loss
$
(32,141
)
 
$
(32,575
)
Net loss per common share (basic and diluted)
$
(0.97
)
 
$
(0.98
)
Weighted average common shares (basic and diluted)
33,180,516

 
33,118,393

Net loss
$
(32,141
)
 
$
(32,575
)
Other comprehensive gain
 
 
 
Unrealized gain on marketable securities

 
2

Comprehensive loss
$
(32,141
)
 
$
(32,573
)

The accompanying notes are an integral part of these consolidated financial statements.

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CURIS, INC. AND SUBSIDIARIES
Consolidated Statements of Stockholders’ Equity (Deficit)
(In thousands, except share data)
 
Common Stock
 
Additional
Paid-in
Capital
 
Treasury
Stock
 
Accumulated
Deficit
 
Accumulated
Other
Comprehensive
Income/(Loss)
 
Total
Stockholders’
Equity
 
Shares
 
Amount
 
Balance, December 31, 2017
33,075,949

 
$
331

 
$
977,453

 
$
(1,524
)
 
$
(952,265
)
 
$
(2
)
 
$
23,993

Issuance of common stock under grant of restricted stock awards
294,250

 
3

 
(3
)
 

 

 

 

Issuances of common stock upon the exercise of stock options and for purchases under the ESPP
101,623

 
1

 
142

 

 

 

 
143

Recognition of stock-based compensation

 

 
3,941

 

 

 

 
3,941

Cancellation of restricted stock awards
(68,000
)
 
(1
)
 
1

 

 

 

 

Retirement of treasury stock
(244,569
)
 
(2
)
 
(1,522
)
 
1,524

 

 

 

Other comprehensive income

 

 

 

 

 
2

 
2

Net loss

 

 

 

 
(32,575
)
 

 
(32,575
)
December 31, 2018
33,159,253

 
332

 
980,012

 

 
(984,840
)
 

 
(4,496
)
Issuances of common stock upon the exercise of stock options and for purchases under the ESPP
91,013

 

 
68

 

 

 

 
68

Recognition of stock-based compensation

 

 
2,658

 

 

 

 
2,658

Cancellation of restricted stock awards
(8,473
)
 

 

 

 

 

 

Net Loss

 

 

 

 
(32,141
)
 

 
(32,141
)
Balance, December 31, 2019
33,241,793

 
$
332

 
$
982,738

 
$

 
$
(1,016,981
)
 
$

 
$
(33,911
)
The accompanying notes are an integral part of these consolidated financial statements.

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CURIS, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows
(In thousands)
 
Years Ended December 31,
 
2019
 
2018
Cash flows from operating activities:
 
 
 
Net loss
$
(32,141
)
 
$
(32,575
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation and amortization
125

 
177

Non-cash lease expense
956

 

Stock-based compensation expense
2,658

 
3,940

Amortization of debt issuance costs
8

 
35

Non-cash imputed interest expense related to the sale of future royalties
287

 

Non-cash interest income on investments
(64
)
 
(147
)
Loss on extinguishment of debt
3,495

 

Loss on disposal of fixed assets
29

 
7

Changes in operating assets and liabilities:
 
 
 
Accounts receivable
(380
)
 
209

Prepaid expenses and other assets
(237
)
 
162

Accounts payable and accrued and other liabilities
60

 
(1,873
)
Operating lease liability
(1,001
)
 

Total adjustments
5,936

 
2,510

Net cash used in operating activities
(26,205
)
 
(30,065
)
Cash flows from investing activities:
 
 
 
Purchases of investments
(11,465
)
 
(26,741
)
Sales and maturities of investments
7,050

 
48,200

Purchases of property and equipment
(41
)
 
(85
)
Net cash (used in) provided by investing activities
(4,456
)
 
21,374

Cash flows from financing activities:
 
 
 
Proceeds from royalty interest purchase agreement with Oberland Capital Management, LLC
65,000

 

Payment of transaction costs on royalty interest purchase agreement
(584
)
 

Proceeds from issuance of common stock under the Company’s stock-based compensation plans
68

 
143

Payment of liability of future royalties, net of imputed interest
(2,226
)
 

Payment on termination of credit agreement with HealthCare Royalty Partners, III, L.P.
(37,162
)
 

Payments made on Curis Royalty’s debt
(1,825
)
 
(6,104
)
Net cash provided by (used in) financing activities
23,271

 
(5,961
)
Net (decrease) increase in cash and cash equivalents and restricted cash
(7,390
)
 
(14,652
)
Cash and cash equivalents and restricted cash, beginning of period
23,789

 
38,441

Cash and cash equivalents and restricted cash, end of period
$
16,399

 
$
23,789

Supplemental cash flow data:
 
 
 
Cash paid for interest
$
4,716

 
$
3,919

The accompanying notes are an integral part of these consolidated financial statements.

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Notes to Consolidated Financial Statements
(1)
Nature of Business
Curis, Inc. is a biotechnology company focused on the development of first-in-class and innovative therapeutics for the treatment of cancer. Throughout this Annual Report on Form 10-K, Curis, Inc. and our wholly owned subsidiaries are collectively referred to as “the Company,” “Curis,” “we,” “us,” or “our.”
The Company conducts its research and development programs both internally and through strategic collaborations. The Company’s clinical stage drug candidates are CA-4948, CI-8993, and fimepinostat:

CA-4948, which is being tested in a dose escalating clinical trial in patients with non-Hodgkin lymphomas, including those with myeloid differentiation primary response 88, or MYD88, alterations. The Company reported preliminary clinical data from the study in the fourth quarter of 2019. The Company is currently planning to initiate a separate Phase 1 trial for acute myeloid leukemia and myelodysplastic syndromes patients in the first half of 2020.

CI-8993, a monoclonal antibody designed to antagonize the V-domain Ig suppressor of T cell activation (“VISTA”) signaling pathway, which the Company plans to begin clinical testing in a Phase 1a/1b trial in 2020.

Fimepinostat, which is currently being explored in clinical studies in patients with MYC-altered diffuse large B-cell lymphoma (DLBCL) and solid tumors and has been granted Orphan Drug Designation and Fast Track Designation for the treatment of DLBCL by the U.S. Food and Drug Administration (“FDA”) in April 2015 and May 2018, respectively. The Company has begun enrollment in a Phase 1 combination study with venetoclax in DLBCL patients, including patients with translocations in both MYC and the BCL2 gene, also referred to as double-hit lymphoma, or high-grade B-cell lymphoma (“HGBL”). The Company reported preliminary clinical data from this combination study in the fourth quarter of 2019. In March 2020, the Company announced that although it observed no significant drug-drug interaction in its Phase 1 study of fimepinostat in combination with venetoclax, the Company did not see an efficacy signal that would warrant continuation of the study. Accordingly, no further patients will be enrolled in this study. The Company is currently evaluating future studies for fimepinostat.

The Company's pipeline includes CA-170, for which the Company announced initial data from a clinical study in patients with mesothelioma, in conjunction with the Society of lmmunotherapy of Cancer conference in November 2019. Based on this data, no further patients will be enrolled in the study. The Company is currently evaluating future studies for CA-170.
The Company’s pipeline also includes CA-327, which is a pre-Investigational New Drug (“IND”) stage oncology drug candidate.
The Company is party to a collaboration with Genentech Inc. (“Genentech”), a member of the Roche Group, under which F. Hoffmann-La Roche Ltd (“Roche”) and Genentech are commercializing Erivedge® (vismodegib), a first-in-class orally administered small molecule Hedgehog signaling pathway inhibitor. Erivedge is approved for the treatment of advanced basal cell carcinoma (“BCC”).
In January 2015, and as amended in September 2016 and February 2020, the Company entered into a collaboration, option and license agreement focused on immuno-oncology and selected precision oncology targets with Aurigene Discovery Technologies Limited (“Aurigene”).
The collaboration with Aurigene is comprised of multiple programs, and the Company has the option to exclusively license each program, including data, intellectual property and compounds associated therewith, once a development candidate is nominated within such program. In October 2015, the Company exercised options to license two programs under this collaboration. The first licensed program is in the immuno-oncology field and the Company has named CA-170, an orally available small molecule antagonist of two immune checkpoints, V-domain Ig suppressor of T-cell activation (“VISTA”) and programmed death ligand-1 (“PDL1”), as the development candidate from this program. The second licensed program is in the precision oncology field and the Company has named CA-4948, an orally available small molecule inhibitor of Interleukin-1 receptor-associated kinase 4 (“IRAK4”) as the development candidate. In October 2016, the Company exercised its option to license a third program in the collaboration, and designated CA-327, a distinct orally available small molecule antagonist of two immune checkpoints PDL1 and T-cell immunoglobulin and mucin domain containing protein-3 (“TIM3”) as the development candidate from this program. In March 2018, the Company exercised its option to license a fourth program, which is an immuno-oncology program.
In January 2020, Curis entered into an option and license agreement with ImmuNext, Inc. Pursuant to the terms of the option and license agreement, the Company has the option, exercisable for a specified period as set forth in the option and

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license agreement, to obtain an exclusive license to develop and commercialize certain VISTA antagonizing compounds, including ImmuNext's lead compound, CI-8993, and products containing these compounds in the field of oncology.
The Company is subject to risks common to companies in the biotechnology industry as well as risks that are specific to the Company’s business, including, but not limited to: the Company’s ability to advance and expand its research and development programs; the Company’s reliance on Aurigene to successfully discover and preclinically develop drug candidates under the parties’ collaboration agreement; the Company’s reliance on Roche and Genentech to successfully commercialize Erivedge in the approved indication of advanced BCC and to progress its clinical development in indications other than BCC; the Company’s ability to obtain adequate financing to fund its operations; the ability of the Company and its wholly owned subsidiary, Curis Royalty, LLC (“Curis Royalty”) to satisfy the terms of the royalty interest purchase agreement (the “Oberland Purchase Agreement”) with TPC Investments I LP and TPC Investments II LP, referred to as the Purchasers, each of which is a Delaware limited partnership managed by Oberland Capital Management, LLC, and Lind SA LLC, referred to as the Agent, a Delaware limited liability company managed by Oberland Capital Management, LLC, as collateral agent for the Purchasers; the Company’s ability to obtain and maintain necessary intellectual property protection; development by the Company’s competitors of new or better technological innovations; the Company's dependence on key personnel; the Company’s ability to comply with regulatory requirements; the Company's ability to obtain and maintain applicable regulatory approvals and commercialize any approved product candidates, and the Company’s ability to execute on its overall business strategies.
The Company’s future operating results will largely depend on the progress of drug candidates currently in its development pipeline and the magnitude of payments that it may receive and make under its current and potential future collaborations. The results of the Company’s operations have varied and will likely continue to vary significantly from year to year and quarter to quarter and depend on a number of factors, including, but not limited to: the timing, outcome and cost of the Company’s preclinical studies and clinical trials for its drug candidates; Aurigene’s ability to successfully discover and develop preclinical programs under the Company’s collaboration with Aurigene, as well as the Company’s decision to exclusively license and further develop programs under this collaboration; Roche and Genentech’s ability to successfully commercialize Erivedge; and positive results in Roche and Genentech’s ongoing clinical trials.
The Company has incurred losses and negative cash flows from operations since its inception. As of December 31, 2019, the Company had an accumulated deficit of approximately $1.0 billion, incurred a loss of $32.1 million and used $26.2 million of cash in operations. The Company expects to continue to generate operating losses in the foreseeable future. The Company anticipates that its $20.5 million of existing cash, cash equivalents and investments at December 31, 2019 should enable it to maintain its planned operations into the second half of 2020. Based on the Company's available cash resources, recurring losses and cash outflows from operations since inception, an expectation of continuing operating losses and cash outflows from operations for the foreseeable future and the need to raise additional capital to finance our future operations, the Company concluded it does not have sufficient cash on hand to support current operations within the next 12 months from the date of filing this Annual Report on Form 10-K. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company expects to finance its operations through its common stock purchase agreement with Aspire Capital Fund LLC, or Aspire Capital, and its at-the-market sales agreement with JonesTrading Institutional Services LLC, or JonesTrading or other potential equity financings, debt financings or other capital sources. However, the Company may not be successful in securing additional financing on acceptable terms, or at all. The Company’s ability to raise additional funds will depend, among other factors, on financial, economic and market conditions, many of which are outside of its control and it may be unable to raise financing when needed, or on terms favorable to the Company. If necessary funds are not available, the Company will have to delay, reduce the scope of, or eliminate some of its development programs, potentially delaying the time to market for or preventing the marketing of any of its product candidates.
Reverse Stock Split
On May 29, 2018, the Company effected a 1-for-5 reverse stock split of its common stock. All references to shares of common stock outstanding, average number of shares outstanding and per share amounts for all periods presented in the accompanying financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split on a retroactive basis (see Note 12).
(2)
Summary of Significant Accounting Policies
(a)
Basis of Presentation and Principals of Consolidation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. (“GAAP”) and include the accounts of our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events,

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considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the Consolidated Financial Statements are issued.
(b)
Use of Estimates and Assumptions
The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and disclosure of revenue, expenses and certain assets and liabilities at the balance sheet date. Such estimates include revenue recognition, including estimates related to the performance obligations under the Company’s collaboration agreements; the estimated repayment term of the Company’s debt and related short and long-term classification; the collectability of receivables; the carrying value of property and equipment and intangible assets; the assumptions used in the Company’s valuation of stock-based compensation and the value of certain investments and liabilities. Actual results may differ from such estimates.
(c)
Cash Equivalents, Restricted Cash, and Investments
The Company had Cash and cash equivalents of $15.4 million and $23.6 million as of December 31, 2019 and 2018 respectively. Cash equivalents consist of short-term, highly liquid investments purchased with original maturities of three months or less. All other liquid investments are classified as marketable securities.
The Company classified $1.0 million and $0.2 million of its cash as restricted cash, as of December 31, 2019 and 2018. This amount represents the security deposit delivered to the respective landlords of the Company's current and future Lexington, Massachusetts headquarters.
The Company's combined cash and restricted cash balances were $16.4 million and $23.8 million as of December 31, 2019 and 2018, as presented on the Company's Consolidated Statements of Cash Flows.
The Company’s short-term investments are marketable debt securities with original maturities of greater than three months from the date of purchase, but less than twelve months from the balance sheet date, and long-term investments are marketable debt securities with original maturities of greater than twelve months from the balance sheet. Marketable securities consist of commercial paper, corporate bonds and notes, and government obligations. All of the Company’s investments have been designated available-for-sale and are stated at fair value. Unrealized gains and temporary losses on investments are included in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity. Realized gains and losses, dividends and interest income are included in other income (expense) in the period during which the securities are sold. Any premium or discount arising at purchase is amortized and/or accreted to interest income.
(d)
Concentrations and Significant Customer Information
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, marketable securities, and accounts receivable. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. The Company’s credit risk related to investments is reduced as a result of the Company’s policy to limit the amount invested in any one issue. As of December 31, 2019, the Company did not have a material concentration in any single investment.
Our operations are located entirely within the U.S. The Company focus is primarily on the development of first-in-class and innovative therapeutics for the treatment of cancer. The Company's one customer, Genentech, accounted for 100% of the total gross revenues for 2019 and 2018.
The Company’s accounts receivable at December 31, 2019 and 2018 represents amounts due from collaborators, primarily for royalties earned on sales of Erivedge by Genentech and Roche.
The Company relies on third-parties to supply certain raw materials necessary to produce its drug candidates, including CA-4948, CI-8993, and fimepinostat, for preclinical studies and clinical trials. There are a small number of suppliers for certain raw materials that the Company uses to manufacture its drug candidates. 
(e)
Long-Lived Assets Other than Goodwill
Long-lived assets other than goodwill consist of property and equipment. The Company applies the guidance in FASB Codification Topic 360-10-05, Impairment or Disposal of Long-Lived Assets. If it were determined that the carrying value of the Company’s other long-lived assets might not be recoverable based upon the existence of one or more indicators of impairment, the Company would measure an impairment based on the difference between the carrying value and fair value of the asset. The Company did not recognize any material impairment charges for the years ended December 31, 2019 or 2018.

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Purchased equipment is recorded at cost. The Company does not currently hold any leased equipment. Depreciation and amortization are provided on the straight-line method over the estimated useful lives of the related assets or the remaining terms of the leases, whichever is shorter, as follows:

Useful Life
Laboratory equipment, computers and software
3-5 years
Leasehold improvements
Lesser of lease or asset life
Office furniture and equipment
5 years
(f)
Leases
In February 2016 the FASB issued ASU No. 2016-02, Leases (Topic 842), a standard issued to increase transparency and comparability among organizations related to their leasing activities. This standard established a right-of-use model that requires the recognition of right-of-use assets and lease liabilities for most leases as well as provides disclosure with respect to certain qualitative and quantitative information related to a company's leasing arrangements to meet the objective of allowing users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.
The FASB subsequently issued the following amendments to ASU 2016-02 that have the same effective date and transition date: ASU No. 2018-10, Codification Improvements to Topic 842, Leases, ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, and ASU No. 2019-01, Leases (Topic 842): Codification Improvements. We adopted these amendments with ASU 2016-02 (collectively, the new leasing standards) effective January 1, 2019.
The Company adopted the leasing standards using the modified retrospective transition approach, as of January 1, 2019, with no restatement of prior periods or cumulative adjustment to retained earnings. Upon adoption, the Company elected the package of transition practical expedients, which allowed Curis to carry forward prior conclusions related to whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases and initial direct costs for existing leases. The Company also made an accounting policy election to not recognize leases with an initial term of 12 months or less within its consolidated balance sheets and to recognize those lease payments on a straight-line basis in its consolidated statements of income over the lease term. Upon adoption of the leasing standard Curis recognized an operating lease asset of approximately $1.0 million and a corresponding operating lease liability of approximately $1.1 million, which are included in the Company's consolidated balance sheets. The adoption of the leasing standard did not have an impact on the consolidated statement of income.
The Company determines if an arrangement is a lease at contract inception. Operating lease assets represent the Company's right to use an underlying asset for the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
As most of the Company's leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate, which is based on rates that would be incurred to borrow on a collateralized basis over a term equal to the lease payments in a similar economic environment, in determining the present value of lease payments.
Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The lease payment used to determine the operating lease asset may include lease incentives, stated rent increases and was recognized as an operating lease right-of-use asset in the consolidated balance sheets. The Company's lease agreements may include both lease and non-lease components, which are accounted for as a single lease component when the payments are fixed. Variable payments included in the lease agreement are expensed as incurred.
The Company's operating lease is reflected in operating lease right-of-use asset and operating lease liability in the consolidated balance sheets. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
For additional information on the adoption of the new leasing standards, please read Note 7, Leases and Commitments, to these consolidated financial statements.
(g)
Goodwill
As of both December 31, 2019 and 2018, the Company had recorded goodwill of $9.0 million. The Company applies the guidance in the FASB Codification Topic 350, Intangibles—Goodwill and Other. During each of December 2019 and 2018, the Company completed its annual goodwill impairment tests and determined that the Company represented a single reporting unit and as of those dates the fair value of the Company exceeded the carrying value of its net assets. Accordingly, no goodwill impairment was recognized for the years ended December 31, 2019 and 2018.

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(h)
Revenue Recognition
Effective January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective transition method. The Company's only contract not completed as of January 1, 2018 was its collaboration agreement with Genentech (see Note 10). The Company assessed the potential effects to the consolidated financial statements and retained earnings and has concluded that, upon adoption of the new standard, there was no material impact.
The Company’s business strategy includes entering into collaborative license and development agreements with biotechnology and pharmaceutical companies for the development and commercialization of the Company’s drug candidates. The terms of the agreements typically include non-refundable license fees, funding of research and development, payments based upon achievement of clinical development and regulatory objectives, and royalties on product sales.
License Fees and Multiple Element Arrangements
If a license to its intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company will recognize revenues from non-refundable, up-front fees allocated to the license at such time as the license is transferred to the licensee and the licensee is able to use, and benefit from, the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, will adjust the measure of performance and related revenue recognition.
If the Company is involved in a steering committee as part of a multiple element arrangement, the Company assesses whether its involvement constitutes a performance obligation or a right to participate. Steering committee services that are not determined to be distinct performance obligations are combined with other research services or performance obligations required under an arrangement, if any, in determining the level of effort required in an arrangement and the period over which the Company expects to complete its aggregate performance obligations.
Appropriate methods of measuring progress include output methods and input methods. In determining the appropriate method for measuring progress, the Company considers the nature of service that it promises to transfer to the customer. When the Company decides on a method of measurement, the Company will apply that single method of measuring progress for each performance obligation satisfied over time and will apply that method consistently to similar performance obligations and in similar circumstances.
If the Company cannot reasonably measure its progress toward complete satisfaction of a performance obligation because the Company lacks reliable information that would be required to apply an appropriate method of measuring progress, but it can reasonably estimate when the performance ceases or the remaining obligations become inconsequential and perfunctory, then revenue is not recognized until the Company can reasonably estimate when the performance obligation ceases or becomes inconsequential. Revenue is then recognized over the remaining estimated period of performance.
Significant management judgment is required in determining the level of effort required under an arrangement and the period over which the Company is expected to complete its performance obligations under an arrangement.
Contingent Research Milestone Payments
ASC 606 constrains the amount of variable consideration included in the transaction price in that either all, or a portion, of an amount of variable consideration should be included in the transaction price. The variable consideration amount should be included only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The assessment of whether variable consideration should be constrained is largely a qualitative one that has two elements: the likelihood of a change in estimate, and the magnitude thereof. Variable consideration is not constrained if the potential reversal of cumulative revenue recognized is not significant, for example.
If the consideration in a contract includes a variable amount, a company will estimate the amount of consideration in exchange for transfer of promised goods or services. The consideration also can vary if a company’s entitlement to the consideration is contingent on the occurrence or nonoccurrence of a future event. The Company considers contingent research milestone payments to fall under the scope of variable consideration, which should be estimated for revenue recognition purposes at the inception of the contract and reassessed ongoing at the end of each reporting period.
The Company assesses whether contingent research milestones should be considered variable consideration that should be constrained and thus not part of the transaction price. This includes an assessment of the probability that all or some of the

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milestone revenues could be reversed when the uncertainty around whether or not the achievement of each milestone is resolved, and the amount of reversal could be significant.
GAAP provides factors to consider when assessing whether variable consideration should be constrained. All of the factors should be considered, and no factor is determinative. The Company considers all relevant factors.
Reimbursement of Costs
Reimbursement of research and development costs by third-party collaborators is recognized as revenue over time provided the Company has determined that it transfers control (i.e. performs the services) of a service over time and, therefore, satisfies a performance obligation according to the provisions outlined in ASC 606-10-25-27, Revenue Recognition.
Royalty Revenue
Since the first quarter of 2012, the Company has recognized royalty revenues related to Genentech’s and Roche’s sales of Erivedge. For arrangements that include sales based royalties, including milestone payments based on the level of sales, and where the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). The Company expects to continue recognizing royalty revenue from Genentech’s sales of Erivedge in the U.S. and in other markets where Genentech and Roche successfully obtain marketing approval, if any (see Note 10). However, a portion of potential Erivedge royalties will be paid to the Purchasers pursuant to the Oberland Purchase Agreement (see Note 8).
Contra Revenue, Net
Contra revenue, net represents shared costs, primarily related to intellectual property, with the Company's collaboration partners, and reserves for potential royalty reductions.
With respect to each of the foregoing areas of revenue recognition, we exercise significant judgment in determining whether an arrangement contains multiple elements, and, if so, how much revenue is allocable to each element. In addition, we exercise our judgment in determining when our significant obligations have been met under such agreements and the specific time periods over which we recognized revenue, such as non-refundable, up-front license fees. To the extent that actual facts and circumstances differ from our initial judgments, our revenue recognition with respect to such transactions would change accordingly and any such change could affect our reported financial results.
(i)
Research and Development
Research and development expense consists of costs incurred to discover, research and develop drug candidates. These expenses primarily include: (1) salaries and related expenses for personnel including stock-based compensation expense; (2) outside service costs, including clinical research organizations and contract manufacturing costs, among others; (3) sublicense payments; and (4) the costs of supplies and reagents, consulting, and occupancy and depreciation charges. The Company expenses research and development costs as they are incurred.
The Company recognizes cost of royalties on Erivedge royalty revenue earned from Genentech related to obligations to third-party university licensors. The Company is also incurring research and development expenses under this collaboration related to the maintenance of these third-party licenses to certain background technologies. In addition, the Company records research and development expense for obligations to certain third-party university licensors upon earning payments from Genentech related to the achievement of clinical development and regulatory objectives under this collaboration. 
(j)
Basic and Diluted Loss per Common Share
Basic and diluted net losses per share were determined by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is the same as basic net loss per common share for all periods presented, as the effect of the potential common stock equivalents is antidilutive due to the Company’s net loss position for all periods presented. Antidilutive securities consist of stock options outstanding as of the respective reporting period. Antidilutive securities as of December 31, 2019 and 2018 consisted of the following:
 
For the Year Ended December 31,
 
2019
 
2018
Stock options outstanding
6,158,026

 
3,714,394

Total antidilutive securities
6,158,026

 
3,714,394


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(k)
Stock-Based Compensation
The Company accounts for stock-based compensation transactions using a grant-date fair-value based method under FASB Codification Topic 718, Compensation-Stock Compensation.
The Company has recorded employee and director stock-based compensation expense of $2.7 million and $3.9 million for the years ended December 31, 2019 and 2018, respectively. The Company estimates that its stock-based compensation expense will increase in 2020 as it has granted, and expects that it may continue to grant options, in 2020 that could increase the amount of stock-based compensation ultimately recognized. The amount of the incremental employee stock-based compensation expense attributable to 2020 employee stock options to be granted will depend primarily on the number of stock options granted, the fair market value of the Company’s common stock at the respective grant dates, and the specific terms of the stock options.
The Company measures compensation cost for stock-based compensation at fair value, including an estimate of forfeitures and recognizes the expense as compensation expense over the period that the recipient is required to provide service in exchange for the award, which generally is the vesting period. The Company uses the Black-Scholes option pricing model to measure the fair value of stock options. This model requires significant estimates related to the award’s expected life and future stock price volatility of the underlying equity security.
In determining the amount of expense to be recorded, the Company also estimates forfeiture rates for awards, based on the probability that employees will complete the required service period. The Company estimates the forfeiture rate based on historical experience. If actual forfeitures differ significantly from the Company’s estimates, additional adjustments to compensation expense may be required in future periods. Ultimately, the actual expense recognized over the vesting period will only be for those shares that vest.
The expected volatility is based on the annualized daily historical volatility of the Company’s stock price for a time period consistent with the expected term of each grant. Management believes that the historical volatility of the Company’s stock price best represents the future volatility of the stock price. The risk-free rate is based on the U.S. Treasury yield in effect at the time of grant for the expected term of the respective grant. The Company has not historically paid cash dividends, and does not expect to pay cash dividends in the foreseeable future.
The stock price volatility and expected terms utilized in the calculation involve management’s best estimates at that time, both of which impact the fair value of the option calculated under the Black-Scholes methodology and, ultimately, the expense that will be recognized over the life of the option. GAAP also requires that the Company recognize compensation expense for only the portion of options that are expected to vest. Therefore, management calculated an estimated annual pre-vesting forfeiture rate that is derived from historical employee termination behavior since the inception of the Company, as adjusted. If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods.
(l)
Comprehensive Loss
Comprehensive loss is comprised of net loss and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized holding gains and losses arising during the period on available-for-sale securities that are not other-than-temporarily impaired. 
(m)
Segment Reporting
The Company has determined that it operates in a single reportable segment, which is the research and development of innovative drug candidates for the treatment of human cancer. The Company expects that any products that are successfully developed and commercialized would be used in the healthcare industry and would be regulated in the United States by the FDA and in overseas markets by similar regulatory authorities.
(n)
Interest Expense on Liability related to the Sale of Future Royalties
In March 2019 the Company entered into the Oberland Purchase Agreement with Oberland Capital. Pursuant to the terms of the Oberland Purchase Agreement the Company sold to Oberland a portion of its rights to receive royalties from Genentech on potential net sales of Erivedge. As a result of the obligation to pay future royalties to Oberland, the Company recorded the proceeds from this transaction as a liability on its Consolidated Balance Sheet that is accounted for using the interest method over the estimated life of the Oberland Purchase Agreement. As a result, the Company imputes interest on the transaction and records imputed interest expense at the estimated interest rate. The Company's estimate of the interest rate under the agreement is based on the amount of royalty payments expected to be received by Oberland over the life of the arrangement. On a quarterly basis, the Company assesses the expected royalty payments to Curis Royalty from Genentech using a combination of historical results and forecasts from market data sources. To the extent such payments are greater or less than the initial estimates or the timing of such payments is materially different than the original estimates, the Company will prospectively adjust the amortization of the liability.

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(o)
New Accounting Pronouncements
Recently Issued and Adopted
In June 2018, the Financial Accounting Standard Board (“FASB”) issued Accounting Standard Update (“ASU”) 2018-07, Compensation - Stock Compensation: Improvements to Nonemployee Share-based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions resulting from expanding the scope of ASC 718, Compensation - Stock Compensation (“ASC 718”). The standard was effective for annual reporting periods and interim periods within those annual periods, beginning after December 15, 2018, and early adoption is permitted, but no earlier than an entity's adoption date of ASC 606, Revenue from Contracts with Customers (“ASC 606”). The Company did not have any outstanding nonemployee awards as of June 30, 2018, and adopted this update as of that date. There was no material impact on the Company's consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting, which clarifies the scope under which modification accounting should be applied to a share based payment award under ASC 718. The standard was be effective for annual reporting periods and interim periods within those annual periods, beginning after December 15, 2017, and early adoption is permitted for interim or annual periods beginning after January 1, 2017. As such, the Company adopted this standard as of January 1, 2018 and concluded there was no material impact on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill under the current standard in testing the interim or annual impairment of goodwill. The standard will be effective for annual reporting periods and interim periods within those annual periods, beginning after December 15, 2019, and early adoption is permitted for interim or annual periods beginning after January 1, 2017. As such, the Company adopted this standard as of January 1, 2018 and concluded there was no material impact on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases. In addition, the FASB issued ASUs 2018-10 and 2018-11, all of which are further clarifying amendments to ASU 2016-02. The standard requires organizations that lease assets to recognize on the balance sheet assets or liabilities, as applicable, for the rights and obligations created by those leases. Additionally, the guidance modifies current guidance for lessor accounting and leveraged leases, and is effective for fiscal years beginning after December 15, 2018, and interim periods within such years. The Company adopted this standard as of January 1, 2019. The resulting impact of the adoption was the recognition of an operating lease right-of-use asset in the amount of $1.0 million and the recognition of operating lease liabilities of $1.1 million on the consolidated balance sheet. The new standard did not have a significant impact on the Company's consolidated statement of operation. For more detail, see Note 2(f) above, Leases.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which amends prior guidance on accounting for equity investments and financial liabilities. The new standard amends certain aspects of accounting and disclosure requirements for financial instruments, including the requirement that equity investments with readily determinable fair values be measured at fair value with changes in fair value recognized in results of operations. The new standard does not apply to investments accounted for under the equity method of accounting or those that result in consolidation of the investee. Equity investments that do not have readily determinable fair values may be measured at fair value or at cost minus impairment adjusted for changes in observable prices. A financial liability that is measured at fair value in accordance with the fair value option is required to be presented separately in other comprehensive income for the portion of the total change in the fair value resulting from change in the instrument-specific credit risk. In addition, a valuation allowance should be evaluated on deferred tax assets related to available-for-sale debt securities in combination with other deferred tax assets. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within such years. As such, the Company adopted this standard as of January 1, 2018 and concluded there was no material impact on its consolidated financial statements.
In May 2014, the FASB issued new revenue recognition guidance in ASU 2014-09, for entities, providing a single, comprehensive model to account for revenue arising from contracts with customers. In addition, the FASB recently issued ASUs 2016-08, 2016-10, 2016-12, 2016-20 and 2017-13, all of which are further clarifying amendments to ASU 2014-09. This new standard provides a five step framework whereby revenue is recognized when promised goods or services are transferred to a customer at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity’s nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Two adoption methods are permitted: retrospectively to all prior reporting periods presented, with certain practical expedients permitted; or retrospectively with the cumulative effect of initially adopting the ASU recognized at the date of initial application. The Company adopted the modified retrospective method. To date, the Company’s sources of collaboration and other revenue have primarily been collaboration agreements. The most significant differences between Topic 606 and previous guidance for license and collaboration revenue are: (i) allocating consideration to performance obligations; and (ii) estimating and determining the timing of recognition of variable consideration received from licensees, including up-front license

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payments, contingent milestones and royalties. The guidance was effective for interim and annual periods beginning after December 15, 2017 and early adoption is permitted. The Company has adopted the guidance as of January 1, 2018. The adoption of this guidance had no material impact on the Company's consolidated financial statements. For more detail, see Note 2(h) above, Revenue Recognition.
Issued, Not Yet Adopted
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement, which modified the disclosure requirements for fair value measurement under ASC 820. The standard was originally effective for annual reporting periods and interim periods within those annual periods, beginning after December 15, 2019, with early adoption permitted, however in November 2019 the effective date for smaller reporting companies was extended to January 1, 2023 with the issuance of ASU 2019-10 Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates. The Company is currently evaluating the effects of this standard and does not expect that adoption of this standard will have a material impact on its consolidated financial statements.
(3)
Fair Value of Financial Instruments
The Company applies the provisions of ASC Topic 820, Fair Value Measurements (“ASC 820”) for its financial assets and liabilities that are re-measured and reported at fair value each reporting period and the non-financial assets and liabilities that are re-measured and reported at fair value on a non-recurring basis. Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which it would transact and consider assumptions that market participants would use when pricing the asset or liability. ASC 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. Financial assets and liabilities are categorized within the valuation hierarchy based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy are defined as follows:
Level 1
Quoted prices in active markets for identical assets or liabilities.
 
 
Level 2
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
 
Level 3
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
In accordance with the fair value hierarchy, the following table shows the fair value as of December 31, 2019 and 2018 of those financial assets and liabilities that are measured at fair value on a recurring basis, according to the valuation techniques the Company used to determine their fair value. No financial assets or liabilities are measured at fair value on a nonrecurring basis at December 31, 2019 and 2018.
 
Quoted Prices in
Active Markets
(Level 1)
 
Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Fair Value
 
(in thousands)
As of December 31, 2019
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
10,684

 
$

 
$

 
$
10,684

US government obligations

 
550

 

 
550

Commercial paper

 
300

 

 
300

Municipal bonds

 
90

 

 
90

Short-term investments:
 
 
 
 
 
 
 
Corporate commercial paper, bonds and notes

 
5,113

 

 
5,113

Total assets at fair value
$
10,684

 
$
6,053

 
$

 
$
16,737


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Quoted Prices in
Active Markets
(Level 1)
 
Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Fair Value
 
(in thousands)
As of December 31, 2018
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
18,180

 
$

 
$

 
$
18,180

Corporate commercial paper, stock, bonds and notes

 
2,199

 

 
2,199

Municipal bonds

 
135

 

 
135

Short-term investments:
 
 
 
 
 
 
 
Corporate commercial paper, stock, bonds and notes

 
634

 

 
634

Total assets at fair value
$
18,180

 
$
2,968

 
$

 
$
21,148

(4)
Investments
The amortized cost, unrealized gains and losses and fair value of investments available-for-sale as of December 31, 2019 are as follows:
 
Amortized
Cost
 
Unrealized
Gain
 
Unrealized
Loss
 
Fair Value
Corporate bonds and notes—short-term
$
5,113

 
$

 
$

 
$
5,113

Total investments
$
5,113

 
$

 
$

 
$
5,113

Short-term investments have maturities ranging from one to twelve months with a weighted average maturity of 0.1 years at December 31, 2019.
The amortized cost, unrealized gains and losses and fair value of investments available-for-sale as of December 31, 2018 are as follows:
 
Amortized
Cost
 
Unrealized
Gain
 
Unrealized
Loss
 
Fair Value
Corporate bonds and notes—short-term
$
634

 
$

 
$

 
$
634

Total investments
$
634

 
$

 
$

 
$
634

Short-term investments have maturities ranging from one and twelve months with a weighted average maturity of 0.1 years at December 31, 2018.
Curis held no securities that were in continuous unrealized loss position for more than 12 months at December 31, 2019 or 2018 respectively.
(5)
Property and Equipment, Net
Property and equipment consist of the following:
 
December 31,
 
2019
 
2018
Laboratory equipment, computers and software
$
1,725

 
$
1,753

Leasehold improvements
185

 
185

Office furniture and equipment
331

 
354

 
2,241

 
2,292

Less—Accumulated depreciation and amortization
(2,087
)
 
(2,025
)
Total
$
154

 
$
267

The Company recorded depreciation and amortization expense of $0.1 million and $0.2 million for the years ended December 31, 2019 and 2018.

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(6)
Accrued Liabilities
Accrued liabilities consist of the following:
 
December 31,
 
2019
 
2018
Accrued compensation
$
1,413

 
$
2,774

Professional fees
289

 
233

Accrued interest on debt (see Note 11)

 
165

Other
208

 
285

Total
$
1,910

 
$
3,457

(7)
Leases and Commitments
(a)
Operating Leases
The Company leases real estate, including laboratory and office space, and certain equipment. The current real estate property that is used for office, research and laboratory space located at 4 Maguire Road in Lexington, Massachusetts expired on February 29, 2020. The Company is exercising its contractual right to holdover on a month-to-month basis until our new facility is available for occupancy.
On December 5, 2019, Curis, Inc. entered into a new lease for our administrative, research and development requirements located at 128 Spring Street in Lexington, Massachusetts. In accordance with the accounting requirements under ASC 842, the lease obligation will not be recorded until its commencement date which is expected in the second quarter of 2020. The Company did record the security deposit provided to the landlord which was classified as restricted cash. The total cash obligation for the base rent over the seven year term of the lease agreement is approximately $8.3 million and the Company will start paying rent on the commencement date.
All of the Company's leases qualify as operating leases. The following table summarizes the presentation in the Company's consolidated balance sheet for the operating leases:
Balance sheet location
 
As of December 31, 2019
Assets:
 
 
Operating lease right-of-use asset
 
$
149

 
 
 
Liabilities:
 
 
Operating lease liability
 
$
166

The following table summarizes the effect of lease costs in our consolidated statements of income:
Income statement location
 
For the year ended
December 31,
2019
Operating lease cost
 
 
Research and development
 
$
651

General and administrative
 
351

Total lease cost
 
$
1,002

In February 2016, the FASB issued ASU 2016-02, Leases. In addition, the FASB issued ASUs 2018-10 and 2018-11, all of which are further clarifying amendments to ASU 2016-02. The standard requires organizations that lease assets to recognize on the balance sheet assets or liabilities, as applicable, for the rights and obligations created by those leases. Additionally, the guidance modifies current guidance for lessor accounting and leveraged leases, and is effective for fiscal years beginning after December 15, 2018, and interim periods within such years. The Company adopted this standard as of January 1, 2019. The resulting impact of the adoption was the recognition of an operating lease right-of-use asset in the amount of $1.0 million and the recognition of operating lease liabilities of $1.1 million on the consolidated balance sheet. The new standard did not have a significant impact on the Company's consolidated statement of operation. The discount rate associated with the Company's right-of-use asset was 9.95%. The non-cash lease expense related to the right of use asset was $1.0 million at December 31, 2019. Cash paid for amounts included in the measurement of lease liabilities were $1.0 million at December 31, 2019.

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Under the current guidance, the Company’s lease payments for the next five years and thereafter is expected to be as follows:
Year Ending December 31,
 
 
2020
 
$
168

2021
 

2022
 

2023
 

2024
 

Thereafter
 

Total lease payments
 
$
168

Less: interest
 
2

Present value of operating lease liabilities
 
$
166

Under the prior lease accounting guidance, the Company’s remaining operating lease commitments for all leased facilities with an initial or remaining term of at least one year are as follows:
Year Ending December 31,
 
 
2019
 
$
1,002

2020
 
168

Total minimum payments
 
$
1,170

Rent expense for all operating leases was $0.9 million for the year ended December 31, 2018. The related deferred rent is included in accrued liabilities and other long-term liabilities in the Company’s consolidated balance sheet as of December 31, 2018.
(b)
License Agreements
In exchange for the right to use licensed technology in its research and development efforts, the Company has entered into various license agreements. These agreements generally stipulate that the Company pay an annual license fee and is obligated to pay royalties on future revenues, if any, resulting from use of the underlying licensed technology. Such revenues may include, for example, up-front license fees, contingent payments upon collaborators’ achievement of development and regulatory objectives, and royalties. In addition, some of the agreements commit the Company to make contractually defined payments upon the attainment of scientific or clinical milestones. The Company expenses these payments as they are incurred and expenses royalty payments as related future product sales or as royalty revenues are recorded. The Company accrues expenses for scientific and clinical objectives over the period that the work required to meet the respective objective is completed, provided that the Company believes that the achievement of such objective is probable. The Company did not incur license fee expenses within the “Research and development” line item of its “Costs and expenses” section of its consolidated statement of operations for the years ended December 31, 2019 or 2018. For the years ended December 31, 2019 and 2018, the Company also recognized $0.5 million and $0.6 million as cost of royalty revenues in its Consolidated Statements of Operations and Comprehensive Loss related to such obligations (see Note 10(a)).
(8)
Liability Related to the Sale of Future Royalties
On March 22, 2019, the Company and Curis Royalty entered into the royalty interest purchase agreement (“Oberland Purchase Agreement”) with entities managed by Oberland Capital Management, LLC (the “Purchasers”). The Company sold to the Purchasers a portion of its rights to receive royalties from Genentech on potential net sales of Erivedge. Concurrently with the closing of the Oberland Purchase Agreement Curis Royalty used a portion of the proceeds to terminate and repay the loan with Healthcare Royalty. (see Note 9)
As upfront consideration for the purchase of the royalty rights, at closing the Purchasers paid to Curis Royalty $65.0 million less certain transaction expenses. Curis Royalty will also be entitled to receive up to approximately $70.7 million in milestone payments based on sales of Erivedge as follows: (i) $17.2 million if the Purchasers and Curis Royalty receive aggregate royalty payments pursuant to the Oberland Purchase Agreement in excess of $18.0 million during the calendar year 2021, subject to certain exceptions and (ii) $53.5 million if the Purchasers receive payments pursuant to the Oberland Purchase Agreement in excess of $117.0 million on or prior to December 31, 2026.

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The Oberland Purchase Agreement provides that after the occurrence of an event of default as defined under the security agreement by Curis Royalty, the Purchasers shall have the option, for a period of 180 days, to require Curis Royalty to repurchase a portion of certain royalty and royalty related payments, excluding a portion of non-U.S. royalties retained by Curis Royalty, referred to as the Purchased Receivables, at a price, referred to as the Put/Call Price, equal to a percentage, beginning at a low triple digit percentage and increasing over time up to a low mid triple digit percentage of the sum of the upfront purchase price and any portion of the milestone payments paid in a lump sum by the Purchasers, if any, minus certain payments previously received by the Purchasers with respect to the Purchased Receivables. Additionally, Curis Royalty shall have the option at any time to repurchase the Purchased Receivables at the Put/Call Price as of the date of such repurchase.
As a result of the obligation to pay future royalties to Oberland, the Company recorded the proceeds from this transaction as a liability on its Consolidated Balance Sheet that will be accounted for using the interest method over the estimated life of the Oberland Purchase Agreement. As a result, the Company imputes interest on the transaction and records imputed interest expense at the estimated interest rate. The Company's estimate of the interest rate under the agreement is based on the amount of royalty payments expected to be received by Oberland over the life of the arrangement. The Company periodically assesses the expected royalty payments to Curis Royalty from Genentech using a combination of historical results and forecasts from market data sources. To the extent such payments are greater or less than the initial estimates or the timing of such payments is materially different than the original estimates, the Company will adjust the amortization of the liability.
The Company determined the fair value of the liability related to the sale of future royalties at the time of the Oberland Purchase Agreement to be $65.0 million, with a current effective annual imputed interest rate of 8.2%. The Company incurred $0.6 million of transaction costs in connection with the agreement. These transaction costs will be amortized to imputed interest expense over the estimated term of the Oberland Purchase Agreement.
The following table shows the activity with respect to the liability related to the sale of future royalties during the year ended December 31, 2019:
Liability related to sale of future royalties at March 22, 2019
$
65,000

Issuance costs capitalized
(584
)
Imputed interest expense recognized
4,055

Less: Payments made to Oberland Capital, LLC
(5,994
)
Carrying value of liability related to sale of future royalties at December 31, 2019
$
62,477

(9)
Income Taxes
For the years ended December 31, 2019 and 2018, the Company did not record any federal or state income tax expense given its continued operating losses.
A reconciliation between income tax benefit and the expected tax benefit at the statutory rate for the years ended December 31, 2019 and 2018 are as follows:
 
For the Year Ended
December 31,
 
2019
 
2018
Statutory federal income tax rate
21.0
 %
 
21.0
 %
State income taxes, net of federal benefit
6.1
 %
 
5.9
 %
Research and development tax credits
2.7
 %
 
3.8
 %
Orphan drug tax credits
4.6
 %
 
3.2
 %
Expiration of NOLs/Credits
(4.0
)%
 
(13.5
)%
Permanent adjustments and other
(0.6
)%
 
(1.1
)%
Change in valuation allowance
(29.8
)%
 
(19.3
)%
Effective income tax rate
 %
 
 %

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The principle components of the Company’s deferred tax assets at December 31, 2019 and 2018, respectively, are as follows:
 
December 31,
 
2019
 
2018
Deferred Tax Assets:
 
 
 
NOL carryforwards
$
58,654

 
$
67,068

Research and development tax credit carryforwards
15,408

 
15,825

Orphan drug tax credit carryforwards
18,088

 
16,625

Depreciation and amortization
9,671

 
10,672

Capitalized research and development expenditures
34,487

 
33,993

Stock options
6,329

 
5,783

Accrued expenses and other
131

 
259

Oberland agreement
17,022

 

Lease liability ASC 842
45

 

Total gross deferred tax asset
159,835

 
150,225

Valuation allowance
(159,794
)
 
(150,225
)
Net deferred tax asset
$
41

 
$

 
 
 
 
Deferred tax liabilities:
 
 
 
Right of use asset ASC 842
(41
)
 

Total gross deferred tax liabilities
$
(41
)

$

 
 
 
 
Net deferred tax assets (liabilities)
$

 
$

For the years ended December 31, 2019 and 2018, the Company had federal net operating losses (“NOL”), of $251.2 and $282.0 million, respectively. The operating losses generated prior to 2018 will expire in years 2020 through 2037, unless previously utilized. The federal operating loss carryforward generated in 2018 and later can be carried forward indefinitely and can be used to offset up to 80% of taxable income of each future tax year. For the years ended December 31, 2019 and 2018, the Company had state NOLs of $93.6 and $124.0 million, respectively. The operating losses will expire in years 2020 through 2038, unless previously utilized.
For the years ended December 31, 2019 and 2018, the Company had federal research and development credit carryforwards of $11.9 and $12.3 million, respectively. The credits will expire in the years 2020 through 2039.
For the years ended December 31, 2019 and 2018, the Company had state research and development credit carryforwards of $4.4 and $4.5 million, respectively. The credits will expire in the years 2020 through 2034, unless previously utilized.
For the years ended December 31, 2019 and 2018, the Company had orphan drug tax credit carryforwards of $18.1 and $16.6 million, these credits, if any, relate to qualified expenses incurred for CUDC-907 since receiving the Orphan Drug designation.
As required by U.S. GAAP, the Company’s management has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, and has determined that it is more likely than not that the Company will not recognize the benefits of the deferred tax assets. Accordingly, a valuation allowance of approximately $159.8 million has been established at December 31, 2019.
The valuation allowance increased approximately $9.6 million and $6.3 million during the years ended December 31, 2019 and 2018. The current year increase in the valuation allowance is primarily due to an increase in net deferred tax assets with an offsetting valuation allowance related to income recorded for tax related to the Oberland royalty purchase agreement. The increase in 2018 is primarily due to the current year net operating loss offset by the valuation allowance.
Utilization of the NOL may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership change limitations that have occurred previously or that could occur in the future. These ownership changes may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income and tax, respectively. The Company completed a §382 study in 2019 and determined no ownership changes have occurred and no limitation on NOLs through December 31, 2018. There could be additional ownership changes in the future, which may result in additional limitations in the utilization of the carryforward NOLs and credits, and the Company does not expect to have any taxable income for the foreseeable future.

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An individual tax position must satisfy for some or all of the benefits of that position to be recognized in a company’s financial statements. At December 31, 2019 and 2018, the Company had no unrecognized tax benefits. The Company has not, as yet, conducted a study of its R&D credit carryforwards. This study may result in an adjustment to the Company’s R&D credit carryforwards, however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position under FASB Codification Topic 740 Income Taxes. A full valuation allowance has been provided against the Company’s R&D credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the consolidated balance sheet or statement of operations if an adjustment were required.
The tax years 2004 through 2019 remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily in the U.S., as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service (“IRS”) or state tax authorities if they have or will be used in a future period. The Company is currently not under examination by the IRS or any other jurisdictions for any tax years. The Company recognizes both accrued interest and penalties related to unrecognized benefits in income tax expense. The Company has not recorded any interest or penalties on any unrecognized tax benefits since its inception.
(10)
Research and Development Collaborations
(a)
Genentech
In June 2003, the Company licensed its proprietary Hedgehog pathway technologies to Genentech for human therapeutic use. The primary focus of the collaborative research plan has been to develop molecules that inhibit the Hedgehog pathway for the treatment of various cancers. The collaboration is currently focused on the development of Erivedge, which is being commercialized by Genentech in the U.S. and by Genentech's parent company, Roche, in several other countries for the treatment of advanced BCC. Pursuant to the agreement, the Company is eligible to receive up to an aggregate of $115.0 million in contingent cash milestone payments, exclusive of royalty payments, in connection with the development of Erivedge or another small molecule Hedgehog pathway inhibitor, assuming the successful achievement by Genentech and Roche of specified clinical development and regulatory objectives. Of this amount, the Company has received $59.0 million in cash milestone payments as of December 31, 2019.
In addition to these payments and pursuant to the collaboration agreement, the Company, is entitled to a royalty on net sales of Erivedge that ranges from 5% to 7.5%. The royalty rate applicable to Erivedge may be decreased by 2% on a country-by-country basis in certain specified circumstances, including when a competing product that binds to the same molecular target as Erivedge is approved by the applicable regulatory authority in another country and is being sold in such country, by a third-party for use in the same indication as Erivedge, or, when there is no issued intellectual property covering Erivedge in a territory in which sales are recorded. In 2016, the FDA and the European Medicine Agency’s Committee for Medicinal Products for Human Use, approved another Hedgehog signaling pathway inhibitor, Odomzo® (sonidegib), which is marketed by Sun Pharmaceutical Industries Ltd., for use in locally advanced BCC. Beginning in the fourth quarter of 2015, Genentech applied the 2% royalty reduction on U.S. sales of Erivedge as a result of the first commercial sale of Odomzo in the U.S. and the Company anticipates that Genentech will reduce by 2% royalties on net sales of Erivedge outside of the United States on a country-by-country basis to the extent that sonidegib is approved by the applicable country's regulatory authority and is being sold in such country. However, pursuant to the Oberland Purchase Agreement, the Company has retained its rights with respect to the 2% of royalties that are subject to such reduction in countries where such reduction has not occurred, subject to the terms and conditions of the Oberland Purchase Agreement (the “Retained Royalty Amounts”).
In March 2017, the Company and Curis Royalty entered into a credit agreement with HealthCare Royalty Partners III, L.P. (“HealthCare Royalty”) for the purpose of refinancing and terminating the loan from BioPharma-II. Accordingly, HealthCare Royalty made a $45.0 million loan at an annual interest rate of 9.95% to Curis Royalty, which was used in part to pay off $18.4million in remaining loan obligations to BioPharma-II under the prior loan with the residual proceeds of $26.6 million distributed to the Company as sole equity member of Curis Royalty. The final maturity date of the loan was the earlier of such date that the principal is paid in full, or Curis Royalty's right to receive royalties under the collaboration agreement with Genentech is terminated. On March 22, 2019, the Company and Curis Royalty terminated, and repaid in full all amounts outstanding under, the loan with HealthCare Royalty.
The Company has identified the following performance obligations related to the Genentech collaboration:
1.To grant the license for its Hedgehog antagonist programs and to provide service on both a steering committee and co-development steering committee. This performance obligation has been satisfied and only contingent royalty revenue remains to be recognized in the future.
2.To provide reimbursable research and development services. This performance obligation has been satisfied and no revenue remains to be recognized in the future.

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The Company recognized $10.4 million in royalty revenues under the Genentech collaboration during the years ended December 31, 2019 and 2018. The Company also recorded $0.5 million and $0.6 million, respectively, as cost of royalty revenues within the costs and expenses section of its consolidated statements of operations and comprehensive loss during these same periods. Cost of royalty revenues is comprised of the 5% of the royalties earned by Curis Royalty with respect to Erivedge outside Australia, and 5% direct net sales in Australia (subject to decrease on expiration of the patent in April 2019 to 5% of the royalty payments that Curis Royalty receives from Genentech, through February 2022), that the Company is obligated to pay to university licensors.
As further discussed in Note 8, a portion of royalty revenues received from Genentech on net sales of Erivedge will be paid to the Purchasers pursuant to the Oberland Purchase Agreement. The Company recorded research and development revenues of $0.1 million during the years ended December 31, 2019 and 2018, respectively, related to expenses incurred by the Company on behalf of Genentech that were paid by the Company and for which Genentech is obligated to reimburse the Company.
Genentech incurred expenses of $0.2 million and $0.1 million, respectively, under this collaboration for which the Company is obligated to reimburse to Genentech, and which the Company has recorded as contra-revenues which have been net against research and development revenues in its consolidated statements of operations and comprehensive loss. The Company will continue to recognize revenue for expense reimbursement as such reimbursable expenses are incurred, provided that the provisions of the ASC 606 are met.
The Company has recorded as amounts receivable from Genentech under this collaboration, comprised primarily of Erivedge royalties earned in the fourth quarters of 2019 and 2018 of $3.2 million and $2.9 million as of December 31, 2019 and 2018, respectively, in “accounts receivable” in the Company's current assets section of its consolidated balance sheets.
(b)
Aurigene
In January 2015, the Company entered into an exclusive collaboration agreement with Aurigene for the discovery, development and commercialization of small molecule compounds in the areas of immuno-oncology and selected precision oncology targets. Under the collaboration agreement, Aurigene granted the Company an option to obtain exclusive, royalty-bearing licenses to relevant Aurigene technology to develop, manufacture and commercialize products containing certain of such compounds anywhere in the world, except for India and Russia, which are territories retained by Aurigene.
In connection with the collaboration agreement, the Company issued to Aurigene 3,424,026 shares of its common stock valued at $24.3 million in partial consideration for the rights granted to the Company under the collaboration agreement, which the Company recognized as expense during the year ended December 31, 2015. The shares were issued pursuant to a stock purchase agreement with Aurigene dated January 18, 2015.
In September 2016, the Company and Aurigene entered into an amendment to the collaboration agreement. Under the terms of the amendment, in exchange for the issuance by the Company to Aurigene of 2,041,666 shares of its common stock, Aurigene waived payment of up to a total of $24.5 million in potential milestones and other payments associated with the first four programs in the collaboration that may have become due from the Company under the collaboration agreement. To the extent any of these waived milestones or other payments are not payable by the Company, for example in the event one or more of the milestone events do not occur, the Company will have the right to deduct the unused waived amount from any one or more of the milestone payment obligations tied to achievement of commercial milestone events. The amendment also provides that, in the event supplemental program activities are performed by Aurigene, the Company will provide up to $2.0 million of additional funding for each of the third and fourth licensed program. The shares were issued pursuant to a stock purchase agreement with Aurigene dated September 7, 2016.
In February 2020, the Company and Aurigene further amended their collaboration agreement. Under the terms of the amended agreement, Aurigene will fund and conduct a Phase 2b/3 randomized study evaluating CA-170, in combination with chemoradiation, in approximately 240 patients with non-squamous non-small cell lung cancer (nsNSCLC). In turn, Aurigene receives rights to develop and commercialize CA-170 in Asia, in addition to its existing rights in India and Russia, based on the terms of the original agreement. The Company retains U.S., European Union, and rest of world rights to CA-170, and is entitled to receive royalty payments on potential future sales of CA-170 in Asia at percentage rates ranging from the high single digits up to 10% subject to specified reductions.
As of December 31, 2019, the Company has exercised its option to license the following four programs under the collaboration:
1.
IRAK4 Program - a precision oncology program of small molecule inhibitors of IRAK4. The development candidate is CA-4948, an orally available small molecule inhibitor of IRAK4.

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2.
PD1/VISTA Program - an immuno-oncology program of small molecule antagonists of PD1 and VISTA immune checkpoint pathways. The development candidate is CA-170, an orally available small molecule antagonist of VISTA and PDL1.
3.
PD1/TIM3 Program - an immuno-oncology program of small molecule antagonists of PD1 and TIM3 immune checkpoint pathways. The development candidate is CA-327, an orally available small molecule antagonist of PDL1 and TIM3.
4.
In March 2018, the Company exercised its option to license a fourth program, which is an immuno-oncology program.
For each of the licensed programs (as described above) the Company is obligated to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize at least one product in each of the U.S., specified countries in the European Union and Japan, and Aurigene is obligated to use commercially reasonable efforts to perform its obligations under the development plan for such licensed program in an expeditious manner.
Subject to specified exceptions, Aurigene and the Company agreed to collaborate exclusively with each other on the discovery, research, development and commercialization of programs and compounds within immuno-oncology for an initial period of approximately two years from the effective date of the collaboration agreement. At the Company’s option, and subject to specified conditions, it may extend such exclusivity for up to three additional one-year periods by paying to Aurigene additional exclusivity option fees on an annual basis. The Company exercised the first one-year exclusivity option in the first quarter of 2017. The fee for this exclusivity option exercise was $7.5 million, which the Company paid in two equal installments in the first and third quarters of 2017. The Company has elected not to further exercise its exclusivity option and thus did not make the $10.0 million payment required for this additional exclusivity in 2018. As a result of the Company’s election to not further exercise its exclusivity option, the Company is no longer operating under broad immuno-oncology exclusivity with Aurigene. The Company has, however, as provided in the agreement, elected to exercise its option to extend exclusivity on a program-by-program, year-by-year, basis for the IRAK4 Program and the PD1/VISTA Program, both of the licensed programs currently in clinical trials.
Since January 2015, the Company has paid $14.5 million in research payments and has waived $19.5 million in milestone payments under the terms of the 2016 amendment.
For each of the IRAK4, PD1/VISTA, PD1/TIM3 programs, and the fourth immuno-oncology program, the Company has remaining unpaid or unwaived payment obligations of $42.5 million per program, related to regulatory approval and commercial sales milestones, plus specified additional payments for approvals for additional indications, if any.
In addition to the collaboration agreement, in June 2017, the Company entered into a master development and manufacturing agreement with Aurigene for the supply of drug substance and drug product, under which it has made cash payments to Aurigene of $1.4 million in 2019 and $0.6 million in 2018.
(c)
ImmuNext
In January 2020, the Company entered into an option and license agreement with ImmuNext. Under the terms of the agreement, the Company has agreed to collaborate with ImmuNext and the Company has agreed to conduct, at its own cost, a Phase 1a/1b clinical trial of an ImmuNext compound that antagonizes VISTA. In exchange, ImmuNext has granted Curis an exclusive option period to obtain an exclusive, worldwide license to develop and commercialize certain VISTA antagonizing compounds and products containing these compounds in the field of oncology. (see Note 17)
(11)
Debt
(a)
HealthCare Royalty Partners III
On March 6, 2017, the Company and Curis Royalty entered into a credit agreement with HealthCare Royalty for the purpose of refinancing Curis Royalty’s financing arrangement with BioPharma-II, referred to herein as the prior loan. On March 22, 2017, the prior loan was terminated in its entirety.
Pursuant to the credit agreement, HealthCare Royalty provided Curis Royalty with a $45.0 million loan at an interest rate of 9.95%, which was used to pay off $18.4 million in remaining loan obligations to BioPharma-II under the prior loan. The remaining proceeds of $26.6 million were distributed to the Company as sole equity holder of Curis Royalty.
Under the terms of the credit agreement with HealthCare Royalty, quarterly Erivedge royalty and royalty-related payments from Genentech were to be first applied to pay, collectively: (i) escrow fees payable by the Company pursuant to an escrow agreement, (ii) the Company’s royalty obligations to academic institutions, (iii) certain expenses incurred by HealthCare Royalty in connection with the credit agreement and related transaction documents, including enforcement of its rights in the case of an event of default under the credit agreement and (iv) expenses incurred by the Company enforcing its right to indemnification under the collaboration agreement. Subsequently, remaining amounts were to be applied first, to pay

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interest and second, to pay principal on the loan. If royalties owed under the Genentech collaboration agreement were insufficient to pay the accrued interest on the outstanding loan, the unpaid interest outstanding would be added to the loan principal on a quarterly basis. On March 22, 2019, the Company and Curis Royalty terminated and repaid all amounts outstanding under the credit agreement, consisting of approximately $33.8 million in remaining loan principal and approximately $3.4 million in accrued and unpaid interest and prepayment fees along with the remaining deferred issuance costs of $0.1 million were recorded as a loss on debt extinguishment.
(b)
Debt Payments to HealthCare Royalty Partners III
During the years ended December 31, 2019 and 2018, Curis Royalty made payments totaling $39.9 million and $10.0 million, respectively, of which $35.6 million and $6.1 million have been applied to the principal, respectively, with the remainder applied to accrued interest. During the first quarter of 2019, the Company repaid all outstanding debt and related accrued interest.
In addition, the Company recorded related accrued interest on its debt of $0.2 million as of December 31, 2018 with such amount included in the Company’s accrued liabilities section of its consolidated balance sheet. For the years ended December 31, 2019 and 2018, respectively, the Company recognized interest expense related to its debt of $0.8 million and $3.9 million, respectively, in the consolidated statement of operations and comprehensive loss.
For the years ended December 31, 2019 and 2018, the Company did not incur any debt issuance costs in connection with its HealthCare Royalty financing transaction. There was no debt outstanding as of December 31, 2019, the direct costs incurred by the Company as of December 31, 2018 were recorded as contra-debt, which directly reduces the outstanding debt balance on the following table:
 
As of
December 31,
 
2018
Debt, current
$
6,920

Debt issue costs, current
(36
)
Debt, current portion net of issuance costs
$
6,884

Debt, long-term
28,696

Debt issue costs, long-term
(96
)
Debt, net of current portion and issuance costs
$
28,600

(12)
Common Stock
(a)
Reverse Stock Split
On May 29, 2018 (the “Effective Date”), the Company filed a Certificate of Amendment to the Company’s Restated Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Certificate of Amendment”), which effected, as of 5:00 p.m. Eastern Time on the Effective Date, a 1-for-5 reverse stock split (the “Reverse Stock Split”) of the Company’s issued and outstanding common stock, $0.01 par value per share (the “Common Stock”).
As a result of the Reverse Stock Split, every five shares of Common Stock issued and outstanding was converted into one share of Common Stock. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who would have otherwise been entitled to a fractional share of Common Stock were instead entitled to receive a proportional cash payment.
The Reverse Stock Split proportionately reduced the number of authorized shares of Common Stock. The Reverse Stock Split did not change the par value of the Common Stock or the authorized number of shares of preferred stock of the Company. All outstanding stock options were adjusted as a result of the Reverse Stock Split, as required by the terms of such stock options.
(b)
Treasury Stock Retirement
Since 2002, the Company has repurchased 244,569 shares of common stock at a total cost of $1.5 million. The shares were repurchased through a combination of a repurchase program of up to $3.0 million approved by the Company's board of directors in 2002 and through employee purchases of common stock upon the exercise of stock options by remittance of shares of Company stock. The Company accounts for its common stock repurchases as treasury stock under the cost method.
In March 2018, the Company retired all 244,569 shares of common stock at a total cost of $1.5 million. This was a non-cash transaction and thus only affected the classifications within the stockholders' equity section of the Company's consolidated balance sheet.

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(c)
2015 Sales Agreement with Cowen
On July 2, 2015, the Company entered into a sales agreement with Cowen, pursuant to which the Company could sell from time to time up to $30.0 million of the Company’s common stock through an “at-the-market” equity offering program under which Cowen was to act as sales agent. Subject to the terms and conditions of the sales agreement, Cowen could sell the common stock by methods deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, including sales made directly on the Nasdaq Global Market, on any other existing trading market for the common stock or to or through a market maker other than on an exchange. In addition, with the Company’s prior written approval, Cowen could also sell the common stock by any other method permitted by law, including in negotiated transactions. Pursuant to the terms of the agreement, the aggregate compensation payable to Cowen was 3% of the gross sales price of the common stock sold by Cowen pursuant to the sales agreement. Each party agreed in the sales agreement to provide indemnification and contribution against certain liabilities, including liabilities under the Securities Act, subject to the terms of the sales agreement. The Company did not sell shares of common stock under this sales agreement during the year ended December 31, 2019. The Company sold 420,796 shares of common stock under this sales agreement for net proceeds of $6.2 million during the year ended December 31, 2018.
The shares sold under the sales agreement prior to May 3, 2018 were issued and sold pursuant to the universal shelf registration statement on Form S-3, filed with the Securities and Exchange Commission on July 2, 2015, and any shares sold under the sales agreement after such date were issued and sold pursuant to the currently effective universal shelf registration statement on Form S-3, filed with the Securities and Exchange Commission on May 3, 2018. As of December 31, 2019, the Company sold an aggregate of 420,796 shares of common stock pursuant to this sales agreement, for net proceeds of $6.2 million.
In connection with entering in a new sales agreement with JonesTrading Institutional Services LLC, or JonesTrading, the Company terminated its sales agreement with Cowen and the “at-the-market” equity offering program in March 2020, and the program with Cowen is no longer available for use by the Company. Please refer to Note 17.
(d)
2018 Charter Amendment
On May 15, 2018, the Company's stockholders approved an increase to the number of authorized shares of its common stock from 45,000,000 shares to 67,500,000 shares.
(e)
2019 Charter Amendment
On May 23, 2019, the Company's stockholders approved an increase to the number of authorized shares of its common stock from 67,500,000 shares to 101,250,000 shares.
(13)
Stock Plans and Stock-Based Compensation
As of December 31, 2019, the Company had two shareholder-approved, stock-based compensation plans: (i) the Amended and Restated 2010 Employee Stock Purchase Plan, (“ESPP”), adopted by the Board of Directors in April 2017 and approved by shareholders in June 2017, and (ii) the Third Amended and Restated 2010 Stock Incentive Plan, (“2010 Plan”), adopted by the Board of Directors in March 2018 and approved by shareholders in June 2018, which was amended to, among other things, add an additional 2,390,000 shares under the 2010 Plan, and set a new expiration date of May 14, 2028 for the 2010 Plan. New employees are typically issued options as an inducement equity award under Nasdaq Listing Rule 5635(c)(4) outside of the 2010 Plan. Effective May 29, 2018, the number of shares of common stock available for issuance under the plans and the number of shares of common stock issuable upon the exercise of then outstanding options have been adjusted to reflect a 1-for-5 reverse stock split (see Note 12).
The Third Amended and Restated 2010 Stock Incentive Plan
The 2010 Plan permits the granting of incentive and non-qualified stock options and stock awards to employees, officers, directors, and consultants of the Company and its subsidiaries at prices determined by the Company’s Board of Directors. On May 23, 2019 the Company's stockholders approved an amendment to the Company's Third Amended and Restated 2010 Stock Incentive Plan to reserve an additional 4,700,000 shares of common stock for issuance under the 2010 Plan. The Company can issue up to 10,890,000 shares of its common stock pursuant to awards granted under the 2010 Plan. Options become exercisable as determined by the Board of Directors and expire up to ten years from the date of grant. The 2010 Plan uses a “fungible share” concept under which each share of stock subject to awards granted as options and stock appreciation rights (“SARs”), will cause one share per share under the award to be removed from the available share pool, while each share of stock subject to awards granted as restricted stock, restricted stock units, other stock-based awards or performance awards where the price charged for the award is less than 100% of the fair market value of the Company’s common stock will cause

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1.3 shares per share under the award to be removed from the available share pool. As of December 31, 2019, the Company had only granted options to purchase shares of the Company’s common stock with an exercise price equal to the closing market price of the Company’s common stock on the Nasdaq Global Market on the grant date. As of December 31, 2019, 5,281,115 shares remained available for grant under the 2010 Plan.
During the year ended December 31, 2019, the Company’s board of directors granted options to purchase 2,737,865 shares of the Company’s common stock to officers and employees of the Company under the 2010 Plan. These options vest and become exercisable as to 25% of the shares underlying the award after the first year and as to an additional 6.25% of the shares underlying the award in each subsequent quarter, based upon continued employment over a four-year period, and are exercisable at a price equal to the closing price of the Company’s common stock on the Nasdaq Global Market on the grant dates.
During the first quarter of 2019, the Company’s board of directors granted options to its non-employee directors to purchase 720,000 shares of common stock under the 2010 Plan, which will vest and become exercisable in one year from the date of grant. These options were granted at an exercise price of $1.16 per share, which equals the closing market price of the Company’s common stock on the Nasdaq Global Market on the grant date. There were no additional non-employee grants made in the current quarter.
During the year ended December 31, 2019, the Company’s board of directors did not grant any restricted stock awards (“RSA”) to officers of the Company. There remain RSAs for an aggregate amount of 30,937 shares outstanding of the Company's common stock previously issued under the 2010 Plan. These RSAs will vest as to 25% of the shares underlying the RSA on the first anniversary of the date of grant and as to an additional 25% annually thereafter until all such shares become vested, based upon continued service to the Company over a four-year period.
Nonstatutory Inducement Grants
For certain new employees the Company issued options as an inducement equity award under Nasdaq Listing Rule 5635(c)(4) outside of the 2010 Plan. The option will vest as to 25% of the shares underlying the option on the first anniversary of the grant date, and as to an additional 6.25% of the shares underlying the option on each successive three-month period thereafter. During the year ended December 31, 2019, the Company’s board of directors granted inducement equity awards of 575,500 shares of common stock. These options were granted at a weighted average exercise price of $1.97, which is based on the closing market price of the Company’s common stock on the Nasdaq Global Market on the grant date.
Employee and Director Grants
Vesting Tied to Service Conditions
In determining the fair value of stock options, the Company generally uses the Black-Scholes option pricing model. As discussed below, for employee stock options with market performance conditions, the Company uses a Monte Carlo simulation valuation model. The Black-Scholes option pricing model employs the following key assumptions for employee and director options awarded during each of the following years: 
 
For the Year Ended
December 31,
 
2019
 
2018
Expected term (years)—Employees and Officers
5.5

 
5.5

Expected term (years)—Directors
5.5

 
N/A

Risk-free interest rate
1.5-2.6%

 
2.5-3.0%

Expected volatility
76-79%

 
66-73%

Expected dividend yield
None

 
None


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The following table summarizes details regarding stock options granted under the Company's equity incentive plans for the year ended December 31, 2019:
 
Number of
Options
 
Weighted
Average
Exercise
Price per
Share
 
Weighted
Average
Remaining Contractual Life
 
Aggregate Intrinsic Value
Outstanding, December 31, 2018
3,714,394

 
$
7.68

 
6.38
 

Granted
4,033,365

 
1.30

 

 

Exercised

 

 

 

Canceled
(1,589,733
)
 
7.97

 

 

Outstanding, December 31, 2019
6,158,026

 
$
3.43

 
8.33
 
$
1,657

Exercisable at December 31, 2019
1,561,926

 
$
8.44

 
6.47
 
$
26

Vested and unvested expected to vest
5,540,023

 
$
3.64

 
8.25
 
$
1,451

At December 31, 2019, the weighted average fair values of stock options granted with standard vesting terms during the years ended December 31, 2019 and 2018 were $0.85 and $1.46 per share of common stock underlying such stock options, respectively. As of December 31, 2019, there was approximately $3.4 million, including the impact of estimated forfeitures, of unrecognized compensation cost related to unvested employee stock option awards outstanding under the Company’s 2010 Plan that is expected to be recognized as expense over a weighted average period of 2.4 years. There were no employee stock options exercised during the year ended December 31, 2019. As there were no employee stock options exercised during either 2019 or 2018, the intrinsic value of employee stock options exercised during the year ended was zero.
The following table presents a summary of outstanding RSAs under the 2010 Plan as of December 31, 2019:
 
Number of
Shares
 
Weighted
Average
Grant Date Fair Value
Unvested, December 31, 2018
226,250

 
3.45

Awarded

 

Vested
(195,313
)
 
3.45

Forfeited

 

Unvested, December 31, 2019
30,937

 
3.45

As of December 31, 2019, there were 30,937 shares outstanding covered by RSAs that are expected to vest. The weighted average fair value of these shares of restricted stock was $3.45 per share and the aggregate fair value of these shares of restricted stock was approximately $0.1 million. As of December 31, 2019, there were approximately $0.1 million of unrecognized compensation costs, net of estimated forfeitures, related to RSAs granted to officers and non-employee directors, which are expected to be recognized as expense over a remaining weighted average period of 2.06 years.
Second Amended and Restated 2010 Employee Stock Purchase Plan (ESPP)
The Company has reserved 2,000,000 of its shares of common stock for issuance under the ESPP. Eligible employees may purchase shares of the Company’s common stock at 85% of the lower closing market price of the common stock at the beginning of the enrollment period or ending date of the any purchase period within a two-year enrollment period, as defined. The Company has four six-month purchase periods per each two-year enrollment period. If, within any one of the four purchase periods in an enrollment period, the purchase period ending stock price is lower than the stock price at the beginning of the enrollment period, the two-year enrollment resets at the new lower stock price. This aspect of the plan was amended in 2017. Prior to 2017, the plan included two six-month purchase period per year with no defined enrollment period. As of December 31, 2019, 521,903 shares were issued under the ESPP, of which 91,013 were issued during 2019. As of December 31, 2019, there were 1,677,934 shares available for future purchase under the ESPP.

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For the years ended December 31, 2019 and 2018, the Company recorded compensation expense related to its ESPP and calculated the fair value of shares expected to be purchased under the ESPP using the Black-Scholes models with the following assumptions:
 
For the Year Ended December 31,
 
2019
 
2018
Compensation expense recognized under ESPP
$
49

 
$
173

Expected term
6-24 months

 
6-24 months

Risk-free interest rate
1.5-2.1%

 
2.1-2.7%

Volatility
92-97%

 
79-104%

Dividends
None

 
None

Employee Stock-Based Compensation Expense
Stock-based compensation for employee and director stock option grants for the years ended December 31, 2019 and 2018 of $2.7 million and $3.9 million, respectively, was calculated using the above valuation models and has been included in the Company’s results of operations. The total fair value of vested stock options for the years ended December 31, 2019 and 2018 was $2.0 million and $4.7 million, respectively.
Total Stock-Based Compensation Expense
For the years ended December 31, 2019 and 2018, the Company recorded employee and non-employee stock-based compensation expense to the following line items in its Costs and Expenses section of the Consolidated Statements of Operations and Comprehensive Loss: 
 
For the Year Ended December 31,
 
2019
 
2018
Research and development expenses
$
575

 
$
1,310

General and administrative expenses
2,083

 
2,630

Total stock-based compensation expense
$
2,658

 
$
3,940

No income tax benefits have been recorded for the years ended December 31, 2019 or 2018, as the Company has recorded a full valuation allowance and management has concluded that it is more likely than not that the net deferred tax assets will not be realized (see Note 9).
(14)
Related Party Transactions
(a)
Agreement with Head of Research and Development - Robert E. Martell, M.D., Ph.D.
On October 17, 2018, the Company entered into an exclusive option and license agreement with Epi-Cure Pharmaceuticals, Inc., (“Epi-Cure”) a privately held early-stage biotechnology company. Robert E. Martell, M.D., Ph.D., the Company’s Head of Research and Development and a former director of the Company, is a founder of Epi-Cure, was formerly an officer and director of Epi-Cure, and is currently a holder of a convertible promissory note to Epi-Cure. Under the terms of the option and license agreement, Epi-Cure has granted Curis an exclusive option to certain program compounds that may arise during the initial research and development period, and any extension thereof. Upon execution of the option and license agreement, the Company has agreed to pay Epi-Cure an upfront payment of $0.1 million for legal and consulting costs incurred by Epi-Cure in connection with the transaction. In July 2019, the Company extended the research and development period of the program until April 2020, in accordance with the terms of the agreement.
Under the terms of the agreement, Epi-Cure will have primary responsibility for conducting research and development activities and Curis will be responsible for funding up to $0.5 million of the research and development program costs and expenses during the initial research and development period. After the end of the initial research and development period, Curis has sixty days to elect to exercise its option to license the program compounds. If the Company makes this election it will make a $2.0 million license fee payment and will be responsible for the development and commercialization of products that may result from the collaboration. Curis will also make cash payments to Epi-Cure subject to successful achievement of certain patent, development, regulatory, and commercial milestones, up to $63.0 million and will also pay Epi-Cure mid-single digit royalties on net product sales if product candidates derived from this collaboration are successfully developed.
Epi-Cure has retained the right to opt in to co-develop and share in profits upon initiation of a Phase 2 clinical study, in which event Curis will share in any development costs and profits on a 50/50 basis. Epi-Cure also has the right to opt-out of co-development/co-profit in which case they will receive royalty payments in lieu of profit-sharing.

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Each party has the right to terminate the agreement for uncured material breach by the other party. Curis has the right to terminate the agreement for its convenience upon sixty days prior written notice. The agreement also sets forth customary terms regarding each party’s intellectual property ownership rights, representations and warranties, indemnification obligations, confidentiality rights and obligations, patent prosecution, and maintenance and defense rights and obligations.
For the periods ended December 31, 2019 and 2018, Curis has paid and expensed $0.3 million and $0.1 million, respectively, of fees related to this agreement.
(b)
Agreement with David Tuck
On May 24, 2018, the Company announced that David Tuck, M.D., Chief Medical Officer, provided notice of his intention to retire from the Company, effective as of August 31, 2018. Dr. Tuck subsequently determined to retire on August 3, 2018. The Company and Dr. Tuck entered into a letter agreement on August 1, 2018 (the “Letter Agreement”) pursuant to which Dr. Tuck agreed to provide the Company with specified advisory services commencing on August 4, 2018 and extending until May 3, 2019, subject to earlier termination (the “Advisory Period”). In consideration for Dr. Tuck’s advisory services, the Company has agreed to (i) pay him a monthly retainer of $35.0 thousand during the Advisory Period and (ii) reimburse him for any pre-approved reasonable, documented out-of-pocket expenses relating to his advisory services. In addition, the Company and Dr. Tuck have agreed to amend his stock option agreements such that his outstanding options will cease to vest as of his date of resignation on August 3, 2018. The Letter Agreement may be terminated (i) at any time upon the mutual written consent of the parties, (ii) at any time by the Company immediately upon Dr. Tuck’s breach or threatened breach of the terms of his Invention, Non-Disclosure and Non-Competition Agreement with the Company, or (iii) by the Company at any time upon Dr. Tuck’s material breach of the terms of the Letter Agreement and failure to cure such breach within five days after written notice from the Company. In the event of termination of the Letter Agreement, Dr. Tuck will be entitled to payment for services performed and expenses paid or incurred prior to the effective date of termination that have not previously been paid. The Letter Agreement also contains other customary terms and conditions relating to his advisory service.
While the Company may utilize Dr. Tuck's consulting services in the future, the Company deemed the services to be a reduced level of service and not substantive. Under ASC 450, Contingencies, when an employee terminates and enters into a consulting agreement and the services to be provided are not deemed substantive, the transaction should be accounted for as a severance arrangement with no future service requirement. Based on this guidance, the Company recognized $0.3 million of expense during 2018, which represented the total obligation under the Letter Agreement.
(15)
Retirement Savings Plan
The Company has a 401(k) retirement savings plan covering substantially all of the Company’s employees. For each of the years ended December 31, 2019 and 2018, the Company made matching contributions of $0.2 million respectively.
(16)
Selected Quarterly Financial Data (Unaudited)
The following are selected quarterly financial data for the years ended December 31, 2019 and 2018:
 
Quarter Ended
 
March 31,
2019
 
June 30,
2019
 
September 30,
2019
 
December 31, 2019
Revenues
$
1,767

 
$
2,094

 
$
2,856

 
$
3,287

Loss from operations
(5,558
)
 
(6,141
)
 
(5,323
)
 
(7,334
)
Net loss
(9,884
)
 
(7,213
)
 
(6,436
)
 
(8,609
)
Net loss per common share (basic and diluted)
$
(0.30
)
 
$
(0.22
)
 
$
(0.19
)
 
$
(0.26
)
Weighted average common shares (basic and diluted)
33,150,869

 
33,154,566

 
33,202,871

 
33,209,217

 
Quarter Ended
 
March 31,
2018
 
June 30,
2018
 
September 30,
2018
 
December 31, 2018
Revenues
$
2,468

 
$
2,358

 
$
2,847

 
$
2,755

Loss from operations
(9,908
)
 
(7,860
)
 
(6,417
)
 
(5,148
)
Net loss
(10,747
)
 
(8,664
)
 
(7,223
)
 
(5,941
)
Net loss per common share (basic and diluted)
$
(0.33
)
 
$
(0.26
)
 
$
(0.22
)
 
$
(0.18
)
Weighted average common shares (basic and diluted)
33,053,702

 
33,135,391

 
33,161,592

 
33,121,666


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(17)
Subsequent Events
(a) ImmuNext Agreement
On January 6, 2020, the Company entered into an option and license agreement with ImmuNext (the “ImmuNext Agreement”). Under the terms of the ImmuNext Agreement, the Company agreed to engage in a collaborative effort with ImmuNext, and to conduct a Phase 1a/1b clinical trial of CI-8993. In exchange, ImmuNext granted the Company an exclusive option, exercisable until the earlier of (a) four years after January 6, 2020 and (b) 90 days after database lock for the first Phase 1a/1b trial in which the endpoints are satisfied (the “Option Period”), to obtain an exclusive, worldwide license to develop and commercialize certain VISTA antagonizing compounds and products containing these compounds in the field of oncology.
A joint steering committee composed of representatives from each of the parties will manage the non-clinical and clinical
development of the VISTA Compounds and Products during the Option Period, including, but not limited to, the approval of
the plan for the Phase 1a/1b trial.
During the Option Period, the Company will conduct the Phase 1a/1b trial and ImmuNext will conduct certain agreed upon non-clinical research activities to support the Phase 1a/1b trial. During the Option Period, the Company is obligated to assign to ImmuNext all right, title and interest in and to, inventions made by the Company alone or jointly with ImmuNext in conducting clinical and non-clinical activities under the ImmuNext Agreement during the Option Period and any patent rights covering those inventions. Effective as of the option exercise date (if any), ImmuNext is obligated to assign to the Company (i) all such inventions that were made solely by the Company and any patent rights covering those inventions that were assigned by the Company to ImmuNext during the Option Period and (ii) a joint ownership interest in all such inventions that were made jointly by the Company and ImmuNext and patent rights covering those inventions that were assigned by the Company to ImmuNext during the Option Period, except for any of those inventions that relates to compounds as to which ImmuNext has retained exclusive rights.
In consideration of the grant of the option, the Company has agreed to make an upfront payment to ImmuNext of $1.3 million.
If the Company elects to exercise the option, the Company has agreed to pay to ImmuNext an option exercise fee of $20.0 million.
If the Company elects to exercise the option, ImmuNext will be eligible to receive up to $4.6 million in potential development milestones, up to $84.3 million in potential regulatory approval milestones, and up to $125.0 million in potential sales milestone payments from the Company. In addition, ImmuNext is eligible to receive tiered royalties on annual net sales on a product-by-product and country-by-country basis, at percentage rates ranging from high single digits to low double digits, subject to specified adjustments.
The royalty payment obligations under the ImmuNext Agreement with respect to a product in a country will expire on the later of (i) expiration of the last-to-expire valid claim of the ImmuNext patents or jointly owned patents covering the manufacture, use or sale of such product in such country, (ii) the expiration of all regulatory exclusivity for such product in such country, and (iii) 10 years from the first commercial sale of such product in such country.
In partial consideration for drug substance, technical advice, and maintenance of ImmuNext’s existing IND and access to ImmuNext’s technology, the Company has agreed to make semi-annual maintenance fee payments of $0.4 million to ImmuNext during the Option Period. In addition, the Company has agreed to reimburse ImmuNext for certain documented external costs and expenses incurred by ImmuNext in carrying out non-clinical research activities approved by the joint steering committee, up to $0.3 million per calendar year, unless otherwise agreed to by both parties in writing.
In addition, the Company has agreed to pay ImmuNext a low double-digit percentage of sublicense revenue received by the Company or its Affiliates.
Unless earlier terminated, will expire upon either: (a) expiration of the Option Period if the Company has not exercised the option; or (b) expiration of all royalty payment obligations for any and all products. Upon expiration (but not on earlier termination) of the ImmuNext Agreement after exercise of the option, the license granted by ImmuNext to the Company shall automatically become fully paid-up, royalty-free, irrevocable and perpetual.
(b) Aspire Capital Fund, LLC
On February 26, 2020, the Company entered into a common stock purchase agreement (the “Agreement”) for the sale of up to $30.0 million with Aspire Capital Fund, LLC (“Aspire Capital”).
Under the terms of the Agreement, Aspire Capital has made an initial investment of $3.0 million via purchase of 2,693,965 common shares of the Company. In addition, Aspire Capital has committed to purchasing up to an additional $27.0 million in shares of the Company's common stock at the Company’s request, from time to time during a 30-month period at prices based on the market price at the time of each sale, subject to specified terms and limitations. There are no warrants,

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derivatives, or other share classes associated with this Agreement. The Company will control the timing and amount of the further sale of its common stock to Aspire Capital.
The Company plans to use the proceeds for any sales made pursuant to the Agreement for general corporate purposes, including research and development, clinical trial activity and working capital. There are no restrictions on future financings and there are no financial covenants, participation rights, rights of first refusal, or penalties in the Agreement. The Company has the right to terminate the Agreement at any time without any additional cost or penalty.
As consideration for Aspire Capital’s obligation under the Agreement, the Company issued 646,551 shares of common stock to Aspire Capital as a commitment fee. The Company also entered into a Registration Rights Agreement with Aspire Capital in connection with its entry into the Agreement.
(c) Termination of 2015 Sales Agreement with Cowen
The Company terminated its sales agreement with Cowen and the “at-the-market” equity offering program in March 2020, and the program is no longer available for use by the Company.
(d) JonesTrading Institutional Services LLC
On March 4, 2020, the Company entered into a Capital on Demand™ Sales Agreement (the “Sales Agreement”) with JonesTrading to sell from time to time up to $30.0 million of the Company’s common stock, par value $0.01 per share (the “Shares”), through an “at the market offering” program (the “Offering”) under which JonesTrading will act as sales agent.
In accordance with the terms of the Sales Agreement, upon delivery of a placement notice and subject to the terms and conditions of the Sales Agreement, JonesTrading may sell the Shares by any method deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including sales made through the Nasdaq Global Market, on any other existing trading market for the Common Stock or to or through a market maker. In addition, with the Company’s prior written approval, JonesTrading may also sell the Shares in privately negotiated transactions.
JonesTrading will use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the rules of the Nasdaq Global Market to sell on the Company’s behalf all of the shares requested to be sold by the Company.
The Company has no obligation to sell any of the Shares under the Sales Agreement. Either the Company or JonesTrading may at any time suspend solicitations and offers under the Sales Agreement upon notice to the other party.
The aggregate compensation payable to JonesTrading shall be equal to 3% of the gross proceeds from sales of the Shares sold by JonesTrading pursuant to the Sales Agreement. In addition, the Company has agreed to reimburse a portion of the expenses of JonesTrading in connection with the offering up to a maximum of $30.0 thousand.
The Sales Agreement contains customary representations and warranties, covenants of each party, and conditions to the sale of any Shares by JonesTrading thereunder. Additionally, each party has agreed in the Sales Agreement to provide indemnification and contribution against certain liabilities, including liabilities under the Securities Act, subject to the terms of the Sales Agreement.
The Sales Agreement will terminate upon the earlier of (i) the issuance and sale of all of the Shares through JonesTrading on the terms and conditions set forth therein, or (ii) termination of the Sales Agreement as permitted therein. JonesTrading may terminate the Sales Agreement at any time in specified circumstances, including: in connection with the occurrence of a material adverse change with respect to the Company that, in JonesTrading’s reasonable judgment, may materially impair its ability to sell the Shares; due to the Company’s inability, refusal or failure to perform specified conditions of the Sales Agreement, subject, in certain circumstances, to the Company’s right to cure within a period of 30 days; if any other condition to JonesTrading’s obligations is not fulfilled; or any suspension of trading in the Shares or in securities generally on the Nasdaq Global Market shall have occurred. The Company and JonesTrading each has the right to terminate the Sales Agreement in its sole discretion at any time upon five days’ notice.
ITEM 9.
CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE
None.

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ITEM 9A.
CONTROLS AND PROCEDURES
Evaluation of Disclosure Controls & Procedures
Our management, with the participation of our chief executive officer, and chief financial officer, evaluated the effectiveness of our disclosure controls and procedures as of December 31, 2019. The term “disclosure controls and procedures,” as defined in Rules 13a-15(e) and 15d-15(e) under the Exchange Act, means controls and other procedures of a company that are designed to ensure that information required to be disclosed by us in the reports that we file or submit under the Exchange Act is recorded, processed, summarized and reported within the time periods specified in the SEC’s rules and forms. Disclosure controls and procedures include, without limitation, controls and procedures designed to ensure that information required to be disclosed by a company in the reports that it files or submits under the Exchange Act is accumulated and communicated to the company’s management, including its principal executive and principal financial officers, as appropriate to allow timely decisions regarding required disclosure. Management recognizes that any controls and procedures, no matter how well designed and operated, can provide only reasonable assurance of achieving their objectives and management necessarily applies its judgment in evaluating the cost-benefit relationship of possible controls and procedures. Based on the evaluation of our disclosure controls and procedures as of December 31, 2019, our chief executive officer and chief financial officer concluded that, as of such date, our disclosure controls and procedures were effective.
Management’s report on internal control over financial reporting, as defined in Rules 13a-15(f) and 15d-15(f) under the Exchange Act, is included in Item 8 of this annual report on Form 10-K and is incorporated herein by reference.
Our management assessed the effectiveness of our internal control over financial reporting as of December 31, 2019. In making this assessment, management used the criteria set forth by the Committee of Sponsoring Organizations of the Treadway Commission (COSO) in its 2013 Internal Control—Integrated Framework.
Changes in Internal Control Over Financial Reporting
No changes in our internal control over financial reporting occurred during the fourth quarter of the fiscal year ended December 31, 2019 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.
ITEM 9B.
OTHER INFORMATION
None.
PART III
ITEM 10.
DIRECTORS, EXECUTIVE OFFICERS AND CORPORATE GOVERNANCE
Information concerning directors that is required by this Item 10 will be set forth in our proxy statement for our 2020 annual meeting of stockholders under the headings “Directors and Nominees for Director,” and “Board Committees” which information is incorporated herein by reference. The information concerning our code of ethics is set forth in our proxy statement under the heading “Code of Business Conduct and Ethics.” The name, age, and position of each of our executive officers is set forth under the heading “Executive Officers of the Registrant” in Part I of this Annual Report on Form 10-K, which information is incorporated herein by reference.
ITEM 11.
EXECUTIVE COMPENSATION
Information required by this Item 11 will be set forth in our proxy statement for our 2020 annual meeting of stockholders under the headings “Executive and Director Compensation and Related Matters,” “Compensation Committee Interlocks and Insider Participation” and “Compensation Committee Report,” which information is incorporated herein by reference.
ITEM 12.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT AND RELATED STOCKHOLDER MATTERS
Information required by this Item 12 relating to security ownership of certain beneficial owners and management will be set forth in our 2020 proxy statement under the caption “Security Ownership of Certain Beneficial Owners and Management” and is incorporated herein by reference. Information required by this Item 12 relating to securities authorized for issuance under equity compensation plans will be set forth in our 2020 proxy statement under the caption “Executive and Director Compensation and Related Matters—Securities Authorized for Issuance Under Equity Compensation Plans” and is incorporated herein by reference.

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ITEM 13.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS, AND DIRECTOR INDEPENDENCE
Information required by this Item 13 will be set forth in our proxy statement for our 2020 annual meeting of stockholders under the headings “Policies and Procedures for Related Person Transactions,” “Determination of Independence” and “Board Committees,” which information is incorporated herein by reference.
ITEM 14.
PRINCIPAL ACCOUNTANT FEES AND SERVICES
Information required by this Item 14 will be set forth in our proxy statement for our 2020 annual meeting of stockholders under the heading “Independent Registered Public Accounting Firm’s Fees and Other Matters,” which information is incorporated herein by reference.
PART IV
ITEM 15.
EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a)(1) Financial Statements.
 
 
Page number
in this report
Curis, Inc. and Subsidiaries
 
(a)(2) Financial Statement Schedules.
All schedules are omitted because they are not applicable or the required information is shown in the Financial Statement or Notes thereto.
(a)(3) List of Exhibits.
 
 
 
 
 
 
Incorporated by Reference
Exhibit
No.
 
Description
 
Link to Filing
 
Form
 
SEC Filing
Date
 
Exhibit
Number
 
Filed with
this 10-K
 
 
Articles of Incorporation and By-laws
 
 
 
 
 
 
 
 
 
 
3.1
 
Restated Certificate of Incorporation of Curis, Inc., as amended
 
 
10-Q
 
8/9/2019
 
3.1
 
 
3.2
 
Certificate of Designations of Curis, Inc.
 
 
S-3 (333-50906)
 
8/10/2001
 
3.2
 
 
3.3
 
Amended and Restated By-laws of Curis, Inc.
 
 
10-K
 
2/29/2016
 
3.3
 
 
 
 
Instruments defining the rights of security holders, including indentures
 
 
 
 
 
 
 
 
 
 
4.1
 
Form of Curis Common Stock Certificate
 
 
10-K
 
3/1/2004
 
4.1
 
 
4.2
 
Description of Registrants' Securities
 
 
 
 
 
 
 
 
X
 
 
Material contracts—Management Contracts and Compensatory Plans
 
 
 
 
 
 
 
 
 
 
#10.1
 
Employment Agreement, dated March 29, 2016, as amended September 24, 2018 by and between Curis, Inc. and James E. Dentzer.
 
 
10-Q
 
11/1/2018
 
10.2
 
 
#10.2
 
Employment Agreement, dated September 11, 2019 between Curis, Inc. and William E. Steinkrauss
 
 
10-Q
 
11/5/2019
 
10.1
 
 

127

Table of Contents

 
 
 
 
 
 
Incorporated by Reference
Exhibit
No.
 
Description
 
Link to Filing
 
Form
 
SEC Filing
Date
 
Exhibit
Number
 
Filed with
this 10-K
#10.3
 
Employment Agreement, dated June 1, 2018, by and between Curis, Inc. and Robert E. Martell, M.D., Ph.D.
 
 
10-Q
 
8/2/2018
 
10.2
 
 
#10.4
 
Form of Indemnification Agreement, by and between Curis, Inc. and each non-employee director of the Board of Directors of Curis, Inc.
 
 
10-Q
 
8/7/2014
 
10.3
 
 
#10.5
 
Curis 2000 Stock Incentive Plan
 
 
S-4/A (333-32446)
 
5/31/2000
 
10.71
 
 
#10.6
 
Curis 2000 Director Stock Option Plan
 
 
S-4/A (333-32446)
 
5/31/2000
 
10.72
 
 
#10.7
 
Form of Incentive Stock Option Agreement for awards granted to named executive officers under Curis’ 2000 Stock Incentive Plan
 
 
10-Q
 
10/26/2004
 
10.2
 
 
#10.8
 
Form of Non-statutory Stock Option Agreement for awards granted to directors and named executive officers under Curis’ 2000 Stock Incentive Plan
 
 
10-Q
 
10/26/2004
 
10.3
 
 
#10.9
 
Form of Non-statutory Stock Option Agreement for awards granted to non-employee directors under Curis’ 2000 Director Stock Option Plan
 
 
10-Q
 
10/26/2004
 
10.4
 
 
#10.10
 
Curis 2010 Stock Incentive Plan
 
 
Def 14A
 
4/16/2010
 
Exhibit A
 
 
#10.11
 
Curis 2010 Employee Stock Purchase Plan
 

 
Def 14A
 
4/16/2010
 
Exhibit B
 
 
#10.12
 
Form of Incentive Stock Option Agreement for awards granted to named executive officers under Curis’ 2010 Stock Incentive Plan
 
 
8-K
 
6/4/2010
 
10.1
 
 
#10.13
 
Form of Non-Statutory Stock Option Agreement for awards granted to directors and named executive officers under Curis’ 2010 Stock Incentive Plan
 
 
8-K
 
6/4/2010
 
10.2
 
 
#10.14
 
Form of Restricted Stock Agreement for awards granted to directors and named executive officers under Curis’ 2010 Stock Incentive Plan
 
 
8-K
 
6/4/2010
 
10.3
 
 
#10.15
 
Curis Amended and Restated 2010 Stock Incentive Plan, as amended
 
 
8-K
 
5/28/2015
 
99.1
 
 
#10.16
 
Form of Incentive Stock Option Agreement for awards granted to named executive officers under Curis’ Amended and Restated 2010 Stock Incentive Plan, as amended
 
 
10-K
 
3/8/2018
 
10.21
 
 
#10.17
 
Form of Non-Statutory Stock Option Agreement for awards granted to directors and named executive officers under Curis’ Amended and Restated 2010 Stock Incentive Plan, as amended
 
 
10-K
 
3/8/2018
 
10.22
 
 
#10.18
 
Form of Restricted Stock Agreement for awards granted to directors and named executive officers under Curis’ Amended and Restated 2010 Stock Incentive Plan, as amended
 
 
10-K
 
3/8/2018
 
10.23
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

128

Table of Contents

 
 
 
 
 
 
Incorporated by Reference
Exhibit
No.
 
Description
 
Link to Filing
 
Form
 
SEC Filing
Date
 
Exhibit
Number
 
Filed with
this 10-K
#10.19
 
Form of Incentive Stock Option Agreement (Online Acceptance) for awards granted to named executive officers under Curis’ Amended and Restated 2010 Stock Incentive Plan
 
 
10-K
 
3/9/2017
 
10.21
 
 
#10.20
 
Form of Nonstatutory Stock Option Agreement (Online Acceptance) granted to directors and named executive officers under Curis’ Amended and Restated 2010 Stock Incentive Plan
 
 
10-K
 
3/9/2017
 
10.22
 
 
#10.21
 
Curis Second Amended and Restated 2010 Stock Incentive Plan
 
 
8-K
 
5/22/2017
 
99.1
 
 
#10.22
 
Form of Incentive Stock Option Agreement for awards granted to named executive officers under Curis’ Second Amended and Restated 2010 Stock Incentive Plan
 
 
10-K
 
3/8/2018
 
10.27
 
 
#10.23
 
Form of Non-Statutory Stock Option Agreement for awards granted to directors and named executive officers under Curis’ Second Amended and Restated 2010 Stock Incentive Plan
 
 
10-K
 
3/8/2018
 
10.28
 
 
#10.24
 
Form of Restricted Stock Agreement for awards granted to directors and named executive officers under Curis’ Second Amended and Restated 2010 Stock Incentive Plan
 
 
10-K
 
3/8/2018
 
10.29
 
 
#10.25
 
Form of Nonstatutory Stock Option Agreement - Inducement Grant pursuant to Nasdaq Stock Market Rule 5635(c)(4)
 
 
S-8
 
1/6/2017
 
99.1
 
 
#10.26
 
Curis Third Amended and Restated 2010 Stock Incentive Plan, as amended
 
 
8-K
 
5/30/2019
 
99.1
 
 
#10.27
 
Curis Amended and Restated 2010 Employee Stock Purchase Plan, as amended
 
 
10-K
 
3/8/2018
 
10.31
 
 
 
 
Material contracts—Leases
 
 
 
 
 
 
 
 
 
 
10.28
 
Lease, dated September 16, 2010, by and between Curis, Inc. and the Trustees of Lexington Office Realty Trust relating to the premises at 4 Maguire Road, Lexington, Massachusetts
 
 
8-K
 
9/21/2010
 
10.1
 
 
10.29
 
Second Amendment to Lease, dated November 1, 2017, by and between Curis, Inc. and the Trustees of Lexington Office Realty Trust relating to the premises at 4 Maguire Road, Lexington, Massachusetts
 
 
10-Q
 
11/7/2017
 
10.2
 
 
10.30
 
Lease, dated December 5, 2019, by and between Curis, Inc. and 128 Spring Street Lexington, LLC relating to the premises at 128 Spring Street, Lexington, Massachusetts
 
 
8-K
 
12/6/2019
 
10.1
 
 
 
 
Material contracts—Financing Agreements
 
 
 
 
 
 
 
 
 
 
10.31
 
Consent and Payment Direction Letter Agreement, dated November 20, 2012 and effective as of December 11, 2012 by and between Curis, Inc., Curis Royalty LLC and Genentech, Inc.
 
 
10-K
 
3/13/2013
 
10.32
 
 
10.32
 
Consent and Payment Direction Letter Agreement, dated March 3, 2017 by and between Curis, Inc., Curis Royalty LLC and Genentech, Inc.
 
 
10-K
 
3/9/2017
 
10.28
 
 

129

Table of Contents

 
 
 
 
 
 
Incorporated by Reference
Exhibit
No.
 
Description
 
Link to Filing
 
Form
 
SEC Filing
Date
 
Exhibit
Number
 
Filed with
this 10-K
†10.33
 
Purchase and Sale Agreement, dated as of December 11, 2012 between Curis, Inc. and Curis Royalty LLC
 
 
10-K
 
3/13/2013
 
10.33
 
 
††10.34
 
Royalty Interest Purchase Agreement, dated March 22, 2019, by and between, Curis, Inc., Curis Royalty LLC, a wholly owned subsidiary of Curis, Inc., TPC Investments I LP and TPC Investments II LP
 
 
10-K
 
3/26/2019
 
10.40
 
 
10.35
 
Security Agreement, dated March 22, 2019, by and between, Curis Royalty LLC, a wholly owned subsidiary of Curis, Inc., TPC Investments I LP and TPC Investments II LP
 
 
10-K
 
3/26/2019
 
10.41
 
 
10.36
 
Pledge Agreement, dated March 22, 2019, by and between, Curis, Inc., TPC Investments I LP and TPC Investments II LP
 
 
10-K
 
3/26/2019
 
10.42
 
 
10.37
 
Consent and Payment Direction Letter Agreement, dated March 22, 2019, by and between Curis, Inc., Curis Royalty LLC and Genentech, Inc.
 
 
10-K
 
3/26/2019
 
10.43
 
 
 
 
Material contracts—License and Collaboration Agreements
 
 
 
 
 
 
 
 
 
 
†10.38
 
Collaborative Research, Development and License Agreement, dated June 11, 2003, by and between Curis, Inc. and Genentech, Inc.
 
 
10-Q
 
8/6/2015
 
10.1
 
 
†10.39
 
Collaboration, License and Option Agreement, dated January 18, 2015, by and between Curis, Inc. and Aurigene Discovery Technologies Limited
 
 
10-K
 
2/24/2015
 
10.32
 
 
†10.40
 
First Amendment to Collaboration, License and Option Agreement, dated September 7, 2016, by and between Curis, Inc. and Aurigene Discovery Technologies Limited
 
 
10-Q
 
11/3/2016
 
10.2
 
 
††10.41
 
Second Amendment to Collaboration, License and Option Agreement, dated February 5, 2020, by and between Curis, Inc. and Aurigene Discovery Technologies Limited
 
 
 
 
 
 
 
 
X
††10.42
 
Option and License Agreement, dated January 6, 2020 by and between Curis, Inc and ImmuNext, Inc.
 
 
 
 
 
 
 
 
X
 
 
Material contracts—Miscellaneous
 
 
 
 
 
 
 
 
 
 
10.43
 
Common Stock Purchase Agreement, dated January 18, 2015, by and between Curis, Inc. and Aurigene Discovery Technologies Limited
 
 
10-K
 
2/24/2015
 
10.34
 
 
10.44
 
Stock Purchase Agreement, dated September 7, 2016, by and between Curis, Inc. and Aurigene Discovery Technologies Limited
 
 
10-Q
 
11/3/2016
 
10.3
 
 
10.45
 
Registration Rights Agreement, dated January 18, 2015, by and between Curis, Inc. and Aurigene Discovery Technologies Limited
 

 
10-K
 
2/24/2015
 
10.35
 
 
10.46
 
Registration Rights Agreement, dated September 7, 2016, by and between Curis, Inc. and Aurigene Discovery Technologies Limited
 
 
10-Q
 
11/3/2016
 
10.4
 
 
10.47
 
Common Stock Purchase Agreement, dated February 26, 2020, by and between Curis, Inc. and Aspire Capital Fund, LLC
 
 
8-K
 
2/27/2020
 
10.1
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 

130

Table of Contents

 
 
 
 
 
 
Incorporated by Reference
Exhibit
No.
 
Description
 
Link to Filing
 
Form
 
SEC Filing
Date
 
Exhibit
Number
 
Filed with
this 10-K
10.48
 
Registration Rights Agreement, dated February 26, 2020, by and between Curis, Inc. and Aspire Capital Fund. LLC
 
 
8-K
 
2/27/2020
 
4.1
 
 
10.49
 
Sales Agreement, dated March 4, 2020, by and between Curis, Inc. and JonesTrading Institutional Services LLC
 
 
8-K
 
3/6/2020
 
1.1
 
 
 
 
Code of Conduct
 
 
 
 
 
 
 
 
 
 
14
 
Amended and Restated Code of Business Conduct and Ethics
 
 
10-K
 
3/8/2018
 
14
 
 
 
 
Additional Exhibits
 
 
 
 
 
 
 
 
 
 
21
 
Subsidiaries of Curis
 
 
 
 
 
 
 
 
X
23.1
 
Consent of PricewaterhouseCoopers LLP
 
 
 
 
 
 
 
 
X
31.1
 
Certification of the Chief Executive Officer pursuant to Rule 13a-14(a) of the Exchange Act/15d-14(a) of the Exchange Act
 
 
 
 
 
 
 
 
X
31.2
 
Certification of the Principal Financial Officer pursuant to Rule 13a-14(a) of the Exchange Act/15d-14(a) of the Exchange Act
 
 
 
 
 
 
 
 
X
32.1
 
Certification of the Chief Executive Officer pursuant to Rule 13a-14(b)/15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350
 
 
 
 
 
 
 
 
X
32.2
 
Certification of the Chief Financial Officer pursuant to Rule 13a-14(b)/15d-14(b) of the Exchange Act and 18 U.S.C. Section 1350
 
 
 
 
 
 
 
 
X
101.INS
 
XBRL Instance Document
 
 
 
 
 
 
 
 
 
X
101.SCH
 
XBRL Taxonomy Extension Schema Document
 
 
 
 
 
 
 
 
 
X
101.CAL
 
XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
 
 
 
 
 
 
X
101.DEF
 
XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
 
 
 
 
 
 
X
101.LAB
 
XBRL Taxonomy Extension Label Linkbase Document
 
 
 
 
 
 
 
 
 
X
101.PRE
 
XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
 
 
 
 
 
 
X

#    Indicates management contract or compensatory plan or arrangement.

Confidential treatment has been granted as to certain portions, which portions have been separately filed with the Securities and Exchange Commission.

††
Confidential treatment has been requested as to certain portions, which portions have been separately filed with the Securities and Exchange Commission.

131

Table of Contents

ITEM 16.
FORM 10-K SUMMARY
None.
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized.
 
 
 
 
CURIS, INC.
 
 
By:
 
/s/ JAMES DENTZER
 
 
James Dentzer
President and Chief Executive Officer
Date: March 19, 2020
Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the dates indicated.
 
 
 
 
 
 
Signature
 
Title
 
Date
 
 
 
/s/ JAMES DENTZER
 
President, Chief Executive Officer and Director (Principal Executive Officer)
 
March 19, 2020
James Dentzer
 
 
/s/ WILLIAM STEINKRAUSS
 
Chief Financial Officer (Principal Financial and Accounting Officer)
 
March 19, 2020
William Steinkrauss
 
 
/s/ MARTYN D. GREENACRE
 
Chairman of the Board of Directors
 
March 19, 2020
Martyn D. Greenacre
 
 
/s/ KENNETH I. KAITIN
 
Director
 
March 19, 2020
Kenneth I. Kaitin
 
 
/s/ LORI A. KUNKEL
 
Director
 
March 19, 2020
Lori A. Kunkel
 
 
/s/ MARC RUBIN
 
Director
 
March 19, 2020
Marc Rubin
 
 
 
 

132
Exhibit


Exhibit 4.2

DESCRIPTION OF SECURITIES REGISTERED UNDER SECTION 12 OF THE EXCHANGE ACT
The following description of registered securities of Curis, Inc. (“us,” “our,” “we” or the “Company”) is intended as a summary only and therefore is not a complete description. This description is based upon, and is qualified by reference to, our certificate of incorporation, our bylaws and applicable provisions of the Delaware General Corporate Law (the “DGCL”). You should read our certificate of incorporation and by-laws, which are incorporated by reference as Exhibit 3.1 and Exhibit 3.3, respectively, to the Annual Report on Form 10-K of which this Exhibit 4.2 is a part, for the provisions that are important to you.
Authorized Capital Stock
Our authorized capital stock consists of 101,250,000 shares of common stock, par value $0.01 per share, and 5,000,000 shares of preferred stock, par value $0.01 per share. Our common stock is registered under Section 12(b) of the Exchange Act.
Common Stock
Voting Rights. For all matters submitted to a vote of stockholders, each holder of common stock is entitled to one vote for each share registered in his or her name on our books. Our common stock does not have cumulative voting rights. Except when a larger vote is required by applicable law, our certificate of incorporation or our by-laws, all elections shall be decided by a plurality, and all other questions shall be decided by a majority of the votes cast by stockholders entitled to vote thereon at a duly held meeting of stockholders at which a quorum is present. The presence in person or by proxy of the holders of record of a majority of our issued and outstanding shares entitled to vote at such meeting constitutes a quorum for the transaction of business at meetings of the stockholders.
Dividends. If our board of directors declares a dividend, holders of common stock will receive payments from our funds that are legally available to pay dividends. However, this dividend right is subject to any preferential dividend rights we may grant to the persons who hold preferred stock, if any is outstanding.
Liquidation and Dissolution. If we are liquidated or dissolved, the holders of our common stock will be entitled to share ratably in all the assets that remain after we pay our liabilities and any amounts we may owe to the persons who hold preferred stock, if any is outstanding.
Other Rights. Holders of the common stock have no right to convert the stock into any other security, have the stock redeemed, purchase additional stock, or maintain their proportionate ownership interest and there are no sinking fund provisions applicable to our common stock. The rights preferences and privileges of the holders of common stock are subject to, and may be adversely affected by, the rights of the holders of shares of any series of preferred stock that the Company may designate and issue.
Preferred Stock
We are authorized to issue “blank check” preferred stock, which may be issued in one or more series upon authorization of our board of directors. Our board of directors is authorized to fix the designation of the series, the number of authorized shares of the series, dividend rights and terms, conversion rights, voting rights, redemption rights and terms, liquidation preferences and any other rights, powers, preferences and limitations applicable to each series of preferred stock. The authorized shares of our preferred stock are available for issuance without further action by our stockholders, unless such action is required by applicable law or the rules of any stock exchange on which our securities may be listed. If the approval of our stockholders is not required for the issuance of shares of our preferred stock, our board may determine not to seek stockholder approval.
A series of our preferred stock could, depending on the terms of such series, impede the completion of a merger, tender offer or other takeover attempt. Our board of directors will make any determination to issue preferred shares based upon its judgment as to the best interests of our stockholders. Our directors, in so acting, could issue preferred stock having terms that could discourage an acquisition attempt through which an acquirer may be able to change the composition of our board of directors, including a tender offer or other transaction that some, or a majority, of our stockholders might believe to be in their best interests or in which stockholders might receive a premium for their stock over the then-current market price of the stock.
Provisions of Our Certificate of Incorporation and By-laws and the Delaware Law That May Have Anti-Takeover Effects
Board of Directors. Our by-laws provide for a board of directors divided as nearly equally as possible into three classes. Each class is elected to a term expiring at the annual meeting of stockholders held in the third year following the year of such election. The number of directors comprising our board of directors is fixed from time to time by the board of directors.        





Removal of Directors by Stockholders. Our by-laws provide that directors may be removed only for cause by the affirmative vote of the holders of 75% of the shares of our capital stock issued, outstanding and entitled to vote.
Advance Notice Provisions. Our by-laws provide that a stockholder must notify us in writing of any stockholder nomination of a director and of any other business that the stockholder intends to bring at a meeting of stockholders not earlier than the 90th day and not later than the 60th day prior to such meeting; provided, if less than 70 days’ notice or prior public disclosure of the date of the meeting is given to stockholders, such nomination shall have been mailed or delivered to the Secretary not later than the close of business on the 10th day following the date on which the notice of the meeting was mailed or such public disclosure was made, whichever occurs first.
No Action by Written Consent. Our certificate of incorporation provides that our stockholders may not act by written consent and may only act at duly called meetings of stockholders; and that the affirmative vote of the holders of at least 75% of the shares of capital stock issued and outstanding and entitled to vote shall be required to amend or repeal, or to adopt any provision inconsistent with, the provision of our certificate of incorporation prohibiting stockholders from acting by written consent.
Amendment to Bylaws. Our by-laws may be amended or repealed by a majority vote of our board of directors or by the affirmative vote of the holders of a majority of our capital stock issued and outstanding and entitled to vote. In addition, the affirmative vote of the holders of at least 75% of the shares of our capital stock issued and outstanding and entitled to vote shall be required to amend or repeal, or to adopt any provision inconsistent with the provisions of our by-laws related to the powers, number, term, classification, committees, the conduct of business at meetings, action by written consent, removal and filling of vacancies with respect to our board of directors; the calling of special meetings of stockholders; the nomination of directors; notice of business at an annual meeting and any provision relating to the amendment of any of these provisions.
Delaware Business Combination Statute. Section 203 of the DGCL is applicable to us. Section 203 of the DGCL restricts some types of transactions and business combinations between a corporation and a 15% stockholder. A 15% stockholder is generally considered by Section 203 to be a person owning 15% or more of the corporation’s outstanding voting stock. Section 203 refers to a 15% stockholder as an “interested stockholder.” Section 203 restricts these transactions for a period of three years from the date the stockholder acquires 15% or more of our outstanding voting stock. With some exceptions, unless the transaction is approved by the board of directors and the holders of at least two-thirds of the outstanding voting stock of the corporation, Section 203 prohibits significant business transactions such as:
a merger with, disposition of significant assets to or receipt of disproportionate financial benefits by the interested stockholder, and

any other transaction that would increase the interested stockholder’s proportionate ownership of any class or series of our capital stock.

The shares held by the interested stockholder are not counted as outstanding when calculating the two-thirds of the outstanding voting stock needed for approval.
The prohibition against these transactions does not apply if:
prior to the time that any stockholder became an interested stockholder, the board of directors approved either the business combination or the transaction in which such stockholder acquired 15% or more of our outstanding voting stock, or

the interested stockholder owns at least 85% of our outstanding voting stock as a result of a transaction in which such stockholder acquired 15% or more of our outstanding voting stock. Shares held by persons who are both directors and officers or by some types of employee stock plans are not counted as outstanding when making this calculation.



Exhibit


Exhibit 10.41
Certain identified information has been excluded from the exhibit because it is both (i) not material and (ii) would likely cause competitive harm to the Company, if publicly disclosed. Double asterisks denote omissions.

SECOND AMENDMENT TO
COLLABORATION, LICENSE AND OPTION AGREEMENT
This Second Amendment to Collaboration, License and Option Agreement (this “Second Amendment”) is entered into as of February 5, 2020 (the “Second Amendment Date”), by and between Aurigene Discovery Technologies Limited, a company organized under the laws of India, having an address of 39-40, KIADB Industrial Area, Phase II, Electronic City Hosur Road, Bangalore - 560100 Karnataka, India (“Aurigene”), and Curis, Inc., a corporation organized under the laws of Delaware, USA, having an address of 4 Maguire Road, Lexington, Massachusetts 02421-3112, USA (“Curis”).
Recitals
Whereas, Aurigene and Curis are parties to that certain Collaboration, License and Option Agreement dated January 18, 2015 (the “Original Agreement”), as amended by that certain letter agreement dated November 4, 2015 (the “2015 Letter Agreement”), and as further amended by that certain First Amendment to Collaboration, License and Option Agreement, dated September 7, 2016 (the “First Amendment”). As used in this Second Amendment, “Agreement” shall mean the Original Agreement, as amended by the 2015 Letter Agreement and the First Amendment;
Whereas, under the Agreement, Curis has an exclusive license from Aurigene to develop and commercialize Program Compounds and Products for the PD-1/VISTA Licensed Program (the “PD-1/VISTA Licensed Program”), including the Program Compound known as CA‑170, including any analogs, derivatives, prodrugs and polymorphs thereof, and any salts, crystalline forms, solvates, hydrates and stereoisomers of any of the foregoing (collectively, “CA‑170”) and Products containing CA‑170 (“CA‑170 Products”), worldwide, excluding India and Russia, and has certain payment obligations to Aurigene with respect to such development and commercialization;
Whereas, under the Agreement, Aurigene has an exclusive license from Curis to develop and commercialize Program Compounds and Products for the PD-1/VISTA Licensed Program in India and Russia; and
Whereas, the Parties now wish to amend the Agreement to, among other things: (i) expand Aurigene’s territory with respect to CA‑170 and CA‑170 Products to all of Asia; and (ii) provide for Aurigene to conduct a clinical study of CA‑170 in combination with chemoradiation followed by maintenance CA-170, in Non-Small Cell Lung Cancer (NSCLC) in Aurigene’s territory; in each case, on the terms and subject to the conditions set forth herein.
Agreement
Now, Therefore, in consideration of the foregoing premises and the mutual covenants contained herein and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, Aurigene and Curis agree as follows:





1.Defined Terms. Capitalized terms used but not otherwise defined in this Second Amendment shall have the meanings provided in the Agreement. As used in this Second Amendment:
(a)“Aurigene CA‑170 Territory” shall mean the countries listed in Exhibit A attached to this Second Amendment.
(b)“Curis CA‑170 Territory” shall mean the Curis Territory, excluding the Republic of India and the Russian Federation and the Aurigene CA‑170 Territory.
2.CA-170 Rights. Effective as of the Second Amendment Date (subject to paragraph 4(e) of this Second Amendment) and solely with respect to CA‑170 and CA‑170 Products:
(a)references to the “Aurigene Territory” in the Agreement and this Second Amendment shall mean the Republic of India, the Russian Federation and the Aurigene CA‑170 Territory;
(b)references in the Agreement to the “Curis Territory” shall mean the Curis CA‑170 Territory;
(c)the Parties acknowledge that the Aurigene Territory License under Section 4.4 of the Agreement in the Aurigene CA‑170 Territory is royalty-bearing pursuant to the terms set forth in this Second Amendment;
(d)the Parties’ respective rights and obligations under Section 4.5(b) of the Agreement shall not apply with respect to CA‑170 and CA‑170 Products;
(e)references in the Agreement to “Major Market” shall not include Japan;
(f)in addition to the Aurigene CA-170 NSCLC Study (as defined below), Aurigene shall have the right to conduct an additional IND-enabling study or clinical trial in non-small cell lung cancer regardless of whether Curis is pursuing or has obtained Regulatory Approval for CA‑170 or CA‑170 Products in non-small cell lung cancer in the same dosage form(s) and formulation(s) in the Curis Territory; provided that Aurigene’s obligations under Section 5.5 of the Agreement to provide Curis written notice and a copy of the protocol for such study at least [**] prior to the scheduled initiation of such study and consider in good faith any comments received from Curis during such period shall continue to apply;
(g)subject to the preceding paragraph 2(f) and paragraph 4(a) of this Second Amendment, Section 5.5 of the Agreement shall continue to apply to Aurigene’s conduct of IND‑enabling studies and clinical trials of CA‑170 and CA‑170 Products;
(h)Section 10.3(a)(ii) of the Agreement shall apply, mutatis mutandis, with respect to any Curis Patent Rights in the Aurigene Territory that cover or claim inventions that are necessary or useful for the development, manufacture or commercialization of CA‑170 or CA‑170 Products;
(i)notwithstanding Section 10.3(a)(ii) of the Agreement, Aurigene shall have final decision-making authority with respect to prosecution and maintenance of Aurigene Patent Rights






in the Aurigene CA‑170 Territory; provided that in the event any such Aurigene Patent Rights cover or claim inventions that are necessary or useful for the development, manufacture or commercialization of both CA‑170 or CA‑170 Products and other Program Compounds or Products for the PD-1/VISTA Licensed Program, then Section 10.3(a)(ii) shall continue to apply; and
(j)without limiting Section 4.7 of the Agreement, and except as permitted under Section 4.6(a)(i) of the Agreement, so long as Aurigene is using Commercially Reasonable Efforts to develop, obtain Regulatory Approval for, and commercialize CA‑170 Product in the Aurigene Territory, Curis agrees not to develop, seek Regulatory Approval for, or commercialize any Program Compounds or Products from the PD-1/VISTA Licensed Program in the Aurigene Territory.
3.CA‑170 Asia Financial Payments. In consideration of the expansion of the Aurigene Territory with respect to CA‑170 and CA‑170 Products, Aurigene hereby agrees to pay royalties to Curis with respect to the commercialization of CA‑170 Products in the Aurigene CA‑170 Territory by or on behalf of Aurigene, its Affiliates and sublicensees, in accordance with Sections 6.7(a) and 6.8(b) of the Agreement; in each case, mutatis mutandis. In addition, the Parties agree that the applicable provisions of Sections 6.10, 6.11, 6.12, 6.13, 6.14, 7.1, 7.2, 7.3(b) (with references to the “Republic of India” and “U.S. federal” changed to “U.S.” and “Indian,” respectively), 7.4 and 7.5 of the Agreement (in each case, mutatis mutandis) shall apply to Aurigene’s payment obligations under this paragraph 3. For clarity, Curis shall have no payment obligations to Aurigene under the Agreement with respect to the development, registration or commercialization of CA‑170 or CA‑170 Products in the Aurigene CA‑170 Territory. For further clarity, Aurigene’s payment obligations under this paragraph 3 shall terminate in the event of termination of the Agreement in its entirety or with respect to the PD‑1/VISTA Licensed Program.
4.CA‑170 Development and Regulatory Matters in the Aurigene CA‑170 Territory.
(a)Aurigene CA‑170 NSCLC Study. Notwithstanding the provisions of Sections 4.11(b) and 5.5 of the Agreement to the contrary, as of the Second Amendment Date, Curis hereby agrees that Aurigene may conduct, and Aurigene hereby agrees to use Commercially Reasonable Efforts to conduct, a randomized clinical trial of CA‑170 in combination with chemoradiation followed by maintenance CA-170, in NSCLC, under [**] protocol [**] (the “Protocol”), in the Aurigene Territory (the “Aurigene CA-170 NSCLC Study”), at Aurigene’s sole expense. In case of any future protocol amendment, Aurigene shall provide such protocol amendment to Curis for review and approval at least [**] prior to the date Aurigene anticipates submitting such protocol amendment for any regulatory or ethics committee approval. As per protocol version [**], Aurigene CA-170 NSCLC Study will [**] evaluate safety of CA-170 with chemotherapy and radiation in up to [**] patients and [**] will be [**] study with approximately 240 patients [**]. Aurigene shall submit the Protocol for regulatory authority review in the [**] calendar year and start enrollment in the [**] (the “Enrollment Period Start”), assuming timely regulatory and ethics committee approvals and drug product availability. Aurigene shall use Commercially Reasonable Efforts to complete enrollment (i.e., first dosing of last patient enrolled) in the Aurigene CA-170 NSCLC Study within [**] of the Enrollment Period Start (the “Enrollment Period”). If there are unexpected issues with respect to drug product availability or emerging safety or other enrollment difficulties, Aurigene shall inform Curis in writing within [**]






of Aurigene becoming aware of such issues or enrollment difficulties. Aurigene shall conduct the Aurigene CA-170 NSCLC Study in compliance with all Applicable Laws, and, as applicable, GCP. Without limiting the generality of the foregoing, Aurigene (itself or with or through its Affiliates or sublicensees) shall be solely responsible for preparing and submitting all required INDs and other Regulatory Filings in connection with the Aurigene CA-170 NSCLC Study in the Aurigene Territory, at Aurigene’s sole expense. Aurigene may utilize Affiliates for the conduct of the Aurigene CA-170 NSCLC Study, provided that: (i) none of Curis’s rights hereunder are diminished or otherwise adversely affected as a result thereof; (ii) each such Affiliate undertakes in writing obligations of confidentiality and non-use regarding Confidential Information at least as stringent as those undertaken by the Parties pursuant to Article 8 of the Agreement; (iii) prior to initiating performance of any such activities, each such Affiliate has signed a binding agreement or instrument assigning, and agreeing to assign, to Aurigene all data and other work product resulting from performance of such activities (subject to reasonable and customary exceptions for improvements to the applicable Affiliate’s pre‑existing proprietary technology, or technology of broad applicability that such Affiliate uses for multiple products in addition to CA‑170 or CA‑170 Product, provided, in each case, that such improvements do not use or incorporate Confidential Information of Curis), including all Patent Rights and other intellectual property rights therein; and (iv) Aurigene shall at all times be fully responsible for the performance of such Affiliate and for payment of such Affiliate.
(b)Diligence. Aurigene shall use Commercially Reasonable Efforts to have completed enrollment in the Aurigene CA-170 NSCLC Study of the specified numbers of patients set forth in the Protocol prior to expiration of the Enrollment Period. In addition, Aurigene (directly or through its Affiliates or sublicensees) shall use Commercially Reasonable Efforts to develop, obtain Regulatory Approval for, and commercialize CA‑170 Product for use within the Field in Japan. For purposes of this paragraph 4(b), it is anticipated that the level of effort may change over time, reflecting changes in the status of Japan.
(c)Disclosure of Results. Aurigene shall (i) disclose and provide a copy to Curis of all results of CMC Activities performed by or on behalf of Aurigene with respect to CA‑170 or CA‑170 Product, including CMC Activities in preparation for or connection with any NDA in the Aurigene CA‑170 Territory, and (ii) disclose and provide a copy to Curis of full tables, figures and listings from, and deliver a true and complete copy of the final study report for, each study, whether clinical or otherwise, of CA‑170 or CA‑170 Product conducted by or on behalf of Aurigene (including the Aurigene CA-170 NSCLC Study), in each case, promptly following the availability thereof. Aurigene shall disclose and provide a copy to Curis of all other information and data reasonably requested by Curis as necessary or useful for manufacture, development or commercialization of CA‑170 or CA‑170 Product in or for the Curis CA‑170 Territory.
(d)Rights of Access and Reference to Regulatory Documents. Aurigene hereby grants to Curis the right to access and reference all INDs and NDAs submitted to, and Regulatory Approvals obtained from, any Regulatory Authority in the Aurigene CA‑170 Territory for CA‑170 or any CA‑170 Product; in each case, solely for the purposes of (i) obtaining and maintaining Regulatory Approvals for CA‑170 and CA‑170 Products in the Field in the Curis CA‑170 Territory, and (ii) complying with applicable pharmacovigilance and other regulatory requirements with respect to CA‑170 Products in the Curis CA‑170 Territory. Aurigene shall,






promptly upon Curis’s request, file with the applicable Regulatory Authority(ies) such letters of access or reference as may be necessary to accomplish the intent of this paragraph 4(d).
(e)Curis’ Rights in the Event of Aurigene Breach. In the event of any material breach by Aurigene of its obligations with respect to CA‑170 or CA‑170 Products under this Second Amendment that is not cured within the applicable cure period under Section 11.2 of the Agreement, Curis shall have the right to terminate Aurigene’s rights under this Second Amendment on account of such breach upon written notice to Aurigene, but Curis shall not have the right to terminate the Agreement in its entirety or to terminate the Agreement in part with respect to the PD-1/VISTA Licensed Program pursuant to Section 11.2 of the Agreement or to elect the alternative remedies under Section 11.3 of the Agreement on account of such breach. Such termination by Curis by reason of Aurigene’s uncured material breach of paragraph 4(b) or the first or fifth sentence of paragraph 4(a) of this Second Amendment shall be Curis’ sole remedy for such breach; otherwise, such termination by Curis shall not preclude Curis from pursuing all rights and remedies it may have at law or in equity with respect to such breach. For clarity:
(i)in the event of termination of the Agreement in its entirety or termination of the Agreement in part with respect to the PD‑1/VISTA Licensed Program, in each case, either by Aurigene pursuant to Section 11.2 of the Agreement or by Curis pursuant to Section 11.4 of the Agreement, this Second Amendment shall also terminate; provided that paragraphs 1, 2(a), 2(b), 2(h) and 6 of this Second Amendment shall survive;
(ii)on a country-by-country basis in the Aurigene CA‑170 Territory, in the event of termination of the Agreement in its entirety or termination of the Agreement in part with respect to the PD-1/VISTA Licensed Program by Curis pursuant to Section 11.2 of the Agreement before the Royalty Term with respect to a CA‑170 Product in any country in the Aurigene CA‑170 Territory has expired, this Second Amendment shall also terminate as to such CA‑170 Product in such country; provided that paragraph 6 of this Second Amendment shall survive; and
(iii)on a country-by-country basis in the Aurigene CA‑170 Territory, in the event of termination of the Agreement in its entirety or termination of the Agreement in part with respect to the PD‑1/VISTA Licensed Program, in each case, by Curis pursuant to Section 11.2 of the Agreement, after the Royalty Term with respect to a CA‑170 Product in any country in the Aurigene CA‑170 Territory has expired, this Second Amendment shall also terminate; provided that (A) paragraphs 1, 2(a), 2(b) and 2(h) of this Second Amendment shall survive as applicable to such CA‑170 Product in such country; and (B) paragraph 6 of this Second Amendment shall survive.
5.Curis Warranties. Curis represents and warrants to Aurigene that, as of the Second Amendment Date:
(a)Curis has the right to grant all rights and licenses it purports to grant to Aurigene under this Second Amendment with respect to the Curis Technology; and
(b)Curis has not granted any Third Party any license, option or other right with respect to CA‑170 or CA‑170 Products in the Aurigene CA‑170 Territory.







6.Error Correction in Section 5.4(a). Section 5.4(a) of the Agreement is hereby amended to remove the reference to “or Third Party subcontractor” in Section 5.4(a)(iii).
7.Effectiveness of Agreement. Except as expressly amended by this Second Amendment, the Agreement shall remain in full force and effect in accordance with its terms.
8.Counterparts. This Second Amendment may be executed in counterparts, each of which shall be deemed an original document, and all of which, together with this writing, shall be deemed one instrument. This Second Amendment may be executed by facsimile or PDF signatures, which signatures shall have the same force and effect as original signatures.
9.Miscellaneous. For clarity, Section 8.5(b) and Articles 13 and 14 of the Agreement shall apply with respect to this Second Amendment.
[Signature page follows.]









































In Witness Whereof, the Parties hereto have duly executed this Second Amendment as of the Second Amendment Date.
Aurigene Discovery Technologies Limited
Curis, Inc.
By: /s/ Murali Ramachandra, Ph.D.
Name: Murali Ramachandra, Ph.D.
Title: Chief Executive Officer
By:/s/ James E. Dentzer
Name: James E. Dentzer
Title: President and CEO





Exhibit



Execution Version
Certain identified information has been marked in the exhibit because it is both (i) not material and (ii) would likely cause competitive harm to the Company, if publicly disclosed.         Double asterisks denote omissions
Exhibit 10.42
OPTION AND LICENSE AGREEMENT
This Option and License Agreement (together with any exhibits or schedules attached hereto, this “Agreement”) is made and entered into as of January 6, 2020 (the “Effective Date”), by and between ImmuNext, Inc., a Delaware corporation located at 1 Medical Center Drive, HB7937, Lebanon, New Hampshire 03755 (“ImmuNext”), and Curis, Inc., a Delaware corporation, with offices at 4 Maguire Road, Lexington, Massachusetts 02421 (“Curis”). ImmuNext and Curis are sometimes referred to herein individually as a “Party” and collectively as the “Parties”.
RECITALS
Whereas, ImmuNext is engaged in drug discovery and development of compounds relating to the V-domain Ig suppressor of T cell activation (“VISTA”);
Whereas, Curis has expertise in research and development of pharmaceutical products;
Whereas, ImmuNext has rights under certain patents, patent applications and know-how relating to compounds that antagonize VISTA;
Whereas, Curis desires to engage in a collaborative effort with ImmuNext pursuant to which Curis shall carry out a Phase 1A/1B Study (as defined below), and Curis shall have an exclusive option such that, upon exercise of such option, Curis shall have exclusive rights to further develop and commercialize certain compounds that antagonize VISTA, all on the terms and conditions set forth herein; and
Whereas, ImmuNext desires to grant to Curis an exclusive option to obtain an exclusive, worldwide license to develop and commercialize such compounds in the Field and, upon exercise of such option, to obtain such license; in each case, on the terms and conditions set forth herein.
Now, Therefore, in consideration of the foregoing premises and the mutual promises, covenants and conditions contained in this Agreement, the Parties agree as follows:
1.Definitions.
The terms in this Agreement with initial letters capitalized, whether used in the singular or the plural, shall have the meaning set forth below or, if not listed below, the meaning designated in places throughout this Agreement.

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1.1“Academic Researcher” means an academic researcher or academic institution engaged by a Party or its Affiliate to conduct activities on behalf of such Party or its Affiliate under this Agreement.
1.2“Actual Combination Product Net Sales” has the meaning set forth in Section 1.125.
1.3“Affiliate” of a Party means any Person that directly or indirectly is controlled by, controls or is under common control with a Party to this Agreement. For the purposes of this definition, the term “control” (including, with correlative meanings, the terms “controlled by” and “under common control with”) as used with respect to a Person means (a) in the case of a corporate entity, direct or indirect ownership of voting securities entitled to cast more than fifty percent (50%) of the votes in the election of directors, (b) in the case of a non-corporate entity, direct or indirect ownership of more than fifty percent (50%) of the equity interests with the power to direct the management and policies of such entity, or (c) any other arrangement whereby a Person controls or has the right to control the board of directors or equivalent governing body or management of a corporation or other entity; provided that, if local Laws restrict foreign ownership, control shall be established by direct or indirect ownership of the maximum ownership percentage that may, under such local Laws, be owned by foreign interests. Notwithstanding the foregoing, Immunometabolism Development LLC (“IDC”) shall not be an Affiliate of ImmuNext for purposes of this Agreement.
1.4“Alliance Manager(s)” has the meaning set forth in Section 2.2.
1.5“American Arbitration Association”, or “AAA”, has the meaning set forth in Section 16.3.
1.6“Antibody” means (a) an antibody molecule, (b) any other molecule comprising or containing one or more immunoglobulin variable domains or a part of any such domains retaining the functionality of such domains, or any fragments, variants, modifications or derivatives thereof that retain the functionality of such domains, or (c) other protein molecule or polypeptide molecule. The term “Antibody” shall include (i) full length antibodies, (ii) less than full length forms of antibodies, such as Fv, Fab, F(ab’)2, and single chain antibodies and (iii) fusions or conjugates composed of a molecule covered by clauses (i) or (ii) above bound to a toxin or label or other compound or functional moiety.
1.7“Assigned Invention” has the meaning provided in Section 12.1.2(b).
1.8“Assigned Technology” has the meaning provided in Section 12.1.2(b).
1.9“Aurigene Agreement” means that certain Collaboration, License and Option Agreement, by and between Curis and Aurigene Discovery Technologies Limited, dated January 18, 2015, as amended from time to time.
1.10“Bankruptcy Code” has the meaning set forth in Section 15.6.
1.11“Bayh-Dole Act” has the meaning set forth in Section 8.3.4(d).

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1.12“Biosimilar” shall mean, with respect to a Product that has received Regulatory Approval in a regulatory jurisdiction and is being marketed and sold by Curis or any of its Affiliates or Sublicensees in such jurisdiction, any biological product that: (a) is sold in such jurisdiction by a Third Party that is not a Sublicensee of Curis or its Affiliates and did not purchase or acquire such product in a chain of distribution that included Curis or any of its Affiliates or Sublicensees; (b) is claimed to be biosimilar to or interchangeable with such Product or otherwise references or relies on the approved BLA for such Product in such jurisdiction (or the safety or efficacy data submitted in support of such BLA) to support a BLA submitted under Section 351(k) of the U.S. Public Health Service Act and the regulations promulgated thereunder (or any successor thereto) or any foreign equivalent thereof in the applicable jurisdiction; and (c) is approved for sale for at least one of the same Indications as such Product in such jurisdiction.
1.13“BLA” means: (a) a Biologics License Application submitted to the FDA pursuant to Section 351(a) of the U.S. Public Health Service Act and the regulations promulgated thereunder, or its successor application; (b) an application for authorization to market and/or sell a biological product submitted to a Regulatory Authority in any country or jurisdiction other than the U.S., including, with respect to the European Union, a marketing authorization application submitted to the EMA pursuant to the Centralized Approval Procedure or with the applicable Regulatory Authority of a country in the European Economic Area with respect to the decentralized procedure, mutual recognition or any national approval procedure; or (c) with respect to any biological product for which any of the foregoing applications has been approved by the applicable Regulatory Authority, an application to supplement or amend such approved application.
1.14“Breaching Party” has the meaning set forth in Section 15.2.1.
1.15“Brief” has the meaning set forth in Section 17.1.2.
1.16“Business Day” means a day other than Saturday, Sunday or any day on which commercial banks located in New York, New York are authorized or obligated by Laws to close.
1.17“Calendar Quarter” means, with respect to any given Calendar Year, the respective periods of three (3) consecutive calendar months ending on March 31, June 30, September 30 or December 31; provided, however, that (a) the first calendar quarter of the Term shall extend from the Effective Date to the end of the first full calendar quarter thereafter; and (b) the last calendar quarter of the Term shall end upon the date of termination of this Agreement.
1.18“Calendar Year” means each successive period of twelve (12) consecutive months commencing on January 1 and ending on December 31; provided, however, that (a) the first calendar year of the Term shall commence on the Effective Date and end on December 31 of the same year; and (b) the last calendar year of the Term shall commence on January 1 of the calendar year in which this Agreement is terminated and end on the date of termination of this Agreement.


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1.19“Cessation Period” has the meaning set forth in Section 15.4.
1.20“Change of Control” means, with respect to a Party, (a) a merger, reorganization, or consolidation of such Party with or into any Third Party, or any other corporate reorganization involving a Third Party, that results in those persons or entities that are stockholders of such Party immediately prior such merger, reorganization, or consolidation owning less than fifty percent (50%) of the surviving entity’s voting power immediately after such merger, reorganization, or consolidation, (b) a change in the legal or beneficial ownership of fifty percent (50%) or more of the combined voting power of the outstanding securities of such Party (whether in a single transaction or series of related transactions), where immediately after giving effect to such change, the legal or beneficial owner of more than fifty percent (50%) of the voting securities of such Party is a Third Party or (c) the sale, transfer, lease, license or other disposition to a Third Party of all or substantially all of such Party’s business or assets to which this Agreement relates in one or a series of related transactions; provided, however, that a “Change of Control” shall not include any transaction or series of related transactions principally conducted for bona fide equity financing purposes in which cash is received by such Party or any successor or indebtedness of such Party is cancelled or converted or a combination thereof.
1.21“Clinical Trials” means Phase 1 Trials, Phase 2 Trials, Phase 3 Trials, Phase 4 Trials, and/or variations of such trials (for example, Phase 2/3).
1.22“Combination Product” means any product that comprises a Product sold in conjunction with one or more Other Actives, whether or not packaged together or in the same therapeutic formulation.
1.23“Commercial Milestone Event” has the meaning set forth in Section 9.3.2(a).
1.24“Commercial Milestone Payment” has the meaning set forth in Section 9.3.2(a).
1.25“Commercialization” or “Commercialize” means activities directed to obtaining pricing and reimbursement approvals, marketing, promoting, manufacturing, distributing, importing, exporting, using, offering for sale, or selling a product.
1.26“Commercially Reasonable Efforts” means (a) with respect to activities of ImmuNext under the Research Plan as set forth in this Agreement and (b) with respect to activities of Curis with respect to the Development or Commercialization of a particular Product, and in each case of (a) and (b), the efforts and resources comparable to those undertaken by a biopharmaceutical or biotechnology company of comparable size and resources as the applicable Party relating to the research, Development or Commercialization of a similar product owned by such company, or to which such company has exclusive rights, with comparable market potential and at a similar stage in development or lifecycle. For purposes of both (a) and (b) above, all relevant factors, as measured by the facts and circumstances at the time such efforts are due, shall be taken into account, including, as applicable and without limitation, stage of development; efficacy and safety relative to competitive products in the marketplace; actual or anticipated Regulatory Approval labeling; the nature and extent of market exclusivity (including

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patent coverage, proprietary position and regulatory exclusivity); and the cost and time required for and likelihood of obtaining Regulatory Approval.
1.27“Competitive Infringement” means, on a country-by-country basis, any suspected or threatened infringement by a Third Party of any ImmuNext Patent, Curis Owned Patent or Jointly Owned Patent (“Infringement”), where (a) any such alleged or threatened Infringement is on account of a Third Party’s manufacture, use, import, offer for sale or sale of a VISTA Antagonist in the Field; (b) a Third Party files any certification in the United States under 21 U.S.C. §355(b)(2) or 21 U.S.C. §355(j)(2) or similar provisions in other jurisdictions in connection with an abbreviated biological product application, or any foreign equivalent thereof, or other BLA, in each case, for a VISTA Antagonist, wherein a Product is the reference product (a “Patent Certification”); or (c) any declaratory judgment action filed by a Third Party that is developing, manufacturing or commercializing Products in the Field alleging the invalidity, unenforceability or non-infringement of any of the ImmuNext Patents, Curis Owned Patents or Jointly Owned Patents.
1.28“Compound” means (a) the Lead Compound; (b) each of the [**] distinct monoclonal Antibodies that are VISTA Antagonists and bear complementarity-determining regions (CDRs) different from the Lead Compound and each other, and that are Controlled by ImmuNext as of the Effective Date or during the Term, the CDRs for which are set forth on Schedule 1.28 (such Antibodies, collectively with the Lead Compound, the “Licensed VISTA Antagonists”); and (c) any VISTA Antagonist resulting from the modification by or on behalf of Curis of any portion of a Licensed VISTA Antagonist set forth in clause (a) or (b) of this definition; but specifically excluding (i) any modification that would cause a Licensed VISTA Antagonist to cease being a VISTA Antagonist, (ii) any modification that is prohibited by clause (a) of Section 8.4.2 or (iii) any conjugating that is prohibited by clause (b) of Section 8.4.2. The CDRs of each of the [**] Licensed VISTA Antagonists are set forth in Schedule 1.28, which may be amended in accordance with Section 8.6. In no event will any Excluded Compound be considered a “Compound” hereunder.
1.29“Confidential Information” of a Party means, subject to the exceptions set forth in Section 13.2, all trade secrets, processes, formulae, Know-How, inventions (including Inventions), chemical or biological materials, chemical structures, techniques, marketing plans, strategies, customer lists, or other information that has been Made by such Party, or to which rights have been assigned or licensed to such Party, as well as any other information and materials that are deemed confidential or proprietary to or by such Party (including all information and materials of such Party’s customers and any other Third Party and their consultants), in each case that are disclosed by such Party to the other Party in connection with this Agreement, whether before or after the Effective Date, and regardless of whether any of the foregoing are marked “confidential” or “proprietary” or communicated to the other by the disclosing Party in oral, written, graphic or electronic form.
1.30“Controlled” or “Controls” when used in reference to any Patent, Know-How or other intellectual property right, means the legal authority or right (whether by ownership, license or otherwise, other than by a license, sublicense or other rights granted pursuant to this Agreement) of a Party hereto (or its Affiliates) to: (a) grant, or procure the grant of, a license or sublicense, to the extent provided for herein, of the Patent, Know-How or other

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intellectual property right to the other Party; or (b) in relation to Know-How only, disclose or provide access to, to the extent provided for herein, such Know-How to the other Party, and in each case without breaching the terms of any agreement with, or requiring the consent of, a Third Party. Notwithstanding the foregoing, a Party will be deemed not to Control any Patent, Know-How or other intellectual property right that is owned or controlled by a Third Party acquirer described in the definition of “Change of Control” or such Third Party’s Affiliates (A) prior to the closing of such Change of Control, except to the extent that any such any Patent, Know-How or other intellectual property right was Controlled by such Party or any of its Affiliates prior to such Change of Control (and for clarity, such Patents so Controlled would include any later filed or issued Patents that claim priority (direct or indirect, in whole or in part) to any such Patents to the extent that the claims of such later-filed or -issued Patents are supported by the claims, disclosure or specification of such Patents), or (B) after such Change of Control to the extent that any such Patent, Know-How or other intellectual property right is Made by such Third Party or its Affiliates (other than such Party or any of its direct or indirect subsidiaries) after such Change of Control but without using or incorporating any Patent, Know-How or other intellectual property right owned or controlled by such Party or any of its direct or indirect subsidiaries immediately before such Change of Control.
1.31“Cover”, “Covering” or “Covered” means, with respect to a product, technology, process or method, that, but for a license granted to a Person under a Valid Claim of any Patent under which such license is granted, the Development, Manufacture, Commercialization and/or other use of such product or the practice of such technology, process or method, by such Person would infringe such Valid Claim (or, in the case of a Valid Claim that has not yet issued, would infringe such Valid Claim if it were to issue).
1.32“Credit Cap” has the meaning set forth in Section 9.4.6.
1.33“Curis Acquisition” has the meaning set forth in Section 8.4.4(b).
1.34“Curis Acquisition Program” has the meaning set forth in Section 8.4.4(b).
1.35“Curis COC Program” has the meaning set forth in Section 8.4.4(a).
1.36“Curis Commercial License” has the meaning provided in Section 8.1.1(b).
1.37“Curis IND” means an IND submitted by or on behalf of Curis or its Affiliate to a Regulatory Authority for the Phase 1A/1B Study.
1.38“Curis Indemnitees” has the meaning set forth in Section 14.2.
1.39“Curis Invented Excluded Compound” means any Curis Invention that is an Excluded Compound.
1.40“Curis Invention” means any Invention Made solely by one or more employees, consultants or contractors of Curis or any of its Affiliates or Sublicensees, and any Know-How pertaining to such Invention that is Made solely by one or more employees,

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consultants or contractors of Curis or any of its Affiliates or Sublicensees in the course of conducting activities under this Agreement during the applicable Period in which such Invention was Made (it being understood that Section 8.3.1(b) prohibits Curis and its Affiliates from Exploiting ImmuNext Technology, Compounds and Products outside the scope of or otherwise not in compliance with the licenses, sublicenses and other rights granted to Curis under this Agreement).
1.41Curis Technology” all Curis Inventions and all Patents that Cover Curis Inventions.
1.42“Curis Licenses” means the Curis R&D License and the Curis Commercial License.
1.43“Curis Option Period Records” has the meaning set forth in Section 3.2.4(b).
1.44“Curis Owned Inventions” means: (a) effective as of the Option Exercise Date (if any) and thereafter, all Reassigned Inventions that were Curis Inventions; and (b) all Curis Inventions Made during the License Period, but excluding, in each case ((a) and (b)), (i) any such Curis Invention that is an Excluded Compound Invention and (ii) any Curis Invented Excluded Compound.
1.45“Curis Owned Patents” means all Patents that Cover Curis Owned Inventions.
1.46“Curis Owned Technology” means all Curis Owned Inventions, and Curis Owned Patents.
1.47“Curis R&D License” has the meaning provided in Section 8.1.1(a).
1.48“Curis Useful Inventions” means all Curis Owned Inventions that are necessary or reasonably useful to Exploit Excluded Compounds outside the Field.
1.49“Curis Useful Patents” means all Patents that Cover Curis Useful Inventions.
1.50“Curis Useful Technology” means Curis Useful Inventions and Curis Useful Patents.
1.51“Damages” has the meaning set forth in Section 14.1.
1.52“Development” means, with respect to a compound or product, any or all pre-clinical and clinical development activities reasonably related to or that may lead to the support, preparation and submission of regulatory filings or otherwise to the testing and validation of such compound or product, including, without limitation, toxicology, pharmacology and other pre-clinical activities, test method development and stability testing, manufacturing process development, formulation development, delivery system development, quality assurance and quality control development, statistical analysis, clinical trials (including any post-approval

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studies required by Regulatory Authorities as a condition to granting Regulatory Approval). When used as a verb, “Develop” means to engage in Development. For clarity, “Development” shall not include any Commercialization activities.
1.53“Development Milestone Event” has the meaning set forth in Section 9.3.1(a).
1.54“Development Milestone Payment” has the meaning set forth in Section 9.3.1(a).
1.55“Development Principles” means the development principles set forth in Schedule 1.53.
1.56“Disclosing Party” has the meaning set forth in Section 13.1.1.
1.57“Dispute” has the meaning set forth in Section 16.1.
1.58“Dollar” or “$”means the lawful currency of the United States.
1.59“Effective Royalty Rate” has the meaning set forth in Section 9.4.5(a).
1.60“EMA” means the European Medicines Agency or any successor agency thereto.
1.61“European Union” or “EU” means the countries comprising the European Union as it may be constituted from time to time, together with those additional countries included in the European Economic Area as it may be constituted from time to time, and any successors to, or new countries created from, any of the foregoing.
1.62“Excluded Compound” means any compound or product that specifically binds VISTA and is not a VISTA Antagonist.
1.63“Excluded Compound Invention” means any Curis Invention, ImmuNext Invention or Joint Invention that, in each case, is solely necessary or solely useful for any Excluded Compound (and, for clarity, is not necessary or useful for any Compound or Product). Without limiting the generality of the foregoing, Excluded Compound Inventions include Curis Invented Excluded Compounds and Jointly Invented Excluded Compounds.
1.64Excluded Compound Technology” means all Excluded Compound Inventions and all Patents that Cover Excluded Compound Inventions.
1.65“Excluded ImmuNext Know-How” means: (a) all Know-How Controlled by ImmuNext or its Affiliates during the Term that is solely useful for an Excluded Compound or is solely useful for subject matter outside the Field (and, for clarity, is not necessary for any Compound or Product); and (b) all Excluded Compound Inventions.
1.66“Excluded ImmuNext Patents” means: (a) all Patents Controlled by ImmuNext or its Affiliates during the Term that Cover an Excluded Compound or Cover subject

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matter outside the Field (and, for clarity, do not Cover any Compound or Product); and (b) all Patents that Cover any Excluded Compound Invention (and, for clarity, do not Cover any Reassigned Technology, Compound or Product).
1.67“Excluded ImmuNext Technology” means Excluded ImmuNext Know-How and Excluded ImmuNext Patents.
1.68“Existing Inventory” means the inventory of drug substance and drug product for the Compounds and Products that ImmuNext Controls as of the Effective Date.
1.69“Existing Patents” has the meaning set forth in Section 11.2.1.
1.70“Expedited Arbitration” has the meaning set forth in Section 17.1.
1.71“Expedited Dispute” has the meaning set forth in Section 17.1.
1.72“Exploit” or “Exploitation” means, collectively, to make, have made, use, have used, sell, have sold, offer for sale, have offered for sale, import, have imported, export, have exported and otherwise exploit and have exploited, including Develop, Manufacture and Commercialize.
1.73“FDA” means the U.S. Food and Drug Administration, or any successor agency thereto.
1.74“Field” means any and all uses in Oncology.
1.75“First Commercial Sale” means the first sale in an arm’s length transaction of a Product by Curis, any Affiliate of Curis, or any Sublicensee, in any case, to the first Third Party (other than a Sublicensee) in any country, in exchange for cash or some equivalent to which value can be assigned for the purpose of determining Net Sales, after Regulatory Approval of such Product has been granted, or such marketing and sale is otherwise permitted, by the Regulatory Authority of such country, excluding registration samples, compassionate use, and use in Clinical Trials.
1.76“Force Majeure” has the meaning set forth in Section 18.3.
1.77“FTE” means a full-time equivalent person year, whether as an employee or contractor, based upon a total of [**] hours per year of scientific work, technical work, project management work, or scientific/clinical/technical management work (but not general managerial work).
1.78“FTE Rate” means (a) for the first FTE devoted to the conduct of activities under this Agreement, the then-current rate (including salary, fringe benefits, overhead and fees) at which the Small Business Innovation Research Program then pays for such person and (b) for all other FTEs devoted to the conduct of activities under this Agreement, [**] Dollars ($[**]) for each FTE, such rate set forth in (b) to be adjusted annually upon mutual agreement by the Parties, based on changes in the Consumer Price Index (as quoted by the U.S. Department of Labor, Bureau of Labor Statistics); provided, however, that the “FTE Rate” shall not increase by

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more than [**] percent ([**]%) annually, with the first adjustment taking effect on January 1, 2021.
1.79“Good Clinical Practices” or “GCP” means the international ethical and scientific quality requirements and standards for designing, conducting, recording and reporting trials that involve the participation of human subjects. In the United States, GCP shall be based on Good Clinical Practices established through FDA regulations and guidances (including International Conference on Harmonization (ICH) E6) and, outside the United States, GCP shall be based on ICH E6.
1.80“Good Laboratory Practices” or “GLP” means the current Good Laboratory Practice (or similar standards) for the conduct of laboratory activities for pharmaceutical or biological products as are required by applicable Regulatory Authorities or applicable Law. In the United States, Good Laboratory Practices are established through FDA regulations (including 21 C.F.R. Part 58), FDA guidances, FDA current review and inspection standards and current industry standards.
1.81“Good Manufacturing Practices” or “GMP” means current Good Manufacturing Practices for the manufacture of products as are required by applicable Regulatory Authorities or applicable Law. In the United States, GMP shall be as defined under the rules and regulations of the FDA (including 21 C.F.R. Parts 210 and 211), as the same may be amended from time to time.
1.82“ImmuNext Acquisition” has the meaning set forth in Section 8.4.3(b).
1.83“ImmuNext Acquisition Program” has the meaning set forth in Section 8.4.3(b).
1.84“ImmuNext COC Program” has the meaning set forth in Section 8.4.3(a).
1.85“ImmuNext Exclusive Patents” means all ImmuNext Patents with claims that Cover any VISTA Antagonist and not any other compound or product.
1.86“ImmuNext Hybrid Patents” means all ImmuNext Patents with claims that Cover both (a) any VISTA Antagonist and (b) any other compound or product.
1.87“ImmuNext Indemnitees” has the meaning set forth in Section 14.1.
1.88“ImmuNext Invention” means any Invention Made solely by one or more employees, consultants or contractors of ImmuNext or any of its Affiliates, and any Know-How pertaining to such Invention that is Made solely by one or more employees, consultants or contractors of ImmuNext or any of its Affiliates in the course of conducting activities under this Agreement during the applicable Period in which such Invention was Made.
1.89“ImmuNext Know-How” means: (a) all Know-How Controlled by ImmuNext or its Affiliates during the Term that is necessary or reasonably useful to Exploit Compounds or Products in the Field; (b) during the Option Period only, all Assigned Inventions

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and Assigned Technology; (c) all ImmuNext Inventions other than Excluded Compound Inventions; and (d) Option Period Results; but, in each case of (a) and (c), excluding Jointly Owned Technology and ImmuNext Patents.
1.90“ImmuNext License” has the meaning set forth in Section 8.1.2.
1.91“ImmuNext Option Period Records” has the meaning set forth in Section 3.2.4(c).
1.92“ImmuNext Patents” means: (a) all Patents Controlled by ImmuNext or its Affiliates during the Term that are necessary or reasonably useful to Exploit Compounds or Products in the Field; (b) during the Option Period, all Patents Covering Assigned Inventions.
1.93“ImmuNext Technology” means ImmuNext Know-How and ImmuNext Patents.
1.94“IND” means an investigational new drug application, clinical trial application, clinical trial exemption, or similar application or submission filed with or submitted to a Regulatory Authority in a jurisdiction that is necessary to commence human clinical trials in such jurisdiction, including any such application filed with the FDA pursuant to 21 C.F.R. Part 312.
1.95“Independent Monitor” has the meaning set forth in Section 3.2.5.
1.96“Indication” means a separate and distinct disease for which (a) the Product is indicated for treatment or (b) the Product is directed with the aim of receiving Regulatory Approval for such indication. To distinguish one Indication from another Indication, the two Indications have to be (i) listed in two different blocks of the ICD-10 and (ii) developed under separate clinical trials. For clarity, a different line of therapy for the same disease shall be deemed the same Indication.
1.97“Infringement” has the meaning set forth in Section 1.27.
1.98“Infringement Action” has the meaning set forth in Section 12.3.5.
1.99“Initiation” means, when used with respect to any Clinical Trial, the first dosing of the first patient in such Clinical Trial.
1.100“Invention” means any invention, discovery, development, improvement, modification, enhancement or derivative, whether or not patentable, that is Made in the course of conducting activities under this Agreement. Without limiting the generality of the foregoing, any composition of matter, method of use or manufacture of a composition of matter, including any Compound or Excluded Compound, that is first Made in the course of conducting activities under this Agreement shall constitute an Invention.
1.101“[**] IND” means U.S. IND [**].

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1.102“Joint Invention” means any Invention Made jointly by, on the one hand, one or more employees, consultants or contractors of ImmuNext or any of its Affiliates, and, on the other hand, one or more employees, consultants or contractors of Curis or any of its Affiliates, and any Know-How pertaining to such Invention that is Made jointly by, on the one hand, one or more employees, consultants or contractors of ImmuNext or any of its Affiliates, and, on the other hand, one or more employees, consultants or contractors of Curis or any of its Affiliates in the course of conducting activities under this Agreement during the applicable Period in which such Invention was Made (it being understood that Section 8.3.1(b) prohibits Curis and its Affiliates from Exploiting ImmuNext Technology, Compounds and Products outside the scope of or otherwise not in compliance with the licenses, sublicenses and other rights granted to Curis under this Agreement).
1.103Joint Technology” means all Joint Inventions and all Patents that Cover Joint Inventions.
1.104“Joint Steering Committee” or “JSC” has the meaning set forth in Section 2.1.1.
1.105“Joint Useful Invention” means any Jointly Owned Invention that is necessary or reasonably useful to Exploit Excluded Compounds outside the Field.
1.106“Joint Useful Technology” means all Joint Useful Inventions and all Patents that Cover Joint Useful Inventions.
1.107“Jointly Invented Excluded Compound” means any Joint Invention that is an Excluded Compound.
1.108“Jointly Owned Inventions” means: (a) effective as of the Option Exercise Date (if any) and thereafter during the Term, all Reassigned Inventions that were Joint Inventions; and (b) all Joint Inventions Made during the License Period, but excluding, in each case ((a) and (b)), (i) any such Joint Invention that is an Excluded Compound Invention and (ii) any Jointly Invented Excluded Compound.
1.109“Jointly Owned Patents” means all Patents that Cover Jointly Owned Inventions.
1.110Jointly Owned Technology” means all Jointly Owned Inventions and Jointly Owned Patents.
1.111KOL Panel” has the meaning set forth in Section 17.2.1.
1.112“Know-How” means any and all commercial, technical, scientific and other data, information, know-how, materials, compounds, trade secrets, knowledge and technology including all technical, scientific, pre-clinical, clinical, regulatory, safety, manufacturing, quality control, marketing, financial and other commercial data (including pharmacological, toxicological and other test data and results) and other information, whether communicated in writing or orally or by any other method, including biological and other tangible materials, protocols, assays, methods, processes, procedures, practices, inventions,

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discoveries, developments, means, formulae, instructions, skills, techniques, sketches, designs, drawings, specifications, schematics, prototypes, expressed ideas and technical assistance, regulatory submissions or other intellectual property of any kind, including improvements, modifications, enhancements and derivatives of any of the foregoing, but excluding Patents.
1.113“Laws” means all applicable laws, statutes, rules, regulations, ordinances and other pronouncements having the effect of law of any federal, national, multinational, state, provincial, county, city or other political subdivision, government or Regulatory Authority, domestic or foreign.
1.114“Lead Compound” means ImmuNext’s proprietary monoclonal antibody known as [**], the CDRs for which are set forth on Schedule 1.28.
1.115“License Period” means the period of time beginning on the Option Exercise Date, if any, and ending on the last day of the Term.
1.116“License Period New In-License” has the meaning set forth in Section 9.6.4(a).
1.117“Licensed VISTA Antagonists” has the meaning set forth in Section 1.28.
1.118“Local Agent” means, in any Minor Market where it is common practice in the pharmaceutical industry for pharmaceutical companies to sell pharmaceutical product to a local distributor/agent in such Minor Market and permit such local distributor/agent to resell such product in that Minor Market without any direct or indirect royalty or other payment obligations to the pharmaceutical company that is calculated based on amounts invoiced or received by such local distributor/agent for in-market sales of such product in such Minor Market (i.e., the only revenue received by the pharmaceutical company with respect to product for in-market distribution in such Minor Market is the purchase price paid by the local distributor/agent to the pharmaceutical company for such product), any such local distributor/agent.
1.119“Made” means made, conceived, created, generated or reduced to practice; provided that “reduced to practice” shall not include constructive reduction to practice through filing or prosecuting a Patent.
1.120“Maintenance Fees” has the meaning set forth in Section 9.1.2.
1.121“Major European Country” means any of [**].
1.122“Major Market” means each of [**].
1.123“Manufacture” means, with respect to a product, those manufacturing activities involved in or relating to (a) manufacturing process development, (b) CMC activities including analytical development and qualification, formulation development, solubility testing, bulk drug substance manufacturing, stability testing and scale-up activities, bulk drug product manufacturing and stability testing, (c) quality assurance and quality control activities including validation testing, qualification and audit of clinical and commercial manufacturing facilities,

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and (d) in the case of either a clinical or commercial supply of such product or supply of such product for any non-clinical study, the manufacturing, processing, formulating, packaging, labeling, holding, quality control testing and release of such product.
1.124“Minor Market” means any country other than [**].
1.125“Net Sales” means the gross amounts billed or invoiced by Curis, its Affiliates or Sublicensees (each, a “Selling Party”), to Third Parties that are not Sublicensees for the sale or other commercial disposition of Products, less the following deductions from such amounts calculated in accordance with United States generally accepted accounting principles, consistently applied and standard internal policies and procedures and accounting standards, consistently applied throughout Curis, to the extent specifically and solely allocated to such Product(s) and actually taken, paid, accrued, allowed, included or allocated based upon good faith estimates in the gross sales prices with respect to such sales (and consistently applied as set forth below):
(a)trade, quantity and cash discounts, allowances, and credits allowed and taken, in any form, but expressly excluding discounts or allowances not attributable to a Product;
(b)refunds, chargebacks and any other allowances given and taken which effectively reduce the gross amounts billed or invoiced;
(c)product returns, including recalls or damaged goods and billing errors, credits and allowances and bad debt;
(d)rebates, chargebacks, and discounts (or the equivalent thereof) accrued and actually paid or credited to any governmental agency (or agent or branch thereof) or to any Third Party payor, administrator or contractee, including but not limited to managed healthcare organizations, pharmacy benefit managers (or equivalent thereof) or their agencies, purchasers, reimbursers, or trade customers, and, any compulsory payments related to the Product(s), and any government levied fees as a result of healthcare reform policies;
(e)discounts (or the equivalent thereof) mandated by, or granted to meet the requirements of, applicable state, provincial or federal Law, including required chargebacks and retroactive price reductions;
(f)transportation, freight, postage charges and other charges such as insurance, relating thereto, in each case included as a specific line item on a bill or an invoice to such Third Parties; and
(g)taxes, tariffs, excises, customs duties, and/or other governmental charges upon or measured by the production, sale, transportation, delivery or use of goods, in each case included as a specific line item on a bill or an invoice to such Third Parties (including VAT, but only to the extent that such VAT taxes are not reimbursable or refundable).
All aforementioned deductions shall only be allowable to the extent they are commercially reasonable and shall be determined, on a country-by-country basis, as incurred in the ordinary

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course of business in type and amount consistent with the Selling Party’s business practices consistently applied across its product lines and accounting standards and verifiable based on Curis’ sales reporting system. All such discounts, allowances, credits, rebates, and other deductions shall be fairly and equitably allocated to Product and other products of the Selling Party such that Product does not bear a disproportionate portion of such deductions. Sales or other commercial dispositions of Product between Selling Parties are not sales to Third Parties and shall be excluded from Net Sales calculations for all purposes so long as such Product is subsequently resold to a Third Party end user. Sales or other commercial dispositions of Product by a Selling Party to a Local Agent in a Minor Market for in-market resale in such Minor Market are sales to Third Parties and shall be included in Net Sales calculations, but the resale or other commercial distribution by such Local Agent in such Minor Market of Product purchased by such Local Agent from such Selling Party shall be excluded from Net Sales calculations for all purposes. In addition, Products provided to Third Parties without charge, in connection with research and development, Clinical Trials, compassionate use, humanitarian and charitable donations, or indigent programs or for use as samples, shall be excluded from the computation of Net Sales, and no payments will be payable on such sales or such other commercial dispositions.
If a Product is sold or otherwise commercially disposed of for consideration other than cash or in a transaction that is not at arm’s length between the buyer and the seller, then the gross amount to be included in the calculation of Net Sales shall be the amount that would have been invoiced had the transaction been conducted at arm’s length and for cash. Such amount that would have been invoiced shall be determined, wherever possible, by reference to the average selling price of the relevant Product in arm’s length transactions in the relevant country. For clarity, such gross amounts shall be subject to the deductions as set forth above in this Section 1.125.
Notwithstanding the foregoing, on a country-by-country basis, if a Product is sold in a country as part of a Combination Product in a Calendar Quarter, Net Sales of such Product in such country during such Calendar Quarter for the purpose of determining royalties and commercialization milestone payments due hereunder shall be calculated as follows:
(i)In the event that both (x) a Single-Agent Product is sold separately in finished form in such country during such Calendar Quarter and (y) the Other Active(s) in such Combination Product are sold separately in finished form in such country during such Calendar Quarter, then Net Sales of such Product shall be determined by multiplying the actual Net Sales of the Combination Product calculated pursuant to the preceding provisions of this Section 1.125 (“Actual Combination Product Net Sales”) in such country during such Calendar Quarter by the fraction, A / (A+B) where A is the weighted average sale price of such Single-Agent Product when sold separately in finished form in such country during such Calendar Quarter, and B is the weighted average sale price of the Other Active(s) in the Combination Product when sold separately in finished form in such country during such Calendar Quarter.
(ii)In the event that a Single-Agent Product is sold separately in finished form in such country during such Calendar Quarter, but the Other Active(s) in such Combination Product are not sold separately in finished form in such country during such Calendar Quarter, then Net Sales of such Product shall be calculated by multiplying the Actual Combination Product Net Sales of the Combination Product in such country during such

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Calendar Quarter by the fraction A / C where A is the weighted average sale price of such Single-Agent Product when sold separately in finished form in such country during such Calendar Quarter and C is the weighted average sale price of the Combination Product in such country during such Calendar Quarter.
(iii)In the event that no Single-Agent Product is sold separately in finished form in such country during such Calendar Quarter, but the Other Active(s) in such Combination Product are sold separately in finished form in such country during such Calendar Quarter, Net Sales of such Product shall be calculated by multiplying the Actual Combination Product Net Sales of the Combination Product by the fraction (C‑B) / C, where B is the weighted average sale price of the Other Active(s) in the Combination Product when sold separately in finished form in such country during such Calendar Quarter, and C is the weighted average sale price of the Combination Product in such country during such Calendar Quarter.
(iv)In the event that neither any Single-Agent Product is sold separately in finished form in such country during such Calendar Quarter, nor the Other Active(s) in such Combination Product are sold separately in finished form in such country during such Calendar Quarter, then the methodology for determining Net Sales of such Product in such country shall be mutually agreed in writing by the parties in good faith based on the relative contributions of the Compound and the Other Active(s) in such Combination Product to the total value of the Combination Product.
1.126“Non-Breaching Party” has the meaning set forth in Section 15.2.1.
1.127“Non-Prosecuting Party” has the meaning set forth in Section 12.2.6(b)(i).
1.128“Notification” has the meaning set forth in Section 10.5.
1.129“Oncology” means an Indication characterized by abnormal cellular proliferation, including solid or liquid malignancies (including primary and metastatic tumors), lymphoid and myeloid proliferative disorders (including myelodysplastic syndrome and myelofibrosis). For clarity, “Oncology” (a) includes all blood-borne cancers, (b) includes cancer immunotherapy and immuno-oncology, (c) does not include NASH or the treatment of non‑malignant fibrosis for or in any organ (e.g. that could be seen as prevention of malignancy, for instance, HCC), but does include the treatment of desmoplastic tumors (e.g., that could be seen as malignancies with a fibrotic component), (d) does not include treatment of immune-related side effects of oncology or immuno-oncology treatment, (e) does not include the treatment of auto-immune or inflammation conditions, diseases or disorders and (f) does not include the treatment of reperfusion injuries.
1.130“Option” has the meaning set forth in Section 3.1.
1.131“Option Exercise Date” has the meaning set forth in Section 3.1.
1.132“Option Exercise Notice” has the meaning set forth in Section 3.1.
1.133“Option Fee” has the meaning set forth in Section 9.2.

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1.134“Option Period” means the period commencing as of the Effective Date and expiring on the earliest of (a) four (4) years after the Effective Date, (b) the Option Exercise Date and (c) termination of this Agreement; provided that such period shall automatically end ninety (90) days after database lock for the first Phase 1A/1B Study in which the endpoints are met, as determined by the JSC.
1.135“Option Period Negotiating Party” has the meaning set forth in Section 9.6.2.
1.136“Option Period New In-License” has the meaning set forth in Section 9.6.2.
1.137“Option Period New In-License Know-How” has the meaning set forth in Section 9.6.3.
1.138 “Option Period New In-License Patents” has the meaning set forth in Section 9.6.3.
1.139 “Option Period Results” means all data, results, information and reports Made by or on behalf of either Party or both Parties during the Option Period in the course of conducting activities under this Agreement, including the conduct of the Research Plan or Phase 1A/1B Study, but excluding all Inventions Made during the Option Period.
1.140“Other Active” means any active pharmaceutical ingredient other than Compound.
1.141Patent Certification” has the meaning set forth in Section 1.27.
1.142“Patents” means (a) patents and patent applications anywhere in the world, (b) all divisionals, continuations, continuations in-part thereof or any other patent application claiming priority, or entitled to claim priority, directly or indirectly to (i) any such patents or patent applications or (ii) any patent or patent application from which such patents or patent applications claim, or is entitled to claim, direct or indirect priority, and (c) all patents issuing on any of the foregoing anywhere in the world, together with all registrations, reissues, re-examinations, patents of addition, renewals, supplemental protection certificates, or extensions of any of the foregoing anywhere in the world.
1.143“Period” means the Option Period or the License Period, as applicable.
1.144“Person” means any individual, firm, corporation, partnership, limited liability company, trust, business trust, joint venture, governmental authority, association, or other entity.
1.145“Phase 1 Trial” means a human clinical trial conducted on a limited number of study subjects for the purpose of gaining evidence of the safety and tolerability of, and information regarding pharmacokinetics and potential pharmacological activity for, a product or compound, as described in 21 C.F.R. § 312.21(a) (including any such clinical study in any country other than the United States).

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1.146“Phase 1A/1B Plan” has the meaning set forth in Section 3.2.2(a).
1.147“Phase 1A/1B Study” means a human clinical trial described in the Phase 1A/1B Plan.
1.148“Phase 2 Trial” means a human clinical trial conducted on study subjects with the disease or condition being studied for the principal purpose of achieving a preliminary determination of efficacy or appropriate dosage ranges, as further described in 21 C.F.R. §312.21(b) (including any such clinical study in any country other than the United States).
1.149“Phase 3 Trial” means a pivotal clinical trial in humans conducted to gain evidence with statistical significance of the efficacy of a product in a target population and to obtain expanded evidence of safety for such product that is needed to evaluate the overall benefit-risk relationship of such product and to provide an adequate basis for physician labeling, as described in 21 C.F.R. § 312.21(c) or the corresponding regulation in jurisdictions other than the United States.
1.150“Phase 4 Trial” means (a) any clinical trial in humans conducted to satisfy a requirement of a Regulatory Authority in order to maintain a Regulatory Approval and (b) any clinical trial in humans conducted after the first Regulatory Approval in the same disease state for which the compound or product received Regulatory Approval.
1.151“PMDA” means, as applicable: (a) the Pharmaceuticals and Medical Devices Agency of Japan or any successor agency thereto in Japan having substantially the same function; or (b) Ministry of Health, Labour and Welfare of Japan or any successor agency thereto in Japan having substantially the same function.
1.152“Product” means any product containing a Compound, either alone or in combination with one or more active ingredients, in all dosages, forms, formulations, presentations, line extension and modes of administration. All references to Products in this Agreement shall be deemed to include Combination Products.
1.153“Prosecuting Party” has the meaning set forth in Section 12.2.6(b)(i).
1.154“Prosecution” (including variations such as “Prosecute”) shall mean, with respect to a Patent, the preparation, filing, prosecution (including conducting all correspondence and interactions with any patent office and seeking, conducting and defending all any interferences, inter partes reviews, reissue proceedings, reexaminations, and oppositions and similar proceedings) and maintenance (including payment of any patent annuity fees) of such Patent, as well as re-examinations, reissues, appeals, post grant reviews (PGR), inter partes reviews (IPR) and requests for patent term adjustments, patent term extensions, supplementary protection certificates, or their equivalents with respect to such Patent, together with the initiation or defense of interferences, oppositions and other similar proceedings with respect to the particular Patent, and any appeals therefrom. For clarification, “Prosecution” (including variations such as “Prosecute”) shall exclude any enforcement action with respect to a Patent.
1.155“Publishing Party” has the meaning set forth in Section 13.6.1.

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1.156“Reassigned Invention” has the meaning provided in Section 12.1.2(c).
1.157Reassigned Technology” has the meaning provided in Section 12.1.2(c).
1.158“Receiving Party” has the meaning set forth in Section 13.1.1.
1.159“Regulatory Approvals” means any and all approvals (including price and reimbursement approvals, if required for marketing or sale), licenses, registrations, or authorizations of any Regulatory Authority that are necessary for the manufacture, use, storage, import, transport or sale of a biological product in a country or other regulatory jurisdiction.
1.160“Regulatory Authority” means any national, supranational or other regulatory agency, department, bureau or other governmental or regulatory authority having the administrative authority to regulate the development or marketing of biological products in any country or other jurisdiction, including the FDA, EMA and PMDA.
1.161“Regulatory Exclusivity” means any period of regulatory data protection or market exclusivity or similar regulatory protection afforded by the Regulatory Authorities in a country, including any such periods listed in the FDA’s Purple Book: Lists of Licensed Biological Products with Reference Product Exclusivity and Biosimilarity or Interchangeability Evaluations or periods under national implementations of Directive 2001/83/EC, and all international equivalents.
1.162“Regulatory Filings” means all INDs, BLAs, Regulatory Approvals, and other filings with, and formal submissions to, Regulatory Authorities, in each case, with respect to the development, manufacture, and marketing and sale of Product in any country or other jurisdiction.
1.163“Remainder” has the meaning set forth in Section 12.3.7.
1.164“Representative” has the meaning set forth in Section 13.1.1.
1.165“Research Budget” means the budget of costs for ImmuNext’s conduct of the Research Plan.
1.166“Research Plan” has the meaning set forth in Section 3.2.2(a).
1.167“Research Principles” means the research principles set forth in Schedule 1.167.
1.168“Right of Reference” means: (a) in the U.S., a right to reference information previously submitted in an IND, as permitted in 21 C.F.R. 312.23(b); or (b) in any other country or jurisdiction, the equivalent authority to rely upon, and otherwise use, an investigation for the purpose of filing, and conducting a clinical trial under, an IND, or obtaining approval of a BLA or other Regulatory Approval, including the ability to make available the underlying raw data from the investigation for audit by the applicable Regulatory Authority in such country or other jurisdiction, if necessary.

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1.169“Risk Minimizing Actions” has the meaning set forth in Section 17.2.2.
1.170Royalty Reduction Date” means the first date on which royalties under clause (a) or (b) of the definition of “Licensed Product” (as defined in [**]) are no longer payable with respect to Net Sales of such “Licensed Product” under [**], as set forth on Schedule 1.169.
1.171“Royalty Term” has the meaning provided in Section 9.4.2.
1.172“Sale Transaction” has the meaning set forth in Section 18.4.1.
1.173“Selling Party” has the meaning set forth in Section 1.124.
1.174“Single-Agent Product” shall mean a Product containing Compound as its sole active pharmaceutical ingredient.
1.175“Subcontractor” means a consultant, subcontractor or other vendor engaged by a Party to conduct activities on behalf of such Party or its Affiliate under this Agreement, but excluding any Academic Researcher.
1.176“Sublicense” means: (a) a (sub)license under the Curis Commercial License; or (b) a (sub)license or other right to market, promote or sell Compound or Product in the Field. For avoidance of doubt, a “Sublicense” shall not include rights granted to a Local Agent in a Minor Market that are limited to the in-market resale in such Minor Market of Product purchased from another Person (including Curis or its Affiliate), where such Local Agent has no direct or indirect royalty or other payment obligations to such other Person (or to Curis or its Affiliate), that is calculated based on amounts invoiced or received by such Local Agent for in-market sales of such purchased Product in such Minor Market.
1.177“Sublicensee” means any Third Party that has received from Curis or its Affiliate, directly or indirectly through one or more tiers as set forth in Section 8.2.5, a Sublicense. For avoidance of doubt, a “Sublicensee” shall not include a Local Agent in a particular Minor Market, provided that such Local Agent shall be deemed not to be a “Sublicensee” solely with respect to Product sold or distributed in such Minor Market.
1.178“Sublicense Revenue” means amounts received by Curis or any of its Affiliates from a Sublicensee in consideration for the grant by Curis or its Affiliate of a Sublicense, including upfront fees, license fees, milestone payments (except as expressly set forth below and excluding Net Sales-based milestone payments), premiums over the fair market value (as of the date of receipt) of equity securities of Curis or its Affiliate, and other payments or consideration of any kind, that, in each case, are received by Curis or its Affiliate from a Sublicensee in consideration for the grant of a Sublicense; provided, however, that if Curis or its Affiliate receives any milestone payment for the achievement by a Sublicensee of a milestone event for which Curis is obligated to pay ImmuNext a milestone payment under Section 9.3.1, then only the amount by which the milestone payment received by Curis or its Affiliate from the Sublicensee exceeds the milestone payment payable (and paid) by Curis to ImmuNext for such Sublicensee’s achievement of such milestone event shall be considered Sublicense Revenue; and provided, further, that “Sublicense Revenue” shall in any event exclude: (a) amounts paid in

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consideration of equity securities of Curis or its Affiliate, except to the extent such payments exceed the fair market value of such securities as of the date of issuance, (b) reimbursement by the Sublicensee for research and development conducted after the date of the Sublicense, accounted for at reasonable and customary rates, on a full-time equivalent basis (any excess over a reasonable and customary FTE rate is included in Sublicense Revenue), (c) royalties on Net Sales of Products by a Sublicensee, and (d) payments for reimbursement of patent prosecution, defense, enforcement and maintenance expenses.
1.179“Term” has the meaning set forth in Section 15.1.
1.180“Terminated Product” has the meaning set forth in Section 15.8.1.
1.181“Third Party” means any Person other than Curis, ImmuNext and their respective Affiliates.
1.182“Third Party Acquiror” has the meaning set forth in Section 18.4.1.
1.183“Third Party Claim” has the meaning set forth in Section 14.1.
1.184“Third Party Licenses” has the meaning set forth in Section 9.4.6.
1.185“Unacceptable Safety Risk” has the meaning set forth in Section 2.1.6(b)(i).
1.186“United States” or “U.S.” means the United States of America and all its territories and possessions.
1.187“Upfront Fee” has the meaning set forth in Section 9.1.1.
1.188“Upstream Agreements” means the agreements set forth on Schedule 1.188.
1.189“Valid Claim” means a claim within a Patent that has not expired, lapsed, or been cancelled or abandoned, and that has not been dedicated to the public, disclaimed, or held unenforceable, invalid, or been cancelled by a court or administrative agency of competent jurisdiction in an order or decision from which no appeal has been or can be taken, including through opposition, re-examination, reissue or disclaimer; provided that, on a country-by-country basis, a patent application or subject matter of a claim thereof pending for more than [**] after the earliest filing date to which such patent application or claim is entitled shall not be considered to have any Valid Claim for purposes of this Agreement unless and until a Patent with respect to such application issues with such claim.
1.190“VISTA” shall have the meaning set forth in the Recitals.
1.191“VISTA Antagonist” means a compound that specifically binds VISTA and inhibits the immunosuppressive effect on T cell proliferation elicited by VISTA, as set forth in the Mixed Lymphocyte Reaction assay identified in Schedule 1.191 and when tested in such compound’s unconjugated form.

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1.192Withholding Action” shall have the meaning set forth in Section 10.6.4
2.Governance
2.1Joint Steering Committee.
2.1.1Formation; Membership. Within [**] after the Effective Date, the Parties shall establish a joint steering committee (the “Joint Steering Committee” or “JSC”). The JSC shall be composed of [**] representatives of each Party, and each Party shall designate its initial JSC representatives by written notice to the other Party. Each Party shall be free to change its JSC representatives on written notice to the other Party, provided that each Party shall ensure that, at all times during the existence of the JSC, its representatives on the JSC have (a) appropriate expertise for the then-current stage of development or commercialization of Product in the Field; and (b) during the Option Period, the authority to bind such Party with respect to matters requiring approval by the JSC.
2.1.2Responsibilities and Authority.
(a)During the Option Period. During the Option Period, the JSC will manage the non-clinical Development and clinical Development of Compounds and Products and will serve as the main forum for data sharing and decision-making regarding the same. The JSC shall also provide a forum for sharing progress and results relating to non-clinical Development and clinical Development of Compounds and Products during the Option Period. In particular, during the Option Period, the JSC shall:
(i)manage the non-clinical Development and clinical Development of Compounds and Products;
(ii)discuss and approve the Research Plan and changes thereto;
(iii)discuss and approve the Research Budget and changes thereto;
(iv)discuss and approve the Phase 1A/1B Plan and changes thereto;
(v)oversee the conduct of the Phase 1A/1B Plan and the Research Plan and review data arising from each such plan;
(vi)discuss the Phase 1A/1B Plan and Research Plan and provide advice regarding any amendments to either plan;
(vii)discuss and determine whether the clinical endpoints for any Phase 1A/1B Study have been met;
(viii)if requested by ImmuNext, discuss whether Curis will permit ImmuNext to use a Compound as a tool compound pursuant to Section 8.3.3(a); and

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(ix)perform such other obligations as are expressly delegated to it under this Agreement.
(b)During the License Period. During the License Period (if any), the JSC shall serve solely as a forum for information sharing and shall not have any decision-making authority. Without limiting the foregoing, during the License Period, Curis shall provide updates to the JSC regarding the status of Regulatory Filings made, anticipated Regulatory Approvals, and anticipated Product launch dates and non-binding estimates of the anticipated occurrence of each Development Milestone Event and Commercial Milestone Event.
2.1.3Meetings. The JSC shall meet at least [**] during the Option Period and at least [**] during the License Period (if any), or, in each case, at such greater frequency as the JSC shall determine. The JSC may meet in person or by means of teleconference, videoconference or other similar communications equipment. In-person meetings shall alternate between ImmuNext and Curis locations within the United States whenever possible unless otherwise agreed by the Parties. Subject to the preceding sentence, JSC meetings shall be held at such times and places as determined by the JSC. The first JSC meeting shall be within [**] after the Effective Date, and the first JSC meeting during the License Period (if any) shall be within [**] after the start of the License Period. Following notice to the other Party, a reasonable number of additional representatives of a Party may attend meetings of the JSC in a non‑voting capacity provided that all such representatives are bound by written confidentiality and non-use obligations commensurate with Section 13. Each Party shall bear its own expenses of participating in meetings of the JSC. Curis shall have responsibility for chairing JSC meetings. The chair shall not have any greater authority than any other representative of either Party on the JSC. Curis’ Alliance Manager shall be responsible for circulating the agenda for such meeting reasonably in advance of such meeting, provided that at ImmuNext’s request, Curis shall include on the agenda for a meeting any matter requested by ImmuNext that is within the scope of the JSC’s responsibility or purview.
2.1.4Minutes. Curis’ Alliance Manager shall be responsible for preparing and circulating minutes of each meeting of the JSC within [**] after such meeting. Minutes of JSC meetings shall set forth, among other things, a description, in reasonable detail, of the discussions at the meeting and a list of any actions, decisions or determinations approved by the JSC. Such minutes shall be effective only after being approved by both Parties. Definitive minutes of all JSC meetings shall be finalized no later than [**] after the meeting to which the minutes pertain.
2.1.5Decision-Making. During the Option Period, decisions of the JSC shall be made by consensus, with each Party’s representatives on the JSC collectively having one vote. No vote of the JSC may be taken unless at least one of each Party’s representatives is present for the vote. Each Party shall be responsible for ensuring that, at all times, its representatives on the JSC act reasonably and in good faith in carrying out their respective responsibilities hereunder.
2.1.6Dispute Resolution. During the Option Period, in the event that the JSC is unable to reach a unanimous decision on a matter that is within its decision-making authority within [**] after it has met and attempted to reach such decision, then either Party may

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refer such matter to a senior executive officer of each Party for attempted resolution. Such senior executive officers shall attempt in good faith to promptly resolve such matter within [**] after such referral. In the event that such senior executive officers are unable to resolve such matter within [**] after such referral, then:
(a)if the matter relates to the [**], Curis will have final-decision making authority with respect to such matter, provided that such decision must be in accordance with the Development Principles;
(b)if the matter relates to the Research Plan, the Research Budget, the Research Principles, the Phase 1A/1B Plan, or the Development Principles, the matter will be referred to the chief executive officer of each Party for attempted resolution. If the chief executive officers are unable to resolve such matter within [**] after such referral, then:
(i)if the matter is a good faith dispute between the Parties as to whether the continuation or resumption of the conduct of a Phase 1A/1B Study that has been halted or suspended due to safety concerns or the conduct of an additional Phase 1 Trial proposed to be added to the Phase 1A/1B Plan as a Phase 1A/1B Study poses a substantial and unacceptable risk to patient safety that outweighs any potential therapeutic benefit of the Product to patients, taking into consideration the (un)availability of therapeutic alternatives to patients (an “Unacceptable Safety Risk”), then either Party may refer such dispute for resolution by a KOL Panel in accordance with Section 17.2;
(ii)if the matter is a dispute as to whether the clinical endpoints for any Phase 1A/1B Study have been met, then either Party may refer such dispute for resolution by a KOL Panel in accordance with Section 17.2; and
(iii)unless Section 2.1.6(b)(i) or 2.1.6(b)(ii) applies, if such matter is a proposed amendment or modification to the Research Plan, the Research Budget, the Research Principles, the Phase 1A/1B Plan, or the Development Principles, the matter will remain deadlocked and the status quo will prevail; and
(c)if such matter relates to use of a Compound as a tool compound pursuant to Section 8.3.3(a), Curis will have final-decision making authority with respect to such matter.
The Parties intend that all matters within the scope of the JSC’s decision-making authority shall be resolved by the Parties in accordance with Sections 2.1.5 and 2.1.6 and, to the extent expressly provided in Section 2.1.6(b)(i) or 2.1.6(b)(ii), Section 17, and each Party acknowledges and agrees that, notwithstanding anything to the contrary in this Agreement, no matter within the scope of the JSC’s authority shall be subject to the dispute resolution mechanisms set forth in Section 16.
2.1.7Limitation on Authority. The JSC shall have only such rights, powers and authority as are expressly delegated to it under this Agreement, and such rights, powers and authority shall be subject to the terms and conditions of this Agreement. The JSC shall not be a substitute for the rights of the Parties hereunder. Notwithstanding any other

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provision of this Agreement to the contrary, the JSC shall not have any right, power or authority: (a) to determine any issue in a manner that would conflict with the express terms and conditions of this Agreement; or (b) to modify or amend the terms and conditions of this Agreement.
2.2Alliance Managers. Promptly after the Effective Date, each Party shall appoint an individual to act as the alliance manager for such Party (each, an “Alliance Manager”) and shall notify the other Party of the name and contact information of its initial Alliance Manager. A Party may replace its Alliance Manager from time to time in its sole discretion upon written notice to the other Party, which shall include the name and contact information of the replacement Alliance Manager. The Alliance Managers shall be the primary points of contact for the Parties regarding the activities contemplated by this Agreement and shall facilitate communication regarding all activities hereunder. During the Option Period, the Alliance Managers shall be responsible for following-up on decisions made by the JSC.
3.Option Grant; Option Exercise; Option Period Development; Option Period Manufacturing.
3.1Option Grant; Option Exercise. Subject to the terms and conditions of this Agreement, ImmuNext hereby grants to Curis the exclusive option, exercisable at Curis’ sole discretion during the Option Period, to obtain the Curis Commercial License (the “Option”). During the Option Period, Curis will have the right (but not the obligation) to exercise the Option in its sole discretion by delivering written notice of such exercise (the “Option Exercise Notice”) to ImmuNext and paying the Option Fee to ImmuNext in accordance with Section 9.2. The date on which the Option Exercise Notice has been delivered and the Option Fee has been paid to ImmuNext shall be the “Option Exercise Date”. If Curis does not exercise the Option during the Option Period, this Agreement will expire in accordance with its terms pursuant to Section 15.1.
3.2Option Period Development.
3.2.1Goals. The objective for the Option Period is for ImmuNext to conduct the Research Plan in a manner that is consistent with the Research Principles and Curis to conduct the Phase 1A/1B Study in a manner that is consistent with the Development Principles, in each case, in order to permit Curis to evaluate whether to exercise the Option. ImmuNext shall conduct the Research Plan activities in accordance with the Research Plan and this Agreement. Curis shall conduct the Phase 1A/1B Study in accordance with the Phase 1A/1B Plan and this Agreement.
3.2.2Option Period Plans; Performance.
(a)Research Plan. During the Option Period, ImmuNext shall use Commercially Reasonable Efforts to conduct in vitro and in vivo experiments that support the Phase 1A/1B Study in accordance with a mutually agreed written research plan (the “Research Plan”), which Research Plan will be consistent with the Research Principles. The Research Plan shall set forth (i) the in vitro and in vivo experiments to be conducted by or on behalf of ImmuNext; (ii) the Research Budget; and (iii) an estimated timeline for the conduct of such experiments. ImmuNext shall deliver an initial draft of the Research Plan to Curis for

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review and approval by the JSC (such approval not to be unreasonably withheld, conditioned or delayed) a draft Research Plan within [**] after the Effective Date. From time to time after approval of the initial Research Plan during the Option Period, either Party may propose amendments to the Research Plan for review and approval by the JSC, provided that any such amendment must be consistent with the Research Principles.
(b)Phase 1A/1B Plan. Within [**] after the Effective Date, Curis shall deliver to ImmuNext for review and approval by the JSC (such approval not to be unreasonably withheld, conditioned or delayed) a draft plan for the conduct of the Phase 1A/1B Study, which shall be consistent with the Development Principles, identify the major parameters of the Phase 1A/1B Study and include an estimated timeline. Upon approval by the JSC in accordance with Section 2.1.2(a)(ii), such plan shall be the “Phase 1A/1B Plan”. From time to time after approval of the initial Phase 1A/1B Plan during the Option Period, either Party may propose amendments to the Phase 1A/1B Plan for review and approval by the JSC, provided that any such amendment must be consistent with the Development Principles.
(c)Endpoints. If the clinical endpoints for a Phase 1A/1B Study are not met, the Parties shall discuss in good faith potential amendments to the Research Plan, Research Budget and Phase 1A/1B Plan to accommodate an additional Phase 1A/1B Study; such amendments to be consistent with the Research Principles and/or Development Principles, as applicable. In no event may Curis conduct a Phase 2 Trial of a Product during the Option Period.
(d)Option Period Diligence. During the Option Period, ImmuNext shall use Commercially Reasonable Efforts to conduct the experiments set forth in the Research Plan in accordance with the Research Plan, including the Research Budget. Without limiting the foregoing, ImmuNext shall be solely responsible for conducting all Research Plan activities, including ensuring that all Research Plan activities are conducted in compliance with applicable Law and industry standards. During the Option Period, Curis shall use Commercially Reasonable Efforts to conduct the Phase 1A/1B Study in accordance with the Phase 1A/1B Plan. Without limiting the foregoing, Curis shall be solely responsible for conducting all activities in connection with the Phase 1A/1B Study, including ensuring that the administration and use of Compounds and Products for the Phase 1A/1B Study are conducted in compliance with applicable Law and industry standards, including GLP, GCP and GMP.
3.2.3Phase 1A/1B Study Costs; Research Plan Costs.
(a)Curis shall bear all costs and expenses (including personnel costs and all other internal costs and external costs) incurred in connection with activities under the Phase 1A/1B Plan.
(b)Following the end of each Calendar Quarter during the Option Period, ImmuNext shall invoice Curis, at cost and in accordance with the Research Budget, for documented external costs and expenses incurred by or on behalf of ImmuNext or its Affiliates, and at the applicable FTE Rate for FTEs used by ImmuNext, in each case, in carrying out its responsibilities under the Research Plan during the previous Calendar Quarter. Notwithstanding the foregoing, the total amount invoiced to Curis for each Calendar Year

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pursuant to this Section 3.2.3(b) shall not exceed two hundred fifty thousand dollars ($250,000), unless otherwise agreed by the Parties in writing (such agreement to be given or withheld in each Party’s sole discretion). Curis shall pay each such invoice within [**] of receipt thereof. ImmuNext will not be required to conduct any activities under the Research Plan unless it is paid in full for all costs and expenses incurred in accordance with the Research Budget. Curis will not be required to pay any amount in excess of one hundred percent (100%) of the Research Budget for ImmuNext’s conduct of the Research Plan.
3.2.4Option Period Updates and Records.
(a)Updates. During the Option Period, (i) Curis shall keep ImmuNext reasonably informed with respect to the progress and results of the Phase 1A/1B Plan and the activities for which it is responsible thereunder by providing updates at each meeting of the JSC and (ii) ImmuNext shall keep Curis reasonably informed with respect to the progress and results of the Research Plan and the activities for which it is responsible thereunder by providing updates at each meeting of the JSC. Such updates shall include all activities conducted and all accomplishments achieved under the Phase 1A/1B Plan or Research Plan (as applicable), all Option Period Results and any new Inventions Made in the course of conducting such activities, and Know-How pertaining to any such Invention that is Made in the course of conducting such activities during the Option Period (it being understood that Section 8.3.1(b) prohibits Curis and its Affiliates from Exploiting ImmuNext Technology, Compounds and Products outside the scope of or otherwise not in compliance with the licenses, sublicenses and other rights granted to Curis under this Agreement), planned activities for the subsequent Calendar Quarter, progress against any timelines, and any other aspects that the JSC may reasonably request, in sufficient detail and in a good scientific manner. Upon a request by a Party, the other Party shall provide a copy of all available raw data relating to the activities conducted by the non-requesting Party under the Phase 1A/1B Plan or Research Plan, as applicable.
(b)Curis Option Period Records. During the Option Period, Curis will maintain, or cause to be maintained, records and laboratory notebooks with respect to its conduct of activities under the Phase 1A/1B Plan (the “Curis Option Period Records”) in sufficient detail and in a good scientific manner and format appropriate for (A) scientific purposes, (B) regulatory purposes, and (C) obtaining and maintaining intellectual property rights and protections, in each case ((A)-(C)) for a period of the longer of as required by applicable Law or [**] after the expiration or termination of the Option Period. The Curis Option Period Records shall be complete and accurate in all material respects and shall fully and properly reflect all work done, Option Period Results, and Inventions Made in the course of conducting the Phase 1A/1B Plan, and Know-How pertaining to any such Invention that is Made in the course of conducting such activities during the Option Period (it being understood that Section 8.3.1(b) prohibits Curis and its Affiliates from Exploiting ImmuNext Technology, Compounds and Products outside the scope of or otherwise not in compliance with the licenses, sublicenses and other rights granted to Curis under this Agreement). Upon ImmuNext’s request during the required retention period, Curis will provide a copy of the Curis Option Period Records to ImmuNext and will meet with ImmuNext from time to time to discuss the same.
(c)ImmuNext Option Period Records. During the Option Period, ImmuNext will maintain, or cause to be maintained, records and laboratory notebooks

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with respect to its conduct of activities under the Research Plan (the “ImmuNext Option Period Records”) in sufficient detail and in a good scientific manner and format appropriate for (A) scientific purposes, (B) regulatory purposes, and (C) obtaining and maintaining intellectual property rights and protections, in each case ((A)-(C)) for a period of [**] after the expiration or termination of the Option Period. The ImmuNext Option Period Records shall be complete and accurate in all material respects and shall fully and properly reflect all work done, Option Period Results, and Inventions Made in the course of conducting activities under the Research Plan, and Know-How pertaining to any such Invention that is Made in the course of conducting such activities during the Option Period (it being understood that Section 8.3.1(b) prohibits Curis and its Affiliates from Exploiting ImmuNext Technology, Compounds and Products outside the scope of or otherwise not in compliance with the licenses, sublicenses and other rights granted to Curis under this Agreement), but are not required to reflect any Excluded Compound Technology or Excluded ImmuNext Technology. Upon Curis’ request during the required retention period, ImmuNext will provide a copy of the ImmuNext Option Period Records to Curis and will meet with Curis from time to time to discuss the same.
(d)Final Report. Within [**] after the earlier of (i) the commencement of the License Period, (ii) the date of expiration of this Agreement pursuant to Section 15.1(a), or (iii) the date of termination of this Agreement for any reason during the Option Period, Curis shall deliver to ImmuNext a final written report of all activities conducted and all accomplishments achieved by Curis in connection with the Phase 1A/1B Plan and all results thereof, in sufficient detail and in a good scientific manner and study report format appropriate for (A) scientific purposes, (B) regulatory purposes, and (C) obtaining and maintaining intellectual property rights and protections. Within [**] after completion of all Research Plan activities, ImmuNext shall deliver to Curis a final written report of all activities conducted and all accomplishments achieved by ImmuNext in connection with the Research Plan and all results thereof, in sufficient detail and in a good scientific manner and study report format appropriate for (A) scientific purposes, (B) regulatory purposes, and (C) obtaining and maintaining intellectual property rights and protections.
(e)Ownership. ImmuNext shall solely own all rights, title and interest (including all intellectual property rights) in and to the ImmuNext Option Period Records and the Option Period Results. Curis shall solely own all rights, title and interest (including all intellectual property rights) in and to the Curis Option Period Records; provided, however, that all Option Period Results recorded or disclosed therein shall be owned by ImmuNext.
3.2.5ImmuNext Independent Monitor. At ImmuNext’s sole cost and expense, ImmuNext may engage an independent Third Party mutually agreeable to both Parties to monitor execution of the Phase 1A/1B Study (such party, the “Independent Monitor”). ImmuNext shall be permitted to share any Confidential Information of Curis with the Independent Monitor as reasonably necessary for the Independent Monitor to perform the obligations of the Independent Monitor as described above. Additionally, the Independent Monitor shall have access to relevant personnel of Curis and any Affiliates during normal business hours, with at least [**] prior notice to Curis, as reasonably necessary for the Independent Monitor to perform its obligations as described above. ImmuNext shall be

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responsible for the compliance of the Independent Monitor with the applicable terms and conditions of this Agreement, including Section 13.
3.2.6ImmuNext Clinical Representative. At ImmuNext’s sole cost and expense, up to [**] qualified ImmuNext representatives designated by ImmuNext shall be permitted to monitor the clinical site calls for the Phase 1A/1B Study. ImmuNext shall be responsible for the compliance of such representative(s) with the applicable terms and conditions of this Agreement, including Section 13.
3.2.7Performance by Affiliates, Subcontractors and Academic Researchers.
(a)Subject to the terms of this Section 3.2.7(a) and Section 7.1.2, each Party shall have the right to perform its obligations under the Phase 1A/1B Plan or the Research Plan or exercise rights under and Section 7.1.2, as applicable, through one or more Affiliates or Subcontractors, provided, in each case, that: (i) none of the other Party’s rights hereunder are diminished or otherwise adversely affected as a result of such delegation or subcontracting; (ii) each such Affiliate and Subcontractor undertakes in writing obligations of confidentiality and non-use regarding Confidential Information at least as stringent as those undertaken by the Parties pursuant to Section 13; (iii) prior to initiating conduct of any Phase 1A/1B Plan or the Research Plan activities, each such Affiliate and Subcontractor has signed a binding agreement or instrument assigning, and agreeing to assign, to such Party all Option Period Results, Inventions Made in the conduct of such activities, and Know-How pertaining to any such Invention that is Made in the course of conducting such activities during the Option Period (it being understood that Section 8.3.1(b) prohibits Curis and its Affiliates from Exploiting ImmuNext Technology, Compounds and Products outside the scope of or otherwise not in compliance with the licenses, sublicenses and other rights granted to Curis under this Agreement); and (iv) such Party shall at all times be fully responsible for the conduct of such Affiliate or Subcontractor, and no such delegation or subcontracting shall relieve such Party of its obligations under the Phase 1A/1B Plan, the Research Plan or this Agreement. Notwithstanding clause (iii) above, the Parties acknowledge that a Subcontractor that is a contract research organization or contract manufacturing organization may be unwilling to agree to assign to the subcontracting Party improvements to such Subcontractor’s pre‑existing proprietary technology that it uses in conducting such activities, or technology of broad applicability that such Subcontractor uses for multiple customers or clients in addition to such Party, and in such event such Party shall not be prohibited from delegating or subcontracting its obligations to such Subcontractor solely by reason thereof if such delegation or subcontracting is pursuant to commercially reasonable and customary terms that otherwise comply with this Section 3.2.7(a). The Party engaging a Subcontractor shall be responsible for the payment of such Subcontractor for the subcontracted activities.
(b)Except as set forth in the remainder of this Section 3.2.7(b), neither Party shall subcontract any Phase 1A/1B Plan or Research Plan activities to any Academic Researcher without the other Party’s prior written consent, which the other Party may condition upon the Academic Researcher’s written agreement to terms and conditions regarding ownership and/or license of intellectual property rights and confidentiality and non‑use of information that, in each case, are acceptable to the other Party. Notwithstanding the foregoing,

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(i) ImmuNext shall have the right to subcontract Research Plan activities to Upstream Licensor 1 pursuant to the Upstream SRA, (ii) ImmuNext shall have the right to subcontract Research Plan activities to Upstream Licensor 1 on a fee-for-service basis under terms and conditions that provide for any intellectual property Made under any such fee-for-service agreement to be owned by ImmuNext, or, solely in the case of engaging Upstream Licensor 1 to analyze samples, under terms and conditions under which ImmuNext shall have the right to use, without limitations on disclosure, all data generated in connection with such activities for any lawful purpose without obligation to Upstream Licensor 1, and (iii) Curis shall have the right to enter into clinical trial agreements with Academic Researchers at clinical trial sites for the Phase 1A/1B Study on customary and reasonable terms, which such clinical trial agreements shall include the assignment to Curis of all Inventions that are directed specifically to the Compound or Product that is the subject of such Phase 1A/1B Study (including the composition, or any method of use or manufacture, of such Compound or Product) or that are anticipated by the protocol for the Phase 1A/1B Study. In no event may either Party allow any Academic Researcher to conduct an investigator-sponsored trial of a Compound or Product.
4.License Period Development and Commercialization.
4.1Responsibility for Development and Commercialization. During the License Period, Curis shall have the sole right to conduct all Development and Commercialization activities with respect to the Compounds and Products in the Field, at Curis’ sole cost and expense. Curis shall be responsible for conducting all such Development and Commercialization activities with respect to Compounds and Products in compliance with all applicable Laws.
4.2Diligence. During the License Period, Curis shall use Commercially Reasonable Efforts to Develop and Commercialize one (1) Product in each Major Market in the Field, and ImmuNext shall have no further obligations under the Research Plan.
4.3Updates. On a [**] basis by [**] of each Calendar Year during the License Period prior to the First Commercial Sale of a Product, and on [**] of each Calendar Year thereafter, Curis shall provide a high-level update, in writing or as part of a JSC meeting, regarding its progress with respect to the Development and registration of Compounds and Products in the Field in the Major Markets, including the status and results of clinical trials and Regulatory Approvals applied for or obtained.
4.4Marking. Curis, is Affiliates and Sublicensees shall mark all Products with applicable issued patent numbers or other intellectual property notices relating to such Products in conformance with applicable Laws and the applicable Upstream Agreements.
5.Technology Transfer
5.1ImmuNext Technology. To the extent not previously provided prior to the Effective Date, within [**] after the Effective Date, ImmuNext will provide to Curis one (1) electronic copy of the following ImmuNext Technology: (a) all documents in ImmuNext’s or any of its Affiliates’ possession as of the Effective Date that describe or contain the chemical or molecular structures, non-clinical data and reports on the Compounds, and (b) all documents in

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ImmuNext’s or any of its Affiliates’ possession as of the Effective Date relating to clinical filings, data and reports on the Compounds. In addition, to the extent not included in clauses (a) and (b) of the preceding sentence, ImmuNext shall provide to Curis, within [**] after the Effective Date, true and complete copies of all written, graphic or electronic embodiments of data in the possession of ImmuNext or its Affiliates from preclinical studies and Clinical Trials of Compounds and Products (it being understood that ImmuNext makes no representation or warranty that any such embodiments of data that were provided to ImmuNext by Upstream Licensor 2 were or are true and complete).
5.2Existing Inventory. Within [**] after the Effective Date, Curis shall provide ImmuNext with evidence that Curis has engaged contract research organizations to manage and store the Existing Inventory in a manner that is reasonably acceptable to ImmuNext. Following receipt of such evidence, ImmuNext will cause control of the Existing Inventory to be transferred to Curis. During the Option Period, (a) absent prior written consent from ImmuNext, Curis may not change any of the contract research organizations it engages to manage or store any of the Existing Inventory and (b) Curis shall not, and shall cause its Affiliates and Sublicensees not to, use the Existing Inventory for any purpose other than to conduct the Phase 1A/1B Study in accordance with the Phase 1A/1B Plan and any supportive non-clinical experiments for the Compounds and Products in the Field.
6.Regulatory Responsibilities.
6.1During the Option Period.
6.1.1During the Option Period, Curis will submit a Curis IND cross-referencing the [**] IND to the appropriate Regulatory Authority in each jurisdiction where the Phase 1A/1B Study will be conducted. ImmuNext hereby grants to Curis and its Affiliates during the Option Period an exclusive Right of Reference to the [**] IND, solely for the purposes of: (i) filing and maintaining the Curis IND(s); (ii) conducting the Phase 1A/1B Study; and (iii) complying with applicable reporting and other regulatory requirements with respect to Products. ImmuNext shall, promptly upon Curis’ request, file with the applicable Regulatory Authority(ies) such letter(s) of authorization, access or cross-reference as may be necessary to accomplish the intent of the preceding sentence. Curis will have the sole right to conduct all regulatory activities to support the Curis IND(s), including all meetings, conferences and discussions (including advisory committee meetings), with regard to the Phase 1A/1B Study and the Curis IND(s), such activities to be conducted at Curis’ sole cost and expense; provided that, (a) Curis shall consult with ImmuNext regarding any such material communications and other material regulatory matters during the Option Period through the JSC, (b) if Curis requests that ImmuNext conduct any communications or otherwise interact with a Regulatory Authority, the Parties will discuss such request in good faith, and if the Parties agree, ImmuNext will engage in such communications or other interaction with such Regulatory Authority and (c) Curis shall provide ImmuNext with copies of all written communications with Regulatory Authorities and written minutes of non-written communications with Regulatory Authorities.
6.1.2Prior to the transfer of the [**] IND pursuant to Section 6.2, Curis shall promptly provide ImmuNext with CMC data regarding the Existing Inventory transferred to Curis hereunder as reasonably requested by ImmuNext for ImmuNext to perform its reporting

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obligations under the [**] IND and data required to support stability work. Without limiting the foregoing, Curis shall provide ImmuNext with the data set forth on Schedule 6.1.2 on an as-required basis to perform ImmuNext’s and its Affiliates’ regulatory obligations with respect to the [**] IND at the applicable frequency set forth on such Schedule. ImmuNext and its Affiliates may use the data provided under this Section 6.1.2 solely to perform ImmuNext’s and its Affiliates’ regulatory obligations with respect to the [**] IND. In addition, Curis and ImmuNext agree to cooperate in the drafting of the annual report for [**] and the filing thereof with relevant Regulatory Authorities.
6.2During the License Period. Promptly upon Curis’ request following the start of the License Period, ImmuNext shall assign and transfer to Curis the [**] IND. Effective as of the Option Exercise Date (if any), unless the [**] IND is transferred to Curis, ImmuNext shall, and does hereby, grant to Curis and its Affiliates during the Option Period an exclusive Right of Reference to the [**] IND, solely for the purposes of: (i) obtaining and maintaining Regulatory Approvals for Products in the Field; (ii) to the extent Curis or any of its Affiliates is manufacturing, or having a contract manufacturing organization manufacture, Compound or Product, conducting or having conducted CMC activities in relation to Compound or Product; (iii) to the extent Curis or any of its Affiliates is manufacturing, or having a contract manufacturing organization manufacture, Compound or Product, the manufacture of Compound or Product for use or distribution anywhere in the world; and (iv) complying with applicable pharmacovigilance and other regulatory requirements with respect to Product, all in accordance with this Agreement. ImmuNext shall, promptly upon Curis’ request, file with applicable Regulatory Authorities such letters of authorization, access or cross-reference as may be necessary to accomplish the intent of the preceding sentence. During the License Period, Curis will be responsible for all regulatory matters with respect to the Compounds and Products in the Field, and Curis shall bear the associated costs and expenses. Without limiting the foregoing, during the License Period, Curis shall own all INDs and BLAs related to the Compounds and Products in the Field submitted by or on behalf of Curis and all Regulatory Approvals received with respect to Compounds and Products in the Field.
6.3No Option Exercise. In the event that Curis does not exercise the Option by the end of the Option Period, (a) Curis shall transfer and assign to ImmuNext or its designee the Curis IND(s) and other Regulatory Filings submitted by Curis to, or filed by Curis with, any Regulatory Authority with respect to any Compound or Product, including any drug or biologic master files held by Curis solely related to Compound or Product; and (b) Curis shall have no rights under Section 6.2.
6.4Pharmacovigilance. To the extent required by applicable Laws or requested by any Regulatory Authority with respect to the class of compounds or products that target VISTA, the Parties will cooperate with regard to the reporting and handling of safety information involving Compounds and Products, on the one hand, and Excluded Compounds, on the other hand. In such case, the Parties will negotiate in good faith and enter into a Safety Data Exchange Agreement defining the pharmacovigilance responsibilities of the Parties, including procedures governing the exchange of safety data and information affecting the class of compounds or products that target VISTA. If ImmuNext enters into a collaboration or license agreement with a Third Party to develop or commercialize one or more Excluded Compounds, and such agreement includes obligations of such Third Party for the benefit of Curis that are

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substantially the same as those set forth above in this Section 6.4 (mutatis mutandis), then Curis agrees to comply with reciprocal obligations to such Third Party. Notwithstanding the foregoing, neither Party shall be obligated to enter into any such agreement if it determines in good faith that such agreement would cause a Party to violate applicable Laws.
7.Manufacture and Supply
7.1During the Option Period.
7.1.1During the Option Period, Curis will have sole right, responsibility and control of, and will bear all costs and expenses of, managing the supply of all Existing Inventory. In addition, Curis will be responsible for all costs and expenses incurred during the Option Period for distribution of Existing Inventory to clinical sites, storage, testing, labeling, and, if necessary, bulk fill and finish; provided that, during the Option Period, Curis and its Affiliates and Sublicensees may only use Existing Inventory for the conduct of the Phase 1A/1B Study and support of the Research Plan. The Parties shall enter into a quality agreement, which will be consistent with this Agreement, setting forth the Parties’ respective rights and obligations with respect to the release of Existing Inventory, including the authority to release and ship Existing Inventory as required to support the Phase 1A/1B Study. Subject to Curis’ right to use Existing Inventory in accordance with this Agreement, ImmuNext shall retain all right, title and interest in and to all Existing Inventory during the Option Period.
7.1.2Except as set forth in this Section 7.1.2 or as otherwise agreed in writing by the Parties, none of Curis, its Affiliates or Sublicensees may Manufacture or have Manufactured any Compound or Product during the Option Period. If the quantity and/or quality of Existing Inventory is insufficient for the conduct and completion of the Phase 1A/1B Study (and any additional Phase 1A/1B Study that the Parties agree Curis may conduct pursuant to Section 3.2.2(c), or the KOL Panel permits Curis to conduct in accordance with Section 17.2) and support of the Research Plan, Curis shall have the right during the Option Period to Manufacture or have Manufactured such additional quantity(ies) of Compound or Product as are reasonably necessary for such purposes. For clarity, Curis shall not be obligated to use in any Phase 1A/1B Study any Existing Inventory that Curis determines is not GMP-compliant, does not conform to the applicable specifications, or is otherwise not suitable for use in humans. If Curis proposes to Manufacture or have Manufactured additional quantity(ies) of Compound or Product in accordance with the foregoing, the Parties shall discuss the same in good faith and shall mutually agree as to the contract manufacturing organization(s) to be used for the Manufacture of such Compound or Product Curis shall keep ImmuNext reasonably informed of the proposed terms of any agreement with such contract manufacturing organization(s) for such Manufacture, shall consider in good faith all reasonable comments provided by ImmuNext and shall provide ImmuNext with a copy of the final agreement.
7.2During the License Period. Promptly following the Option Exercise Date, ImmuNext shall transfer to Curis the materials Controlled by ImmuNext and its Affiliates that are necessary to synthesize or are reasonably useful for synthesizing the drug substance and/or drug product for the Compounds and Product, as well as all process and quality documentation, standards and assays for Compounds and Products that are Controlled by ImmuNext or its Affiliates; provided that in no event will ImmuNext or its Affiliates transfer to

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Curis any Excluded ImmuNext Technology. During the License Period, Curis shall be responsible for Manufacturing (or having Manufactured) the drug substance and drug product forms of the Compounds and Products and will bear all of the associated costs and expenses.
8.Licenses; Reservation of Rights; Exclusivity
8.1Licenses.
8.1.1To Curis.
(a)Subject to the terms and conditions of this Agreement, ImmuNext hereby grants to Curis, during the Option Period, (i) an exclusive, worldwide, royalty‑free (sub)license, without the right to grant sublicenses but with the right to extend such (sub)license to Curis’ Affiliates, under the ImmuNext Technology, to research, develop and use Compounds and Products in the Field, and (ii) subject to Section 3.2.7(a) and Section 7.1.2, a co-exclusive, worldwide, royalty‑free (sub)license, without the right to grant sublicenses but with the right to extend such (sub)license to Curis’ Affiliates and the right to contract with Third Party contract manufacturing organizations solely in accordance with Section 3.2.7(a) and 7.1.2, under the ImmuNext Technology, to make and have made Compounds to be used to conduct the activities set forth in the Phase 1A/1B Plan ((i) and (ii) collectively, the “Curis R&D License”).
(b)Subject to the terms and conditions of this Agreement, effective as of the Option Exercise Date (if any), ImmuNext shall, and does hereby, grant to Curis an exclusive, worldwide, royalty-bearing (sub)license, including the right to sublicense through multiple tiers in accordance with Section 8.2, under the ImmuNext Technology and under ImmuNext’s interest in the Jointly Owned Technology, in each case, solely to Exploit Compounds and Products in the Field (the “Curis Commercial License”).
8.1.2To ImmuNext. Subject to the terms and conditions of this Agreement, effective as of the Option Exercise Date (if any), Curis shall, and does hereby, grant to ImmuNext and its Affiliates an exclusive, worldwide, perpetual, irrevocable, royalty-free, fully paid-up license, including the right to sublicense through multiple tiers in accordance with Section 8.2, under the Curis Useful Technology and under Curis’ interest in the Joint Useful Technology, in each case, solely to Exploit Excluded Compounds outside the Field (the “ImmuNext License”). For the avoidance of doubt, the ImmuNext License shall survive the termination or expiration of this Agreement.
8.2Sublicensing. Curis shall have the right to grant Sublicenses under the Curis Commercial License, and ImmuNext shall have the right to grant sublicenses under the ImmuNext License, in each case, through multiple tiers of sublicense solely in accordance with this Section 8.2, as follows:
8.2.1each Sublicense or ImmuNext sublicense (as applicable) shall refer to this Agreement and shall be subordinate to and consistent with the terms and conditions of this Agreement, and shall not limit the ability of the granting Party to fully perform its obligations under this Agreement or the other Party’s rights under this Agreement;

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8.2.2in each Sublicense, the Sublicensee shall agree to be subject to, and bound by, the terms and conditions of the applicable Upstream Agreements to the extent required under the terms of such Upstream Agreements;
8.2.3Curis shall remain responsible for the performance of its obligations under this Agreement and the conduct of its Affiliates and Sublicensees hereunder, including the payment of all payments due, and making reports and keeping books and records, and shall cause each Affiliate and Sublicensee to enable Curis to comply with the terms and conditions of this Agreement;
8.2.4ImmuNext shall remain responsible for the performance of its obligations under this Agreement and the conduct of its Affiliates and sublicensees hereunder, including making reports and keeping books and records, and shall cause each Affiliate and ImmuNext sublicensee to enable ImmuNext to comply with the terms and conditions of this Agreement; and
8.2.5Sublicensees or ImmuNext sublicensees (as applicable) shall have the right to grant further Sublicenses or ImmuNext sublicenses (as applicable) of the same or lesser scope as its Sublicense or ImmuNext sublicense (as applicable) from the granting Party under the Curis Commercial License or the ImmuNext License, as applicable (the counterparty to such further Sublicense/sublicensee also being a “Sublicensee” or “ImmuNext sublicensee”, as applicable); provided, however, that such further Sublicenses or ImmuNext sublicenses (as applicable) shall be in accordance with and subject to all of the terms and conditions of this Section 8.2 and Section 8.3 (i.e., such initial Sublicensee or ImmuNext sublicensee shall be subject to this Section 8.2.5 in the same manner and to the same extent as the granting Party).
8.3No Implied Licenses; Retained Rights; Reservation of Rights.
8.3.1No Implied Licenses.
(a)No license or other right is or shall be created or granted hereunder by implication, estoppel or otherwise. All licenses and rights are or shall be granted only as expressly provided in this Agreement. All rights not expressly granted by a Party under this Agreement are reserved by such Party and may be used by such Party for any purpose. Curis hereby acknowledges that neither ImmuNext nor any of its Affiliates is granting Curis or any of its Affiliates any rights under Excluded ImmuNext Technology.
(b)Neither Curis nor any of its Affiliates will use or practice any ImmuNext Technology or Exploit any Compound or Product outside the scope of or otherwise not in compliance with the licenses, sublicenses and rights granted to Curis under this Agreement.
(c)Notwithstanding any other provision of this Agreement, for the purposes of the Curis Licenses with respect to any Product that is a Combination Product, (i) such license will only include a license with respect to the Compound in such Combination Product, and (ii) in no event is a license granted hereunder with respect to any Other Active(s) included in such Combination Product.

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(d)Neither ImmuNext nor any of its Affiliates will use or practice any Curis Useful Technology outside the scope of or otherwise not in compliance with the licenses and rights granted to ImmuNext under this Agreement.
8.3.2Limited Exploitation Rights. Without limiting Section 8.4.2, Curis agrees (on behalf of itself and its Affiliates), and shall cause each of its Sublicensees to agree as a condition to the grant of a Sublicense, not to Exploit any ImmuNext Technology (a) for any compounds or products other than Compounds or Products or (b) outside the Field. Without limiting Section 8.3.1, ImmuNext agrees (on behalf of itself and its Affiliates), and shall cause each of its sublicensees to agree as a condition to the grant of a sublicense under the ImmuNext License, not to Exploit any Curis Useful Technology for any compounds or products other than Excluded Compounds outside the Field.
8.3.3Retained Rights.
(a)Notwithstanding anything herein to the contrary, ImmuNext and its Affiliates hereby retain the right under the ImmuNext Technology to make, have made and use (i) VISTA Antagonists other than Compounds as tool compounds and (ii) VISTA Antagonists for counterscreening, to perform its obligations under this Agreement, and as otherwise permitted by this Agreement. For clarity, except as expressly prohibited by Section 8.4.1, ImmuNext and its Affiliates retain all right, title and interest in and to the ImmuNext Technology in connection with the research, Development, Manufacture and Commercialization of compounds or products other than Compounds and Products.
(b)Notwithstanding anything herein to the contrary, except as expressly prohibited by Section 8.4.2, Curis and its Affiliates retain all right, title and interest in and to the Curis Useful Technology and Curis’ interest in the Joint Useful Technology in connection with the research, Development, Manufacture and Commercialization of compounds or products other than Excluded Compounds.
8.3.4Upstream Agreements. Curis acknowledges and agrees that this Agreement is subject to the terms and conditions of the Upstream Agreements. Further, without limiting any provision of any Upstream Agreement, this Agreement is expressly subject to the following reservations of rights:
(a)this Agreement is subject to the reservation in Section 2.01 of Upstream Agreement 1;
(b)this Agreement is subject to the reservation in clause 2.6 of Upstream Agreement 3;

(c)this Agreement is subject to the reservation in Section 2.02 of Upstream Agreement 4;
(d)this Agreement is subject to all of the terms and conditions of Title 35 of the United States Code §§200 et al. (“Bayh-Dole Act”) and 37 C.F.R. Part 401 et

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al., as required, for example, under Section 2.02 of Upstream Agreement 4. Curis agrees to take all actions necessary on its part to enable ImmuNext and its Affiliates to perform its obligations under such Laws to the extent applicable to the ImmuNext Patents, including complying with the applicable sections with respect to the engagement of U.S. manufacturers (unless an appropriate waiver is obtained from the United States Government). Upon reasonable request by either Party, the other Party shall cooperate fully in requesting and obtaining any waiver with respect to any requirements of 35 U.S.C. § 204 applicable to the ImmuNext Patents that is necessary, and in securing the support of the relevant licensor of the ImmuNext Patents for such request.
8.4Exclusivity.
8.4.1ImmuNext. ImmuNext hereby covenants to Curis that, during the Term, ImmuNext shall not and shall cause its Affiliates not to: (a) clinically Develop, Manufacture or Commercialize any compound that specifically binds VISTA in the Field, nor (b) clinically Develop, Manufacture (other than Manufacture of Compound and Product on behalf of Curis) or Commercialize any VISTA Antagonist in or outside of the Field.
8.4.2Curis. Curis hereby covenants to ImmuNext that, during the Term, Curis shall not and shall cause its Affiliates not to: (a) modify any of the CDRs of the Compounds or Products (provided, for clarity, that Curis may modify portions of the Compounds or Products outside of the CDRs, including the Fc portion of the Compounds or Products, as long as the resulting modified compound is a VISTA Antagonist), (b) conjugate (including any antibody- drug conjugate) any of the Compounds or Products, (c) research, Develop or Commercialize any of the Compounds or Products for any use outside the Field, nor (d) except for any compound licensed to Curis pursuant to the Aurigene Agreement as of the Effective Date, clinically Develop, Manufacture or Commercialize any compound that specifically binds VISTA in the Field other than the Compounds or Products as contemplated in this Agreement.
8.4.3ImmuNext Change of Control or Acquisition.
(a)ImmuNext Change of Control. Notwithstanding Section 8.4.1, if a Change of Control occurs with respect to ImmuNext or any of its Affiliates with a Third Party, and the Third Party (or any of such Third Party’s Affiliates or any successors or assigns of such Third Party or such Third Party’s Affiliates, other than ImmuNext and its Affiliates as of the Change of Control) has as of the Change of Control, or later has, a program (or rights thereto) that would otherwise violate Section 8.4.1 (each, an “ImmuNext COC Program”), then (i) Section 8.4.1 will not apply with respect to such ImmuNext COC Program, and (ii) such Third Party, or any of such Third Party’s Affiliates or any successors or assigns of such Third Party or such Third Party’s Affiliates, as applicable, will be permitted to initiate, pursue and continue such ImmuNext COC Program after such Change of Control and such initiation, pursuit and continuation will not constitute a violation of Section 8.4.1; provided that (A) none of the Jointly Owned Technology, Curis Useful Technology or Confidential Information of Curis will be used in the ImmuNext COC Program, and (B) the conduct of the Research Plan will be conducted separately from any activities directed to such ImmuNext COC Program, including the maintenance of separate lab notebooks and records and separate personnel working on each of the activities under this Agreement and the activities covered under such ImmuNext COC Program.

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(b)ImmuNext Acquisition. In addition, notwithstanding Section 8.4.1, if (i) ImmuNext or its Affiliate acquires a Third Party (by merger, sale, consolidation, reorganization or otherwise) so that such Third Party becomes an Affiliate over which ImmuNext or its Affiliate has control, or (ii) ImmuNext or its Affiliate acquires all or substantially all of the assets of a Third Party (including any subsidiaries or divisions thereof) (each of (i) and (ii), an “ImmuNext Acquisition”), and, in each case, the Third Party (or any of such Third Party’s Affiliates or any successors or assigns of such Third Party or such Third Party’s Affiliates, other than ImmuNext and its Affiliates as of the ImmuNext Acquisition) already has, or the acquired assets contain, as applicable, a program that existed prior to, or was substantially in the process of being implemented prior to such ImmuNext Acquisition and is in fact implemented within the [**] period immediately following such ImmuNext Acquisition, the conduct of which, in each case, would otherwise violate any of Section 8.4.1 (an “ImmuNext Acquisition Program”), then ImmuNext or such Affiliate will, within [**] after the closing of such ImmuNext Acquisition, provide written notice to Curis that ImmuNext or such Affiliates has rights to an ImmuNext Acquisition Program as a result of an ImmuNext Acquisition, which written notice will indicate whether ImmuNext or such Affiliate will (A) divest its rights to such ImmuNext Acquisition Program, or (B) cease the Exploitation of such ImmuNext Acquisition Program. If ImmuNext provides notice as described in clause (A) of the preceding sentence, ImmuNext, and its Affiliates if applicable, will divest such ImmuNext Acquisition Program within [**] after Curis’ receipt of ImmuNext’s notice, and if ImmuNext provides notice as described in clause (B) of the preceding sentence, ImmuNext, and its Affiliates if applicable, will cease the Exploitation of such ImmuNext Acquisition Program as soon as reasonably practicable, giving due consideration to ethical concerns and requirements under applicable Law and any agreements with Third Parties. If ImmuNext or its Affiliates is unable to (1) divest an ImmuNext Acquisition Program within the [**] period specified above or (2) cease the Exploitation of such ImmuNext Acquisition Program because doing so would violate applicable Law or any agreements with Third Parties, then ImmuNext shall provide Curis with evidence of reasonable ongoing efforts to divest such ImmuNext Acquisition Program or reasonable plans to cease the Exploitation of such ImmuNext Acquisition Program, as applicable, and in each case, ImmuNext shall continue to work to divest or cease the Exploitation of such ImmuNext Acquisition Program. ImmuNext and its Affiliates will segregate the ImmuNext Acquisition Program prior to the time of divestiture pursuant to clause (A) or the cessation of Exploitation pursuant to clause (B) above, and ImmuNext and its Affiliates will ensure that (x) none of the Jointly Owned Technology, Curis Useful Technology or Confidential Information of Curis will be used in the ImmuNext Acquisition Program, and (y) the Research Plan will be conducted separately from any activities directed to such ImmuNext Acquisition Program, including the maintenance of separate lab notebooks and records and separate personnel working on each of the activities under this Agreement and the activities covered under such ImmuNext Acquisition Program.
8.4.4Curis Change of Control or Acquisition.
(a)Curis Change of Control. Notwithstanding Section 8.4.2, if a Change of Control occurs with respect to Curis or any of its Affiliates with a Third Party, and the Third Party (or any of such Third Party’s Affiliates or any successors or assigns of such Third Party or such Third Party’s Affiliates, other than Curis and its Affiliates as of the Change of Control) has as of the Change of Control, or later has, a program (or rights thereto) that would

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otherwise violate Section 8.4.2 (each, a “Curis COC Program”), then (i) Section 8.4.2 will not apply with respect to such Curis COC Program, and (ii) such Third Party, or any of such Third Party’s Affiliates or any successors or assigns of such Third Party or such Third Party’s Affiliates, as applicable, will be permitted to initiate, pursue and continue such Curis COC Program after such Change of Control and such initiation, pursuit and continuation will not constitute a violation of Section 8.4.2; provided that (A) none of the ImmuNext Technology, Jointly Owned Technology, Confidential Information of ImmuNext, or materials supplied by or on behalf of ImmuNext to Curis or any of its Affiliates hereunder will be used in the Curis COC Program and (B) the activities under this Agreement will be conducted separately from any activities directed to such Curis COC Program, including the maintenance of separate lab notebooks and records and separate personnel working on each of the activities under this Agreement and the activities covered under such Curis COC Program.
(b)Curis Acquisition. In addition, notwithstanding Section 8.4.2, if (i) Curis or its Affiliate acquires a Third Party (by merger, sale, consolidation, reorganization or otherwise) so that such Third Party becomes an Affiliate over which Curis or its Affiliate has control, or (ii) Curis or its Affiliate acquires all or substantially all of the assets of a Third Party (including any subsidiaries or divisions thereof) (each of (i) and (ii), a “Curis Acquisition”), and, in each case, the Third Party (or any of such Third Party’s Affiliates or any successors or assigns of such Third Party or such Third Party’s Affiliates, other than Curis and its Affiliates as of the Curis Acquisition) already has, or the acquired assets contain, as applicable, a program that existed prior to, or was substantially in the process of being implemented prior to such Curis Acquisition and is in fact implemented within the [**] period immediately following such Curis Acquisition, the conduct of which, in each case, would otherwise violate any of Section 8.4.2 (an “Curis Acquisition Program”), then Curis or such Affiliate will, within [**] after the closing of such Curis Acquisition, provide written notice to ImmuNext that Curis or such Affiliates has rights to a Curis Acquisition Program as a result of a Curis Acquisition, which written notice will indicate whether Curis or such Affiliate will (A) divest its rights to such Curis Acquisition Program, or (B) cease the Exploitation of such Curis Acquisition Program. If Curis provides notice as described in clause (A) of the preceding sentence, Curis, and its Affiliates if applicable, will divest such Curis Acquisition Program within [**] after ImmuNext’s receipt of Curis’ notice, and if Curis provides notice as described in clause (B) of the preceding sentence, Curis, and its Affiliates if applicable, will cease the Exploitation of such Curis Acquisition Program as soon as reasonably practicable, giving due consideration to ethical concerns and requirements under applicable Law and any agreements with Third Parties. If Curis or its Affiliates is unable to (1) divest a Curis Acquisition Program within the [**] period specified above or (2) cease the Exploitation of such Curis Acquisition Program because doing so would violate applicable Law or any agreements with Third Parties, then Curis shall provide ImmuNext with evidence of reasonable ongoing efforts to divest such Curis Acquisition Program or reasonable plans to cease the Exploitation of such Curis Acquisition Program, as applicable, and in each case, Curis shall continue to work to divest or cease the Exploitation of such Curis Acquisition Program. Curis and its Affiliates will segregate the Curis Acquisition Program prior to the time of divestiture pursuant to clause (A) or the cessation of Exploitation pursuant to clause (B) above, and Curis and its Affiliates will ensure that (x) none of the ImmuNext Technology, Jointly Owned Technology, Confidential Information of ImmuNext, or materials supplied by or on behalf of ImmuNext to Curis or any of its Affiliates hereunder will be used in

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the Curis Acquisition Program, and (y) the activities required under this Agreement will be conducted separately from any activities directed to such Curis Acquisition Program, including the maintenance of separate lab notebooks and records and separate personnel working on each of the activities under this Agreement and the activities covered under such Curis Acquisition Program.
8.5Excluded Compounds. As between the Parties, ImmuNext will retain all right, title and interest in and to all Excluded Compounds, and is not granting to Curis or its Affiliates any options, rights or licenses with respect to any Excluded Compounds, including the composition of matter or any method of use or Manufacture thereof.
8.6Additional Vista Antagonists. If Curis determines in good faith that it needs access to an additional VISTA Antagonist antibody or CDR for Development under this Agreement in the Field, it will have the right to swap one of its existing Compounds for a different VISTA Antagonist antibody or CDR; provided that the Parties must mutually agree to the selection, and Curis must surrender a previously selected Compound back to ImmuNext. Upon such agreement, the Parties will amend Schedule 1.28 to reflect the CDRs for the then-current list of Licensed VISTA Antagonists. For clarity, Curis is limited to [**] distinct Compounds at any one time, though the specific Compounds subject to the Option, Curis Licenses and rights under this Agreement may change over time.
9.Financial Terms
9.1Program Support Payments. In partial consideration for drug substance, technical advice, and maintenance of the [**] IND and access to the ImmuNext Technology, Curis shall make payments as follows:
9.1.1Upfront Payment. Within [**] after the Effective Date, Curis shall pay to ImmuNext a one-time, non-creditable, non-refundable payment of One Million Two Hundred Fifty Thousand Dollars ($1,250,000) (the “Upfront Fee”). If Curis fails to deliver the Upfront Fee within the specified period, then the Option and the Curis R&D License shall be deemed terminated, null and void.
9.1.2Maintenance Fees. On each six (6)-month anniversary of the Effective Date during the Option Period, Curis shall pay to ImmuNext a non-creditable (except as set forth in this Section 9.1.2), non-refundable payment of Three Hundred Seventy-Five Thousand Dollars ($375,000) (collectively, the “Maintenance Fees”). ImmuNext shall deliver a written invoice to Curis for each Maintenance Fee due hereunder no earlier than [**] prior to the applicable six (6)-month period, and Curis shall pay such invoice within [**] of receipt. If Curis exercises the Option and timely paid a Maintenance Fee in the six (6) months prior to the date on which Curis will pay the Option Fee, then a pro-rated portion of the final Maintenance Fee paid prior to such Option exercise shall be creditable to the Option Fee. For example, if Curis exercises the Option two (2) months into the third (3rd) year of the Option Period, then four-sixths (4/6) of the final Maintenance Fee paid by Curis to ImmuNext would be credited to the Option Fee.

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9.2Option Fee. On or within [**] after the date Curis delivers the Option Exercise Notice (but in any event prior to expiration of the Option Period), Curis shall pay to ImmuNext a one-time, non-creditable, non-refundable payment of Twenty Million Dollars ($20,000,000), subject to any credit to be applied pursuant to Section 9.1.2 (the “Option Fee”). If Curis fails to deliver the Option Fee prior to the expiration of the Option Period, then the Option, the Curis R&D License and all other rights and licenses granted hereunder shall be deemed terminated, null and void and the Curis Commercial License shall never be exercisable.
9.3Milestones. In consideration for the grant of the Curis Commercial License:
9.3.1Development Milestones.
(a)Curis will make each of the following one-time, non-refundable, non-creditable milestone payments (each a “Development Milestone Payment”) to ImmuNext following the first occurrence of the corresponding milestone event (each a “Development Milestone Event”) by or on behalf of Curis, any of its Affiliates or any of their respective Sublicensees with respect to a Product during the License Period:
Development Milestone Event
Development Milestone Payment (in US Dollars)
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]
[**]

(b)For the avoidance of doubt, each Development Milestone Payment will be payable to ImmuNext no more than one (1) time.
(c)If any of Development Milestone Events 3 through 8 is achieved and Development Milestone Event 1 or 2 was skipped, then the skipped Developmental Milestone Event(s) will be deemed to have been achieved upon the achievement of the first achievement of any of Development Milestone Events 3 through 8. Further, If Development Milestone Event 4 is achieved and Development Milestone Event 3 was skipped, then Development Milestone Event 3 will be deemed to have been achieved upon the achievement of Development Milestone Event 4.
(d)Curis shall notify ImmuNext within [**] after the first occurrence of each such Development Milestone Event and shall pay to ImmuNext the corresponding Development Milestone Payment within [**] after the occurrence of such Development Milestone Event.

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9.3.2Commercial Milestones.
(a)Curis will make the following one-time, non-refundable, non-creditable milestone payments (each a “Commercial Milestone Payment”) to ImmuNext following the first occurrence of the corresponding milestone event (each a “Commercial Milestone Event”) with respect to Net Sales of Products by Curis, its Affiliates and Sublicensees:
Commercial Milestone Event
Commercial Milestone Payment (in US Dollars)
First Calendar Year in which worldwide annual Net Sales of Products equal or exceed $[**]
[**]
Cumulative Net Sales of Products first reach $[**]
[**]
Cumulative Net Sales of Products first reach $[**]
[**]
Cumulative Net Sales of Products first reach $[**]
[**]
Cumulative Net Sales of Products first reach $[**]
[**]
Cumulative Net Sales of Products first reach $[**]
[**]

(b)For the avoidance of doubt, each Commercial Milestone Payment will be payable to ImmuNext no more than one (1) time. Further, the Commercial Milestone Payments in this Section 9.3.2 are additive, such that if more than one Commercial Milestone Event specified above is achieved in the same Calendar Year, then the corresponding Commercial Milestone Payment for each such Commercial Milestone Event will be payable.
(c)Curis shall notify ImmuNext within [**] after the end of the Calendar Quarter in which each Commercial Milestone Event is achieved of the occurrence of such Commercial Milestone Event and shall pay to ImmuNext the corresponding payment within [**] after the end of the relevant Calendar Quarter.

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9.4Royalty Payments to ImmuNext.
9.4.1Royalties. Subject to Sections 9.4.2 through 9.4.8 hereof, as partial consideration for the Curis Commercial License, Curis will pay ImmuNext royalties on worldwide aggregate annual Net Sales of each Product by Curis, its Affiliates and Sublicensees on a Product-by-Product basis in each Calendar Year in which a Product is sold at the applicable incremental royalty rate(s) set forth below:
Net Sales of a Product in a Calendar Year
Column A:
Royalty Rates for Net Sales occurring before the Royalty Reduction Date
Column B:
Royalty Rates for Net Sales occurring on after the Royalty Reduction Date
Portion less than or equal to $[**]
[**]%
[**]%
Portion greater than $[**] and less than or equal to $[**]
[**]%
[**]%
Portion greater than $[**] and less than or equal to $[**]
[**]%
[**]%
Portion greater than $[**] and less than or equal to $[**]
[**]%
[**]%
Portion greater than $[**]
[**]%
[**]%
Provided that, if any actions or omissions by or on behalf of Curis or any of its Affiliates or Sublicensees cause the royalty rate payable pursuant to the [**] Agreement to be greater than the lowest amount set forth therein on the Effective Date, the royalty rate set forth above in this Section 9.4.1 shall be increased by the increase in royalty rate payable pursuant to the [**] Agreement.
Royalties under this Section 9.4.1 shall be calculated by reference to increments of worldwide aggregate annual Net Sales of each Product in a Calendar Year. By way of example, in the case of a Product to which the royalty rates in Column A apply, if worldwide aggregate annual Net Sales of such Product in a Calendar Year are $[**], the following royalty payment for such Calendar Year would be payable under this Section 9.4.1: [**].
9.4.2Royalty Term. Royalties under Section 9.4.1 shall be payable on a Product-by-Product and country-by-country basis, from the date of First Commercial Sale of a Product in a country until the latest of: (a) the expiration of the last to expire Valid Claim of any ImmuNext Patent or Jointly Owned Patent Covering the manufacture, use or sale of such Product in such country, (b) the expiration of all Regulatory Exclusivity for such Product in such country, and (c) ten (10) years from the First Commercial Sale of such Product in such country (the “Royalty Term”). On a Product-by-Product and country-by-country basis, upon expiration of the Royalty Term with respect to a Product in a country, the Curis Commercial License with respect to such Product in such country shall automatically become royalty-free, fully paid-up, irrevocable and perpetual.

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9.4.3Reduction of Royalties Due to Patent Expiration. Subject to Section 9.4.7, during any portion of the Royalty Term for a Product in a country when there is no Valid Claim of the ImmuNext Patents or Jointly Owned Patents Covering the manufacture, use or sale of such Product in such country, the royalties payable by Curis with respect to Net Sales of such Product in such country shall be reduced by [**] percent ([**]%) in accordance with Section 9.4.5.
9.4.4Biosimilar Competition. Subject to Section 9.4.7, on a Product-by-Product and country-by-country basis, if, during the Royalty Term for a Product in a country, unit sales of one or more Biosimilars of such Product in a country account for more than [**] percent ([**]%) of combined unit sales of (a) such Product and (b) such Biosimilar(s), in such country, as determined by reference to applicable sales data obtained from IQVIA or from such other independent source for such sales data as may be agreed upon by the Parties (provided that such other source, if any, shall be generally recognized as a reliable source for pharmaceutical sales data among major pharmaceutical companies), then for the remainder of the Royalty Term for such Product in such country, the royalties payable by Curis with respect to Net Sales of such Product in such country shall be reduced by [**] percent ([**]%) in accordance with Section 9.4.5.
9.4.5Calculation of Reductions to Royalties. Any reduction pursuant to Section 9.4.3 or Section 9.4.4 of the royalties payable by Curis to ImmuNext with respect to Net Sales of a particular Product in a particular country under Section 9.4.1 will be calculated as follows:
(a)Determination of Effective Royalty Rate. First, the effective, or “blended,” royalty rate applicable to worldwide aggregate annual Net Sales of such Product (excluding Net Sales of such Product in any country that occur after expiration of the Royalty Term for such Product in such country) in the applicable Calendar Year will be determined by dividing: (x) the total amount of royalties that would be payable under Section 9.4.1 with respect to worldwide aggregate annual Net Sales of such Product in such Calendar Year (excluding Net Sales of such Product in any country that occur after expiration of the Royalty Term for such Product in such country), without giving effect to any royalty reduction or adjustment that may be available under Section 9.4.3, Section 9.4.4 or Section 9.4.6; by (y) the total amount of worldwide aggregate annual Net Sales of such Product in such Calendar Year (excluding Net Sales of such Product in any country that occur after expiration of the Royalty Term for such Product in such country); expressed as a percentage (such percentage, the “Effective Royalty Rate”). By way of illustration, the Effective Royalty Rate in the case of the example given in the last paragraph of Section 9.4.1 would be approximately [**].
(b)Application of Reductions. Any available royalty reduction under Section 9.4.3 or Section 9.4.4 with respect to Net Sales of a particular Product in a particular country would be calculated by applying the applicable percentage reduction under such Section to the amount of royalties determined by multiplying the Net Sales of such Product in such country by the applicable Effective Royalty Rate.
9.4.6Third Party Licenses. Subject to Section 9.4.7, in the event that Curis (or its Affiliate or Sublicensee, as applicable) is required to obtain one or more licenses

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under Patents of a Third Party (“Third Party Licenses”) that are reasonably necessary for the manufacture, use or sale of a Product in a country, [**]% of the royalties actually paid under such Third Party Licenses by Curis (or by such Affiliate or Sublicensee, as applicable) for sales of such Product in such country for a Calendar Quarter will be creditable against the royalty payments payable by Curis to ImmuNext with respect to Net Sales of such Product in such country; provided, however, that in no event will the royalties owed by Curis to ImmuNext hereunder with respect to Net Sales of such Product for such Calendar Quarter be reduced by more than [**]% as a result of any and all such credits in the aggregate (the “Credit Cap”). In the event that [**]% of the royalty payments paid under such Third Party Licenses in a Calendar Quarter with respect to sales of such Product exceeds the amount by which Curis is permitted to credit against royalty payments to ImmuNext in such Calendar Quarter by reason of the Credit Cap, Curis shall be entitled to carry forward the excess to offset royalty payments due to ImmuNext in the following [**], subject, in each case, to the Credit Cap. For clarity, Curis will not be entitled to credit any portion of royalties paid by Curis or its Affiliate or Sublicensee to Third Parties under Third Party Licenses with respect to any Other Active in any Combination Product.
9.4.7Royalty Floor. In no case shall all available reductions to royalties payable with respect to a particular Product in a country under Sections 9.4.3, 9.4.4 and 9.4.6, in the aggregate, lower the amount of royalties payable under this Section 9.4 with respect to such Product in such country to less than the greater of (a) [**] percent ([**]%) of the royalty payment that would be payable to ImmuNext with respect to such Product in such country in such Calendar Quarter absent any such reductions or (b) the sum of ImmuNext’s royalty payment obligations under the Upstream Agreements with respect to such Product in such country in such Calendar Quarter plus [**] percent ([**]%).
9.4.8Only One Royalty. The obligation to pay royalties pursuant to Section 9.4.1 is imposed only once with respect to the same unit of a Product, regardless of how many ImmuNext Patents or Jointly Owned Patents may cover or claim the Product.
9.5Sublicensing Revenue.
9.5.1Curis shall pay to ImmuNext [**] percent ([**]%) of Sublicense Revenue received by Curis or any of its Affiliates from a Sublicensee.
9.5.2Neither Curis nor any of its Affiliates will structure a transaction with a Sublicensee that includes both a Sublicense and a (sub)license under other technology in a manner designed to circumvent or minimize Curis’ obligations under Section 9.5.1 by allocating disproportionate relative value to the other technology being (sub)licensed.
9.5.3Each time Curis or any of its Affiliates grants a Sublicense that is subject to Section 9.5.1, Curis will provide ImmuNext with a true and complete copy of the Sublicense agreement, and if ImmuNext believes that Curis or its Affiliate has structured such agreement in a manner designed to circumvent or minimize Curis’ obligations under Section 9.5.1 (whether pursuant solely to such agreement or a series of agreements or transactions), ImmuNext may refer such dispute to baseball arbitration in accordance with Section 17.1.

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9.6Third Party Agreements.
9.6.1Upstream Agreements. During the Term of this Agreement, except as otherwise expressly set forth in Section 10.5, ImmuNext will be solely responsible for all upfront, milestone, royalty and other payments to any Third Party under the Upstream Agreements.
9.6.2Negotiation of Option Period New In-Licenses. During the Option Period, if a Party identifies any Patents or Know-How of a Third Party to which a Party (or its Affiliate) does not have rights and that may be necessary or reasonably useful for the development, manufacture, use, sale, offer for sale, import, or export of Compounds or Products in the Field, such Party shall inform the other Party thereof. ImmuNext shall have the first right to negotiate and enter into an agreement pursuant to which ImmuNext or its Affiliate will obtain a license or other rights to such Patents or Know-How (each such agreement, an “Option Period New In-License”). Within [**] of a Party providing notice to the other Party pursuant to the foregoing provisions of this Section 9.6.2, ImmuNext shall notify Curis in writing that ImmuNext shall exercise such first right to negotiate and enter into such Option Period New In-License or that ImmuNext is waiving such first right to negotiate and enter into such Option Period New In-License. If ImmuNext notifies Curis that ImmuNext is waiving such first right to negotiate and enter into such Option Period New In-License, or if ImmuNext fails to deliver written notice to Curis within such [**] period indicating that ImmuNext shall exercise such first right to negotiate and enter into such Option Period New In-License, then Curis shall have the right to negotiate and enter into such Option Period New In-License, provided that such Option Period New In-License shall expressly permit assignment to ImmuNext without the consent of the licensor in the event of termination or expiration of the Option Period prior to exercise of the Option by Curis. If a Party exercises its right to negotiate and enter into any Option Period New In-License during the Option Period, such Party (the “Option Period Negotiating Party”) shall keep the other Party reasonably informed regarding the progress of negotiating such Option Period New In-License and the terms thereof. If ImmuNext is the Option Period Negotiating Party, (a) the terms of such Option Period New In-License shall not disadvantage any Compound or Product (including any activities under this Agreement with respect to any Compound or Product) relative to any other compound or product covered by such Option Period New In-License, (b) ImmuNext shall use Commercially Reasonable Efforts to negotiate terms of such Option Period New In-License that apply to Compounds or Products (including sublicense rights, patent matters, confidentiality, reporting, audit rights, indemnification and diligence) that are no less favorable to Curis than the terms of this Agreement and (c) ImmuNext shall reasonably negotiate to include in such Option Period New In-License a “standby license” such that if such agreement is terminated by the licensor for any reason other than Curis’ breach of this Agreement or such Option Period New In-License, Curis shall retain access to the licenses granted under such Option Period New In-License. If the Option Period Negotiating Party (or its Affiliate) enters into an Option Period New In-License, the Option Period Negotiating Party will provide a true and complete copy of such Option Period New In-License to the other Party within [**] after execution of such Option Period New In-License.
9.6.3Election Under Option Period New In-Licenses. At such time (if ever) as Curis exercises the Option, Curis shall notify ImmuNext in writing (either in the Option Exercise Notice or by other written notice to ImmuNext delivered prior to the Option

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Exercise Date) of each Option Period New In-License entered into by ImmuNext or its Affiliate under which Curis elects to obtain a sublicense under the Curis Commercial License, including the specific Patents (if less than all) and/or Know-How (if less than all) subject to such Option Period New In‑License that Curis elects to include in the ImmuNext Patents and/or ImmuNext Know-How, respectively. Any such Patents and/or Know-How under which Curis elects to obtain a sublicense (“Option Period New In-License Patents” and “Option Period New In-License Know-How,” respectively) shall be deemed included the ImmuNext Patents and/or ImmuNext Know-How, respectively, effective as of the Option Exercise Date (if any). During the License Period, Curis shall pay to ImmuNext in a timely manner, and ImmuNext shall pay to the applicable Third Party licensee in a timely manner, all milestone payments and royalties with respect to any Compound or Product that become due under the applicable Option Period New In-License as a result of the development, manufacture, use, sale, offer for sale, import, or export of any Compound or Product by or on behalf of Curis, its Affiliates and Sublicensees, on a pass-through basis (i.e., without mark-up), it being understood that: (i) any such milestone payments or royalties payable with respect to any Compound or Product under such Option Period New In-License are in addition to the milestone payments and royalties due under Sections 9.3 and 9.4; and (ii) with respect to any Option Period New In-License Patents covered by such Option Period New In-License that are included in the ImmuNext Patents, such Option Period New In-License shall be deemed a Third Party License for purposes of Section 9.4.6.
9.6.4Negotiation of License Period New In-Licenses.
(a)During the License Period, if a Party identifies any Patents or Know-How of a Third Party to which a Party (or its Affiliate) does not have rights and that may be necessary or reasonably useful for the development, manufacture, use, sale, offer for sale, import, or export of Compounds or Products in the Field, such Party shall inform the other Party thereof. Unless the Parties mutually agree in their sole discretion that one of the Parties will negotiate, for the benefit of both Parties, an agreement pursuant to which such Party obtains on behalf of both Parties a license or other rights to such Patents or Know-How (each such agreement, an “License Period New In-License”) as are necessary or reasonably useful both for the development, manufacture, use, sale, offer for sale import, or export of Compounds or Products in the Field and for the development, manufacture, use, sale, offer for sale, import, or export Excluded Compounds outside the Field, Curis shall have the sole right to negotiate and enter into a License Period New In-License with such Third Party under the applicable Patents and/or Know-How to develop, make, have made, use, sell, have sold, offer for sale, import or export Compounds and Products in the Field and ImmuNext shall have the sole right to negotiate and enter into a License Period New In-License with such Third Party under the applicable Patents and/or Know-How to develop, make, have made, use, sell, have sold, offer for sale, import or export Excluded Compounds outside the Field. Each Party shall be solely responsible for payment of all amounts that become due under any such License Period New In-License entered into by such Party or its Affiliate, and, to the extent applicable, any License Period New In-License entered into by Curis shall be deemed a Third Party License for purposes of Section 9.4.6.
(b)Notwithstanding the definitions of ImmuNext Patents and ImmuNext Know-How, during the License Period, if, notwithstanding Section 9.6.4(a), ImmuNext or its Affiliate obtains any license from any Third Party (whether by in-license or by

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assignment of a license agreement to ImmuNext or its Affiliate, but subject to Section 18.4.1) under any Patents and/or Know-How of such Third Party that is necessary or reasonably useful for the development, manufacture, use, sale, offer for sale, import, or export of Compounds or Products in the Field, ImmuNext shall provide written notice thereof to Curis no later than [**] after ImmuNext or its Affiliate obtains such license and a copy of the applicable license agreement. Curis, at its sole option exercisable by written notice to ImmuNext within [**] of Curis’ receipt of a copy of such license agreement, elect to include the Patents (or any of them) and/or Know-How (or any of it) subject to such license agreement in the ImmuNext Patents and/or ImmuNext Know-How, respectively. Thereafter during the License Period, Curis shall pay to ImmuNext in a timely manner, and ImmuNext shall pay to the applicable Third Party licensee in a timely manner, all milestone payments and royalties with respect to any Compound or Product that become due under such license agreement as a result of the development or commercialization of any Compound or Product by or on behalf of Curis, its Affiliates and Sublicensees, on a pass-through basis (i.e., without mark-up), it being understood that: (i) any such milestone payments or royalties payable with respect to any Compound or Product under such license agreement are in addition to the milestone payments and royalties due under Sections 9.3 and 9.4; and (ii) with respect to any Patents licensed to ImmuNext under such license agreement that are included in the ImmuNext Patents, to the extent applicable, such license agreement shall be deemed a Third Party License for purposes of Section 9.4.6. If, during the [**] period following Curis’ receipt of a copy of such license agreement, Curis does not provide a written notice to ImmuNext electing to include the Patents (or any of them) and/or Know-How (or any of it) subject to such license agreement in the ImmuNext Patents and/or ImmuNext Know-How, respectively, such Patents and Know-How will not be included in the definition of ImmuNext Patents or ImmuNext Know-How, as applicable.
9.6.5Confidentiality. Any copy of an Option Period New In-License or License Period New In-License or other license agreement entered into by a Party that is provided to the other Party pursuant to Section 9.6.2 or Section 9.6.3 shall be deemed the Confidential Information of the Party providing such copy.
10.Payments; Records; Audits
10.1Royalty Payment Reports. Royalties under Section 9.4 and payments with respect to Sublicense Revenues under Section 9.5 shall be calculated and reported for each Calendar Quarter and shall be paid within [**] after the end of each Calendar Quarter (or portion thereof if this Agreement terminates during a Calendar Quarter). Each such payment shall be accompanied or preceded by a written report of Net Sales and Sublicense Revenues in sufficient detail to permit confirmation of the accuracy of the payment made, including, on a country-by-country basis, the amount of gross sales and Net Sales of each Product in each country during the applicable Calendar Quarter (including such amounts expressed in local currency and as converted to Dollars), and a detailed calculation of royalty payments due on such Net Sales for such Calendar Quarter (including all deductions and reductions and tax withholding). Reporting for the Calendar Quarter in which the rates in Column A of the table in Section 9.4.1 cease to apply and the royalty rates in Column B of the table in Section 9.4.1 begin to apply shall be sufficiently detailed for ImmuNext to pay the appropriate royalty to Upstream Licensor 4. Further, upon request, Curis shall meet with Upstream Licensor 4 to discuss the calculations of royalties for such Calendar Quarter.

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10.2Exchange Rate; Manner and Place of Payment. All payment amounts in this Agreement are expressed in Dollars, and all payments hereunder shall be payable in Dollars. When conversion of payments from any foreign currency is required, such conversion shall be calculated at the rate of exchange for such currency used throughout the applicable Selling Party’s accounting system for financial reporting purposes for the Calendar Quarter for which payment is due. All payments owed under this Agreement shall be made by wire transfer of immediately available funds to such U.S. bank account as shall be designated by ImmuNext.
10.3Records Retention. Curis shall keep, and shall cause each of its Affiliates and Sublicensees, if any, to keep, full and accurate books of accounting pertaining to the sale or other disposition of Products and the receipt of Sublicense Revenues in sufficient detail to permit ImmuNext to confirm the accuracy of all Net Sales-based payments under Sections 9.3.2 and 9.4 and all amounts payable to ImmuNext with respect to Sublicense Revenues under Section 9.5, for a period of [**] after the Calendar Year to which such records pertain. Records shall be kept at Curis’ principal place of business.
10.4Audits.
10.4.1By ImmuNext. During the Term and for a period of [**] thereafter, Curis shall permit an independent, certified public accountant of nationally recognized standing appointed by ImmuNext, and reasonably acceptable to Curis, during normal business hours and upon [**] prior written notice, but in no case more than [**], to examine such records, at the location(s) where such records are maintained by or on behalf of Curis in the ordinary course of business, as may be necessary for the sole purpose of verifying the calculation and reporting of Net Sales and the correctness of any payment made under this Agreement for any period within the preceding [**], provided that the records for a given Calendar Year shall be subject to audit pursuant to this Section 10.4 [**], except as otherwise permitted to be audited pursuant to the terms of an Upstream Agreement. Results of any such examination shall be made available simultaneously to both Curis and ImmuNext. The independent, certified public accountant shall disclose to ImmuNext only the amounts that the independent auditor believes to be due and payable hereunder to ImmuNext, details concerning any discrepancy from the amount paid and the amount due, and shall disclose no other information revealed in such audit. Any and all records examined by such independent accountant shall be deemed Curis’ Confidential Information which may not be disclosed by said independent, certified public accountant to any Third Party, and Curis may require such accountant to enter into an appropriate written agreement obligating it to be bound by obligations of confidentiality and restrictions on use of such Confidential Information that are substantially similar to the obligations and restrictions set forth in Section 13. If, as a result of any inspection of the books and records of Curis, its Affiliates or any Sublicensee, it is shown that payments under this Agreement were less than the amount, which should have been paid, then Curis shall make all payments required to be made to eliminate any discrepancy revealed by such inspection within [**] of receipt of the applicable report from the independent auditor, with interest from the date such amount was due (calculated in accordance with Section 10.7). If, as a result of any inspection of the books and records of Curis, its Affiliates or any Sublicensee pursuant to this Section 10.4, it is shown that payments under this Agreement were more than the amount which should have been paid, then ImmuNext shall credit such amounts to Curis against the next payment due ImmuNext. If there are no future payments due ImmuNext, such credit shall be paid to Curis within [**] after the date of

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the audit report. ImmuNext shall pay for such audits, except that in the event that the audited amounts were underpaid by Curis by more than [**] percent ([**]%) of the amounts that should have been paid during the period in question as per the audit, Curis shall pay the reasonable out-of-pocket costs of the audit. Except as set forth in Section 10.4.2, upon the expiration of [**] following the end of any Calendar Year, the calculation of royalties payable with respect to such year shall be binding and conclusive upon the Parties.
10.4.2By ImmuNext on Behalf of Upstream Licensor 4. During the Term and for a period of [**] thereafter, Curis shall permit an independent, certified public accountant of nationally recognized standing appointed by Upstream Licensor 4, and reasonably acceptable to ImmuNext and Curis, during normal business hours and upon [**] prior written notice to examine such records, at the location(s) where such records are maintained, as may be necessary for the sole purpose of verifying the calculation and reporting of Net Sales and the correctness of any payment made under this Agreement for any period within the preceding [**]. Any such audit shall be conducted on behalf of Upstream Licensor 4 and [**], whether conducted by or on behalf of ImmuNext pursuant to Section 10.4.1 or conducted by or on behalf of ImmuNext on behalf of Upstream Licensor 4 pursuant to this Section 10.4.2, may be conducted in [**]; provided that, notwithstanding anything to the contrary in Section 10.4.1, ImmuNext shall be entitled to conduct [**] on behalf of Upstream Licensor 4 following expiration or termination of this Agreement and provided further that such [**] limitation shall not apply in the event that Upstream Licensor 4 exercises its right to an audit during a [**] in which ImmuNext has already exercised its own right to an audit. The terms set forth in Section 10.4.1 regarding sharing of the report of the independent public accountant, disclosure of the results of examination, amounts due and payable, details of discrepancy from the amounts paid and the amounts due, in each case, shall apply to any audit conducted under this Section 10.4.2; provided, however, that ImmuNext may disclose such information to Upstream Licensor 4, but no other Third Party. If, as a result of any inspection of the books and records of Curis, its Affiliates or any Sublicensee pursuant to this Section 10.4.2, it is shown that payments under this Agreement were less than the amount which should have been paid, then Curis shall make all payments required to be made to eliminate any discrepancy with respect to payments owed by ImmuNext to Upstream Licensor 4 under Upstream Agreement 4 revealed by such inspection within [**]. Upon the expiration of [**] following the end of any Calendar Year, the calculation of royalties payable with respect to such year shall be binding and conclusive upon Upstream Licensor 4.
10.5Diligence Payments under Upstream Agreement 1.
10.5.1ImmuNext shall be solely responsible for the payment of any milestone payment that becomes due under Section 5.01(e) of Upstream Agreement 1 as a result of the achievement by ImmuNext, its Affiliate or any Third Party sublicensee of any milestone event set forth in Section 5.01 of Upstream Agreement 1, and Curis shall have no obligation to ImmuNext with respect to such payment or with respect to the corresponding diligence obligation set forth in Section 4.01 of Upstream Agreement 1.
10.5.2At least [**] prior to each of the diligence obligation dates set forth Section 4.01 of Upstream Agreement 1 with respect to any diligence obligation that has not been previously performed by ImmuNext, its Affiliate or a Third Party sublicensee, ImmuNext shall

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provide written notice to Curis of the number of Third Party sublicensees under the license granted to ImmuNext pursuant to Upstream Agreement 1 as of such date. Curis shall provide written notice to ImmuNext at least [**] prior to each of the diligence obligation dates set forth Section 4.01 of Upstream Agreement 1 with respect to any diligence obligation that has not been performed by ImmuNext, its Affiliate or a Third Party sublicensee as to whether or not Curis elects to retain its sublicense under the license granted to ImmuNext pursuant to Upstream Agreement 1 (each, a “Notification”). If (a) Curis elects to retain such sublicense and (b) neither Curis nor ImmuNext nor any of its Affiliates or Third Party sublicensees has performed such diligence obligation by the applicable diligence obligation date, then Curis shall pay to ImmuNext that portion of the milestone payment corresponding to such diligence obligation set forth in Section 5.01(e) of Upstream Agreement 1 determined by [**] pursuant to Upstream Agreement 1.
10.5.3During the License Period, and only if the First Commercial Sale of a Product has occurred prior to the time a particular minimum annual royalty payment is actually paid by ImmuNext to Upstream Licensor 1 under Section 4.02 of Upstream Agreement 1, Curis shall pay to ImmuNext that portion of the applicable minimum annual royalty due to Upstream Licensor 1 determined by [**].
10.5.4[**] percent ([**]%) of any payment made by Curis to ImmuNext under this Section 10.5 shall be credited towards the next milestone payment payable by Curis to ImmuNext under Section 9.3.1, if any.
10.5.5ImmuNext shall submit to Curis a written invoice for any payment that becomes due pursuant to this Section 10.5, which notice shall set forth the number of Third Party sublicensees under the license granted to ImmuNext pursuant to Upstream Agreement 1 as of the date the corresponding payment became due to Upstream Licensor 1. Curis shall pay the undisputed amounts set forth in each such invoice within [**] after receipt of such invoice. For clarity, should there not be a next milestone payment payable by Curis to ImmuNext to offset the credit, then Curis may apply the full amount of such credit against royalties payable by Curis to ImmuNext hereunder.
10.5.6Should a Notification indicate that Curis elects not to retain its sublicense under the license granted to ImmuNext pursuant to Upstream Agreement 1, all ImmuNext Technology that is subject to ImmuNext’s Control pursuant to Upstream Agreement 1 shall be automatically excluded from ImmuNext Technology for purposes of this Agreement, and Curis will not be responsible for any diligence milestone payment or annual minimum royalty (or any portion of either of the foregoing) that becomes due after such Notification.
10.5.7Except as set forth in this Section 10.5, Curis will not be responsible for any payment obligation of ImmuNext or its Affiliates under any Upstream Agreement.

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10.6Taxes.
10.6.1Curis will make all payments to ImmuNext under this Agreement without deduction or withholding for taxes except to the extent that any such deduction or withholding is required by Law in effect at the time of payment.
10.6.2Any tax required to be withheld on amounts payable under this Agreement will promptly be paid by Curis on behalf of ImmuNext to the appropriate governmental authority, and Curis will furnish ImmuNext with proof of payment of such tax. Any such tax required to be withheld will be borne by ImmuNext.
10.6.3Curis and ImmuNext will cooperate with respect to all documentation required by any taxing authority or reasonably requested by Curis to secure a reduction in the rate of applicable withholding taxes. On the date of execution of this Agreement, ImmuNext will deliver to Curis an accurate and complete Internal Revenue Service Form W-9.
10.6.4If Curis had a duty to withhold taxes in connection with any payment it made to ImmuNext under this Agreement but Curis failed to withhold, and such taxes were assessed against and paid by Curis, then ImmuNext will reimburse Curis for such taxes (including interest) actually paid by Curis. If Curis makes a claim under this Section 10.6.4, it will comply with the obligations imposed by Section 10.6.2 as if Curis had withheld taxes from a payment to ImmuNext, except as set forth in this Section 10.6.4. Notwithstanding the foregoing, if, as a result of a Withholding Action (as defined below) by Curis (including any assignee or successor), withholding is required by Laws and the amount of such withholding exceeds the amount of withholding that would have been required if Curis had not committed the Withholding Action, then Curis shall pay an additional amount to ImmuNext such that, after withholding from the amounts payable and such additional amount, ImmuNext receives the same amount as it would have received from Curis absent such Withholding Action by Curis. However, if, as a result of a Withholding Action by ImmuNext (including any assignee or successor), withholding is required by Laws and the amount of such withholding exceeds the amount of withholding that would have been required if ImmuNext (or its assignee or successor) had not committed the Withholding Action, no amount due by Curis to ImmuNext pursuant to this Agreement shall be increased for such excess withholding and, subject to the terms of this Agreement, the required amount shall be withheld and submitted to the appropriate Governmental Authority by Curis. For purposes of this Section 10.6.4, “Withholding Action” by a Party means (i) a permitted assignment or sublicense of this Agreement (in whole or in part) by such Party to an Affiliate or Third Party outside of the United States; (ii) the exercise by such Party of its rights under this Agreement (in whole or in part) through an Affiliate or Third Party outside of the United States (or the direct exercise of such rights by an Affiliate of such Party outside of the United States); (iii) a redomiciliation of such Party (or its assignee or successor of this Agreement) to a jurisdiction outside the United States; and (iv) any action by such Party that causes this Agreement or any payment made under this Agreement to become subject to tax in a jurisdiction outside of the United States or subject any payments made under this Agreement to withholding in any jurisdiction that would not have been required absent such action.

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10.7Tax Treatment. For U.S. federal income tax purposes, Curis acknowledges that ImmuNext intends to treat (a) the Upfront Fee as the payment of option premium by Curis to ImmuNext in exchange for ImmuNext’s grant of the Option to obtain the exclusive license set forth in Section 3.1, (b) the payment of the Option Fee as the exercise of the Option and (c) the failure by Curis to deliver the Option Fee prior to the expiration of the Option Period as gain on the lapse of an option for ImmuNext within the meaning of Section 1234(b) of the Internal Revenue Code of 1986, as amended.
10.8Interest Due. Without limiting any other rights or remedies available to either Party, each Party shall pay the other interest on any payments that are not paid on or before the date such payments are due under this Agreement at a rate equal to the lesser of (a) [**] percent ([**]%) above the prime rate as reported by Citibank, New York, New York on the date such payment was due to be paid, or (b) the maximum applicable legal rate on such date, calculated on the total number of days payment is delinquent.
10.9Blocked Currency. If by Law or fiscal policy of a particular country, conversion into Dollars or transfer of funds of a convertible currency to the United States is restricted or forbidden, royalties accrued in such country shall be paid to ImmuNext in the country in local currency by deposit in a local bank designated by ImmuNext for such deposit, unless the Parties otherwise agree.
11.Representations, Warranties, and Covenants; Disclaimers; Limitation of Liability
11.1Mutual Representations and Warranties. As of the Effective Date, Each Party represents and warrants to the other Party, that:
11.1.1such Party is duly organized, validly existing, and in good standing under the Laws of the jurisdiction of its incorporation and has full corporate power and authority to enter into this Agreement and to perform its obligations hereunder;
11.1.2such Party has taken all requisite action on its part to authorize the execution and delivery of this Agreement and the performance by such Party of its obligations hereunder;
11.1.3this Agreement has been duly executed and delivered on behalf of such Party, and constitutes a legal, valid, binding obligation of such Party, enforceable against it in accordance with the terms hereof, except to the extent that enforcement of the rights and remedies created hereby is subject to (a) bankruptcy, insolvency, reorganization, moratorium and other similar laws of general application affecting the rights and remedies of creditors, or (b) laws governing specific performance, injunctive relief and other equitable remedies;
11.1.4the execution, delivery and performance of this Agreement by such Party does not constitute a breach or default under or conflict with any agreement, instrument, or understanding, oral or written, to which it is a party or by which it is bound, nor violate any Law of any court, governmental body or administrative or other agency having jurisdiction over such

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Party, which breach, default, conflict or violation, in each case, would adversely affect the other Party;
11.1.5no government authorization, consent, approval, license, exemption, filing or registration with any court or governmental department, commission, board, bureau, agency or instrumentality, domestic or foreign, under any Laws currently in effect, is or will be necessary for, or in connection with, the transaction contemplated by this Agreement, or for the performance by such Party of its obligations under this Agreement, except as may be required to transfer an IND or to Exploit any Product;
11.1.6such Party has not employed and, to its knowledge, has not used a contractor or consultant that has employed, any individual or entity (a) debarred by the FDA (or subject to a similar sanction of EMA or other applicable Regulatory Authority), (b) who is the subject of an FDA debarment investigation or proceeding (or similar proceeding of EMA or other applicable Regulatory Authority), or (c) has been charged with or convicted under United States Law for conduct relating to the development or approval, or otherwise relating to the regulation of any product under the Generic Drug Enforcement Act of 1992, as amended, in each case, in the conduct of its activities prior to the Effective Date; and
11.1.7such Party is not aware of any action or petition, pending or otherwise, for bankruptcy or insolvency of such Party in any state, country or other jurisdiction.
11.2Additional Representations and Warranties of ImmuNext. As of the Effective Date, ImmuNext hereby represents and warrants to Curis that:
11.2.1as of the Effective Date, the Patents set forth on Schedule 11.2.1 constitute all Patents Controlled by ImmuNext or its Affiliates that are necessary for the Exploitation of Compounds and Products in the Field (the “Existing Patents”);
11.2.2Schedule 11.2.1 accurately identifies each Existing Patent that is an ImmuNext Exclusive Patent as such and each Existing Patent that is an ImmuNext Hybrid Patent as such;
11.2.3except as set forth on Schedule 11.2.1, ImmuNext is the sole owner of the Existing Patents. With respect to each Existing Patent that is not solely owned by ImmuNext, Schedule 11.2.1 accurately identifies the registered owner(s) of such Existing Patent;
11.2.4with respect to those Existing Patents that ImmuNext has the right to Prosecute, ImmuNext has complied with all applicable Laws in connection with the Prosecution of such Existing Patents (including the duty of candor), and all material renewal and maintenance fees due prior to the Effective Date with respect to the prosecution and maintenance of such Existing Patents have been paid. With respect to those Existing Patents that are being Prosecuted by a Third Party, to ImmuNext’s knowledge, such Third Party has complied with all applicable Laws in connection with the Prosecution of such Existing Patents (including the duty of candor), and all material renewal and maintenance fees due prior to the Effective Date with respect to the prosecution and maintenance of such Existing Patents have been paid;

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11.2.5as of the Effective Date, ImmuNext or an Affiliate of ImmuNext Controls the Know-How provided or to be provided to Curis in accordance with the first sentence of Section 5.1;
11.2.6neither ImmuNext nor any of its Affiliates has granted to any Third Party or Affiliate any rights (including any license, or option or other right to obtain a license) (a) under the ImmuNext Technology that would conflict with any of the rights or licenses granted to Curis or its Affiliates hereunder or (b) to Develop or Commercialize any Compound or Product;
11.2.7to ImmuNext’s knowledge, none of the manufacture, use or sale of any Compound as contemplated by this Agreement infringes or would infringe the Patents of any Third Party (excluding Patents of Third Parties that are included in the ImmuNext Patents);
11.2.8neither ImmuNext nor any of its Affiliates has received any written notice from any Third Party claiming that the development, manufacture, use, sale, offer for sale, import, or export of Compound or Product infringes, misappropriates or would infringe or misappropriate the Patent or other intellectual property rights of any Third Party;
11.2.9neither ImmuNext nor any of its Affiliates has received any written notice from any Third Party seeking to invalidate or otherwise challenge the ownership, scope, validity and/or enforceability of the claims of the Existing Patents and, to ImmuNext’s knowledge, no such challenge is pending or threatened;
11.2.10to ImmuNext’s knowledge, no Third Party is infringing or misappropriating, or has infringed or misappropriated, any of the ImmuNext Technology;
11.2.11all tangible or recorded information and data provided by or on behalf of ImmuNext to Curis related to any Compound or Product on or before the Effective Date in contemplation of this Agreement was and is, to ImmuNext’s knowledge, true, accurate and complete in all material respects; provided, however, that, in the case of any such information and data that was Made by or on behalf of Upstream Licensor 2 and provided to ImmuNext, ImmuNext represents and warrants only that the copies of such information and data provided by or on behalf of ImmuNext to Curis on or before the Effective Date are true and correct copies of the embodiments of such information and data provided to ImmuNext by or on behalf of Upstream Licensor 2 and that ImmuNext has no actual knowledge that any such information and data is untrue or inaccurate; and ImmuNext has not failed to disclose, or failed to cause to be disclosed, any such information or data in its possession and Control related to any Compound or Product that would cause the information and data that has been disclosed to be misleading in any material respect;
11.2.12neither ImmuNext nor any of its Affiliates is a party to any litigation relating to the ImmuNext Technology or any Compound or Product, and neither ImmuNext nor any of its Affiliates has received written notice of any pending or threatened litigation related to the ImmuNext Technology or any Compound or Product;

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11.2.13ImmuNext has provided or made available to Curis all relevant documents and written communications and materials in its and its Affiliates’ possession from or to any Regulatory Authority related to any Compound or Product;
11.2.14other than the [**] IND, no IND has been filed by or on behalf of ImmuNext or its Affiliates, and, to ImmuNext’s knowledge, by any ImmuNext licensee under the ImmuNext Technology, with any Regulatory Authority for any Compound or Product;
11.2.15as of the Effective Date, ImmuNext has provided Curis with true, complete (unless redacted and disclosed as such to Curis in writing) and correct copies of all Upstream Agreements, including all amendments thereto;
11.2.16other than the Upstream Agreements, there are no agreements to which ImmuNext or any of its Affiliates is a party pursuant to which any ImmuNext Technology is licensed to ImmuNext by any Third Party;
11.2.17as of the Effective Date, except as set forth on Schedule 11.2.17, the Upstream Agreements are in full force and effect and ImmuNext is in compliance with the material terms of each such Upstream Agreements and has made all necessary annual payments and/or milestone payments to keep such Upstream Agreements in full force and effect. The Upstream Agreements are the only agreements as of the Effective Date between ImmuNext and any Third Party that impose an obligation on ImmuNext to pay milestone payments or royalties to a Third Party with respect to the Development or Commercialization of any Compound or Product;
11.2.18IDC is not controlled by ImmuNext, where “controlled by” has the meaning set forth in the definition of “Affiliate”; and
11.2.19IDC does not Control Patents that specifically Cover Know-How that specifically relates to VISTA Antagonists.
11.3Additional Representations and Warranties of Curis. As of the Effective Date, Curis hereby represents and warrants to ImmuNext that Curis has provided ImmuNext with true, complete and correct copies of all the Aurigene Agreement, including all amendments thereto; each, as filed by Curis with the Securities and Exchange Commission.
11.4Mutual Covenants. Each Party hereby covenants to the other Party that:
11.4.1all employees, agents, consultants and contactors of such Party or its Affiliates conducting activities under this Agreement shall be under the obligation to assign to such Party or Affiliate all right, title and interest in and to Inventions Made by such employee, agent, consultant or contractor in the course of conducting activities under this Agreement, and Know-How pertaining to any such Invention that is Made by such person in the course of conducting such person’s work for such Party or its Affiliates (it being understood that Section 8.3.1(b) prohibits Curis and its Affiliates from Exploiting ImmuNext Technology, Compounds and Products outside the scope of or otherwise not in compliance with the licenses, sublicenses and other rights granted to Curis under this Agreement), subject to any exceptions permitted under Section 3.2.5;

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11.4.2such Party shall perform its obligations and conduct its activities pursuant to this Agreement (a) in compliance with all Laws and industry standards, including GLP, GCP and GMP, in each case as applicable under the Laws of the country and the state and local government wherein such activities are conducted, and with respect to the care, handling and use in research and Development activities hereunder of any non-human animals by or on behalf of such Party, shall at all times comply (and shall ensure compliance by any of its Subcontractors) with all Laws, and also with the standards in the pharmaceutical industry for the Development and Manufacture of pharmaceutical or biological products, and (b) with individuals who are appropriately trained and qualified;
11.4.3neither Party shall employ (or, to its knowledge, use any contractor or consultant that employs) any individual or entity (a) debarred by the FDA (or subject to a similar sanction of EMA or other applicable Regulatory Authority), (b) who is the subject of an FDA debarment investigation or proceeding (or similar proceeding of EMA or other applicable Regulatory Authority), or (c) has been charged with or convicted under United States Law for conduct relating to the development, approval or otherwise relating to the regulation of any product under the Generic Drug Enforcement Act of 1992, as amended, in each case, in the conduct of its activities under this Agreement; and
11.4.4neither Party shall, during the Term, grant any right or license to any Third Party relating to any of the intellectual property rights it Controls that would conflict or interfere with any of the rights or licenses granted to the other Party hereunder.
11.5Additional Covenants of ImmuNext. ImmuNext hereby covenants to Curis that:
11.5.1ImmuNext shall not terminate any Upstream Agreement without the prior written consent of Curis;
11.5.2Without the prior written consent of Curis, ImmuNext shall not amend, or waive any of its rights under, any Upstream Agreement in any manner that would diminish the rights granted to Curis hereunder or impose any additional obligation on Curis or any of its Affiliates or Sublicensees with respect to the Development or Commercialization of any Compound or Product;
11.5.3ImmuNext shall use Commercially Reasonable Efforts to avoid taking or omitting to take any action that would constitute a breach of any Upstream Agreement or that would otherwise entitle the counterparty to such Upstream Agreement to terminate such Upstream Agreement or terminate or reduce the scope of ImmuNext’s rights thereunder related to the ImmuNext Technology or any Compound or Product; and
11.5.4ImmuNext promptly shall provide Curis with notice of ImmuNext’s receipt of written notice of an allegation of any breach, of any Upstream Agreement, and ImmuNext shall take reasonable steps to cure any such alleged breach or breach within the time period allowed for cure or, and in the event that any such breach or alleged breach is the consequence of ImmuNext’s failure to make any payment under the terms of an Upstream Agreement, and Curis, in its sole discretion, desires to make a payment to cure such

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alleged breach or breach, any such payment made by Curis will be creditable by Curis against any payments due by Curis to ImmuNext hereunder.
11.6Additional Covenants of Curis. Curis hereby covenants to ImmuNext that:
11.6.1Curis shall not, and shall cause its Affiliates and all Sublicensees not to, bring suit against Upstream Licensor 4 or any of its Affiliates (as defined in Upstream Agreement 4) with respect to the Patent Rights (as defined in Upstream Agreement 4) that are the subject of such agreement and Curis hereby acknowledges and agrees that if Curis breaches this Section 11.6.1, notwithstanding anything herein to the contrary, ImmuNext or Upstream Licensor 4 may terminate Curis’ and its Affiliates’ sublicense under Upstream Agreement 4;
11.6.2In the event of a conflict between the terms of this Agreement and an Upstream Agreement as applicable to ImmuNext Technology that is subject to such Upstream Agreement, Curis, its Affiliates and all Sublicensees shall comply with the provision that is more favorable to ImmuNext or the other party to the Upstream Agreement;
11.6.3Curis shall reasonably cooperate with ImmuNext in performing ImmuNext’s obligations under each Upstream Agreement as applicable to any Compound or Product (including, for instance, with respect to reporting to the other party to an Upstream Agreement);
11.6.4Subject to applicable Law, during the License Period, Curis will maintain written policies and training programs to ensure that its sales force and that of its Affiliates and all Sublicensees do not engage in any advertising or promotional activities relating to any Compound or Product directed primarily to customers or other buyers or users of any Compound or Product for use outside the Field;
11.6.5Without the prior written consent of ImmuNext, Curis shall not amend the Aurigene Agreement to obtain any license or other right to any compound the primary mechanism of action of which is antagonism of VISTA and that is not licensed to Curis under the Aurigene Agreement as of the Effective Date.
11.7DISCLAIMERS.
11.7.1EXCEPT AS EXPRESSLY SET FORTH IN SECTIONS 11.1 AND 11.2, NEITHER IMMUNEXT NOR ANY OF ITS AFFILIATES MAKES ANY REPRESENTATIONS OR WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY IMMUNEXT CONFIDENTIAL INFORMATION, IMMUNEXT PATENTS, IMMUNEXT KNOW-HOW OR ANY LICENSE GRANTED BY IMMUNEXT HEREUNDER, OR WITH RESPECT TO THE PRODUCTS. EXCEPT AS EXPRESSLY SET FORTH IN SECTIONS 11.1 AND 11.2, NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION OR WARRANTY THAT ANY PATENT OR OTHER PROPRIETARY RIGHTS INCLUDED IN THE IMMUNEXT PATENTS ARE VALID OR ENFORCEABLE OR THAT USE OF THE

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IMMUNEXT TECHNOLOGY CONTEMPLATED HEREUNDER DOES NOT INFRINGE ANY PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY.
11.7.2EXCEPT AS EXPRESSLY SET FORTH IN SECTIONS 11.1 AND 11.3, CURIS MAKES NO REPRESENTATIONS OR WARRANTIES OF ANY KIND, EITHER EXPRESS OR IMPLIED, INCLUDING ANY EXPRESS OR IMPLIED WARRANTIES OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE WITH RESPECT TO ANY CURIS CONFIDENTIAL INFORMATION OR ANY LICENSE GRANTED BY CURIS HEREUNDER. NOTHING IN THIS AGREEMENT SHALL BE CONSTRUED AS A REPRESENTATION OR WARRANTY THAT ANY PATENT OR OTHER PROPRIETARY RIGHTS OF CURIS ARE VALID OR ENFORCEABLE OR THAT THE USE OF ANY CURIS INTELLECTUAL PROPERTY OR CURIS CONFIDENTIAL INFORMATION DOES NOT INFRINGE ANY PATENTS OR OTHER INTELLECTUAL PROPERTY RIGHTS OF ANY THIRD PARTY.
11.8LIMITATION OF LIABILITY. EXCEPT IN THE CASE OF BREACH OF SECTION 13 OR IN THE CASE OF WILLFUL MISCONDUCT OR FRAUD OF A PARTY, NEITHER PARTY SHALL BE ENTITLED TO RECOVER FROM THE OTHER PARTY ANY INCIDENTAL, INDIRECT, SPECIAL, EXEMPLARY, PUNITIVE, MULTIPLE, OR CONSEQUENTIAL DAMAGES (INCLUDING LOST PROFITS, LOSS OF USE, DAMAGE TO GOODWILL, OR LOSS OF BUSINESS) IN CONNECTION WITH THIS AGREEMENT OR ANY LICENSE OR OTHER RIGHTS GRANTED HEREUNDER, WHETHER UNDER ANY CONTRACT, NEGLIGENCE, STRICT LIABILITY OR OTHER LEGAL OR EQUITABLE THEORY; provided, however, that this Section 11.8 shall not be construed to limit either Party’s indemnification obligations under Section 14, or any liability (whether in contract, tort or otherwise) which cannot by law be excluded or limited.
12.Intellectual Property
12.1Disclosure; Ownership.
12.1.1Disclosure. Inventorship of Inventions shall be determined in accordance with the rules of inventorship under U.S. patent laws. Each Party shall promptly disclose to the other Party in writing each Invention Made in whole or in part by such Party or its Affiliates in the course of conducting activities under this Agreement, and Know-How pertaining to such Invention that is Made in whole or in part by such Party or its Affiliates in the course of conducting activities under this Agreement during the applicable Period in which such Invention was Made (it being understood that Section 8.3.1(b) prohibits Curis and its Affiliates from Exploiting ImmuNext Technology, Compounds and Products outside the scope of or otherwise not in compliance with the licenses, sublicenses and other rights granted to Curis under this Agreement); provided, however, that ImmuNext shall have no obligation to disclose to Curis any ImmuNext Invention or Joint Invention that, in each case, is an Excluded Compound Invention or an Excluded Compound.
12.1.2Ownership. Except as expressly set forth below in this Section 12.1.2, ownership of Inventions shall follow inventorship as determined in accordance

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with the Laws in the United States as such laws exist on the date on which the relevant Invention is Made, irrespective of where such activity occurs - i.e., except as expressly set forth below in this Section 12.1.2, Curis Inventions shall be owned solely by Curis, ImmuNext Inventions shall be owned solely by ImmuNext, and Joint Inventions shall be owned jointly by Curis and ImmuNext in equal undivided shares.
(a)Excluded Compound Technology. ImmuNext shall solely own, and Curis hereby assigns to ImmuNext all right, title and interest in and to, all Curis Technology and Joint Technology that, in each case, is Excluded Compound Technology.
(b)Assigned Technology; Option Period Results. Subject to Section 12.1.2(c), ImmuNext shall solely own, and Curis hereby assigns to ImmuNext all right, title and interest in and to, (i) each Curis Invention and each Joint Invention that, in each case, is Made during the Option Period and is not Excluded Compound Invention (collectively, “Assigned Invention”), (ii) all Patents that Cover Assigned Inventions (collectively with all Assigned Inventions, “Assigned Technology”) and (iii) all Option Period Results.
(c)Reassigned Technology. Effective as of the Option Exercise Date (if any): (i) Curis shall solely own, and ImmuNext shall, and it hereby does, assign to Curis all right, title and interest in and to, all Assigned Technology that was Curis Technology; and (ii) the Parties shall jointly own in equal, undivided shares, and ImmuNext shall, and it hereby does, assign to Curis an equal, undivided joint ownership interest in and to, all Assigned Technology that was Joint Technology ((i) and (ii), collectively, “Reassigned Technology”).
(d)Jointly Owned Technology. Subject to the terms and conditions of this Agreement, including the license grants, during and after the License Period, each Party shall have the right to practice, and to grant licenses under, such Party’s joint ownership interest in Jointly Owned Technology without the other Party’s consent and shall have no duty to account to the other Party for such practice or license, and each Party hereby waives any right it may have under the laws of any jurisdiction to require any such consent or accounting.
12.2Prosecution of Patents.
12.2.1Prosecution of ImmuNext Hybrid Patents. Subject to the Upstream Agreements and Section 12.2.6, ImmuNext shall have the first right, but not an obligation, to Prosecute all ImmuNext Hybrid Patents during the Term, at ImmuNext’s sole cost and expense.
12.2.2Prosecution of ImmuNext Exclusive Patents. Subject to the Upstream Agreements and Section 12.2.6, (a) ImmuNext shall have the sole right, but not an obligation, to Prosecute the ImmuNext Exclusive Patents during the Option Period, and (b) Curis shall have the first right, but not an obligation, to Prosecute the ImmuNext Exclusive Patents during the License Period. Curis shall reimburse ImmuNext for the reasonable and documented expenses incurred by ImmuNext in the Prosecution of the ImmuNext Exclusive Patents and shall be solely responsible for all expenses incurred by Curis in the Prosecution of the ImmuNext Exclusive Patents.

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12.2.3Prosecution of Certain Curis Patents. Subject to Section 12.2.6, during the License Period, Curis shall have the sole right, but not an obligation, to Prosecute Patents claiming Curis Owned Inventions, including Curis Useful Patents. Curis shall bear all costs and expenses incurred by or on behalf of Curis associated therewith.
12.2.4Prosecution of Jointly Owned Patents. Subject to Section 12.2.6, during the License Period, Curis have the first right, but not an obligation, to Prosecute Jointly Owned Patents. Curis shall bear all costs and expenses incurred by or on behalf of Curis associated therewith.
12.2.5Prosecution of Excluded ImmuNext Patents. As between the Parties, ImmuNext shall have the sole right, but not an obligation, to Prosecute the Excluded ImmuNext Patents during the Term. ImmuNext shall bear all costs and expenses incurred by ImmuNext associated therewith, and Curis shall have no rights with respect to the Prosecution of any Excluded ImmuNext Patents.
12.2.6Review Rights with respect to Prosecution.
(a)During the Option Period. During the Option Period, ImmuNext shall (i) regularly provide Curis with copies of all patent applications within the ImmuNext Exclusive Patents and ImmuNext Hybrid Patents filed hereunder and other material submissions and correspondence with the patent offices with respect to such Patents, in sufficient time to allow for review and comment by Curis; and (ii) provide Curis and its patent counsel with an opportunity to consult with ImmuNext and its patent counsel regarding (A) the filing and contents of any such application, amendment, submission or response, and (B) whether to attempt to segregate into separate Patents (1) claims that would cause a Patent to be an ImmuNext Exclusive Patent from (2) claims that would cause a Patent to be an ImmuNext Hybrid Patent. The advice and suggestions of Curis and its patent counsel shall be taken into consideration in good faith by ImmuNext and its patent counsel in connection with the foregoing. ImmuNext shall pursue in good faith all reasonable claims requested by Curis in the Prosecution of any ImmuNext Exclusive Patent or ImmuNext Hybrid Patent during the Option Period.
(b)During the License Period.
(i)During the License Period, the Party Prosecuting (the “Prosecuting Party”) ImmuNext Hybrid Patents, ImmuNext Exclusive Patents, Curis Useful Patents or Jointly Owned Patents shall (A) regularly provide the other Party (the “Non-Prosecuting Party”) with copies of all patent applications within such Patents filed hereunder and other material submissions and correspondence with the patent offices with respect to such Patents, in sufficient time to allow for review and comment by the Non-Prosecuting Party; and (B) provide the Non-Prosecuting and its patent counsel with an opportunity to consult with the Prosecuting Party and its patent counsel regarding the filing and contents of any such application, amendment, submission or response, and the advice and suggestions of the Non-Prosecuting Party and its patent counsel shall be taken into consideration in good faith by the Prosecuting Party and its patent counsel in connection with such filing. The Prosecuting Party

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shall pursue in good faith all reasonable claims requested by the Non-Prosecuting Party in the Prosecution of Patents subject to this Section 12.2.6(b).
(ii)In the event that Curis decides not to continue the Prosecution of any ImmuNext Exclusive Patent, Curis Useful Patent or Jointly Owned Patent under this Section 12.2.6(b), Curis shall provide ImmuNext with notice of such decision at least [**] prior to any pending lapse or abandonment thereof. In the event that ImmuNext decides not to continue the Prosecution of any ImmuNext Hybrid Patent under this Section 12.2.6(b), ImmuNext shall provide Curis with notice of such decision at least [**] prior to any pending lapse or abandonment thereof. In the event of notice under this Section 12.2.6(b)(ii), the Party giving notice shall provide the other Party with an opportunity to assume responsibility for Prosecution of the relevant Patent and for all costs and expenses associated therewith. In the event that a Party receiving notice assumes such responsibility for such Prosecution and such costs and expenses, such Party shall have the right to transfer the responsibility for such Prosecution of such Patent applications and Patents to patent counsel selected by it.
12.2.7Cooperation of the Parties. Each Party agrees to reasonably cooperate in the Prosecution of Patents under this Section 12.2 and in the obtaining and maintenance of any patent extensions, supplementary protection certificates and the like with respect thereto. Such cooperation includes, but is not limited to: (a) executing papers and instruments, or requiring its employees, consultants or contractors, to execute such papers and instruments, so as to effectuate the ownership of Inventions set forth in Section 12.1.2, and Patents claiming or disclosing such Inventions, and to enable the other Party to apply for and to Prosecute patent applications in any country as permitted by this Agreement; and (b) promptly informing the other Party of any matters coming to such Party’s attention that may affect the preparation, filing, prosecution or maintenance of any such patent applications.
12.3Enforcement of Patents Against Infringers. Subject to the terms and conditions of the Upstream Agreements, to the extent such agreements apply to the ImmuNext Patents, the following provisions shall apply:
12.3.1Notice. Each Party shall exercise reasonable diligence in identifying actual or potential Competitive Infringement of any ImmuNext Patent, Curis Owned Patent or Jointly Owned Patent. Each Party shall notify the other party in writing within [**] (except as expressly set forth below) of becoming aware of any suspected or threatened Competitive Infringement of any ImmuNext Patent, Curis Owned Patent or Jointly Owned Patent, and the remainder of this Section 12.3 shall apply to such Competitive Infringement; provided, however, that each Party shall notify the other Party of any Patent Certification regarding any ImmuNext Patent, Curis Owned Patent or Jointly Owned Patent that it receives, and provide the other Party with a copy of such Patent Certification, within [**] of receipt. Notwithstanding the foregoing, ImmuNext is not required to give Curis notice infringement of any Excluded ImmuNext Patent.
12.3.2Enforcement of ImmuNext Patents during the Option Period. As between the Parties, ImmuNext will have the sole right, but not an obligation, to bring (or defend) and control any action or proceeding with respect to Competitive Infringement of any ImmuNext Patent during the Option Period.

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12.3.3Enforcement of ImmuNext Hybrid Patents during the License Period. As between the Parties, during the License Period, ImmuNext will have the first right, but not an obligation, to bring (or defend) and control any action or proceeding with respect to Competitive Infringement of any ImmuNext Hybrid Patent, and Curis shall have the right to be represented in any such action or proceeding, at Curis’ expense and by counsel of its own choice. If ImmuNext withdraws from any such action or proceeding with respect to Competitive Infringement of any ImmuNext Hybrid Patent, or fails to bring any such action or proceeding with respect to Competitive Infringement of any ImmuNext Hybrid Patent within [**] following the notice of alleged Competitive Infringement, then Curis shall have the right, but not the obligation, to continue, or to bring (or defend) and control any such action at its own expense and by counsel of its own choice, and ImmuNext shall have the right, at its own expense, to be represented in any such action by counsel of its own choice, subject to Section 12.3.6.
12.3.4Enforcement of ImmuNext Exclusive Patents, Curis Owned Patents and Jointly Owned Patents during the License Period. As between the Parties, during the License Period, Curis will have the (a) first right, but not an obligation, to bring (or defend) and control any action or proceeding with respect to Competitive Infringement of any ImmuNext Exclusive Patent or Jointly Owned Patent and (b) the sole right, but not an obligation, to bring any (or defend) and control any action or proceeding with respect to Competitive Infringement of any Curis Owned Patent. If Curis withdraws from any such action or proceeding with respect to Competitive Infringement of any ImmuNext Exclusive Patent or Jointly Owned Patent, or fails to bring any such action or proceeding with respect to Competitive Infringement of any ImmuNext Exclusive Patent or Jointly Owned Patent within [**] following the notice of alleged Competitive Infringement, then ImmuNext shall have the right, but not the obligation, to continue, or to bring (or defend) and control any such action at its own expense and by counsel of its own choice, and Curis shall have the right, at its own expense, to be represented in any such action by counsel of its own choice, subject to Section 12.3.6.
12.3.5Enforcement of Excluded ImmuNext Patents during the License Period. As between the Parties, during the Term, ImmuNext will have the sole right, but not an obligation, to bring (or defend) and control any action or proceeding with respect to Infringement (each, an “Infringement Action”) of any Excluded ImmuNext Patent, and Curis shall not have any rights with respect to any such Infringement Action.
12.3.6Procedure for Enforcement.
(a)The non-enforcing Party pursuant to Section 12.3.3 or Section 12.3.4 (as applicable) shall reasonably assist the enforcing Party (at the enforcing Party’s expense) in any such action if so requested, and shall lend its name and be joined as a party plaintiff to such actions if reasonably requested by such enforcing Party or required by Laws. The non-enforcing Party shall have the right to participate and be represented in any such action by its own counsel at its own expense. The non-enforcing Party shall cooperate, at the enforcing Party’s cost and expense, with the enforcing Party in investigating or terminating any suspected infringement, whether through legal action, negotiation or otherwise, including by producing all reasonably pertinent records, papers, information, samples, specimens and similar items, and directing its employees to testify and grant interviews, upon the request of the enforcing Party. The enforcing Party will keep the non-enforcing Party reasonably informed of the status of the

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action. The enforcing Party will have an obligation to consult with the non-enforcing Party and will take any comments from the non-enforcing Party into good faith consideration with respect to the infringement, claim construction or defense of the validity or enforceability of any claim in an ImmuNext Patent or Jointly Owned Patent. The enforcing Party shall provide to the non-enforcing Party copies of any papers relating to the infringement and/or validity litigation of the involved Patent promptly upon their being filed or received.
(b)The enforcing Party may not enter into a settlement of any action pursuant to Section 12.3.3 or Section 12.3.4 (as applicable) which restricts the scope, or adversely affects the enforceability, of the rights of the other Party under this Agreement without the prior written consent of such other Party (such consent not to be unreasonably withheld, conditioned or delayed).
12.3.7Damages. Except as otherwise agreed by the parties in connection with a cost-sharing arrangement, any recovery as a result of any action or proceeding pursuant to Section 12.3.3 or Section 12.3.4, whether by way of settlement or otherwise, shall first be used first to reimburse the Party that brought (or defended) and controlled such action or proceeding for its documented, out-of-pocket costs and expenses (including court, attorneys’ and professional fees) incurred in connection with such action or proceeding, and then to reimburse the other Party for its documented, out-of-pocket costs and expenses (including court, attorneys’ and professional fees) incurred in connection with such action or proceeding (to the extent not previously reimbursed by the enforcing Party). If, after such reimbursement of the Parties’ cost and expenses, any funds shall remain from such damages or other sums recovered (“Remainder”) and any of the Upstream Agreements requires ImmuNext to share such Remainder with the licensor under such Upstream Agreement, such Remainder shall be shared with the applicable licensor in accordance with the applicable Upstream Agreement. After such sharing, any remaining portion of the Remainder, or if the Remainder is not required to be shared with any licensor under an Upstream Agreement, the Remainder, shall be retained by the enforcing Party; provided, however, that:
(a)in the event that ImmuNext was the enforcing Party following exercise of its first right under Section 12.3.3 with respect to any ImmuNext Hybrid Patent, that part of the Remainder (or of the remaining portion thereof) that is attributable to Competitive Infringement of such Patent shall be allocated as follows: (i) to the extent it represents compensatory damages for Competitive Infringement, [**]% to ImmuNext and [**]% to Curis; and (ii) to the extent it represents special, exemplary, punitive or consequential damages (including treble damages) for Competitive Infringement, [**]% to ImmuNext and [**]% to Curis. For clarity, Curis shall not be entitled to any portion of a recovery realized by ImmuNext as a result of any action brought and controlled by ImmuNext pursuant to Section 12.3.3 with respect to any ImmuNext Hybrid Patent that is specifically attributable to Infringement, other than Competitive Infringement, of such Patent; and
(b)in the event that Curis was the enforcing Party following exercise of its first right under Section 12.3.4 with respect to any ImmuNext Exclusive Patent or Jointly Owned Patent, that part of the Remainder (or of the remaining portion thereof) that is attributable to Competitive Infringement of such Patent shall be allocated as follows: (i) to the extent it represents compensatory damages for Competitive Infringement, [**]% to Curis and

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[**]% to ImmuNext; and (ii) to the extent it represents special, exemplary, punitive or consequential damages (including treble damages) for Competitive Infringement, [**]% to Curis and [**]% to ImmuNext.
12.4Patent Term Extension. Each Party shall each cooperate with the other Party and shall use Commercially Reasonable Efforts in obtaining patent term extension and Regulatory Exclusivity (including, for example, any pediatric exclusivity extensions as may be available) or supplemental protection certificates or their equivalents in any country with respect to Patents Covering the Products, as applicable and subject to any restrictions set forth in the Upstream Agreements. If elections with respect to obtaining such patent term extensions, Regulatory Exclusivity, or supplemental protection certificates are to be made, Curis shall have the right to make the election to seek (a) patent term extension solely with respect to ImmuNext Exclusive Patents, Curis Owned Patents and Jointly Owned Patents, (b) Regulatory Exclusivity, or (c) supplemental protection. For such purpose, for all Regulatory Approvals, Curis shall use reasonable efforts to provide ImmuNext with notice of each expected Regulatory Approval of a Product prior to the expected date of Regulatory Approval, as well as promptly notifying ImmuNext after receiving each Regulatory Approval of a Product in each territory confirming the date of such Regulatory Approval.
12.5Patent Certification. In the event a Third Party files a Patent Certification (as defined in Section 1.27), upon request of a Party, the other Party shall provide reasonable assistance and cooperation (including making available to such first Party documents possessed by such other Party that are reasonably required by such first Party and making available personnel for interviews and testimony) in any actions reasonably undertaken by such first Party in accordance with Section 12.3. The Parties shall cooperate to compile an accurate list of all Patents required to be provided by Curis, its Affiliate and/or Sublicensee pursuant to 35 U.S.C. Section 351(l)(1)(3)(A). Notwithstanding the preceding sentence, Curis will retain final decision-making authority as to such listing of all applicable Patents for such Product.
12.6Defense Against Claims of Infringement of Third Party Patents. If a Third Party asserts that a Patent or other right owned by it is or has been infringed by the manufacture, use, sale, offer for sale import, or export of a Compound or Product, the Party first obtaining knowledge of such a claim shall immediately provide the other Party written notice of such claim along with the related facts in reasonable detail. In such event, unless the Parties otherwise agree, [**] shall have the first right, but not the obligation, at its expense, to control such defense with respect to such Compound or Product. Each Party shall cooperate with the defending Party, at the defending Party’s reasonable request and expense, and shall have the right to be represented separately by counsel of its own choice, but at its own expense. The defending Party shall also control settlement of such claim; provided, however, that no settlement shall be entered into without the prior consent of the other Party if such settlement would adversely affect the rights and benefits of, or impose or adversely affect any obligations on, the other Party (such consent not to be unreasonably withheld, delayed or conditioned).
13.Confidentiality
13.1Nondisclosure.

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13.1.1Each Party agrees that, during the Term and for a period of [**] thereafter, a Party (the “Receiving Party”) receiving Confidential Information of the other Party (the “Disclosing Party”) (or that has received any such Confidential Information from the other Party prior to the Effective Date) shall (a) maintain in confidence such Confidential Information using not less than the efforts such Receiving Party uses to maintain in confidence its own proprietary information of similar kind and value but at least reasonable efforts, (b) not disclose such Confidential Information to any Third Party without the prior written consent of the Disclosing Party, except for disclosures expressly permitted pursuant to this Agreement, and (c) not use such Confidential Information for any purpose except those permitted by this Agreement (it being understood that this clause (c) shall not create or imply any rights or licenses not expressly granted under this Agreement). The Receiving Party shall use at least the same standard of care as it uses to protect proprietary or confidential information of its own, but no less than reasonable care, to ensure that its, and its Affiliates’, directors, officers, employees, and consultants (“Representatives”) do not disclose or make any unauthorized use of the Confidential Information. The Receiving Party shall be responsible for any failure by its Representatives which, if committed by Receiving Party, would be a breach of this Agreement. The Receiving Party shall promptly notify the Disclosing Party upon discovery of any unauthorized use or disclosure of the Confidential Information.
13.1.2At all times during and after the Term, all ImmuNext Technology, Excluded ImmuNext Technology, and, notwithstanding Section 13.2.2 and 13.2.5, Excluded Compound Technology are the Confidential Information of ImmuNext.
13.1.3During the Option Period, all Curis Technology and Joint Technology (in each case of Curis Technology and Joint Technology, excluding Excluded Compounds and Excluded Compound Technology) Made during the Option Period, all Option Period Results, Curis Option Period Records and ImmuNext Option Period Records are the Confidential Information of both Parties with each Party being treated as the Receiving Party.
13.1.4During the License Period and thereafter, notwithstanding Sections 13.2.2 and 13.2.5: (i) all Curis Option Period Records and Curis Owned Technology are the Confidential Information of Curis; and (ii) all ImmuNext Option Period Records, Option Period Results and Jointly Owned Technology are the Confidential Information of both Parties with each Party being treated as the Receiving Party. Notwithstanding the foregoing, in the event of termination of this Agreement in its entirety by ImmuNext pursuant to Section 15.2.1, 15.3, 15.4 or 15.6, or by Curis pursuant to Section 15.5, the Option Period Results and the Curis Option Period Records shall become the Confidential Information of ImmuNext.
13.2Exceptions. The obligations in Section 13.1 shall not apply with respect to any portion of the Confidential Information that the Receiving Party can show by competent written proof:
13.2.1was generally available to the public or otherwise part of the public domain at the time of disclosure to the Receiving Party hereunder;

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13.2.2was known to the Receiving Party or any of its Affiliates, without any obligation to keep it confidential or any restriction on its use, prior to disclosure by the Disclosing Party, as evidenced by contemporaneous written records;
13.2.3is subsequently disclosed to the Receiving Party or any of its Affiliates by a Third Party lawfully in possession thereof and without any obligation to keep it confidential or any restriction on its use;
13.2.4is published by a Third Party or otherwise becomes publicly available or enters the public domain, after it is disclosed to the Receiving Party other than through any act or omission of the Receiving Party in breach of this Agreement; or
13.2.5is independently developed by or for the Receiving Party or its Affiliates, as evidenced by written records prepared contemporaneously with such independent development, without reference to or reliance upon the Disclosing Party’s Confidential Information.
13.3Authorized Disclosure. The Receiving Party may disclose Confidential Information belonging to the Disclosing Party, and Confidential Information deemed to belong to both Parties under the terms of this Agreement, to the extent (and only to the extent) such disclosure is reasonably necessary in the following instances:
(a)to the extent such disclosure is to a governmental authority as reasonably necessary in filing or prosecuting Patent, copyright or trademark applications in accordance with this Agreement, prosecuting or defending litigation related to this Agreement, complying with applicable governmental regulations with respect to conduct under this Agreement, obtaining Regulatory Approval or performing post‑approval regulatory obligations for the Compounds or Products, or otherwise required by Law;
(b)subject to Sections 13.5 and 13.7, complying with Laws (including the rules and regulations of the Securities and Exchange Commission or any national securities exchange) and with any valid order of a court of competent jurisdiction;
(c)disclosure, solely on a “need to know basis,” to (i) Affiliates, (ii) any Third Party that is party to any Upstream Agreement, potential or actual collaborators (including (sub)licensees), acquirers, merger partners, assignees, Subcontractors, investment bankers, investors, lenders or other financial partners, advisors, and each of the Parties’ respective Representatives, each of whom prior to disclosure must be bound by written obligations of confidentiality and non-use no less restrictive than the obligations set forth in this Section 13 (but subject to a shorter period of confidentiality and non-use if customary under the circumstances); provided, however, that, in each of the foregoing situations, the Receiving Party shall remain responsible for any failure by any Person who receives Confidential Information pursuant to this Section 13.3(c) to treat such Confidential Information as required under this Section 13; and
(d)With respect to pre-clinical data generated during the Option Period, ImmuNext may disclose such data in connection with research grant applications

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prepared (and grants received thereunder) by ImmuNext or Upstream Licensor 1; provided, however, that ImmuNext and Upstream Licensor 1, as applicable, identify any such data as proprietary and/or confidential.
If and whenever any Confidential Information is disclosed in accordance with this Section 13, such disclosure shall not cause any such information to cease to be Confidential Information, except to the extent that such disclosure results in a public disclosure of such information (other than by breach of this Agreement). Where reasonably possible and subject to Sections 13.5 and 13.7 and other than pursuant to Section 13.3(c), the Receiving Party shall notify the Disclosing Party of the Receiving Party’s intent to make such disclosure pursuant to this Section 13.3 sufficiently prior to making such disclosure so as to allow the Disclosing Party adequate time to take whatever action it may deem appropriate to protect the confidentiality of the information, and the Receiving Party will provide reasonable assistance to the Disclosing Party with respect thereto; provided that, in any event, the Receiving Party will use reasonable measures to ensure confidential treatment of such information.
13.4Terms of this Agreement. The Parties acknowledge that this Agreement and all of the terms of this Agreement shall be treated as Confidential Information of both Parties; provided, however, that ImmuNext shall be permitted to disclose this Agreement to the extent required under any of the Upstream Agreements.
13.5Filing of this Agreement. The Parties shall coordinate in advance with each other in connection with the filing of this Agreement (including redaction of certain provisions of this Agreement) with any securities authority or with any stock exchange on which securities issued by a Party or its Affiliate are traded, and each Party will use reasonable efforts to seek and obtain confidential treatment for the terms proposed to be redacted; provided that each Party will ultimately retain control over what terms are disclosed to any securities authority or stock exchange, as the case may be, to the extent such Party determines, on the advice of legal counsel, that disclosure is reasonably necessary to comply with applicable Laws, including disclosure requirements of the U.S. Securities and Exchange Commission, or with the requirements of any stock exchange on which securities issued by a Party or its Affiliates are traded, and provided further that the Parties will use their reasonable efforts to file redacted versions with any governing bodies which are consistent with redacted versions previously filed with any other governing bodies.
13.6Publications.
13.6.1During the Option Period, each Party shall have the right to publish information generated by or on behalf of such Party that is related to any Compound or Product; such publications include oral presentations and abstracts. Before any such paper is submitted for publication or an oral presentation is made, the Party proposing to make such publication (the “Publishing Party”) shall deliver to the other Party a then-current copy of the paper or materials for presentation at least [**] prior to submitting the paper to a publisher or making the presentation. The other Party shall review such materials and give its comments to the Publishing Party within [**]. Failure to respond within the time period set forth above shall be deemed approval to publish or present. Notwithstanding the foregoing, the Publishing Party shall comply with the other Party’s request to delete references to the other Party’s Confidential

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Information in any such publication and, upon request, shall withhold publication for an additional [**] in order to permit the applicable Party to obtain Patent protection in accordance with this Agreement.
13.6.2During the License Period, Curis shall have the sole right to publish information related to the Compounds or Products; such publications include oral presentations and abstracts. Before any such paper is submitted for publication or an oral presentation is made, Curis shall deliver to ImmuNext a then-current copy of the paper or materials for presentation at least [**] prior to submitting the paper to a publisher or making the presentation. ImmuNext shall review such materials and give its comments to Curis within [**]. Failure to respond within the time period set forth above shall be deemed approval to publish or present. Notwithstanding the foregoing, Curis shall comply with ImmuNext’s request to delete references to ImmuNext’s Confidential Information in any such publication and, upon request, shall withhold publication for an additional [**] in order to permit the applicable Party to obtain Patent protection in accordance with this Agreement.
13.6.3Any publication shall include recognition of the respective contributions of the Parties according to standard practice for assigning scientific credit, either through authorship or acknowledgement, as may be appropriate.
13.7Press Release. Promptly following the Effective Date, Curis will issue a press release mutually agreed upon by the Parties announcing the existence of this Agreement. It is further acknowledged that each Party may desire or be required to issue subsequent press releases relating to this Agreement or activities conducted hereunder. The Parties agree to consult with each other reasonably and in good faith with respect to the text and timing of subsequent press releases prior to the issuance thereof, provided that, subject to the remainder of this Section 13.7, consent of the non-issuing Party may not be withheld in the case of releases that the other Party determines, based on advice of counsel, are reasonably necessary to comply with applicable Laws, including disclosure requirements of the U.S. Securities and Exchange Commission, or with the requirements of any stock exchange on which securities issued by a Party or its Affiliates are traded. In the event of a required public announcement, to the extent there is sufficient time while still being able to comply with applicable Laws, including disclosure requirements of the U.S. Securities and Exchange Commission, or with the requirements of any stock exchange on which securities issued by a Party or its Affiliates are traded, the Party making such announcement shall provide the other Party with a copy of the proposed text of such announcement sufficiently in advance of the scheduled release to afford such other Party a reasonable opportunity to review and comment upon the proposed text. Each Party may make public statements regarding this Agreement in response to questions by the press, analysts, investors or those attending industry conferences or financial analyst calls, or issue press releases, so long as the contents of any such public statement or press release are contained in a prior public disclosure or public statement approved by the other Party pursuant to this Section 13.7 or permitted by Section 13.3 and does not reveal non‑public information about the other Party.

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14.Indemnity and Insurance
14.1Curis Indemnity. Curis shall indemnify, defend, and hold harmless ImmuNext and its Affiliates, and their respective officers, directors, employees, agents, licensors, and their respective successors, heirs and assigns, and representatives (the “ImmuNext Indemnitees”), from and against any and all losses, damages, liabilities, expenses and costs, including reasonable legal expense and attorneys’ fees (“Damages”), to which any ImmuNext Indemnitee may become subject as a result of any claim, demand, action or other proceeding by any Third Party (each, a “Third Party Claim”), to the extent such Damages arise out of or relate to: (a) the gross negligence, recklessness, or willful misconduct of any Curis Indemnitee (defined below) under this Agreement; (b) any breach by Curis or any of its Affiliates or Sublicensees of any representation, warranty, covenant or other agreement made by Curis in this Agreement; or (c) the Exploitation of Compounds or Products by or on behalf of Curis, its Affiliates or Sublicensees; except, in each case, to the extent such Damages result from the gross negligence, recklessness or willful misconduct of any ImmuNext Indemnitee or the breach by ImmuNext of any warranty, representation, covenant or agreement made by ImmuNext in this Agreement.
14.2ImmuNext Indemnity. ImmuNext shall indemnify, defend, and hold harmless Curis and its Affiliates, and their respective officers, directors, employees, agents, licensors, and their respective successors, heirs and assigns, and representatives (the “Curis Indemnitees”), from and against any and all Damages to which any Curis Indemnitee may become subject as a result of any Third Party Claim, to the extent such Damages arise out of or relate to: (a) the gross negligence, recklessness, or willful misconduct of any ImmuNext Indemnitee under this Agreement; (b) any breach by ImmuNext or any of its Affiliates of any representation, warranty, covenant or other agreement made by ImmuNext in this Agreement; (c) any breach by ImmuNext or any of its Affiliates of any Upstream Agreement prior to the Effective Date; or (d) the Exploitation of any Excluded Compound by or on behalf of ImmuNext, its Affiliates, licensees or sublicensees; except, in each case, to the extent such Damages result from the gross negligence, recklessness or willful misconduct of any Curis Indemnitee or the breach by Curis of any warranty, representation, covenant or agreement made by Curis in this Agreement.
14.3Indemnification Procedure.
14.3.1Promptly after receipt by a Party of notice, or such Party otherwise becoming aware, of any actual or potential Third Party Claim which could give rise to a right to indemnification pursuant to Section 14.1 or Section 14.2, such Party shall promptly give the other Party written notice describing the Third Party Claim in reasonable detail. The indemnified Party shall not take any action that impairs the defense of any Third Party Claim by the indemnifying Party. The failure or delay of a Party to give notice in the manner provided herein shall not relieve the indemnifying Party of its obligations under this Section 14, except to the extent that such failure or delay to give notice actually prejudices the indemnifying Party’s ability to defend such Third Party Claim.
14.3.2The indemnifying Party shall have the right, exercisable by written notice to the indemnified Party within [**] of receipt of notice of the commencement of or

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assertion of any Third Party Claim, to assume the defense of such Third Party Claim. Following such notice, the indemnifying Party shall, at its sole cost and expense, assume and conduct such defense, with counsel selected by the indemnifying Party and reasonably acceptable to the indemnified Party.
14.3.3If the indemnifying Party undertakes to defend any Third Party Claim as provided in Section 14.3.1 the indemnified Party agrees to reasonably cooperate with the indemnifying Party and its counsel in the defense of such Third Party Claim, including by furnishing such records, information and testimony and attending such conferences, discovery proceedings, hearings, trials or appeals as may reasonably be requested by the indemnifying Party. All reasonable costs and expenses incurred in connection with such cooperation shall be borne by the indemnifying Party. The indemnified Party shall have the right to participate in (but not control) and be represented by its own counsel (at the indemnified Party’s own expense) in connection with such Third Party Claim.
14.3.4If the indemnifying Party does not defend the Third Party Claim, or fails to notify the indemnified Party of its election to defend as herein provided, the indemnified Party shall have the right, at its option, to defend such Third Party Claim by counsel of its choice and its reasonable costs and expenses for such Third Party Claim shall be included as part of the indemnification obligation of the indemnifying Party hereunder.
14.3.5Notwithstanding the foregoing, neither Party may settle or compromise any Third Party Claim without the other Party’s prior written consent if such settlement or compromise would: (a) commit the other Party to take, or to forbear to take, any action; (b) subject the other Party to an injunction; (c) constitute an admission of guilt or liability by the other Party; or (d) impose any financial liability on the other Party.
14.3.6The Parties shall in all cases reasonably cooperate in the defense of any Third Party Claims and each Party shall make reasonably available to the other Party any books, records or other documents within its control that are reasonably necessary or appropriate for such defense. Notwithstanding anything to the contrary in this Section 14.3, the Party conducting the defense of a Third Party Claim shall (a) keep the other party informed on a reasonable and timely basis as to the status of the defense of such Third Party Claim, and (b) conduct the defense of such Third Party Claim in a prudent manner.
14.4Insurance. During the Term, Curis will obtain and maintain, at its sole expense, the following minimum required insurance: comprehensive general liability insurance (including umbrella and excess liability insurance) and products liability insurance each with minimum limits of [**] Dollars ($[**]) per occurrence and [**] Dollars ($[**]) annual aggregate. During the Option Period, ImmuNext shall maintain, and during the Term, Curis shall maintain, any mandatory insurance, including but not limited to workers compensation coverage, in accordance with all applicable Laws. Commercial insurance shall be obtained from reputable and financially secure insurance carriers having a minimum A.M. Best rating (or equivalent) of A-. With respect to any such insurance policy that is written on a claims-made basis (and not on an occurrence basis), Curis shall ensure continuity of coverage for claims which may be presented during the [**] period following the expiration or termination of this Agreement. Curis will furnish to ImmuNext, on request, certificates of insurance evidencing the minimum

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required insurance. Curis shall provide ImmuNext with written notice at least [**] prior to the cancellation, non-renewal or material change in such insurance that would result in noncompliance of the terms and conditions set forth in this Section 14.4. Curis shall name ImmuNext as an additional insured on the insurance Curis carries pursuant to this Section 14.4.
15.Term and Termination
15.1Term; Expiration. The term of this Agreement (the “Term”) shall begin on the Effective Date and, unless earlier terminated in accordance with this Section 15, expire upon, as applicable, either:
(a)expiration of the Option Period if Curis has not exercised the Option prior to such expiration; or
(b)if Curis timely exercises the Option, expiration of the last-to-expire Royalty Term for any and all Products.
15.2Termination for Material Breach.
15.2.1Material Breach. Either Party (the “Non-Breaching Party”) may, without prejudice to any other remedies available to it at law or in equity, terminate this Agreement in its sole discretion in the event the other Party (the “Breaching Party”) has materially breached this Agreement, and such breach has continued for [**] (or [**] in the case of failure to make payment when due) after written notice thereof is provided to the Breaching Party by the Non-Breaching Party, such notice describing the alleged material breach in sufficient detail to put the Breaching Party on notice; provided that, if such breach is not susceptible to cure within the applicable cure period set forth above, then, the Non-Breaching Party’s right to termination shall be suspended only if and for so long as the Breaching Party has provided to the Non-Breaching Party a written plan that is reasonably calculated to effect a cure and such plan is reasonably acceptable to the Non-Breaching Party, and the Breaching Party commits to and does carry out such plan.
15.2.2Disagreement as to Material Breach; Cure Period. If the Parties reasonably and in good faith disagree as to whether there has been a material breach, the Party that disputes that there has been a material breach may contest the allegation in accordance with Section 16. Any right to terminate under Section 15.2.1 shall be stayed and the cure period tolled in the event that, during the applicable cure period for the alleged breach, the Party alleged to have been in material breach shall have initiated dispute resolution in accordance with Section 16 with respect to the alleged breach, which stay and tolling shall continue until such dispute has been resolved in accordance with Section 16 or 17, as applicable. It is understood and acknowledged that, during the pendency of such a dispute, this Agreement shall remain in full force and effect in accordance with its terms.
15.3Termination by ImmuNext for Patent Challenge. In the event that Curis or any of its Affiliates or any Sublicensee institutes, prosecutes or otherwise participates in (or in any way aids any Third Party in instituting, prosecuting or participating in), at law or in equity or before any administrative or regulatory body, including the U.S. Patent and Trademark

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Office or its foreign counterparts, any claim, demand, action or cause of action for declaratory relief, damages or any other remedy or for an enjoinment, injunction or any other equitable remedy, including any interference, re-examination, opposition or any similar proceeding, alleging that any claim in a Patent within the ImmuNext Patents is invalid, unenforceable or otherwise not patentable, ImmuNext may terminate this Agreement upon [**] prior written notice to Curis with respect to the challenged Patent.
15.4Termination by ImmuNext for Cessation. In the event that Curis and its Affiliates and Sublicensees conduct no research, Development, Manufacturing or Commercialization activities with respect to Compounds or Products for the relevant Cessation Period (other than as a result of ImmuNext’s failure to perform its obligations under Section 3.2.2(a), 3.2.2(d), 5, 6.1.1 or 6.1.2), ImmuNext may, at its election, terminate this Agreement in its entirety or on a Product-by-Product basis upon [**] prior written notice to Curis; provided that the Cessation Period shall be extended on a day-by-day basis for delays due to any of the following causes: (a) any Force Majeure, (b) to the extent Development activities are being undertaken to comply with any change in applicable Law, or (c) to the extent Curis reasonably determines in accordance with Curis’ internal procedures consistently applied that additional time is required to investigate, respond to and resolve (i) any patient safety issue or (ii) any manufacturing issue; provided in all cases that Curis is using Commercially Reasonable Efforts to resolve the cause of the delay. The “Cessation Period” shall be a continuous period of [**] during the Option Period and [**] during the License Period.
15.5Curis Termination for Convenience. Curis may, in its sole discretion and for any reason or no reason at all, terminate this Agreement, in its entirety or on a Product-by-Product basis, effective upon ninety (90) days’ prior written notice to ImmuNext.
15.6Insolvency or Bankruptcy. To the extent permitted under Law, either Party may terminate this Agreement, (a) if, at any time, the other Party files in any court or agency pursuant to any statute or regulation of any state or country, a petition in bankruptcy or insolvency or for reorganization or for an arrangement or for the appointment of a receiver or trustee of the Party or of substantially all of its assets, or (b) if the other Party is served with an involuntary petition against it, filed in any insolvency proceeding, and such petition shall not be dismissed within [**] after the filing thereof, or (c) if the other Party shall propose or be a party to any dissolution or liquidation, or (d) if the other Party shall make an assignment of substantially all of its assets for the benefit of creditors. Upon the occurrence of any of the foregoing (a) through (d) affecting a Party, such Party agrees to give the other Party prompt notice thereof to the extent permitted by Laws. All rights and licenses granted under or pursuant to any section of this Agreement to either Party are and shall otherwise be deemed to be for purposes of Section 365(n) of Title 11, United States Code (the “Bankruptcy Code”) licenses of rights to “intellectual property” as defined in Section 101(35A) of the Bankruptcy Code. The Parties shall retain and may fully exercise all of their respective rights and elections under the Bankruptcy Code. The parties further agree that, in the event of the commencement of a bankruptcy proceeding by or against a Party under the United States Bankruptcy Code, the non‑debtor Party shall be entitled to a complete duplicate of (or complete access to, as appropriate) any such intellectual property and all embodiments of such intellectual property, and the same, which, if not already in the non‑debtor party’s possession, shall be promptly delivered to it (a) upon any such commencement of a bankruptcy proceeding upon the non‑debtor party’s

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written request therefor, unless the debtor party continues to perform all of its obligations under this Agreement or (b) if not delivered under clause (a) above, following the rejection of this Agreement by or on behalf of the debtor party upon written request therefor by the non‑debtor party. All written agreements entered into in connection with the Parties’ conduct under this Agreement from time to time shall be considered agreements “supplementary” to this Agreement for purposes of Section 365(n) of the Bankruptcy Code.
15.7Consequences of Expiration. In the event of expiration of this Agreement pursuant to Section 15.1(b), the Curis Commercial License shall automatically become fully-paid up, royalty-free, irrevocable and perpetual.
15.8Consequences of Termination.
15.2.1Consequences of Termination by Curis pursuant to Section 15.5 or by ImmuNext pursuant to Section 15.2.1, 15.3, 15.4 or 15.6. In the event of termination of this Agreement by Curis pursuant to Section 15.5 or by ImmuNext pursuant to Section 15.2.1, 15.3, 15.4 or 15.6, with respect to any applicable terminated Product:
(a)Notwithstanding anything contained in this Agreement to the contrary, all rights and licenses granted herein to Curis shall terminate;
(b)Subject to the payment of the royalty set forth in Section 15.8.1(c), Curis hereby grants to ImmuNext and its Affiliates (i) an exclusive, perpetual, nontransferable (except as provided in Section 18.4), worldwide right and license, with the right to grant sublicenses (through multiple tiers), under Patents Controlled by Curis or any of its Affiliates and existing as of the effective date of termination that are necessary or reasonably useful for the Exploitation of the Compounds or Product(s) (including all back-up candidates) that were the subject of Exploitation under this Agreement immediately prior the effective date of such termination (and any derivatives, improvements, modifications or enhancements thereto) (collectively, the “Terminated Product(s)”), solely to Exploit such Terminated Product(s), and (ii) a non-exclusive license (with the right to grant sublicenses through multiple tiers) under any Know-How Controlled by Curis or any of its Affiliates and existing as of the effective date of termination that is necessary or reasonably useful for the Exploitation of the Terminated Products, in each case ((i) and (ii)), to Exploit such Terminated Products in any and all fields of use;
(c)As consideration for the rights granted to ImmuNext and its Affiliates under Section 15.8.1(b), ImmuNext shall pay to Curis a royalty on net sales (which shall be determined in a manner consistent with Section 1.124) by ImmuNext, its Affiliates or sublicensees of such Terminated Product. Sections 9.4.2 (mutatis mutandis, with the reference to “any ImmuNext Patent” therein to be deemed to refer to “any Curis Owned Patent”), 10.1, 10.2, 10.3, 10.4, 10.6, 10.7, 10.8 and 10.9 shall apply to the payments due to Curis, if any, under Sections 15.8.1(b) and 15.8.1(c) (mutatis mutandis).

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Stage of Development of such Terminated Product as of the effective date of termination
Royalty Rate
Prior to [**] for such Terminated Product
[**]%
After [**] for such Terminated Product
[**]%

(d)All payment obligations hereunder shall terminate, except (i) those that are accrued and unpaid as of the effective date of such termination; and (ii) such payment obligations as set forth in Section 15.8.1(c). ImmuNext will provide to Curis an invoice for any amounts due under this Section 15.8.1(d) and Curis shall, within [**] after the receipt of such invoice, pay such invoice.
(e)Curis and its Affiliates shall promptly either, at ImmuNext’s election, return to ImmuNext or destroy, at no cost to ImmuNext, all ImmuNext Know-How, materials and other data and information transferred by ImmuNext to Curis; and ImmuNext, except as provided in Section 15.8.1(f), shall promptly either, at Curis’ election, return to Curis or destroy, at no cost to Curis, all Curis Confidential Information;
(f)Curis shall promptly provide to ImmuNext any information, materials, data and documents in the possession or Control of Curis or its Affiliates relating to any Terminated Product, including copies of all results of Clinical Trials of any Terminated Product, and all other information developed by or for the benefit of Curis or any of its Affiliates with respect to any Terminated Product. Curis will cooperate with ImmuNext to provide a smooth transfer of such information, materials, data and documents. Curis shall conduct such transfer at Curis’ cost and expense;
(g)Curis shall assign to ImmuNext or its designee any and all Regulatory Filings with respect to any Terminated Product Controlled by Curis or its Affiliate.
(h)As between the Parties, ImmuNext shall own all right, title and interest in and to all Know-How Made by or on behalf of ImmuNext or its Affiliates in connection with the Terminated Products on or after the date of termination;
(i)As of the date of termination, ImmuNext shall have the sole right, but not an obligation, to Prosecute the Jointly Owned Patents and Curis not have any rights with respect to such Prosecution. ImmuNext shall be responsible for all Prosecution costs associated with such Patents following the date of termination. Promptly following termination of this Agreement, the Parties shall cooperate to transfer to ImmuNext or its designee all records related to the Prosecution of such Patents reasonably requested by ImmuNext and in a format mutually agreed upon by the Parties;
(j)As of the date of termination, ImmuNext shall have the sole right, not an obligation, to bring any Infringement Action with respect to any Jointly Owned Patents and Curis shall not have any right pursuant to this Agreement to bring or continue any Infringement Action or to share in any recoveries received by ImmuNext; provided that Curis and its Affiliates shall cooperate with ImmuNext in bringing and maintaining any such Infringement action at ImmuNext’s cost and expense in the manner set forth in Section 12.3.6(a);

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(k)Notwithstanding anything herein to the contrary, as of the date of termination, Curis shall treat the following Confidential Information of Curis as if it were Confidential Information of ImmuNext and shall hold such Confidential Information confidential on ImmuNext’s behalf under the terms of Section 13 (mutatis mutandis): Research Plan, Phase 1A/1B Plan, Phase 1A/1B Study, and all information, materials, data and documents transferred to ImmuNext pursuant to this Section 15.8.1; provided that Sections 13.2.2 and 13.2.5 shall not apply with respect to the foregoing and neither Curis nor any of its Affiliates shall have any rights under Section 13.6 with respect to any of the foregoing Confidential Information. ImmuNext may use or disclose such transferred Confidential Information of Curis consistent with its license under this Section 15.8.1;
(l)For all Products for which Regulatory Approval was obtained prior to the effective date of termination of this Agreement, Curis may sell inventory of Product remaining in Curis’ or its Affiliates’ possession as of the effective date of termination for up to [**] after the effective date of termination, subject to Curis’ Commercial Milestone Payment, royalty payment and reporting obligations to ImmuNext under Section 9.3.2, Section 9.4 and Section 10, respectively;
(m)Subject to Curis’ rights under Section 15.8.1(l), ImmuNext shall have the right, but not the obligation, to purchase from Curis any or all usable inventory of Compound or Product in Curis’ or its Affiliates’ possession as of the date of termination or at the end of the sell-down period set forth in Section 15.8.1(l) at a supply price equal to Curis’ out-of-pocket cost of such inventory plus [**]%. Any packaging, transport, insurance and other costs relating to delivery shall be at ImmuNext’s expense; and
(n)Solely in the event such termination occurs during the Option Period, ImmuNext shall notify Curis no later than the effective date of such termination whether or not ImmuNext wishes to assume responsibility for any then-ongoing Phase 1A/1B Study. If ImmuNext does not timely notify Curis that ImmuNext elects to assume responsibility for any such Phase 1A/1B Study, then Curis shall wind-down such Phase 1A/1B Study in compliance with GCP and with due regard for patient/subject safety and close out participating clinical sites, at Curis’ sole cost and expense. If ImmuNext timely notifies Curis that ImmuNext elects to assume responsibility for any such Phase 1A/1B Study, then the Parties shall reasonably cooperate to effect an orderly and prompt transfer of responsibility for such Phase 1A/1B Study to ImmuNext, at Curis’ sole cost and expense with respect to the costs of such transfer and the costs and expenses of conducting such Phase 1A/1B Study up to the time responsibility for conduct of such Phase 1A/1B Study is transferred to ImmuNext (it being understood that Curis will have no obligation to enroll any additional patients/subjects in such Phase 1A/1B Study after notice of termination of this Agreement has been delivered by a Party). ImmuNext shall be solely responsible for all costs and expenses of such Phase 1A/1B Study incurred from the date that responsibility for such Phase 1A/1B is transferred to ImmuNext. For clarity, if ImmuNext assumes any such activities, Curis shall remain responsible for all obligations, including indemnification, for all activities conducted by or on behalf of Curis or its Affiliates or Sublicensees prior to such assumption by ImmuNext.

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15.8.2Consequences of Termination by Curis Pursuant to Section 15.2.1 or 15.6. In the event of termination by Curis of this Agreement pursuant to Section 15.2.1 or pursuant to Section 15.6:
(a)in the event such termination occurs during the Option Period, all ImmuNext’s activities under the Research Plan shall terminate, ImmuNext shall invoice Curis pursuant to Section 3.2.3(b) for amounts due with respect to Research Plan activities conducted prior to the effective date of such termination, and Curis shall pay such invoice;
(b)in the event such termination occurs during the License Period, the licenses granted by ImmuNext to Curis and its Affiliates pursuant to Section 8.1.1 shall continue in full force and in perpetuity, and Curis’ obligation to pay the milestone payments set forth in Sections 9.3.1 and 9.3.2, the royalty payments set forth in Section 9.4, and the payments with respect to Sublicense Revenue set forth in Section 9.5, shall survive and continue in accordance with the terms and conditions set forth in Sections 9 and 10;
(c)ImmuNext shall promptly either, at Curis’ election, return to Curis or destroy, at no cost to Curis, all Curis Confidential Information, materials and other data and information transferred by Curis to ImmuNext; and
(d)Curis shall have the right to pursue any other remedies available at law or at equity.
15.9Survival. Notwithstanding anything to the contrary in this Agreement, the following provisions shall survive expiration or termination of this Agreement: Sections 1, 3.2.4(d), 3.2.4(e), 8.1.2, 9.4.2 (last sentence only, except as expressly set forth below), 8.3, 10 (excluding Section 10.5, except as expressly set forth below), 11.7, 11.8, 12.1, 13.1, 13.2, 13.3, 13.4, 13.5, 13.6.2, 13.6.3, 14, 15.6, 15.7, 15.8, 15.9, 16, 17.1, and 18. In addition, in the event of termination of this Agreement by Curis during the License Period pursuant to Section 15.2.1 or pursuant to Section 15.6, Sections 9.3, 9.4, 9.5, 9.6.1, 10.5, 12.2, 12.3, 12.4, 12.5, and 12.6 shall survive such termination. Expiration or any termination of this Agreement shall not relieve the Parties of any liability or obligation which accrued hereunder prior to the effective date of expiration or termination nor preclude either Party from pursuing all rights and remedies it may have hereunder or at law or in equity, subject to Section 16 or, as applicable, Section 17.1, with respect to any breach of this Agreement or prejudice either Party’s right to obtain performance of any obligation. Except as otherwise expressly set forth herein, all other rights, licenses and obligations shall terminate upon expiration or termination of this Agreement.
16.Dispute Resolution
16.1Exclusive Dispute Resolution Mechanism. Subject to Sections 2.1.6, 9.5.3 and 17, the Parties agree that the procedures set forth in this Section 16 shall be the exclusive mechanism for resolving any dispute, controversy, or claim (collectively, “Disputes”) between the Parties that may arise from time to time pursuant to this Agreement relating to any Party’s rights and/or obligations hereunder that cannot be resolved through good faith negotiation between the Parties (or the JSC, as applicable).

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16.2Resolution by Executive Officers. Except as otherwise provided in this Agreement, in the event of any dispute between the Parties in connection with this Agreement, the construction hereof, or the rights, duties or liabilities of either Party hereunder, the Parties shall first attempt in good faith to resolve such dispute by negotiation and consultation between themselves. In the event that such dispute is not resolved on an informal basis within [**] following the commencement of such negotiation or consultation, either Party may, by written notice to the other Party, refer the dispute to the executive officers designated by the Parties for attempted resolution. Such officers, or their designees, shall attempt in good faith to promptly resolve such dispute within [**] after such referral. In the event that any matter is not resolved under the foregoing provisions, each Party may, at its sole discretion, seek resolution of such matter in accordance with Section 16.3.
16.3Arbitration. Subject to Section 16.4, any Dispute, shall be resolved by binding arbitration before a panel of three (3) independent, neutral arbitrators in accordance with the rules of the American Arbitration Association (“AAA”) in effect at the time the proceeding is initiated. In any such arbitration, the following procedures shall apply:
16.3.1The arbitration shall be conducted pursuant to the then-current AAA rules (in the case of disputes involving [**] Dollars ($[**]) or less, or JSC disputes that are not finally resolved pursuant to Section 16.2, the accelerated rules shall be used, and for all other disputes the comprehensive rules shall be used), in effect on the date of the arbitration.
16.3.2The panel will be comprised of one arbitrator chosen by Curis, one by ImmuNext and the third by the two so chosen. If either, or both, of Curis or ImmuNext fails to choose an arbitrator or arbitrators within [**] after receiving notice of commencement of arbitration or if the two arbitrators fail to choose a third arbitrator within [**] after their appointment, then either or both Parties shall immediately request that the AAA select the remaining number of arbitrators to be selected, which arbitrator(s) shall have the requisite scientific background, experience and expertise. The place of arbitration shall be Boston, Massachusetts.
16.3.3Either Party may apply to the arbitrators for interim injunctive relief until the arbitration decision is rendered or the Dispute is otherwise resolved. The arbitrators shall have no authority to award punitive or any other type of damages not measured by a Party’s compensatory damages or that is otherwise prohibited by this Agreement. Each Party shall bear its own costs and expenses and attorneys’ fees in connection with any such arbitration.
16.3.4Except to the extent necessary to confirm or to enforce an award or decision or as may be required by Laws, neither Party nor any arbitrator may disclose the existence or results of any arbitration without the prior written consent of both Parties. In no event shall any arbitration be initiated after the date when commencement of a legal or equitable proceeding based on the Dispute would be barred by the applicable New York statute of limitations.
16.3.5In the event of a Dispute involving the alleged breach of this Agreement (including whether a Party has performed its diligence obligations hereunder),

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(a) neither Party may terminate this Agreement under Section 15.2.1 until resolution of the Dispute pursuant to this Section 16.3 and (b) if the arbitrators render a decision that a breach of this Agreement has occurred, the arbitrators shall have no authority to modify the right of the non-breaching Party to terminate this Agreement in accordance with Section 15.2.
16.3.6Any disputed performance or suspended performance pending the resolution of a Dispute that the arbitrators determine to be required to be performed by a Party shall be completed within a reasonable time period following the final decision of the arbitrators.
16.3.7The decision of the arbitrators with respect to any Disputes subject to resolution pursuant to this Section 16 shall be final and binding upon the Parties. In no event shall the arbitrators be permitted to reform or amend this Agreement through their decision. Any monetary payment to be made by a Party pursuant to a decision of the arbitrators shall be made in United States dollars. Either Party may enforce the decision of the arbitrators in any court of competent jurisdiction.
16.4Court Actions. Nothing contained in this Agreement shall deny either Party the right to seek injunctive or other equitable relief from a court of competent jurisdiction in the context of a bona fide emergency or prospective irreparable harm, and such an action may be filed and maintained notwithstanding any ongoing discussions between the Parties or any ongoing arbitration proceeding. In addition, either Party may bring an action in any court of competent jurisdiction to resolve disputes pertaining to the validity, construction, scope, enforceability, infringement or other violations of Patents or other intellectual property rights, and no such claim shall be subject to arbitration pursuant to Section 16.3, Expedited Arbitration pursuant to Section 17.1, or resolution by KOL Panel pursuant to Section 17.2.
17.Certain Disputes.
17.1Baseball Arbitration. If a Party exercises its rights under Section 9.5.3 to refer a dispute to expedited arbitration (an “Expedited Dispute”), then the Parties will follow the expedited dispute resolution process in this Section 17.1 (“Expedited Arbitration”), and not the dispute resolution processes in Section 16. The Expedited Dispute will be submitted to fast‑track, binding arbitration in accordance with the following:
17.1.1The arbitration will be conducted in Boston, Massachusetts under the rules of the AAA for the resolution of commercial disputes in the most expedited manner permitted by such rules. The Parties will appoint a single, independent, neutral arbitrator to be selected by mutual agreement. If the Parties are unable to agree on an arbitrator, the Parties will request that the AAA select the arbitrator. The arbitrator will be a professional with at least [**] of experience in the biopharmaceutical and life sciences industries and with expertise in the structuring of the financial terms of licenses of biopharmaceutical products. The cost of the arbitration will be borne equally by the Parties. Except in a proceeding to enforce the results of the arbitration or as otherwise required by applicable Laws, neither Party nor the arbitrator may disclose the existence, content or results of any arbitration hereunder without the prior written agreement of the Parties.

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17.1.2Within [**] after such matter is referred to arbitration, each Party will provide the arbitrator with a proposal (which will be a draft of such Party’s proposed resolution) and written memorandum in support of its position regarding the Expedited Dispute, as well as any documentary evidence it wishes to provide in support thereof (each, a “Brief”) and the arbitrator will provide each Party’s Brief to the other Party after it receives it from each Party.
17.1.3Within [**] after a Party submits its Brief, the other Party will have the right to respond thereto. The response and any material in support thereof will be provided to the arbitrator and the other Party.
17.1.4The arbitrator will have the right to meet with the Parties as necessary to inform the arbitrator’s determination and to conduct independent research and analysis (but shall not meet with a Party outside the presence of the other Party). Within [**] after the receipt by the arbitrator of both Parties’ responses (or expiration of the [**] period if any Party fails to submit a response), the arbitrator will deliver his/her decision regarding the Expedited Dispute in writing. The sole decision-making authority of the arbitrator shall be to select the proposed resolution of one of the Parties in its entirety without modification.
17.2KOL Panel.
17.2.1If a Party exercises its right under Section 2.1.6(b)(i) or Section 2.1.6(b)(ii) to refer the applicable disputed matter for resolution pursuant to this Section 17.2, then the matter shall be shall be decided by a panel of three (3) internationally-renowned key opinion leaders in the Field or the relevant portion thereof, with each Party appointing one key opinion leader and the Party-selected key opinion leaders collectively appointing a third key opinion leader (such key opinion leaders, the “KOL Panel”). Promptly after selection of the KOL Panel, the KOL Panel shall convene a meeting to consider the Parties’ respective positions on the matter. The Parties shall mutually agree on the medium by which each Party may present its position to the KOL Panel (i.e., in writing and/or orally) and shall establish a reasonable limit on the length (i.e., page limit and/or duration) of each Party’s presentation.
17.2.2In the case of a matter referred pursuant to Section 2.1.6(b)(i), the sole questions to be posed to and answered by the KOL Panel are:
(i)Does the proposed continuation or resumption of the applicable Phase 1A/1B Study or the conduct of the applicable proposed additional Phase 1 Trial pose an Unacceptable Safety Risk?; and
(ii)If the proposed continuation or resumption of the applicable Phase 1A/1B Study or the conduct of the applicable proposed additional Phase 1 Trial does not pose an Unacceptable Safety Risk, does the KOL Panel nevertheless recommend that any specific modifications to the protocol for the applicable trial be made or other actions be taken in connection with such trial to reduce risks to patient safety (“Risk-Minimizing Actions”)?

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If the KOL Panel determines that the continuation or resumption of the conduct of the applicable Phase 1A/1B Study or the conduct of the applicable proposed additional Phase 1 Trial poses an Unacceptable Safety Risk, then in no event may Curis continue or resume such Phase 1A/1B Study or conduct such additional Phase 1 Trial absent ImmuNext’s written agreement. If the KOL Panel determines that the continuation or resumption of the conduct of the applicable Phase 1A/1B Study or the conduct of the applicable proposed additional Phase 1 Trial does not pose an Unacceptable Safety Risk but recommends that specific Risk-Minimizing Actions be implemented, then Curis may proceed with the applicable Phase 1A/1B Study or Phase 1 Trial, provided that it implements such Risk-Minimizing Actions.
17.2.3In the case of a matter referred pursuant to Section 2.1.6(b)(ii), the sole questions to be posed to and answered by the KOL Panel are:
(a)Did the applicable Phase 1A/1B Study meet any or all of its clinical endpoints?; and
(b)If the answer to the preceding question is yes, which of the clinical endpoint(s) of such Phase 1A/1B Study were met?
17.2.4The determination of the KOL Panel shall be final and binding upon the Parties. The Parties shall share equally the fees and costs of the KOL Panel members, regardless of the KOL Panel’s ultimate determination.
18.Miscellaneous
18.1Severability. If one or more of the provisions of this Agreement is held to be invalid or unenforceable, the provision shall be considered severed from this Agreement and shall not serve to invalidate any remaining provisions hereof. The Parties shall make a good faith effort to replace any invalid or unenforceable provision with a valid and enforceable one such that the objectives contemplated by the Parties when entering this Agreement may be realized.
18.2Notices. Any notice required or permitted to be given by this Agreement shall be in writing and shall be (a) delivered by hand or by overnight courier with tracking capabilities or (b) mailed postage prepaid by first class, registered or certified mail, in each case ((a) and (b)), addressed as set forth below unless changed by notice so given:
If to Curis:
Curis, Inc.
4 Maguire Road
Lexington, MA 02421
Attention: Chief Executive Officer


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With a copy to:

Cooley LLP
4401 Eastgate Mall
San Diego, CA 92121
Attention: Jane K. Adams

If to ImmuNext:
ImmuNext, Inc.
1 Medical Center Drive
HB7937
Lebanon, New Hampshire 03756
Attention: David DeLucia, Chief Executive Officer

With a copy to (which shall not constitute notice):

Goodwin Procter LLP
100 Northern Avenue
Boston, MA 02210
Attention: Sarah A. Solomon, Esquire

McLane Middleton
900 Elm Street
10th Floor
Manchester, NH 03101
Attention: Daniel J. Norris, Esquire

Any such notice shall be deemed given on the date received. A Party may add, delete or change the person or address to which notices should be sent at any time upon written notice delivered to the Party’s notices in accordance with this Section 18.2.
18.3Force Majeure. Neither Party shall be liable for delay or failure in the performance of any of its obligations hereunder if such delay or failure is due to causes beyond its reasonable control, including acts of God, fires, earthquakes, acts of war, terrorism, or civil unrest (“Force Majeure”); provided, however, that the affected Party promptly notifies the other Party and provided further that the affected Party shall use its Commercially Reasonable Efforts to avoid or remove such causes of non-performance and to mitigate the effect of such occurrence, and shall continue to perform its obligations with the utmost dispatch whenever such causes are removed. When such circumstances arise, the Parties shall negotiate in good faith any modifications of the terms of this Agreement that may be necessary or appropriate in order to arrive at an equitable solution.
18.4Assignment. Except as expressly provided hereunder, neither this Agreement nor any rights or obligations hereunder may be assigned or otherwise transferred by either Party without the prior written consent of the other Party (such consent not to be

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unreasonably withheld); provided, however, that either Party may assign this Agreement and its rights and obligations hereunder without the other Party’s consent:
18.4.1in connection with the transfer or sale of all or substantially all of the business of such Party to which this Agreement relates to a Third Party (“Third Party Acquirer), whether by merger, sale of stock, sale of assets, reorganization, consolidation or otherwise (each, a “Sale Transaction”), provided that in the event of a Sale Transaction (whether this Agreement is actually assigned or is assumed by the Third Party Acquirer or the surviving corporation resulting from such Sale Transaction by operation of law (e.g., in the context of a reverse triangular merger)), intellectual property rights of the Third Party Acquirer that existed prior to the Sale Transaction shall not be included in the technology licensed hereunder or otherwise subject to this Agreement; or
18.4.2to an Affiliate of such Party, provided that the assigning Party shall remain liable and responsible to the non‑assigning Party hereto for the performance and observance of all such duties and obligations by such Affiliate.
Subject to the foregoing, this Agreement shall inure to the benefit of and be binding on the Parties’ successors and assigns. Any assignment or transfer in violation of the foregoing shall be null and void and wholly invalid, the assignee or transferee in any such assignment or transfer shall acquire no rights whatsoever, and the non-assigning, non-transferring Party shall not recognize, or be required to recognize, such assignment or transfer.
18.5Waivers and Modifications. The failure of any Party to insist on the performance of any obligation hereunder shall not be deemed to be a waiver of such obligation. Waiver of any breach of any provision hereof shall not be deemed to be a waiver of any other breach of such provision or any other provision on such occasion or any succeeding occasion. No waiver, modification, release or amendment of any obligation under or provision of this Agreement shall be valid or effective unless in writing and signed by both Parties.
18.6Choice of Law. This Agreement shall be governed by, enforced and construed in accordance with the Laws of the State of New York without regard to any conflicts of law provision that would result in the application of the Laws of any State other than the State of New York.
18.7Relationship of the Parties. Each Party is an independent contractor under this Agreement. Nothing contained herein is intended or is to be construed so as to constitute ImmuNext and Curis as partners, agents or joint venturers. Neither Party shall have any express or implied right or authority to assume or create any obligations on behalf of or in the name of the other Party or to bind the other Party to any contract, agreement or undertaking with any Third Party. Upstream Licensor 4 is a Third Party beneficiary of this Agreement. Except for Upstream Licensor 4, there are no other express or implied Third Party beneficiaries hereunder.
18.8Entire Agreement. This Agreement, together with the attached exhibits and schedules, constitutes the entire agreement between the Parties as to the subject matter of

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this Agreement, and supersedes and merges all prior and contemporaneous negotiations, representations, agreements and understandings regarding the same.
18.9Counterparts. This Agreement may be executed in counter-parts with the same effect as if both Parties had signed the same document. All such counterparts shall be deemed an original, shall be construed together and shall constitute one and the same instrument. Signatures to this Agreement transmitted by facsimile, by email in “portable document format” (“.pdf”), or by any other electronic means intended to preserve the original graphic and pictorial appearance of this Agreement shall have the same effect as physical delivery of the paper document bearing original signature.
18.10Further Assurances. Each Party agrees, at its own expense, to do, or procure the doing of, all such further acts and things and shall execute and deliver such other agreements, certificates, instruments and documents as are reasonably necessary in order to give full effect to this Agreement.
18.11Interpretation.
18.11.1Each of the Parties acknowledges and agrees that this Agreement has been diligently reviewed by and negotiated by and between them, that in such negotiations each of them has been represented by competent counsel and that the final agreement contained herein, including the language whereby it has been expressed, represents the joint efforts of the Parties and their counsel. Accordingly, in interpreting this Agreement or any provision hereof, no presumption shall apply against any Party as being responsible for the wording or drafting of this Agreement or any such provision, and ambiguities, if any, in this Agreement shall not be construed against any Party, irrespective of which Party may be deemed to have authored the ambiguous provision.
18.11.2The definitions of the terms herein shall apply equally to the singular and plural forms of the terms defined. Whenever the context may require, any pronoun shall include the corresponding masculine, feminine and neuter forms. The word “will” shall be construed to have the same meaning and effect as the word “shall.” The word “any” shall mean “any and all” unless otherwise clearly indicated by context. The word “including” will be construed as “including without limitation.” The word “or” is disjunctive but not necessarily exclusive.
18.11.3Unless the context requires otherwise, (a) any definition of or reference to any agreement, instrument or other document herein shall be construed as referring to such agreement, instrument or other document as from time to time amended, supplemented or otherwise modified (subject to any restrictions on such amendments, supplements or modifications set forth herein or therein), (b) any reference to any Laws herein shall be construed as referring to such Laws as from time to time enacted, repealed or amended, (c) any reference herein to any Person shall be construed to include the Person’s successors and assigns, and (d) all references herein to Sections, Schedules or Exhibits, unless otherwise specifically provided, shall be construed to refer to Sections, Schedules and Exhibits of this Agreement.

- 84 -




18.11.4Headings and captions are for convenience only and are not be used in the interpretation of this Agreement.
[Signature Page Follows]


- 85 -




IN WITNESS WHEREOF, the Parties have caused this Option and License Agreement to be executed by their respective duly authorized officers as of the Effective Date.

ImmuNext, Inc.
Curis, Inc.
By:/s/ David DeLucia
By:/s/ James Dentzer
Name: David DeLucia
Name:James Dentzer
Title: CEO
Title: President and CEO



    







[ Signature Page to Option and License Agreement ]



- 86 -
Exhibit



EXHIBIT 21
SUBSIDIARIES OF THE REGISTRANT
 
SUBSIDIARY NAME
JURISDICTION OF ORGANIZATION
DOING BUSINESS AS
Curis Securities Corporation
Massachusetts
Curis Securities Corporation
Curis Royalty LLC
Delaware
Curis Royalty LLC
 



Exhibit


EXHIBIT 23.1

CONSENT OF INDEPENDENT REGISTERED PUBLIC ACCOUNTING FIRM

We hereby consent to the incorporation by reference in the Registration Statements on Form S-3 (Nos. 333-224627, 333-214899, 333-205460, 333-203480, 333-108570, 333-115832, and 333-145675) and Form S-8 (Nos. 333-235499, 333-228811 , 333-222259, 333-218632, 333-215453, 333-206323, 333-191074, 333-157543, 333-42596, 333-141175, 333-149720 and 333-167675) of Curis, Inc. of our report dated March 19, 2020 relating to the financial statements and the effectiveness of internal control over financial reporting, which appears in this Form 10-K.

 
/s/ PRICEWATERHOUSECOOPERS LLP
Boston, Massachusetts
March 19, 2020





Exhibit


EXHIBIT 31.1
CERTIFICATION OF PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(a) OF THE EXCHANGE ACT
I, James E. Dentzer, certify that:
 
1.
I have reviewed this Annual Report on Form 10-K of Curis, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
March 19, 2020
/S/ JAMES E. DENTZER
 
 
James Dentzer
 
 
President and Chief Executive Officer
 
 
(Principal Executive Officer)



Exhibit


EXHIBIT 31.2
CERTIFICATION OF PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a-14(a) OF THE EXCHANGE ACT
I, William Steinkrauss, certify that:
 
1.
I have reviewed this Annual Report on Form 10-K of Curis, Inc.;
2.
Based on my knowledge, this report does not contain any untrue statement of a material fact or omit to state a material fact necessary to make the statements made, in light of the circumstances under which such statements were made, not misleading with respect to the period covered by this report;
3.
Based on my knowledge, the financial statements, and other financial information included in this report, fairly present in all material respects the financial condition, results of operations and cash flows of the registrant as of, and for, the periods presented in this report;
4.
The registrant’s other certifying officer and I are responsible for establishing and maintaining disclosure controls and procedures (as defined in Exchange Act Rules 13a-15(e) and 15d-15(e)) and internal control over financial reporting (as defined in Exchange Act Rules 13a-15(f) and 15d-15(f)) for the registrant and have:
a)
Designed such disclosure controls and procedures, or caused such disclosure controls and procedures to be designed under our supervision, to ensure that material information relating to the registrant, including its consolidated subsidiaries, is made known to us by others within those entities, particularly during the period in which this report is being prepared;
b)
Designed such internal control over financial reporting, or caused such internal control over financial reporting to be designed under our supervision, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles;
c)
Evaluated the effectiveness of the registrant’s disclosure controls and procedures and presented in this report our conclusions about the effectiveness of the disclosure controls and procedures, as of the end of the period covered by this report based on such evaluation; and
d)
Disclosed in this report any change in the registrant’s internal control over financial reporting that occurred during the registrant’s most recent fiscal quarter (the registrant’s fourth fiscal quarter in the case of an annual report) that has materially affected, or is reasonably likely to materially affect, the registrant’s internal control over financial reporting; and
5.
The registrant’s other certifying officer and I have disclosed, based on our most recent evaluation of internal control over financial reporting, to the registrant’s auditors and the audit committee of the registrant’s board of directors (or persons performing the equivalent functions):
a)
All significant deficiencies and material weaknesses in the design or operation of internal control over financial reporting which are reasonably likely to adversely affect the registrant’s ability to record, process, summarize and report financial information; and
b)
Any fraud, whether or not material, that involves management or other employees who have a significant role in the registrant’s internal control over financial reporting.

Date:
March 19, 2020
/S/ WILLIAM STEINKRAUSS
 
 
William Steinkrauss
 
 
Chief Financial Officer
 
 
(Principal Financial Officer)




Exhibit


EXHIBIT 32.1
CERTIFICATION OF THE PRINCIPAL EXECUTIVE OFFICER PURSUANT TO RULE 13a-14(b) OF THE EXCHANGE ACT AND 18 U.S.C. SECTION 1350
In connection with the Annual Report on Form 10-K of Curis, Inc. (the “Company”) for the period ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, James Dentzer, President and Chief Executive Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date:
March 19, 2020
/S/ JAMES E. DENTZER
 
 
James Dentzer
 
 
President and Chief Executive Officer
 
 
(Principal Executive Officer)





Exhibit


EXHIBIT 32.2
CERTIFICATION OF THE PRINCIPAL FINANCIAL OFFICER PURSUANT TO RULE 13a-14(b) OF THE EXCHANGE ACT AND 18 U.S.C. SECTION 1350
In connection with the Annual Report on Form 10-K of Curis, Inc. (the “Company”) for the period ended December 31, 2019 as filed with the Securities and Exchange Commission on the date hereof (the “Report”), the undersigned, William Steinkrauss, Chief Financial Officer of the Company, hereby certifies, pursuant to 18 U.S.C. Section 1350, that:
(1) The Report fully complies with the requirements of Section 13(a) or 15(d) of the Securities Exchange Act of 1934; and
(2) The information contained in the Report fairly presents, in all material respects, the financial condition and results of operations of the Company.
Date:
March 19, 2020
/S/ WILLIAM STEINKRAUSS
 
 
William Steinkrauss
 
 
Chief Financial Officer
 
 
(Principal Financial Officer)




v3.20.1
Consolidated Statements of Stockholders' Equity - USD ($)
$ in Thousands
Total
Common Stock
Additional Paid-in Capital
Treasury Stock
Accumulated Deficit
Accumulated Other Comprehensive Income/(Loss)
Beginning balance (in shares) at Dec. 31, 2017   33,075,949        
Beginning balance at Dec. 31, 2017 $ 23,993 $ 331 $ 977,453 $ (1,524) $ (952,265) $ (2)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Issuance of common stock under grant of restricted stock awards (in shares)   294,250        
Issuance of common stock under grant of restricted stock awards 0 $ 3 (3)      
Issuances of common stock upon the exercise of stock options and for purchases under the ESPP (in shares)   101,623        
Issuances of common stock upon the exercise of stock options and for purchases under the ESPP 143 $ 1 142      
Recognition of stock-based compensation 3,941   3,941      
Cancellation of restricted stock awards (shares)   (68,000)        
Cancellation of restricted stock awards 0 $ (1) 1      
Retirement of Treasury Stock (shares)   (244,569)        
Retirement of treasury stock 0 $ (2) (1,522) 1,524    
Other comprehensive income 2         2
Net loss $ (32,575)       (32,575)  
Ending balance (in shares) at Dec. 31, 2018 33,159,253 33,159,253        
Ending balance at Dec. 31, 2018 $ (4,496) $ 332 980,012 0 (984,840) 0
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Issuances of common stock upon the exercise of stock options and for purchases under the ESPP (in shares)   91,013        
Issuances of common stock upon the exercise of stock options and for purchases under the ESPP 68   68      
Recognition of stock-based compensation 2,658   2,658      
Cancellation of restricted stock awards (shares)   (8,473)        
Cancellation of restricted stock awards 0          
Net loss $ (32,141)       (32,141)  
Ending balance (in shares) at Dec. 31, 2019 33,241,793 33,241,793        
Ending balance at Dec. 31, 2019 $ (33,911) $ 332 $ 982,738 $ 0 $ (1,016,981) $ 0
v3.20.1
Document and Entity Information - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Mar. 12, 2020
Jun. 30, 2019
Document And Entity Information [Abstract]      
Document Type 10-K    
Amendment Flag false    
Document Period End Date Dec. 31, 2019    
Document Fiscal Year Focus 2019    
Document Fiscal Period Focus FY    
Entity Registrant Name CURIS INC    
Entity Central Index Key 0001108205    
Current Fiscal Year End Date --12-31    
Entity Well-known Seasoned Issuer No    
Entity Current Reporting Status Yes    
Entity Voluntary Filers No    
Entity Filer Category Non-accelerated Filer    
Entity Small Business true    
Entity Emerging Growth Company false    
Entity Shell Company false    
Entity Common Stock, Shares Outstanding   36,582,309  
Entity Public Float     $ 51.2
v3.20.1
Fair Value of Financial Instruments
12 Months Ended
Dec. 31, 2019
Fair Value Disclosures [Abstract]  
Fair Value of Financial Instruments
Fair Value of Financial Instruments
The Company applies the provisions of ASC Topic 820, Fair Value Measurements (“ASC 820”) for its financial assets and liabilities that are re-measured and reported at fair value each reporting period and the non-financial assets and liabilities that are re-measured and reported at fair value on a non-recurring basis. Fair value is the price that would be received from selling an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. When determining fair value, the Company considers the principal or most advantageous market in which it would transact and consider assumptions that market participants would use when pricing the asset or liability. ASC 820 establishes a three-level valuation hierarchy for disclosure of fair value measurements. Financial assets and liabilities are categorized within the valuation hierarchy based upon the lowest level of input that is significant to the measurement of fair value. The three levels of the hierarchy are defined as follows:
Level 1
Quoted prices in active markets for identical assets or liabilities.
 
 
Level 2
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
 
Level 3
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.

In accordance with the fair value hierarchy, the following table shows the fair value as of December 31, 2019 and 2018 of those financial assets and liabilities that are measured at fair value on a recurring basis, according to the valuation techniques the Company used to determine their fair value. No financial assets or liabilities are measured at fair value on a nonrecurring basis at December 31, 2019 and 2018.
 
Quoted Prices in
Active Markets
(Level 1)
 
Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Fair Value
 
(in thousands)
As of December 31, 2019
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
10,684

 
$

 
$

 
$
10,684

US government obligations

 
550

 

 
550

Commercial paper

 
300

 

 
300

Municipal bonds

 
90

 

 
90

Short-term investments:
 
 
 
 
 
 
 
Corporate commercial paper, bonds and notes

 
5,113

 

 
5,113

Total assets at fair value
$
10,684

 
$
6,053

 
$

 
$
16,737

 
Quoted Prices in
Active Markets
(Level 1)
 
Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Fair Value
 
(in thousands)
As of December 31, 2018
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
18,180

 
$

 
$

 
$
18,180

Corporate commercial paper, stock, bonds and notes

 
2,199

 

 
2,199

Municipal bonds

 
135

 

 
135

Short-term investments:
 
 
 
 
 
 
 
Corporate commercial paper, stock, bonds and notes

 
634

 

 
634

Total assets at fair value
$
18,180

 
$
2,968

 
$

 
$
21,148

v3.20.1
Stock Plans and Stock-Based Compensation - Summary of ESPP (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Compensation expense recognized under ESPP $ 2,658 $ 3,940
Minimum risk-free interest rate (percent) 1.50% 2.50%
Maximum risk-free interest rate (percent) 2.60% 3.00%
Minimum volatility (percent) 76.00% 66.00%
Maximum volatility (percent) 79.00% 73.00%
Dividends 0.00% 0.00%
Employee Stock Purchase Plan | 2010 Employee Stock Purchase Plan    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Compensation expense recognized under ESPP $ 49 $ 173
Minimum risk-free interest rate (percent) 1.50% 2.10%
Maximum risk-free interest rate (percent) 2.10% 2.70%
Minimum volatility (percent) 92.00% 79.00%
Maximum volatility (percent) 97.00% 104.00%
Dividends 0.00% 0.00%
Minimum | Employee Stock Purchase Plan | 2010 Employee Stock Purchase Plan    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Expected term 6 months 6 months
Maximum | Employee Stock Purchase Plan | 2010 Employee Stock Purchase Plan    
Share-based Compensation Arrangement by Share-based Payment Award [Line Items]    
Expected term 24 months 24 months
v3.20.1
Income Taxes - Components of Deferred Tax Assets (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Deferred Tax Assets:    
NOL carryforwards $ 58,654 $ 67,068
Research and development tax credit carryforwards 15,408 15,825
Orphan drug tax credit carryforwards 18,088 16,625
Depreciation and amortization 9,671 10,672
Capitalized research and development expenditures 34,487 33,993
Stock options 6,329 5,783
Accrued expenses and other 131 259
Oberland agreement 17,022 0
Lease liability ASC 842 45  
Total gross deferred tax asset 159,835 150,225
Valuation allowance (159,794) (150,225)
Net deferred tax asset 41 0
Deferred tax liabilities:    
Right of use asset ASC 842 (41)  
Total gross deferred tax liabilities (41) 0
Net deferred tax assets (liabilities) $ 0 $ 0
v3.20.1
Common Stock (Details)
1 Months Ended 12 Months Ended 42 Months Ended 194 Months Ended
May 29, 2018
$ / shares
Jul. 02, 2015
USD ($)
Mar. 31, 2018
USD ($)
shares
Dec. 31, 2019
USD ($)
$ / shares
shares
Dec. 31, 2018
USD ($)
$ / shares
shares
Dec. 31, 2018
$ / shares
shares
Feb. 28, 2018
USD ($)
shares
May 23, 2019
shares
May 22, 2019
shares
May 15, 2018
shares
May 14, 2018
shares
Common Stock And Warrant Liability [Line Items]                      
Common stock, par value (in dollars per share) | $ / shares $ 0.01     $ 0.01 $ 0.01 $ 0.01          
Stock split ratio 0.2                    
Treasury stock acquired (shares) | shares             244,569.2        
Treasury stock acquired             $ 1,500,000        
Approved repurchase of common stock       $ 3,000,000              
Treasury stock retired (shares) | shares     244,569.2                
Treasury stock retired     $ 1,500,000   $ 0            
Common stock, shares authorized (in shares) | shares       101,250,000 67,500,000 67,500,000   101,250,000 67,500,000 67,500,000 45,000,000
Cowen | At-the-market Agreement                      
Common Stock And Warrant Liability [Line Items]                      
Number of shares sold (in shares) | shares       0 420,796.2 420,796.2          
Compensation payable, percentage of gross sales price of stock sold   3.00%                  
Net proceeds from sale of shares       $ 6,200,000 $ 6,200,000            
Cowen | Maximum | At-the-market Agreement                      
Common Stock And Warrant Liability [Line Items]                      
Equity offering program (up to)   $ 30,000,000                  
v3.20.1
Stock Plans and Stock-Based Compensation (Tables)
12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Valuation Assumptions Used to Calculate Fair Value of Employee Options Awarded
The Black-Scholes option pricing model employs the following key assumptions for employee and director options awarded during each of the following years: 
 
For the Year Ended
December 31,
 
2019
 
2018
Expected term (years)—Employees and Officers
5.5

 
5.5

Expected term (years)—Directors
5.5

 
N/A

Risk-free interest rate
1.5-2.6%

 
2.5-3.0%

Expected volatility
76-79%

 
66-73%

Expected dividend yield
None

 
None

Summary of Stock Option Activity
 
Number of
Options
 
Weighted
Average
Exercise
Price per
Share
 
Weighted
Average
Remaining Contractual Life
 
Aggregate Intrinsic Value
Outstanding, December 31, 2018
3,714,394

 
$
7.68

 
6.38
 

Granted
4,033,365

 
1.30

 

 

Exercised

 

 

 

Canceled
(1,589,733
)
 
7.97

 

 

Outstanding, December 31, 2019
6,158,026

 
$
3.43

 
8.33
 
$
1,657

Exercisable at December 31, 2019
1,561,926

 
$
8.44

 
6.47
 
$
26

Vested and unvested expected to vest
5,540,023

 
$
3.64

 
8.25
 
$
1,451

Nonvested Restricted Stock Shares Activity
The following table presents a summary of outstanding RSAs under the 2010 Plan as of December 31, 2019:
 
Number of
Shares
 
Weighted
Average
Grant Date Fair Value
Unvested, December 31, 2018
226,250

 
3.45

Awarded

 

Vested
(195,313
)
 
3.45

Forfeited

 

Unvested, December 31, 2019
30,937

 
3.45

Summary of Compensation Expense Related to ESPP
For the years ended December 31, 2019 and 2018, the Company recorded compensation expense related to its ESPP and calculated the fair value of shares expected to be purchased under the ESPP using the Black-Scholes models with the following assumptions:
 
For the Year Ended December 31,
 
2019
 
2018
Compensation expense recognized under ESPP
$
49

 
$
173

Expected term
6-24 months

 
6-24 months

Risk-free interest rate
1.5-2.1%

 
2.1-2.7%

Volatility
92-97%

 
79-104%

Dividends
None

 
None

Employee and Non-Employee Stock-Based Compensation Expense Allocation
For the years ended December 31, 2019 and 2018, the Company recorded employee and non-employee stock-based compensation expense to the following line items in its Costs and Expenses section of the Consolidated Statements of Operations and Comprehensive Loss: 
 
For the Year Ended December 31,
 
2019
 
2018
Research and development expenses
$
575

 
$
1,310

General and administrative expenses
2,083

 
2,630

Total stock-based compensation expense
$
2,658

 
$
3,940

v3.20.1
Leases and Commitments (Tables)
12 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Balance Sheet Information for Operating Leases
All of the Company's leases qualify as operating leases. The following table summarizes the presentation in the Company's consolidated balance sheet for the operating leases:
Balance sheet location
 
As of December 31, 2019
Assets:
 
 
Operating lease right-of-use asset
 
$
149

 
 
 
Liabilities:
 
 
Operating lease liability
 
$
166

Lease Cost
The following table summarizes the effect of lease costs in our consolidated statements of income:
Income statement location
 
For the year ended
December 31,
2019
Operating lease cost
 
 
Research and development
 
$
651

General and administrative
 
351

Total lease cost
 
$
1,002

Lease Maturity Schedule
Under the current guidance, the Company’s lease payments for the next five years and thereafter is expected to be as follows:
Year Ending December 31,
 
 
2020
 
$
168

2021
 

2022
 

2023
 

2024
 

Thereafter
 

Total lease payments
 
$
168

Less: interest
 
2

Present value of operating lease liabilities
 
$
166

Under the prior lease accounting guidance, the Company’s remaining operating lease commitments for all leased facilities with an initial or remaining term of at least one year are as follows:
Year Ending December 31,
 
 
2019
 
$
1,002

2020
 
168

Total minimum payments
 
$
1,170

v3.20.1
Summary of Significant Accounting Policies - Estimated Useful Lives of Long-Lived Assets (Details)
12 Months Ended
Dec. 31, 2019
Office furniture and equipment  
Property, Plant and Equipment [Line Items]  
Useful Life 5 years
Minimum | Laboratory equipment, computers and software  
Property, Plant and Equipment [Line Items]  
Useful Life 3 years
Maximum | Laboratory equipment, computers and software  
Property, Plant and Equipment [Line Items]  
Useful Life 5 years
v3.20.1
Leases and Commitments
12 Months Ended
Dec. 31, 2019
Leases [Abstract]  
Leases and Commitments
Leases and Commitments
(a)
Operating Leases
The Company leases real estate, including laboratory and office space, and certain equipment. The current real estate property that is used for office, research and laboratory space located at 4 Maguire Road in Lexington, Massachusetts expired on February 29, 2020. The Company is exercising its contractual right to holdover on a month-to-month basis until our new facility is available for occupancy.
On December 5, 2019, Curis, Inc. entered into a new lease for our administrative, research and development requirements located at 128 Spring Street in Lexington, Massachusetts. In accordance with the accounting requirements under ASC 842, the lease obligation will not be recorded until its commencement date which is expected in the second quarter of 2020. The Company did record the security deposit provided to the landlord which was classified as restricted cash. The total cash obligation for the base rent over the seven year term of the lease agreement is approximately $8.3 million and the Company will start paying rent on the commencement date.
All of the Company's leases qualify as operating leases. The following table summarizes the presentation in the Company's consolidated balance sheet for the operating leases:
Balance sheet location
 
As of December 31, 2019
Assets:
 
 
Operating lease right-of-use asset
 
$
149

 
 
 
Liabilities:
 
 
Operating lease liability
 
$
166


The following table summarizes the effect of lease costs in our consolidated statements of income:
Income statement location
 
For the year ended
December 31,
2019
Operating lease cost
 
 
Research and development
 
$
651

General and administrative
 
351

Total lease cost
 
$
1,002


In February 2016, the FASB issued ASU 2016-02, Leases. In addition, the FASB issued ASUs 2018-10 and 2018-11, all of which are further clarifying amendments to ASU 2016-02. The standard requires organizations that lease assets to recognize on the balance sheet assets or liabilities, as applicable, for the rights and obligations created by those leases. Additionally, the guidance modifies current guidance for lessor accounting and leveraged leases, and is effective for fiscal years beginning after December 15, 2018, and interim periods within such years. The Company adopted this standard as of January 1, 2019. The resulting impact of the adoption was the recognition of an operating lease right-of-use asset in the amount of $1.0 million and the recognition of operating lease liabilities of $1.1 million on the consolidated balance sheet. The new standard did not have a significant impact on the Company's consolidated statement of operation. The discount rate associated with the Company's right-of-use asset was 9.95%. The non-cash lease expense related to the right of use asset was $1.0 million at December 31, 2019. Cash paid for amounts included in the measurement of lease liabilities were $1.0 million at December 31, 2019.
Under the current guidance, the Company’s lease payments for the next five years and thereafter is expected to be as follows:
Year Ending December 31,
 
 
2020
 
$
168

2021
 

2022
 

2023
 

2024
 

Thereafter
 

Total lease payments
 
$
168

Less: interest
 
2

Present value of operating lease liabilities
 
$
166

Under the prior lease accounting guidance, the Company’s remaining operating lease commitments for all leased facilities with an initial or remaining term of at least one year are as follows:
Year Ending December 31,
 
 
2019
 
$
1,002

2020
 
168

Total minimum payments
 
$
1,170


Rent expense for all operating leases was $0.9 million for the year ended December 31, 2018. The related deferred rent is included in accrued liabilities and other long-term liabilities in the Company’s consolidated balance sheet as of December 31, 2018.
(b)
License Agreements
In exchange for the right to use licensed technology in its research and development efforts, the Company has entered into various license agreements. These agreements generally stipulate that the Company pay an annual license fee and is obligated to pay royalties on future revenues, if any, resulting from use of the underlying licensed technology. Such revenues may include, for example, up-front license fees, contingent payments upon collaborators’ achievement of development and regulatory objectives, and royalties. In addition, some of the agreements commit the Company to make contractually defined payments upon the attainment of scientific or clinical milestones. The Company expenses these payments as they are incurred and expenses royalty payments as related future product sales or as royalty revenues are recorded. The Company accrues expenses for scientific and clinical objectives over the period that the work required to meet the respective objective is completed, provided that the Company believes that the achievement of such objective is probable. The Company did not incur license fee expenses within the “Research and development” line item of its “Costs and expenses” section of its consolidated statement of operations for the years ended December 31, 2019 or 2018. For the years ended December 31, 2019 and 2018, the Company also recognized $0.5 million and $0.6 million as cost of royalty revenues in its Consolidated Statements of Operations and Comprehensive Loss related to such obligations (see Note 10(a)).
v3.20.1
Debt
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Debt
Debt
(a)
HealthCare Royalty Partners III
On March 6, 2017, the Company and Curis Royalty entered into a credit agreement with HealthCare Royalty for the purpose of refinancing Curis Royalty’s financing arrangement with BioPharma-II, referred to herein as the prior loan. On March 22, 2017, the prior loan was terminated in its entirety.
Pursuant to the credit agreement, HealthCare Royalty provided Curis Royalty with a $45.0 million loan at an interest rate of 9.95%, which was used to pay off $18.4 million in remaining loan obligations to BioPharma-II under the prior loan. The remaining proceeds of $26.6 million were distributed to the Company as sole equity holder of Curis Royalty.
Under the terms of the credit agreement with HealthCare Royalty, quarterly Erivedge royalty and royalty-related payments from Genentech were to be first applied to pay, collectively: (i) escrow fees payable by the Company pursuant to an escrow agreement, (ii) the Company’s royalty obligations to academic institutions, (iii) certain expenses incurred by HealthCare Royalty in connection with the credit agreement and related transaction documents, including enforcement of its rights in the case of an event of default under the credit agreement and (iv) expenses incurred by the Company enforcing its right to indemnification under the collaboration agreement. Subsequently, remaining amounts were to be applied first, to pay interest and second, to pay principal on the loan. If royalties owed under the Genentech collaboration agreement were insufficient to pay the accrued interest on the outstanding loan, the unpaid interest outstanding would be added to the loan principal on a quarterly basis. On March 22, 2019, the Company and Curis Royalty terminated and repaid all amounts outstanding under the credit agreement, consisting of approximately $33.8 million in remaining loan principal and approximately $3.4 million in accrued and unpaid interest and prepayment fees along with the remaining deferred issuance costs of $0.1 million were recorded as a loss on debt extinguishment.
(b)
Debt Payments to HealthCare Royalty Partners III
During the years ended December 31, 2019 and 2018, Curis Royalty made payments totaling $39.9 million and $10.0 million, respectively, of which $35.6 million and $6.1 million have been applied to the principal, respectively, with the remainder applied to accrued interest. During the first quarter of 2019, the Company repaid all outstanding debt and related accrued interest.
In addition, the Company recorded related accrued interest on its debt of $0.2 million as of December 31, 2018 with such amount included in the Company’s accrued liabilities section of its consolidated balance sheet. For the years ended December 31, 2019 and 2018, respectively, the Company recognized interest expense related to its debt of $0.8 million and $3.9 million, respectively, in the consolidated statement of operations and comprehensive loss.
For the years ended December 31, 2019 and 2018, the Company did not incur any debt issuance costs in connection with its HealthCare Royalty financing transaction. There was no debt outstanding as of December 31, 2019, the direct costs incurred by the Company as of December 31, 2018 were recorded as contra-debt, which directly reduces the outstanding debt balance on the following table:
 
As of
December 31,
 
2018
Debt, current
$
6,920

Debt issue costs, current
(36
)
Debt, current portion net of issuance costs
$
6,884

Debt, long-term
28,696

Debt issue costs, long-term
(96
)
Debt, net of current portion and issuance costs
$
28,600

v3.20.1
Accrued Liabilities (Tables)
12 Months Ended
Dec. 31, 2019
Other Liabilities Disclosure [Abstract]  
Summary of Accrued Liabilities
Accrued liabilities consist of the following:
 
December 31,
 
2019
 
2018
Accrued compensation
$
1,413

 
$
2,774

Professional fees
289

 
233

Accrued interest on debt (see Note 11)

 
165

Other
208

 
285

Total
$
1,910

 
$
3,457

v3.20.1
Retirement Savings Plan
12 Months Ended
Dec. 31, 2019
Retirement Benefits [Abstract]  
Retirement Savings Plan
Retirement Savings Plan
The Company has a 401(k) retirement savings plan covering substantially all of the Company’s employees. For each of the years ended December 31, 2019 and 2018, the Company made matching contributions of $0.2 million respectively.
v3.20.1
Summary of Significant Accounting Policies (Tables)
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Summary of Estimated Useful Lives of Long-Lived Assets Other Than Goodwill
Depreciation and amortization are provided on the straight-line method over the estimated useful lives of the related assets or the remaining terms of the leases, whichever is shorter, as follows:

Useful Life
Laboratory equipment, computers and software
3-5 years
Leasehold improvements
Lesser of lease or asset life
Office furniture and equipment
5 years
Summary of Antidilutive Securities
Antidilutive securities as of December 31, 2019 and 2018 consisted of the following:
 
For the Year Ended December 31,
 
2019
 
2018
Stock options outstanding
6,158,026

 
3,714,394

Total antidilutive securities
6,158,026

 
3,714,394

v3.20.1
Selected Quarterly Financial Data (Unaudited) (Details) - USD ($)
$ / shares in Units, $ in Thousands
3 Months Ended 12 Months Ended
Dec. 31, 2019
Sep. 30, 2019
Jun. 30, 2019
Mar. 31, 2019
Dec. 31, 2018
Sep. 30, 2018
Jun. 30, 2018
Mar. 31, 2018
Dec. 31, 2019
Dec. 31, 2018
Quarterly Financial Information Disclosure [Abstract]                    
Revenues $ 3,287 $ 2,856 $ 2,094 $ 1,767 $ 2,755 $ 2,847 $ 2,358 $ 2,468 $ 10,004 $ 10,428
Loss from operations (7,334) (5,323) (6,141) (5,558) (5,148) (6,417) (7,860) (9,908) (24,356) (29,333)
Net loss $ (8,609) $ (6,436) $ (7,213) $ (9,884) $ (5,941) $ (7,223) $ (8,664) $ (10,747) $ (32,141) $ (32,575)
Net loss per common share (basic and diluted) (in dollars per share) $ (0.26) $ (0.19) $ (0.22) $ (0.30) $ (0.18) $ (0.22) $ (0.26) $ (0.33) $ (0.97) $ (0.98)
Weighted average common shares (basic and diluted) (in shares) 33,209,217 33,202,871 33,154,566 33,150,869 33,121,666 33,161,592 33,135,391 33,053,702 33,180,516 33,118,393
v3.20.1
Accrued Liabilities (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Other Liabilities Disclosure [Abstract]    
Accrued compensation $ 1,413 $ 2,774
Professional fees 289 233
Accrued interest on debt (see Note 11) 0 165
Other 208 285
Total $ 1,910 $ 3,457
v3.20.1
Fair Value of Financial Instruments (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Corporate commercial paper, stock, bonds and notes $ 5,113 $ 634
Fair value, measurements, recurring    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Total assets at fair value 16,737 21,148
Fair value, measurements, recurring | Corporate commercial paper, bonds and notes    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Corporate commercial paper, stock, bonds and notes 5,113 634
Fair value, measurements, recurring | Money market funds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents 10,684 18,180
Fair value, measurements, recurring | Corporate commercial paper, bonds and notes    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents   2,199
Fair value, measurements, recurring | US government obligations    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents 550  
Fair value, measurements, recurring | Commercial paper    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents 300  
Fair value, measurements, recurring | Municipal bonds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents 90 135
Fair value, measurements, recurring | Quoted Prices in Active Markets (Level 1)    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Total assets at fair value 10,684 18,180
Fair value, measurements, recurring | Quoted Prices in Active Markets (Level 1) | Corporate commercial paper, bonds and notes    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Corporate commercial paper, stock, bonds and notes 0 0
Fair value, measurements, recurring | Quoted Prices in Active Markets (Level 1) | Money market funds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents 10,684 18,180
Fair value, measurements, recurring | Quoted Prices in Active Markets (Level 1) | Corporate commercial paper, bonds and notes    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents   0
Fair value, measurements, recurring | Quoted Prices in Active Markets (Level 1) | US government obligations    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents 0  
Fair value, measurements, recurring | Quoted Prices in Active Markets (Level 1) | Commercial paper    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents 0  
Fair value, measurements, recurring | Quoted Prices in Active Markets (Level 1) | Municipal bonds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents 0 0
Fair value, measurements, recurring | Other Observable Inputs (Level 2)    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Total assets at fair value 6,053 2,968
Fair value, measurements, recurring | Other Observable Inputs (Level 2) | Corporate commercial paper, bonds and notes    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Corporate commercial paper, stock, bonds and notes 5,113 634
Fair value, measurements, recurring | Other Observable Inputs (Level 2) | Money market funds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents 0 0
Fair value, measurements, recurring | Other Observable Inputs (Level 2) | Corporate commercial paper, bonds and notes    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents   2,199
Fair value, measurements, recurring | Other Observable Inputs (Level 2) | US government obligations    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents 550  
Fair value, measurements, recurring | Other Observable Inputs (Level 2) | Commercial paper    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents 300  
Fair value, measurements, recurring | Other Observable Inputs (Level 2) | Municipal bonds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents 90 135
Fair value, measurements, recurring | Unobservable Inputs (Level 3)    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Total assets at fair value 0 0
Fair value, measurements, recurring | Unobservable Inputs (Level 3) | Corporate commercial paper, bonds and notes    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Corporate commercial paper, stock, bonds and notes 0 0
Fair value, measurements, recurring | Unobservable Inputs (Level 3) | Money market funds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents 0 0
Fair value, measurements, recurring | Unobservable Inputs (Level 3) | Corporate commercial paper, bonds and notes    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents   0
Fair value, measurements, recurring | Unobservable Inputs (Level 3) | US government obligations    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents 0  
Fair value, measurements, recurring | Unobservable Inputs (Level 3) | Commercial paper    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents 0  
Fair value, measurements, recurring | Unobservable Inputs (Level 3) | Municipal bonds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Cash equivalents $ 0 $ 0
v3.20.1
Liability Related to the Sale of Future Royalties (Details) - USD ($)
$ in Thousands
9 Months Ended 12 Months Ended
Mar. 22, 2019
Dec. 31, 2019
Dec. 31, 2019
Dec. 31, 2018
Nonmonetary Transaction [Line Items]        
Proceeds from royalty interest purchase agreement with Oberland Capital Management, LLC     $ 65,000 $ 0
Non-cash interest rate (percent)     8.20%  
Transaction fees $ 600      
Nonmonetary Transaction [Roll Forward]        
Liability related to sale of future royalties at March 22, 2019   $ 65,000    
Issuance costs capitalized   (584)    
Imputed interest expense recognized   4,055    
Less: Payments made to Oberland Capital, LLC   (5,994)    
Carrying value of liability related to sale of future royalties at December 31, 2019 65,000 $ 62,477 $ 62,477  
Oberland Capital        
Nonmonetary Transaction [Line Items]        
Proceeds from royalty interest purchase agreement with Oberland Capital Management, LLC 65,000      
Cash proceeds from royalty purchase agreement 70,700      
Purchaser default option period (days)     180 days  
Royalty Amounts In 2021 | Oberland Capital        
Nonmonetary Transaction [Line Items]        
Cash proceeds from royalty purchase agreement 17,200      
Royalty amount threshold 18,000      
Aggregate Net Royalties Prior To 2027 | Oberland Capital        
Nonmonetary Transaction [Line Items]        
Cash proceeds from royalty purchase agreement 53,500      
Royalty amount threshold $ 117,000      
v3.20.1
Related Party Transactions
12 Months Ended
Dec. 31, 2019
Related Party Transactions [Abstract]  
Related Party Transactions
Related Party Transactions
(a)
Agreement with Head of Research and Development - Robert E. Martell, M.D., Ph.D.
On October 17, 2018, the Company entered into an exclusive option and license agreement with Epi-Cure Pharmaceuticals, Inc., (“Epi-Cure”) a privately held early-stage biotechnology company. Robert E. Martell, M.D., Ph.D., the Company’s Head of Research and Development and a former director of the Company, is a founder of Epi-Cure, was formerly an officer and director of Epi-Cure, and is currently a holder of a convertible promissory note to Epi-Cure. Under the terms of the option and license agreement, Epi-Cure has granted Curis an exclusive option to certain program compounds that may arise during the initial research and development period, and any extension thereof. Upon execution of the option and license agreement, the Company has agreed to pay Epi-Cure an upfront payment of $0.1 million for legal and consulting costs incurred by Epi-Cure in connection with the transaction. In July 2019, the Company extended the research and development period of the program until April 2020, in accordance with the terms of the agreement.
Under the terms of the agreement, Epi-Cure will have primary responsibility for conducting research and development activities and Curis will be responsible for funding up to $0.5 million of the research and development program costs and expenses during the initial research and development period. After the end of the initial research and development period, Curis has sixty days to elect to exercise its option to license the program compounds. If the Company makes this election it will make a $2.0 million license fee payment and will be responsible for the development and commercialization of products that may result from the collaboration. Curis will also make cash payments to Epi-Cure subject to successful achievement of certain patent, development, regulatory, and commercial milestones, up to $63.0 million and will also pay Epi-Cure mid-single digit royalties on net product sales if product candidates derived from this collaboration are successfully developed.
Epi-Cure has retained the right to opt in to co-develop and share in profits upon initiation of a Phase 2 clinical study, in which event Curis will share in any development costs and profits on a 50/50 basis. Epi-Cure also has the right to opt-out of co-development/co-profit in which case they will receive royalty payments in lieu of profit-sharing.
Each party has the right to terminate the agreement for uncured material breach by the other party. Curis has the right to terminate the agreement for its convenience upon sixty days prior written notice. The agreement also sets forth customary terms regarding each party’s intellectual property ownership rights, representations and warranties, indemnification obligations, confidentiality rights and obligations, patent prosecution, and maintenance and defense rights and obligations.
For the periods ended December 31, 2019 and 2018, Curis has paid and expensed $0.3 million and $0.1 million, respectively, of fees related to this agreement.
(b)
Agreement with David Tuck
On May 24, 2018, the Company announced that David Tuck, M.D., Chief Medical Officer, provided notice of his intention to retire from the Company, effective as of August 31, 2018. Dr. Tuck subsequently determined to retire on August 3, 2018. The Company and Dr. Tuck entered into a letter agreement on August 1, 2018 (the “Letter Agreement”) pursuant to which Dr. Tuck agreed to provide the Company with specified advisory services commencing on August 4, 2018 and extending until May 3, 2019, subject to earlier termination (the “Advisory Period”). In consideration for Dr. Tuck’s advisory services, the Company has agreed to (i) pay him a monthly retainer of $35.0 thousand during the Advisory Period and (ii) reimburse him for any pre-approved reasonable, documented out-of-pocket expenses relating to his advisory services. In addition, the Company and Dr. Tuck have agreed to amend his stock option agreements such that his outstanding options will cease to vest as of his date of resignation on August 3, 2018. The Letter Agreement may be terminated (i) at any time upon the mutual written consent of the parties, (ii) at any time by the Company immediately upon Dr. Tuck’s breach or threatened breach of the terms of his Invention, Non-Disclosure and Non-Competition Agreement with the Company, or (iii) by the Company at any time upon Dr. Tuck’s material breach of the terms of the Letter Agreement and failure to cure such breach within five days after written notice from the Company. In the event of termination of the Letter Agreement, Dr. Tuck will be entitled to payment for services performed and expenses paid or incurred prior to the effective date of termination that have not previously been paid. The Letter Agreement also contains other customary terms and conditions relating to his advisory service.
While the Company may utilize Dr. Tuck's consulting services in the future, the Company deemed the services to be a reduced level of service and not substantive. Under ASC 450, Contingencies, when an employee terminates and enters into a consulting agreement and the services to be provided are not deemed substantive, the transaction should be accounted for as a severance arrangement with no future service requirement. Based on this guidance, the Company recognized $0.3 million of expense during 2018, which represented the total obligation under the Letter Agreement.
v3.20.1
Summary of Significant Accounting Policies (Policies)
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Consolidation
Basis of Presentation and Principals of Consolidation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. (“GAAP”) and include the accounts of our wholly owned subsidiaries.
Use of Estimates
Use of Estimates and Assumptions
The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and disclosure of revenue, expenses and certain assets and liabilities at the balance sheet date. Such estimates include revenue recognition, including estimates related to the performance obligations under the Company’s collaboration agreements; the estimated repayment term of the Company’s debt and related short and long-term classification; the collectability of receivables; the carrying value of property and equipment and intangible assets; the assumptions used in the Company’s valuation of stock-based compensation and the value of certain investments and liabilities. Actual results may differ from such estimates.
Cash Equivalents, Restricted Cash, and Investments
Cash Equivalents, Restricted Cash, and Investments
The Company had Cash and cash equivalents of $15.4 million and $23.6 million as of December 31, 2019 and 2018 respectively. Cash equivalents consist of short-term, highly liquid investments purchased with original maturities of three months or less. All other liquid investments are classified as marketable securities.
The Company classified $1.0 million and $0.2 million of its cash as restricted cash, as of December 31, 2019 and 2018. This amount represents the security deposit delivered to the respective landlords of the Company's current and future Lexington, Massachusetts headquarters.
The Company's combined cash and restricted cash balances were $16.4 million and $23.8 million as of December 31, 2019 and 2018, as presented on the Company's Consolidated Statements of Cash Flows.
The Company’s short-term investments are marketable debt securities with original maturities of greater than three months from the date of purchase, but less than twelve months from the balance sheet date, and long-term investments are marketable debt securities with original maturities of greater than twelve months from the balance sheet. Marketable securities consist of commercial paper, corporate bonds and notes, and government obligations. All of the Company’s investments have been designated available-for-sale and are stated at fair value. Unrealized gains and temporary losses on investments are included in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity. Realized gains and losses, dividends and interest income are included in other income (expense) in the period during which the securities are sold. Any premium or discount arising at purchase is amortized and/or accreted to interest income.
Concentrations and Significant Customer Information
Concentrations and Significant Customer Information
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, marketable securities, and accounts receivable. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. The Company’s credit risk related to investments is reduced as a result of the Company’s policy to limit the amount invested in any one issue. As of December 31, 2019, the Company did not have a material concentration in any single investment.
Our operations are located entirely within the U.S. The Company focus is primarily on the development of first-in-class and innovative therapeutics for the treatment of cancer. The Company's one customer, Genentech, accounted for 100% of the total gross revenues for 2019 and 2018.
The Company’s accounts receivable at December 31, 2019 and 2018 represents amounts due from collaborators, primarily for royalties earned on sales of Erivedge by Genentech and Roche.
The Company relies on third-parties to supply certain raw materials necessary to produce its drug candidates, including CA-4948, CI-8993, and fimepinostat, for preclinical studies and clinical trials. There are a small number of suppliers for certain raw materials that the Company uses to manufacture its drug candidates.
Long-Lived Assets Other than Goodwill
Long-Lived Assets Other than Goodwill
Long-lived assets other than goodwill consist of property and equipment. The Company applies the guidance in FASB Codification Topic 360-10-05, Impairment or Disposal of Long-Lived Assets. If it were determined that the carrying value of the Company’s other long-lived assets might not be recoverable based upon the existence of one or more indicators of impairment, the Company would measure an impairment based on the difference between the carrying value and fair value of the asset.
Leases
Leases
In February 2016 the FASB issued ASU No. 2016-02, Leases (Topic 842), a standard issued to increase transparency and comparability among organizations related to their leasing activities. This standard established a right-of-use model that requires the recognition of right-of-use assets and lease liabilities for most leases as well as provides disclosure with respect to certain qualitative and quantitative information related to a company's leasing arrangements to meet the objective of allowing users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.
The FASB subsequently issued the following amendments to ASU 2016-02 that have the same effective date and transition date: ASU No. 2018-10, Codification Improvements to Topic 842, Leases, ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, and ASU No. 2019-01, Leases (Topic 842): Codification Improvements. We adopted these amendments with ASU 2016-02 (collectively, the new leasing standards) effective January 1, 2019.
The Company adopted the leasing standards using the modified retrospective transition approach, as of January 1, 2019, with no restatement of prior periods or cumulative adjustment to retained earnings. Upon adoption, the Company elected the package of transition practical expedients, which allowed Curis to carry forward prior conclusions related to whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases and initial direct costs for existing leases. The Company also made an accounting policy election to not recognize leases with an initial term of 12 months or less within its consolidated balance sheets and to recognize those lease payments on a straight-line basis in its consolidated statements of income over the lease term. Upon adoption of the leasing standard Curis recognized an operating lease asset of approximately $1.0 million and a corresponding operating lease liability of approximately $1.1 million, which are included in the Company's consolidated balance sheets. The adoption of the leasing standard did not have an impact on the consolidated statement of income.
The Company determines if an arrangement is a lease at contract inception. Operating lease assets represent the Company's right to use an underlying asset for the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
As most of the Company's leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate, which is based on rates that would be incurred to borrow on a collateralized basis over a term equal to the lease payments in a similar economic environment, in determining the present value of lease payments.
Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The lease payment used to determine the operating lease asset may include lease incentives, stated rent increases and was recognized as an operating lease right-of-use asset in the consolidated balance sheets. The Company's lease agreements may include both lease and non-lease components, which are accounted for as a single lease component when the payments are fixed. Variable payments included in the lease agreement are expensed as incurred.
The Company's operating lease is reflected in operating lease right-of-use asset and operating lease liability in the consolidated balance sheets. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
Goodwill
Goodwill
As of both December 31, 2019 and 2018, the Company had recorded goodwill of $9.0 million. The Company applies the guidance in the FASB Codification Topic 350, Intangibles—Goodwill and Other. During each of December 2019 and 2018, the Company completed its annual goodwill impairment tests and determined that the Company represented a single reporting unit and as of those dates the fair value of the Company exceeded the carrying value of its net assets.
Revenue Recognition
Revenue Recognition
Effective January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective transition method. The Company's only contract not completed as of January 1, 2018 was its collaboration agreement with Genentech (see Note 10). The Company assessed the potential effects to the consolidated financial statements and retained earnings and has concluded that, upon adoption of the new standard, there was no material impact.
The Company’s business strategy includes entering into collaborative license and development agreements with biotechnology and pharmaceutical companies for the development and commercialization of the Company’s drug candidates. The terms of the agreements typically include non-refundable license fees, funding of research and development, payments based upon achievement of clinical development and regulatory objectives, and royalties on product sales.
License Fees and Multiple Element Arrangements
If a license to its intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company will recognize revenues from non-refundable, up-front fees allocated to the license at such time as the license is transferred to the licensee and the licensee is able to use, and benefit from, the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, will adjust the measure of performance and related revenue recognition.
If the Company is involved in a steering committee as part of a multiple element arrangement, the Company assesses whether its involvement constitutes a performance obligation or a right to participate. Steering committee services that are not determined to be distinct performance obligations are combined with other research services or performance obligations required under an arrangement, if any, in determining the level of effort required in an arrangement and the period over which the Company expects to complete its aggregate performance obligations.
Appropriate methods of measuring progress include output methods and input methods. In determining the appropriate method for measuring progress, the Company considers the nature of service that it promises to transfer to the customer. When the Company decides on a method of measurement, the Company will apply that single method of measuring progress for each performance obligation satisfied over time and will apply that method consistently to similar performance obligations and in similar circumstances.
If the Company cannot reasonably measure its progress toward complete satisfaction of a performance obligation because the Company lacks reliable information that would be required to apply an appropriate method of measuring progress, but it can reasonably estimate when the performance ceases or the remaining obligations become inconsequential and perfunctory, then revenue is not recognized until the Company can reasonably estimate when the performance obligation ceases or becomes inconsequential. Revenue is then recognized over the remaining estimated period of performance.
Significant management judgment is required in determining the level of effort required under an arrangement and the period over which the Company is expected to complete its performance obligations under an arrangement.
Contingent Research Milestone Payments
ASC 606 constrains the amount of variable consideration included in the transaction price in that either all, or a portion, of an amount of variable consideration should be included in the transaction price. The variable consideration amount should be included only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The assessment of whether variable consideration should be constrained is largely a qualitative one that has two elements: the likelihood of a change in estimate, and the magnitude thereof. Variable consideration is not constrained if the potential reversal of cumulative revenue recognized is not significant, for example.
If the consideration in a contract includes a variable amount, a company will estimate the amount of consideration in exchange for transfer of promised goods or services. The consideration also can vary if a company’s entitlement to the consideration is contingent on the occurrence or nonoccurrence of a future event. The Company considers contingent research milestone payments to fall under the scope of variable consideration, which should be estimated for revenue recognition purposes at the inception of the contract and reassessed ongoing at the end of each reporting period.
The Company assesses whether contingent research milestones should be considered variable consideration that should be constrained and thus not part of the transaction price. This includes an assessment of the probability that all or some of the milestone revenues could be reversed when the uncertainty around whether or not the achievement of each milestone is resolved, and the amount of reversal could be significant.
GAAP provides factors to consider when assessing whether variable consideration should be constrained. All of the factors should be considered, and no factor is determinative. The Company considers all relevant factors.
Reimbursement of Costs
Reimbursement of research and development costs by third-party collaborators is recognized as revenue over time provided the Company has determined that it transfers control (i.e. performs the services) of a service over time and, therefore, satisfies a performance obligation according to the provisions outlined in ASC 606-10-25-27, Revenue Recognition.
Royalty Revenue
Since the first quarter of 2012, the Company has recognized royalty revenues related to Genentech’s and Roche’s sales of Erivedge. For arrangements that include sales based royalties, including milestone payments based on the level of sales, and where the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). The Company expects to continue recognizing royalty revenue from Genentech’s sales of Erivedge in the U.S. and in other markets where Genentech and Roche successfully obtain marketing approval, if any (see Note 10). However, a portion of potential Erivedge royalties will be paid to the Purchasers pursuant to the Oberland Purchase Agreement (see Note 8).
Contra Revenue, Net
Contra revenue, net represents shared costs, primarily related to intellectual property, with the Company's collaboration partners, and reserves for potential royalty reductions.
With respect to each of the foregoing areas of revenue recognition, we exercise significant judgment in determining whether an arrangement contains multiple elements, and, if so, how much revenue is allocable to each element. In addition, we exercise our judgment in determining when our significant obligations have been met under such agreements and the specific time periods over which we recognized revenue, such as non-refundable, up-front license fees. To the extent that actual facts and circumstances differ from our initial judgments, our revenue recognition with respect to such transactions would change accordingly and any such change could affect our reported financial results.
Research and Development
Research and Development
Research and development expense consists of costs incurred to discover, research and develop drug candidates. These expenses primarily include: (1) salaries and related expenses for personnel including stock-based compensation expense; (2) outside service costs, including clinical research organizations and contract manufacturing costs, among others; (3) sublicense payments; and (4) the costs of supplies and reagents, consulting, and occupancy and depreciation charges. The Company expenses research and development costs as they are incurred.
The Company recognizes cost of royalties on Erivedge royalty revenue earned from Genentech related to obligations to third-party university licensors. The Company is also incurring research and development expenses under this collaboration related to the maintenance of these third-party licenses to certain background technologies. In addition, the Company records research and development expense for obligations to certain third-party university licensors upon earning payments from Genentech related to the achievement of clinical development and regulatory objectives under this collaboration.
Basic and Diluted Loss Per Common Share
Basic and Diluted Loss per Common Share
Basic and diluted net losses per share were determined by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is the same as basic net loss per common share for all periods presented, as the effect of the potential common stock equivalents is antidilutive due to the Company’s net loss position for all periods presented. Antidilutive securities consist of stock options outstanding as of the respective reporting period.
Stock-Based Compensation
Stock-Based Compensation
The Company accounts for stock-based compensation transactions using a grant-date fair-value based method under FASB Codification Topic 718, Compensation-Stock Compensation.
The Company has recorded employee and director stock-based compensation expense of $2.7 million and $3.9 million for the years ended December 31, 2019 and 2018, respectively. The Company estimates that its stock-based compensation expense will increase in 2020 as it has granted, and expects that it may continue to grant options, in 2020 that could increase the amount of stock-based compensation ultimately recognized. The amount of the incremental employee stock-based compensation expense attributable to 2020 employee stock options to be granted will depend primarily on the number of stock options granted, the fair market value of the Company’s common stock at the respective grant dates, and the specific terms of the stock options.
The Company measures compensation cost for stock-based compensation at fair value, including an estimate of forfeitures and recognizes the expense as compensation expense over the period that the recipient is required to provide service in exchange for the award, which generally is the vesting period. The Company uses the Black-Scholes option pricing model to measure the fair value of stock options. This model requires significant estimates related to the award’s expected life and future stock price volatility of the underlying equity security.
In determining the amount of expense to be recorded, the Company also estimates forfeiture rates for awards, based on the probability that employees will complete the required service period. The Company estimates the forfeiture rate based on historical experience. If actual forfeitures differ significantly from the Company’s estimates, additional adjustments to compensation expense may be required in future periods. Ultimately, the actual expense recognized over the vesting period will only be for those shares that vest.
The expected volatility is based on the annualized daily historical volatility of the Company’s stock price for a time period consistent with the expected term of each grant. Management believes that the historical volatility of the Company’s stock price best represents the future volatility of the stock price. The risk-free rate is based on the U.S. Treasury yield in effect at the time of grant for the expected term of the respective grant. The Company has not historically paid cash dividends, and does not expect to pay cash dividends in the foreseeable future.
The stock price volatility and expected terms utilized in the calculation involve management’s best estimates at that time, both of which impact the fair value of the option calculated under the Black-Scholes methodology and, ultimately, the expense that will be recognized over the life of the option. GAAP also requires that the Company recognize compensation expense for only the portion of options that are expected to vest. Therefore, management calculated an estimated annual pre-vesting forfeiture rate that is derived from historical employee termination behavior since the inception of the Company, as adjusted. If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods.
Comprehensive Loss
Comprehensive Loss
Comprehensive loss is comprised of net loss and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized holding gains and losses arising during the period on available-for-sale securities that are not other-than-temporarily impaired.
Segment Reporting
Segment Reporting
The Company has determined that it operates in a single reportable segment, which is the research and development of innovative drug candidates for the treatment of human cancer. The Company expects that any products that are successfully developed and commercialized would be used in the healthcare industry and would be regulated in the United States by the FDA and in overseas markets by similar regulatory authorities.
New Accounting Pronouncements
New Accounting Pronouncements
Recently Issued and Adopted
In June 2018, the Financial Accounting Standard Board (“FASB”) issued Accounting Standard Update (“ASU”) 2018-07, Compensation - Stock Compensation: Improvements to Nonemployee Share-based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions resulting from expanding the scope of ASC 718, Compensation - Stock Compensation (“ASC 718”). The standard was effective for annual reporting periods and interim periods within those annual periods, beginning after December 15, 2018, and early adoption is permitted, but no earlier than an entity's adoption date of ASC 606, Revenue from Contracts with Customers (“ASC 606”). The Company did not have any outstanding nonemployee awards as of June 30, 2018, and adopted this update as of that date. There was no material impact on the Company's consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting, which clarifies the scope under which modification accounting should be applied to a share based payment award under ASC 718. The standard was be effective for annual reporting periods and interim periods within those annual periods, beginning after December 15, 2017, and early adoption is permitted for interim or annual periods beginning after January 1, 2017. As such, the Company adopted this standard as of January 1, 2018 and concluded there was no material impact on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill under the current standard in testing the interim or annual impairment of goodwill. The standard will be effective for annual reporting periods and interim periods within those annual periods, beginning after December 15, 2019, and early adoption is permitted for interim or annual periods beginning after January 1, 2017. As such, the Company adopted this standard as of January 1, 2018 and concluded there was no material impact on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases. In addition, the FASB issued ASUs 2018-10 and 2018-11, all of which are further clarifying amendments to ASU 2016-02. The standard requires organizations that lease assets to recognize on the balance sheet assets or liabilities, as applicable, for the rights and obligations created by those leases. Additionally, the guidance modifies current guidance for lessor accounting and leveraged leases, and is effective for fiscal years beginning after December 15, 2018, and interim periods within such years. The Company adopted this standard as of January 1, 2019. The resulting impact of the adoption was the recognition of an operating lease right-of-use asset in the amount of $1.0 million and the recognition of operating lease liabilities of $1.1 million on the consolidated balance sheet. The new standard did not have a significant impact on the Company's consolidated statement of operation. For more detail, see Note 2(f) above, Leases.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which amends prior guidance on accounting for equity investments and financial liabilities. The new standard amends certain aspects of accounting and disclosure requirements for financial instruments, including the requirement that equity investments with readily determinable fair values be measured at fair value with changes in fair value recognized in results of operations. The new standard does not apply to investments accounted for under the equity method of accounting or those that result in consolidation of the investee. Equity investments that do not have readily determinable fair values may be measured at fair value or at cost minus impairment adjusted for changes in observable prices. A financial liability that is measured at fair value in accordance with the fair value option is required to be presented separately in other comprehensive income for the portion of the total change in the fair value resulting from change in the instrument-specific credit risk. In addition, a valuation allowance should be evaluated on deferred tax assets related to available-for-sale debt securities in combination with other deferred tax assets. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within such years. As such, the Company adopted this standard as of January 1, 2018 and concluded there was no material impact on its consolidated financial statements.
In May 2014, the FASB issued new revenue recognition guidance in ASU 2014-09, for entities, providing a single, comprehensive model to account for revenue arising from contracts with customers. In addition, the FASB recently issued ASUs 2016-08, 2016-10, 2016-12, 2016-20 and 2017-13, all of which are further clarifying amendments to ASU 2014-09. This new standard provides a five step framework whereby revenue is recognized when promised goods or services are transferred to a customer at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity’s nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Two adoption methods are permitted: retrospectively to all prior reporting periods presented, with certain practical expedients permitted; or retrospectively with the cumulative effect of initially adopting the ASU recognized at the date of initial application. The Company adopted the modified retrospective method. To date, the Company’s sources of collaboration and other revenue have primarily been collaboration agreements. The most significant differences between Topic 606 and previous guidance for license and collaboration revenue are: (i) allocating consideration to performance obligations; and (ii) estimating and determining the timing of recognition of variable consideration received from licensees, including up-front license payments, contingent milestones and royalties. The guidance was effective for interim and annual periods beginning after December 15, 2017 and early adoption is permitted. The Company has adopted the guidance as of January 1, 2018. The adoption of this guidance had no material impact on the Company's consolidated financial statements. For more detail, see Note 2(h) above, Revenue Recognition.
Issued, Not Yet Adopted
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement, which modified the disclosure requirements for fair value measurement under ASC 820. The standard was originally effective for annual reporting periods and interim periods within those annual periods, beginning after December 15, 2019, with early adoption permitted, however in November 2019 the effective date for smaller reporting companies was extended to January 1, 2023 with the issuance of ASU 2019-10 Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates. The Company is currently evaluating the effects of this standard and does not expect that adoption of this standard will have a material impact on its consolidated financial statements.
Fair Value of Financial Instruments
Level 1
Quoted prices in active markets for identical assets or liabilities.
 
 
Level 2
Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities.
 
 
Level 3
Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
v3.20.1
Property and Equipment, Net (Tables)
12 Months Ended
Dec. 31, 2019
Property, Plant and Equipment [Abstract]  
Schedule of Property and Equipment
Property and equipment consist of the following:
 
December 31,
 
2019
 
2018
Laboratory equipment, computers and software
$
1,725

 
$
1,753

Leasehold improvements
185

 
185

Office furniture and equipment
331

 
354

 
2,241

 
2,292

Less—Accumulated depreciation and amortization
(2,087
)
 
(2,025
)
Total
$
154

 
$
267

v3.20.1
Retirement Savings Plan (Details) - USD ($)
$ in Millions
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Retirement Benefits [Abstract]    
Matching contribution $ 0.2 $ 0.2
v3.20.1
Subsequent Events - JonesTrading Institutional Services LLC Agreement (Details)
Mar. 04, 2020
USD ($)
day
Dec. 31, 2019
$ / shares
Dec. 31, 2018
$ / shares
May 29, 2018
$ / shares
Subsequent Event [Line Items]        
Common stock, par value (in dollars per share) | $ / shares   $ 0.01 $ 0.01 $ 0.01
JonesTrading Institutional Services LLC | Subsequent Event        
Subsequent Event [Line Items]        
Sales agreement compensation fee (as a percentage of gross proceeds) 3.00%      
Sales agreement, days notice to terminate (days) | day 5      
Common Stock | JonesTrading Institutional Services LLC | Subsequent Event        
Subsequent Event [Line Items]        
Sales agreement authorized amount $ 30,000,000      
Maximum | JonesTrading Institutional Services LLC | Subsequent Event        
Subsequent Event [Line Items]        
Sales agreement, reimbursable expenses $ 30,000      
v3.20.1
Income Taxes - Narrative (Details) - USD ($)
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Income Taxes [Line Items]    
Orphan drug tax credit carryforwards $ 18,088,000 $ 16,625,000
Valuation allowance 159,794,000 150,225,000
Increase (decrease) in valuation allowance 9,600,000 6,300,000
Unrecognized tax benefits 0 0
Uncertain tax position 0  
Federal    
Income Taxes [Line Items]    
Net operating loss 251,200,000 282,000,000
Federal | Research and experimentation    
Income Taxes [Line Items]    
Research and experimentation credit carryforwards 11,900,000 12,300,000
State    
Income Taxes [Line Items]    
Net operating loss 93,600,000 124,000,000
State | Research and experimentation    
Income Taxes [Line Items]    
Research and experimentation credit carryforwards $ 4,400,000 $ 4,500,000
v3.20.1
Leases and Commitments - Narrative (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Dec. 05, 2019
Jan. 01, 2019
Lessee, Lease, Description [Line Items]        
Operating lease right-of-use asset $ 149      
Operating lease liability $ 166      
Discount rate (percent) 9.95%      
Operating lease expense $ 1,000      
Operating lease payments 1,000      
Rent expense   $ 900    
Cost of royalties $ 503 $ 563    
Massachusetts | Building        
Lessee, Lease, Description [Line Items]        
Lease term (years)     7 years  
Lease rent payments due     $ 8,300  
Accounting Standards Update 2016-02        
Lessee, Lease, Description [Line Items]        
Operating lease right-of-use asset       $ 1,000
Operating lease liability       $ 1,100
v3.20.1
Investments (Details)
$ in Thousands
12 Months Ended
Dec. 31, 2019
USD ($)
security
Dec. 31, 2018
USD ($)
security
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost $ 5,113 $ 634
Unrealized Gain 0 0
Unrealized Loss 0 0
Fair Value $ 5,113 $ 634
Short-term investments    
Debt Securities, Available-for-sale [Line Items]    
Weighted average maturity of short-term investments 1 month 1 month
Corporate Debt Securities | Short-term investments    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost $ 5,113 $ 634
Unrealized Gain 0 0
Unrealized Loss 0 0
Fair Value $ 5,113 $ 634
Debt securities    
Debt Securities, Available-for-sale [Line Items]    
Number of securities in unrealized loss position for more than 12 months | security 0 0
Minimum | Short-term investments    
Debt Securities, Available-for-sale [Line Items]    
Range of maturities 1 month 1 month
Maximum | Short-term investments    
Debt Securities, Available-for-sale [Line Items]    
Range of maturities 12 months 12 months
v3.20.1
Summary of Significant Accounting Policies
12 Months Ended
Dec. 31, 2019
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies
Summary of Significant Accounting Policies
(a)
Basis of Presentation and Principals of Consolidation
The accompanying consolidated financial statements have been prepared in conformity with accounting principles generally accepted in the U.S. (“GAAP”) and include the accounts of our wholly owned subsidiaries. All intercompany balances and transactions have been eliminated in consolidation.
In accordance with Accounting Standards Update (“ASU”) 2014-15, Disclosure of Uncertainties about an Entity’s Ability to Continue as a Going Concern (Subtopic 205-40), the Company has evaluated whether there are conditions and events, considered in the aggregate, that raise substantial doubt about the Company’s ability to continue as a going concern within one year after the date that the Consolidated Financial Statements are issued.
(b)
Use of Estimates and Assumptions
The preparation of the Company’s consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts and disclosure of revenue, expenses and certain assets and liabilities at the balance sheet date. Such estimates include revenue recognition, including estimates related to the performance obligations under the Company’s collaboration agreements; the estimated repayment term of the Company’s debt and related short and long-term classification; the collectability of receivables; the carrying value of property and equipment and intangible assets; the assumptions used in the Company’s valuation of stock-based compensation and the value of certain investments and liabilities. Actual results may differ from such estimates.
(c)
Cash Equivalents, Restricted Cash, and Investments
The Company had Cash and cash equivalents of $15.4 million and $23.6 million as of December 31, 2019 and 2018 respectively. Cash equivalents consist of short-term, highly liquid investments purchased with original maturities of three months or less. All other liquid investments are classified as marketable securities.
The Company classified $1.0 million and $0.2 million of its cash as restricted cash, as of December 31, 2019 and 2018. This amount represents the security deposit delivered to the respective landlords of the Company's current and future Lexington, Massachusetts headquarters.
The Company's combined cash and restricted cash balances were $16.4 million and $23.8 million as of December 31, 2019 and 2018, as presented on the Company's Consolidated Statements of Cash Flows.
The Company’s short-term investments are marketable debt securities with original maturities of greater than three months from the date of purchase, but less than twelve months from the balance sheet date, and long-term investments are marketable debt securities with original maturities of greater than twelve months from the balance sheet. Marketable securities consist of commercial paper, corporate bonds and notes, and government obligations. All of the Company’s investments have been designated available-for-sale and are stated at fair value. Unrealized gains and temporary losses on investments are included in accumulated other comprehensive income (loss) as a separate component of stockholders’ equity. Realized gains and losses, dividends and interest income are included in other income (expense) in the period during which the securities are sold. Any premium or discount arising at purchase is amortized and/or accreted to interest income.
(d)
Concentrations and Significant Customer Information
Financial instruments which potentially subject the Company to concentrations of credit risk consist principally of cash and cash equivalents, marketable securities, and accounts receivable. The Company maintains deposits in federally insured financial institutions in excess of federally insured limits. Management believes that the Company is not exposed to significant credit risk due to the financial position of the depository institutions in which those deposits are held. The Company’s credit risk related to investments is reduced as a result of the Company’s policy to limit the amount invested in any one issue. As of December 31, 2019, the Company did not have a material concentration in any single investment.
Our operations are located entirely within the U.S. The Company focus is primarily on the development of first-in-class and innovative therapeutics for the treatment of cancer. The Company's one customer, Genentech, accounted for 100% of the total gross revenues for 2019 and 2018.
The Company’s accounts receivable at December 31, 2019 and 2018 represents amounts due from collaborators, primarily for royalties earned on sales of Erivedge by Genentech and Roche.
The Company relies on third-parties to supply certain raw materials necessary to produce its drug candidates, including CA-4948, CI-8993, and fimepinostat, for preclinical studies and clinical trials. There are a small number of suppliers for certain raw materials that the Company uses to manufacture its drug candidates. 
(e)
Long-Lived Assets Other than Goodwill
Long-lived assets other than goodwill consist of property and equipment. The Company applies the guidance in FASB Codification Topic 360-10-05, Impairment or Disposal of Long-Lived Assets. If it were determined that the carrying value of the Company’s other long-lived assets might not be recoverable based upon the existence of one or more indicators of impairment, the Company would measure an impairment based on the difference between the carrying value and fair value of the asset. The Company did not recognize any material impairment charges for the years ended December 31, 2019 or 2018.
Purchased equipment is recorded at cost. The Company does not currently hold any leased equipment. Depreciation and amortization are provided on the straight-line method over the estimated useful lives of the related assets or the remaining terms of the leases, whichever is shorter, as follows:

Useful Life
Laboratory equipment, computers and software
3-5 years
Leasehold improvements
Lesser of lease or asset life
Office furniture and equipment
5 years

(f)
Leases
In February 2016 the FASB issued ASU No. 2016-02, Leases (Topic 842), a standard issued to increase transparency and comparability among organizations related to their leasing activities. This standard established a right-of-use model that requires the recognition of right-of-use assets and lease liabilities for most leases as well as provides disclosure with respect to certain qualitative and quantitative information related to a company's leasing arrangements to meet the objective of allowing users of financial statements to assess the amount, timing and uncertainty of cash flows arising from leases.
The FASB subsequently issued the following amendments to ASU 2016-02 that have the same effective date and transition date: ASU No. 2018-10, Codification Improvements to Topic 842, Leases, ASU No. 2018-11, Leases (Topic 842): Targeted Improvements, and ASU No. 2019-01, Leases (Topic 842): Codification Improvements. We adopted these amendments with ASU 2016-02 (collectively, the new leasing standards) effective January 1, 2019.
The Company adopted the leasing standards using the modified retrospective transition approach, as of January 1, 2019, with no restatement of prior periods or cumulative adjustment to retained earnings. Upon adoption, the Company elected the package of transition practical expedients, which allowed Curis to carry forward prior conclusions related to whether any expired or existing contracts are or contain leases, the lease classification for any expired or existing leases and initial direct costs for existing leases. The Company also made an accounting policy election to not recognize leases with an initial term of 12 months or less within its consolidated balance sheets and to recognize those lease payments on a straight-line basis in its consolidated statements of income over the lease term. Upon adoption of the leasing standard Curis recognized an operating lease asset of approximately $1.0 million and a corresponding operating lease liability of approximately $1.1 million, which are included in the Company's consolidated balance sheets. The adoption of the leasing standard did not have an impact on the consolidated statement of income.
The Company determines if an arrangement is a lease at contract inception. Operating lease assets represent the Company's right to use an underlying asset for the lease term and operating lease liabilities represent its obligation to make lease payments arising from the lease. Operating lease assets and liabilities are recognized at the commencement date of the lease based upon the present value of lease payments over the lease term. When determining the lease term, the Company includes options to extend or terminate the lease when it is reasonably certain that the Company will exercise that option.
As most of the Company's leases do not provide an implicit interest rate, the Company uses its incremental borrowing rate, which is based on rates that would be incurred to borrow on a collateralized basis over a term equal to the lease payments in a similar economic environment, in determining the present value of lease payments.
Right-of-use assets and lease liabilities are recognized at the lease commencement date based on the present value of lease payments over the lease term. The lease payment used to determine the operating lease asset may include lease incentives, stated rent increases and was recognized as an operating lease right-of-use asset in the consolidated balance sheets. The Company's lease agreements may include both lease and non-lease components, which are accounted for as a single lease component when the payments are fixed. Variable payments included in the lease agreement are expensed as incurred.
The Company's operating lease is reflected in operating lease right-of-use asset and operating lease liability in the consolidated balance sheets. Lease expense for lease payments is recognized on a straight-line basis over the lease term.
For additional information on the adoption of the new leasing standards, please read Note 7, Leases and Commitments, to these consolidated financial statements.
(g)
Goodwill
As of both December 31, 2019 and 2018, the Company had recorded goodwill of $9.0 million. The Company applies the guidance in the FASB Codification Topic 350, Intangibles—Goodwill and Other. During each of December 2019 and 2018, the Company completed its annual goodwill impairment tests and determined that the Company represented a single reporting unit and as of those dates the fair value of the Company exceeded the carrying value of its net assets. Accordingly, no goodwill impairment was recognized for the years ended December 31, 2019 and 2018.
(h)
Revenue Recognition
Effective January 1, 2018, the Company adopted ASC Topic 606, Revenue from Contracts with Customers (“ASC 606”), using the modified retrospective transition method. The Company's only contract not completed as of January 1, 2018 was its collaboration agreement with Genentech (see Note 10). The Company assessed the potential effects to the consolidated financial statements and retained earnings and has concluded that, upon adoption of the new standard, there was no material impact.
The Company’s business strategy includes entering into collaborative license and development agreements with biotechnology and pharmaceutical companies for the development and commercialization of the Company’s drug candidates. The terms of the agreements typically include non-refundable license fees, funding of research and development, payments based upon achievement of clinical development and regulatory objectives, and royalties on product sales.
License Fees and Multiple Element Arrangements
If a license to its intellectual property is determined to be distinct from the other performance obligations identified in the arrangement, the Company will recognize revenues from non-refundable, up-front fees allocated to the license at such time as the license is transferred to the licensee and the licensee is able to use, and benefit from, the license. For licenses that are bundled with other promises, the Company utilizes judgment to assess the nature of the combined performance obligation to determine whether the combined performance obligation is satisfied over time or at a point in time and, if over time, the appropriate method of measuring progress for purposes of recognizing revenue from non-refundable, up-front fees. The Company evaluates the measure of progress each reporting period and, if necessary, will adjust the measure of performance and related revenue recognition.
If the Company is involved in a steering committee as part of a multiple element arrangement, the Company assesses whether its involvement constitutes a performance obligation or a right to participate. Steering committee services that are not determined to be distinct performance obligations are combined with other research services or performance obligations required under an arrangement, if any, in determining the level of effort required in an arrangement and the period over which the Company expects to complete its aggregate performance obligations.
Appropriate methods of measuring progress include output methods and input methods. In determining the appropriate method for measuring progress, the Company considers the nature of service that it promises to transfer to the customer. When the Company decides on a method of measurement, the Company will apply that single method of measuring progress for each performance obligation satisfied over time and will apply that method consistently to similar performance obligations and in similar circumstances.
If the Company cannot reasonably measure its progress toward complete satisfaction of a performance obligation because the Company lacks reliable information that would be required to apply an appropriate method of measuring progress, but it can reasonably estimate when the performance ceases or the remaining obligations become inconsequential and perfunctory, then revenue is not recognized until the Company can reasonably estimate when the performance obligation ceases or becomes inconsequential. Revenue is then recognized over the remaining estimated period of performance.
Significant management judgment is required in determining the level of effort required under an arrangement and the period over which the Company is expected to complete its performance obligations under an arrangement.
Contingent Research Milestone Payments
ASC 606 constrains the amount of variable consideration included in the transaction price in that either all, or a portion, of an amount of variable consideration should be included in the transaction price. The variable consideration amount should be included only to the extent that it is probable that a significant reversal in the amount of cumulative revenue recognized will not occur when the uncertainty associated with the variable consideration is subsequently resolved. The assessment of whether variable consideration should be constrained is largely a qualitative one that has two elements: the likelihood of a change in estimate, and the magnitude thereof. Variable consideration is not constrained if the potential reversal of cumulative revenue recognized is not significant, for example.
If the consideration in a contract includes a variable amount, a company will estimate the amount of consideration in exchange for transfer of promised goods or services. The consideration also can vary if a company’s entitlement to the consideration is contingent on the occurrence or nonoccurrence of a future event. The Company considers contingent research milestone payments to fall under the scope of variable consideration, which should be estimated for revenue recognition purposes at the inception of the contract and reassessed ongoing at the end of each reporting period.
The Company assesses whether contingent research milestones should be considered variable consideration that should be constrained and thus not part of the transaction price. This includes an assessment of the probability that all or some of the milestone revenues could be reversed when the uncertainty around whether or not the achievement of each milestone is resolved, and the amount of reversal could be significant.
GAAP provides factors to consider when assessing whether variable consideration should be constrained. All of the factors should be considered, and no factor is determinative. The Company considers all relevant factors.
Reimbursement of Costs
Reimbursement of research and development costs by third-party collaborators is recognized as revenue over time provided the Company has determined that it transfers control (i.e. performs the services) of a service over time and, therefore, satisfies a performance obligation according to the provisions outlined in ASC 606-10-25-27, Revenue Recognition.
Royalty Revenue
Since the first quarter of 2012, the Company has recognized royalty revenues related to Genentech’s and Roche’s sales of Erivedge. For arrangements that include sales based royalties, including milestone payments based on the level of sales, and where the license is deemed to be the predominant item to which the royalties relate, the Company recognizes revenue at the later of (i) when the related sales occur, or (ii) when the performance obligation to which some or all of the royalty has been allocated has been satisfied (or partially satisfied). The Company expects to continue recognizing royalty revenue from Genentech’s sales of Erivedge in the U.S. and in other markets where Genentech and Roche successfully obtain marketing approval, if any (see Note 10). However, a portion of potential Erivedge royalties will be paid to the Purchasers pursuant to the Oberland Purchase Agreement (see Note 8).
Contra Revenue, Net
Contra revenue, net represents shared costs, primarily related to intellectual property, with the Company's collaboration partners, and reserves for potential royalty reductions.
With respect to each of the foregoing areas of revenue recognition, we exercise significant judgment in determining whether an arrangement contains multiple elements, and, if so, how much revenue is allocable to each element. In addition, we exercise our judgment in determining when our significant obligations have been met under such agreements and the specific time periods over which we recognized revenue, such as non-refundable, up-front license fees. To the extent that actual facts and circumstances differ from our initial judgments, our revenue recognition with respect to such transactions would change accordingly and any such change could affect our reported financial results.
(i)
Research and Development
Research and development expense consists of costs incurred to discover, research and develop drug candidates. These expenses primarily include: (1) salaries and related expenses for personnel including stock-based compensation expense; (2) outside service costs, including clinical research organizations and contract manufacturing costs, among others; (3) sublicense payments; and (4) the costs of supplies and reagents, consulting, and occupancy and depreciation charges. The Company expenses research and development costs as they are incurred.
The Company recognizes cost of royalties on Erivedge royalty revenue earned from Genentech related to obligations to third-party university licensors. The Company is also incurring research and development expenses under this collaboration related to the maintenance of these third-party licenses to certain background technologies. In addition, the Company records research and development expense for obligations to certain third-party university licensors upon earning payments from Genentech related to the achievement of clinical development and regulatory objectives under this collaboration. 
(j)
Basic and Diluted Loss per Common Share
Basic and diluted net losses per share were determined by dividing net loss by the weighted average number of common shares outstanding during the period. Diluted net loss per common share is the same as basic net loss per common share for all periods presented, as the effect of the potential common stock equivalents is antidilutive due to the Company’s net loss position for all periods presented. Antidilutive securities consist of stock options outstanding as of the respective reporting period. Antidilutive securities as of December 31, 2019 and 2018 consisted of the following:
 
For the Year Ended December 31,
 
2019
 
2018
Stock options outstanding
6,158,026

 
3,714,394

Total antidilutive securities
6,158,026

 
3,714,394


(k)
Stock-Based Compensation
The Company accounts for stock-based compensation transactions using a grant-date fair-value based method under FASB Codification Topic 718, Compensation-Stock Compensation.
The Company has recorded employee and director stock-based compensation expense of $2.7 million and $3.9 million for the years ended December 31, 2019 and 2018, respectively. The Company estimates that its stock-based compensation expense will increase in 2020 as it has granted, and expects that it may continue to grant options, in 2020 that could increase the amount of stock-based compensation ultimately recognized. The amount of the incremental employee stock-based compensation expense attributable to 2020 employee stock options to be granted will depend primarily on the number of stock options granted, the fair market value of the Company’s common stock at the respective grant dates, and the specific terms of the stock options.
The Company measures compensation cost for stock-based compensation at fair value, including an estimate of forfeitures and recognizes the expense as compensation expense over the period that the recipient is required to provide service in exchange for the award, which generally is the vesting period. The Company uses the Black-Scholes option pricing model to measure the fair value of stock options. This model requires significant estimates related to the award’s expected life and future stock price volatility of the underlying equity security.
In determining the amount of expense to be recorded, the Company also estimates forfeiture rates for awards, based on the probability that employees will complete the required service period. The Company estimates the forfeiture rate based on historical experience. If actual forfeitures differ significantly from the Company’s estimates, additional adjustments to compensation expense may be required in future periods. Ultimately, the actual expense recognized over the vesting period will only be for those shares that vest.
The expected volatility is based on the annualized daily historical volatility of the Company’s stock price for a time period consistent with the expected term of each grant. Management believes that the historical volatility of the Company’s stock price best represents the future volatility of the stock price. The risk-free rate is based on the U.S. Treasury yield in effect at the time of grant for the expected term of the respective grant. The Company has not historically paid cash dividends, and does not expect to pay cash dividends in the foreseeable future.
The stock price volatility and expected terms utilized in the calculation involve management’s best estimates at that time, both of which impact the fair value of the option calculated under the Black-Scholes methodology and, ultimately, the expense that will be recognized over the life of the option. GAAP also requires that the Company recognize compensation expense for only the portion of options that are expected to vest. Therefore, management calculated an estimated annual pre-vesting forfeiture rate that is derived from historical employee termination behavior since the inception of the Company, as adjusted. If the actual number of forfeitures differs from those estimated by management, additional adjustments to compensation expense may be required in future periods.
(l)
Comprehensive Loss
Comprehensive loss is comprised of net loss and other comprehensive income (loss). Other comprehensive income (loss) includes unrealized holding gains and losses arising during the period on available-for-sale securities that are not other-than-temporarily impaired. 
(m)
Segment Reporting
The Company has determined that it operates in a single reportable segment, which is the research and development of innovative drug candidates for the treatment of human cancer. The Company expects that any products that are successfully developed and commercialized would be used in the healthcare industry and would be regulated in the United States by the FDA and in overseas markets by similar regulatory authorities.
(n)
Interest Expense on Liability related to the Sale of Future Royalties
In March 2019 the Company entered into the Oberland Purchase Agreement with Oberland Capital. Pursuant to the terms of the Oberland Purchase Agreement the Company sold to Oberland a portion of its rights to receive royalties from Genentech on potential net sales of Erivedge. As a result of the obligation to pay future royalties to Oberland, the Company recorded the proceeds from this transaction as a liability on its Consolidated Balance Sheet that is accounted for using the interest method over the estimated life of the Oberland Purchase Agreement. As a result, the Company imputes interest on the transaction and records imputed interest expense at the estimated interest rate. The Company's estimate of the interest rate under the agreement is based on the amount of royalty payments expected to be received by Oberland over the life of the arrangement. On a quarterly basis, the Company assesses the expected royalty payments to Curis Royalty from Genentech using a combination of historical results and forecasts from market data sources. To the extent such payments are greater or less than the initial estimates or the timing of such payments is materially different than the original estimates, the Company will prospectively adjust the amortization of the liability.
(o)
New Accounting Pronouncements
Recently Issued and Adopted
In June 2018, the Financial Accounting Standard Board (“FASB”) issued Accounting Standard Update (“ASU”) 2018-07, Compensation - Stock Compensation: Improvements to Nonemployee Share-based Payment Accounting, which simplifies the accounting for nonemployee share-based payment transactions resulting from expanding the scope of ASC 718, Compensation - Stock Compensation (“ASC 718”). The standard was effective for annual reporting periods and interim periods within those annual periods, beginning after December 15, 2018, and early adoption is permitted, but no earlier than an entity's adoption date of ASC 606, Revenue from Contracts with Customers (“ASC 606”). The Company did not have any outstanding nonemployee awards as of June 30, 2018, and adopted this update as of that date. There was no material impact on the Company's consolidated financial statements.
In May 2017, the FASB issued ASU 2017-09, Scope of Modification Accounting, which clarifies the scope under which modification accounting should be applied to a share based payment award under ASC 718. The standard was be effective for annual reporting periods and interim periods within those annual periods, beginning after December 15, 2017, and early adoption is permitted for interim or annual periods beginning after January 1, 2017. As such, the Company adopted this standard as of January 1, 2018 and concluded there was no material impact on its consolidated financial statements.
In January 2017, the FASB issued ASU 2017-04, Simplifying the Test for Goodwill Impairment, which simplifies the subsequent measurement of goodwill under the current standard in testing the interim or annual impairment of goodwill. The standard will be effective for annual reporting periods and interim periods within those annual periods, beginning after December 15, 2019, and early adoption is permitted for interim or annual periods beginning after January 1, 2017. As such, the Company adopted this standard as of January 1, 2018 and concluded there was no material impact on its consolidated financial statements.
In February 2016, the FASB issued ASU 2016-02, Leases. In addition, the FASB issued ASUs 2018-10 and 2018-11, all of which are further clarifying amendments to ASU 2016-02. The standard requires organizations that lease assets to recognize on the balance sheet assets or liabilities, as applicable, for the rights and obligations created by those leases. Additionally, the guidance modifies current guidance for lessor accounting and leveraged leases, and is effective for fiscal years beginning after December 15, 2018, and interim periods within such years. The Company adopted this standard as of January 1, 2019. The resulting impact of the adoption was the recognition of an operating lease right-of-use asset in the amount of $1.0 million and the recognition of operating lease liabilities of $1.1 million on the consolidated balance sheet. The new standard did not have a significant impact on the Company's consolidated statement of operation. For more detail, see Note 2(f) above, Leases.
In January 2016, the FASB issued ASU 2016-01, Recognition and Measurement of Financial Assets and Financial Liabilities, which amends prior guidance on accounting for equity investments and financial liabilities. The new standard amends certain aspects of accounting and disclosure requirements for financial instruments, including the requirement that equity investments with readily determinable fair values be measured at fair value with changes in fair value recognized in results of operations. The new standard does not apply to investments accounted for under the equity method of accounting or those that result in consolidation of the investee. Equity investments that do not have readily determinable fair values may be measured at fair value or at cost minus impairment adjusted for changes in observable prices. A financial liability that is measured at fair value in accordance with the fair value option is required to be presented separately in other comprehensive income for the portion of the total change in the fair value resulting from change in the instrument-specific credit risk. In addition, a valuation allowance should be evaluated on deferred tax assets related to available-for-sale debt securities in combination with other deferred tax assets. The guidance is effective for fiscal years beginning after December 15, 2017, and interim periods within such years. As such, the Company adopted this standard as of January 1, 2018 and concluded there was no material impact on its consolidated financial statements.
In May 2014, the FASB issued new revenue recognition guidance in ASU 2014-09, for entities, providing a single, comprehensive model to account for revenue arising from contracts with customers. In addition, the FASB recently issued ASUs 2016-08, 2016-10, 2016-12, 2016-20 and 2017-13, all of which are further clarifying amendments to ASU 2014-09. This new standard provides a five step framework whereby revenue is recognized when promised goods or services are transferred to a customer at an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The new standard also requires significantly expanded disclosures regarding the qualitative and quantitative information of an entity’s nature, amount, timing, and uncertainty of revenue and cash flows arising from contracts with customers. Two adoption methods are permitted: retrospectively to all prior reporting periods presented, with certain practical expedients permitted; or retrospectively with the cumulative effect of initially adopting the ASU recognized at the date of initial application. The Company adopted the modified retrospective method. To date, the Company’s sources of collaboration and other revenue have primarily been collaboration agreements. The most significant differences between Topic 606 and previous guidance for license and collaboration revenue are: (i) allocating consideration to performance obligations; and (ii) estimating and determining the timing of recognition of variable consideration received from licensees, including up-front license payments, contingent milestones and royalties. The guidance was effective for interim and annual periods beginning after December 15, 2017 and early adoption is permitted. The Company has adopted the guidance as of January 1, 2018. The adoption of this guidance had no material impact on the Company's consolidated financial statements. For more detail, see Note 2(h) above, Revenue Recognition.
Issued, Not Yet Adopted
In August 2018, the FASB issued ASU 2018-13, Fair Value Measurement, which modified the disclosure requirements for fair value measurement under ASC 820. The standard was originally effective for annual reporting periods and interim periods within those annual periods, beginning after December 15, 2019, with early adoption permitted, however in November 2019 the effective date for smaller reporting companies was extended to January 1, 2023 with the issuance of ASU 2019-10 Financial Instruments-Credit Losses (Topic 326), Derivatives and Hedging (Topic 815), and Leases (Topic 842) Effective Dates. The Company is currently evaluating the effects of this standard and does not expect that adoption of this standard will have a material impact on its consolidated financial statements.
v3.20.1
Consolidated Statements of Operations and Comprehensive Loss - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Revenues, net:    
Total revenues, net $ 10,004 $ 10,428
Costs and expenses:    
Cost of royalties 503 563
Research and development 22,302 24,413
General and administrative 11,555 14,785
Total costs and expenses 34,360 39,761
Loss from operations (24,356) (29,333)
Other expense:    
Loss on debt extinguishment (3,495) 0
Interest income 614 684
Imputed interest expense related to the sale of future royalties (4,055) 0
Interest expense, debt (791) (3,926)
Other income (expense), net (58) 0
Total other expense (7,785) (3,242)
Net loss $ (32,141) $ (32,575)
Net loss per common share (basic and diluted) (in dollars per share) $ (0.97) $ (0.98)
Weighted average common shares (basic and diluted) (in shares) 33,180,516 33,118,393
Other comprehensive gain    
Unrealized gain on marketable securities $ 0 $ 2
Comprehensive loss (32,141) (32,573)
Royalties    
Revenues, net:    
Total revenues, net 10,418 10,421
Contra revenue, net    
Revenues, net:    
Total revenues, net $ (414) $ 7
v3.20.1
Income Taxes - Reconciliation (Details)
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Income Tax Disclosure [Abstract]    
Statutory federal income tax rate 21.00% 21.00%
State income taxes, net of federal benefit 6.10% 5.90%
Research and development tax credits 2.70% 3.80%
Orphan drug tax credits 4.60% 3.20%
Expiration of NOLs/Credits (4.00%) (13.50%)
Permanent adjustments and other (0.60%) (1.10%)
Change in valuation allowance (29.80%) (19.30%)
Effective income tax rate 0.00% 0.00%
v3.20.1
Debt - Schedule of Debt (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Debt Disclosure [Abstract]    
Debt, current   $ 6,920
Debt issue costs, current   (36)
Debt, current portion net of issuance costs $ 0 6,884
Debt, long-term   28,696
Debt issue costs, long-term   (96)
Debt, net of current portion and issuance costs $ 0 $ 28,600
v3.20.1
Stock Plans and Stock-Based Compensation - Summary of Activity (Details) - USD ($)
$ / shares in Units, $ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Number of Options    
Outstanding (beginning balance) (in shares) 3,714,394  
Granted (in shares) 4,033,365  
Exercised (in shares) 0  
Canceled (in shares) (1,589,733)  
Outstanding (ending balance) (in shares) 6,158,026 3,714,394
Exercisable (in shares) 1,561,926  
Vested and unvested expected to vest (in shares) 5,540,023  
Share-based Compensation Arrangement by Share-based Payment Award, Options, Outstanding, Weighted Average Exercise Price [Abstract]    
Outstanding (beginning balance) (in dollars per share) $ 7.68  
Granted (in dollars per share) 1.30  
Exercised (in dollars per share) 0.00  
Canceled (in dollars per share) 7.97  
Outstanding (ending balance) (in dollars per share) 3.43 $ 7.68
Exercisable (in dollars per share) 8.44  
Vested and unvested expected to vest (in dollars per share) $ 3.64  
Weighted Average Remaining Contractual Life and Aggregate Intrinsic Value    
Outstanding 8 years 4 months 6 years 4 months 17 days
Exercisable 6 years 5 months 19 days  
Vested and unvested expected to vest 8 years 3 months  
Outstanding $ 1,657  
Exercisable 26  
Vested and unvested expected to vest $ 1,451  
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]    
Awarded (in shares) 575,500  
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]    
Awarded (dollars per share) $ 1.97  
Restricted Stock    
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Number of Shares [Roll Forward]    
Outstanding, beginning of period (in shares) 226,250  
Awarded (in shares) 0  
Vested (in shares) (195,313)  
Forfeited (in shares) 0  
Outstanding, end of period (in shares) 30,937 226,250
Share-based Compensation Arrangement by Share-based Payment Award, Equity Instruments Other than Options, Nonvested, Weighted Average Grant Date Fair Value [Abstract]    
Outstanding, beginning of period (dollars per share) $ 3.45  
Awarded (dollars per share) 0.00  
Vested (dollars per share) 3.45  
Forfeited (dollars per share) 0.00  
Outstanding, end of period (dollars per share) $ 3.45 $ 3.45
v3.20.1
Summary of Significant Accounting Policies - Antidilutive Securities (Details) - shares
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Total antidilutive securities (in shares) 6,158,026 3,714,394
Stock options outstanding    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Total antidilutive securities (in shares) 6,158,026 3,714,394
v3.20.1
Selected Quarterly Financial Data (Unaudited) (Tables)
12 Months Ended
Dec. 31, 2019
Quarterly Financial Information Disclosure [Abstract]  
Summary of Quarterly Financial Data
The following are selected quarterly financial data for the years ended December 31, 2019 and 2018:
 
Quarter Ended
 
March 31,
2019
 
June 30,
2019
 
September 30,
2019
 
December 31, 2019
Revenues
$
1,767

 
$
2,094

 
$
2,856

 
$
3,287

Loss from operations
(5,558
)
 
(6,141
)
 
(5,323
)
 
(7,334
)
Net loss
(9,884
)
 
(7,213
)
 
(6,436
)
 
(8,609
)
Net loss per common share (basic and diluted)
$
(0.30
)
 
$
(0.22
)
 
$
(0.19
)
 
$
(0.26
)
Weighted average common shares (basic and diluted)
33,150,869

 
33,154,566

 
33,202,871

 
33,209,217

 
Quarter Ended
 
March 31,
2018
 
June 30,
2018
 
September 30,
2018
 
December 31, 2018
Revenues
$
2,468

 
$
2,358

 
$
2,847

 
$
2,755

Loss from operations
(9,908
)
 
(7,860
)
 
(6,417
)
 
(5,148
)
Net loss
(10,747
)
 
(8,664
)
 
(7,223
)
 
(5,941
)
Net loss per common share (basic and diluted)
$
(0.33
)
 
$
(0.26
)
 
$
(0.22
)
 
$
(0.18
)
Weighted average common shares (basic and diluted)
33,053,702

 
33,135,391

 
33,161,592

 
33,121,666

v3.20.1
Liability Related to the Sale of Future Royalties (Tables)
12 Months Ended
Dec. 31, 2019
Nonmonetary Transactions [Abstract]  
Schedule of Liability Due to Non-Cash Transaction
The following table shows the activity with respect to the liability related to the sale of future royalties during the year ended December 31, 2019:
Liability related to sale of future royalties at March 22, 2019
$
65,000

Issuance costs capitalized
(584
)
Imputed interest expense recognized
4,055

Less: Payments made to Oberland Capital, LLC
(5,994
)
Carrying value of liability related to sale of future royalties at December 31, 2019
$
62,477

v3.20.1
Accrued Liabilities
12 Months Ended
Dec. 31, 2019
Other Liabilities Disclosure [Abstract]  
Accrued Liabilities
Accrued Liabilities
Accrued liabilities consist of the following:
 
December 31,
 
2019
 
2018
Accrued compensation
$
1,413

 
$
2,774

Professional fees
289

 
233

Accrued interest on debt (see Note 11)

 
165

Other
208

 
285

Total
$
1,910

 
$
3,457

v3.20.1
Research and Development Collaborations
12 Months Ended
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Research and Development Collaborations
Research and Development Collaborations
(a)
Genentech
In June 2003, the Company licensed its proprietary Hedgehog pathway technologies to Genentech for human therapeutic use. The primary focus of the collaborative research plan has been to develop molecules that inhibit the Hedgehog pathway for the treatment of various cancers. The collaboration is currently focused on the development of Erivedge, which is being commercialized by Genentech in the U.S. and by Genentech's parent company, Roche, in several other countries for the treatment of advanced BCC. Pursuant to the agreement, the Company is eligible to receive up to an aggregate of $115.0 million in contingent cash milestone payments, exclusive of royalty payments, in connection with the development of Erivedge or another small molecule Hedgehog pathway inhibitor, assuming the successful achievement by Genentech and Roche of specified clinical development and regulatory objectives. Of this amount, the Company has received $59.0 million in cash milestone payments as of December 31, 2019.
In addition to these payments and pursuant to the collaboration agreement, the Company, is entitled to a royalty on net sales of Erivedge that ranges from 5% to 7.5%. The royalty rate applicable to Erivedge may be decreased by 2% on a country-by-country basis in certain specified circumstances, including when a competing product that binds to the same molecular target as Erivedge is approved by the applicable regulatory authority in another country and is being sold in such country, by a third-party for use in the same indication as Erivedge, or, when there is no issued intellectual property covering Erivedge in a territory in which sales are recorded. In 2016, the FDA and the European Medicine Agency’s Committee for Medicinal Products for Human Use, approved another Hedgehog signaling pathway inhibitor, Odomzo® (sonidegib), which is marketed by Sun Pharmaceutical Industries Ltd., for use in locally advanced BCC. Beginning in the fourth quarter of 2015, Genentech applied the 2% royalty reduction on U.S. sales of Erivedge as a result of the first commercial sale of Odomzo in the U.S. and the Company anticipates that Genentech will reduce by 2% royalties on net sales of Erivedge outside of the United States on a country-by-country basis to the extent that sonidegib is approved by the applicable country's regulatory authority and is being sold in such country. However, pursuant to the Oberland Purchase Agreement, the Company has retained its rights with respect to the 2% of royalties that are subject to such reduction in countries where such reduction has not occurred, subject to the terms and conditions of the Oberland Purchase Agreement (the “Retained Royalty Amounts”).
In March 2017, the Company and Curis Royalty entered into a credit agreement with HealthCare Royalty Partners III, L.P. (“HealthCare Royalty”) for the purpose of refinancing and terminating the loan from BioPharma-II. Accordingly, HealthCare Royalty made a $45.0 million loan at an annual interest rate of 9.95% to Curis Royalty, which was used in part to pay off $18.4million in remaining loan obligations to BioPharma-II under the prior loan with the residual proceeds of $26.6 million distributed to the Company as sole equity member of Curis Royalty. The final maturity date of the loan was the earlier of such date that the principal is paid in full, or Curis Royalty's right to receive royalties under the collaboration agreement with Genentech is terminated. On March 22, 2019, the Company and Curis Royalty terminated, and repaid in full all amounts outstanding under, the loan with HealthCare Royalty.
The Company has identified the following performance obligations related to the Genentech collaboration:
1.To grant the license for its Hedgehog antagonist programs and to provide service on both a steering committee and co-development steering committee. This performance obligation has been satisfied and only contingent royalty revenue remains to be recognized in the future.
2.To provide reimbursable research and development services. This performance obligation has been satisfied and no revenue remains to be recognized in the future.
The Company recognized $10.4 million in royalty revenues under the Genentech collaboration during the years ended December 31, 2019 and 2018. The Company also recorded $0.5 million and $0.6 million, respectively, as cost of royalty revenues within the costs and expenses section of its consolidated statements of operations and comprehensive loss during these same periods. Cost of royalty revenues is comprised of the 5% of the royalties earned by Curis Royalty with respect to Erivedge outside Australia, and 5% direct net sales in Australia (subject to decrease on expiration of the patent in April 2019 to 5% of the royalty payments that Curis Royalty receives from Genentech, through February 2022), that the Company is obligated to pay to university licensors.
As further discussed in Note 8, a portion of royalty revenues received from Genentech on net sales of Erivedge will be paid to the Purchasers pursuant to the Oberland Purchase Agreement. The Company recorded research and development revenues of $0.1 million during the years ended December 31, 2019 and 2018, respectively, related to expenses incurred by the Company on behalf of Genentech that were paid by the Company and for which Genentech is obligated to reimburse the Company.
Genentech incurred expenses of $0.2 million and $0.1 million, respectively, under this collaboration for which the Company is obligated to reimburse to Genentech, and which the Company has recorded as contra-revenues which have been net against research and development revenues in its consolidated statements of operations and comprehensive loss. The Company will continue to recognize revenue for expense reimbursement as such reimbursable expenses are incurred, provided that the provisions of the ASC 606 are met.
The Company has recorded as amounts receivable from Genentech under this collaboration, comprised primarily of Erivedge royalties earned in the fourth quarters of 2019 and 2018 of $3.2 million and $2.9 million as of December 31, 2019 and 2018, respectively, in “accounts receivable” in the Company's current assets section of its consolidated balance sheets.
(b)
Aurigene
In January 2015, the Company entered into an exclusive collaboration agreement with Aurigene for the discovery, development and commercialization of small molecule compounds in the areas of immuno-oncology and selected precision oncology targets. Under the collaboration agreement, Aurigene granted the Company an option to obtain exclusive, royalty-bearing licenses to relevant Aurigene technology to develop, manufacture and commercialize products containing certain of such compounds anywhere in the world, except for India and Russia, which are territories retained by Aurigene.
In connection with the collaboration agreement, the Company issued to Aurigene 3,424,026 shares of its common stock valued at $24.3 million in partial consideration for the rights granted to the Company under the collaboration agreement, which the Company recognized as expense during the year ended December 31, 2015. The shares were issued pursuant to a stock purchase agreement with Aurigene dated January 18, 2015.
In September 2016, the Company and Aurigene entered into an amendment to the collaboration agreement. Under the terms of the amendment, in exchange for the issuance by the Company to Aurigene of 2,041,666 shares of its common stock, Aurigene waived payment of up to a total of $24.5 million in potential milestones and other payments associated with the first four programs in the collaboration that may have become due from the Company under the collaboration agreement. To the extent any of these waived milestones or other payments are not payable by the Company, for example in the event one or more of the milestone events do not occur, the Company will have the right to deduct the unused waived amount from any one or more of the milestone payment obligations tied to achievement of commercial milestone events. The amendment also provides that, in the event supplemental program activities are performed by Aurigene, the Company will provide up to $2.0 million of additional funding for each of the third and fourth licensed program. The shares were issued pursuant to a stock purchase agreement with Aurigene dated September 7, 2016.
In February 2020, the Company and Aurigene further amended their collaboration agreement. Under the terms of the amended agreement, Aurigene will fund and conduct a Phase 2b/3 randomized study evaluating CA-170, in combination with chemoradiation, in approximately 240 patients with non-squamous non-small cell lung cancer (nsNSCLC). In turn, Aurigene receives rights to develop and commercialize CA-170 in Asia, in addition to its existing rights in India and Russia, based on the terms of the original agreement. The Company retains U.S., European Union, and rest of world rights to CA-170, and is entitled to receive royalty payments on potential future sales of CA-170 in Asia at percentage rates ranging from the high single digits up to 10% subject to specified reductions.
As of December 31, 2019, the Company has exercised its option to license the following four programs under the collaboration:
1.
IRAK4 Program - a precision oncology program of small molecule inhibitors of IRAK4. The development candidate is CA-4948, an orally available small molecule inhibitor of IRAK4.
2.
PD1/VISTA Program - an immuno-oncology program of small molecule antagonists of PD1 and VISTA immune checkpoint pathways. The development candidate is CA-170, an orally available small molecule antagonist of VISTA and PDL1.
3.
PD1/TIM3 Program - an immuno-oncology program of small molecule antagonists of PD1 and TIM3 immune checkpoint pathways. The development candidate is CA-327, an orally available small molecule antagonist of PDL1 and TIM3.
4.
In March 2018, the Company exercised its option to license a fourth program, which is an immuno-oncology program.
For each of the licensed programs (as described above) the Company is obligated to use commercially reasonable efforts to develop, obtain regulatory approval for, and commercialize at least one product in each of the U.S., specified countries in the European Union and Japan, and Aurigene is obligated to use commercially reasonable efforts to perform its obligations under the development plan for such licensed program in an expeditious manner.
Subject to specified exceptions, Aurigene and the Company agreed to collaborate exclusively with each other on the discovery, research, development and commercialization of programs and compounds within immuno-oncology for an initial period of approximately two years from the effective date of the collaboration agreement. At the Company’s option, and subject to specified conditions, it may extend such exclusivity for up to three additional one-year periods by paying to Aurigene additional exclusivity option fees on an annual basis. The Company exercised the first one-year exclusivity option in the first quarter of 2017. The fee for this exclusivity option exercise was $7.5 million, which the Company paid in two equal installments in the first and third quarters of 2017. The Company has elected not to further exercise its exclusivity option and thus did not make the $10.0 million payment required for this additional exclusivity in 2018. As a result of the Company’s election to not further exercise its exclusivity option, the Company is no longer operating under broad immuno-oncology exclusivity with Aurigene. The Company has, however, as provided in the agreement, elected to exercise its option to extend exclusivity on a program-by-program, year-by-year, basis for the IRAK4 Program and the PD1/VISTA Program, both of the licensed programs currently in clinical trials.
Since January 2015, the Company has paid $14.5 million in research payments and has waived $19.5 million in milestone payments under the terms of the 2016 amendment.
For each of the IRAK4, PD1/VISTA, PD1/TIM3 programs, and the fourth immuno-oncology program, the Company has remaining unpaid or unwaived payment obligations of $42.5 million per program, related to regulatory approval and commercial sales milestones, plus specified additional payments for approvals for additional indications, if any.
In addition to the collaboration agreement, in June 2017, the Company entered into a master development and manufacturing agreement with Aurigene for the supply of drug substance and drug product, under which it has made cash payments to Aurigene of $1.4 million in 2019 and $0.6 million in 2018.
(c)
ImmuNext
In January 2020, the Company entered into an option and license agreement with ImmuNext. Under the terms of the agreement, the Company has agreed to collaborate with ImmuNext and the Company has agreed to conduct, at its own cost, a Phase 1a/1b clinical trial of an ImmuNext compound that antagonizes VISTA. In exchange, ImmuNext has granted Curis an exclusive option period to obtain an exclusive, worldwide license to develop and commercialize certain VISTA antagonizing compounds and products containing these compounds in the field of oncology. (see Note 17)
v3.20.1
Selected Quarterly Financial Data (Unaudited)
12 Months Ended
Dec. 31, 2019
Quarterly Financial Information Disclosure [Abstract]  
Selected Quarterly Financial Data (Unaudited)
Selected Quarterly Financial Data (Unaudited)
The following are selected quarterly financial data for the years ended December 31, 2019 and 2018:
 
Quarter Ended
 
March 31,
2019
 
June 30,
2019
 
September 30,
2019
 
December 31, 2019
Revenues
$
1,767

 
$
2,094

 
$
2,856

 
$
3,287

Loss from operations
(5,558
)
 
(6,141
)
 
(5,323
)
 
(7,334
)
Net loss
(9,884
)
 
(7,213
)
 
(6,436
)
 
(8,609
)
Net loss per common share (basic and diluted)
$
(0.30
)
 
$
(0.22
)
 
$
(0.19
)
 
$
(0.26
)
Weighted average common shares (basic and diluted)
33,150,869

 
33,154,566

 
33,202,871

 
33,209,217

 
Quarter Ended
 
March 31,
2018
 
June 30,
2018
 
September 30,
2018
 
December 31, 2018
Revenues
$
2,468

 
$
2,358

 
$
2,847

 
$
2,755

Loss from operations
(9,908
)
 
(7,860
)
 
(6,417
)
 
(5,148
)
Net loss
(10,747
)
 
(8,664
)
 
(7,223
)
 
(5,941
)
Net loss per common share (basic and diluted)
$
(0.33
)
 
$
(0.26
)
 
$
(0.22
)
 
$
(0.18
)
Weighted average common shares (basic and diluted)
33,053,702

 
33,135,391

 
33,161,592

 
33,121,666

v3.20.1
Fair Value of Financial Instruments (Tables)
12 Months Ended
Dec. 31, 2019
Fair Value Disclosures [Abstract]  
Schedule of Financial Assets and Liabilities Measured at Fair Value on a Recurring Basis
In accordance with the fair value hierarchy, the following table shows the fair value as of December 31, 2019 and 2018 of those financial assets and liabilities that are measured at fair value on a recurring basis, according to the valuation techniques the Company used to determine their fair value. No financial assets or liabilities are measured at fair value on a nonrecurring basis at December 31, 2019 and 2018.
 
Quoted Prices in
Active Markets
(Level 1)
 
Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Fair Value
 
(in thousands)
As of December 31, 2019
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
10,684

 
$

 
$

 
$
10,684

US government obligations

 
550

 

 
550

Commercial paper

 
300

 

 
300

Municipal bonds

 
90

 

 
90

Short-term investments:
 
 
 
 
 
 
 
Corporate commercial paper, bonds and notes

 
5,113

 

 
5,113

Total assets at fair value
$
10,684

 
$
6,053

 
$

 
$
16,737

 
Quoted Prices in
Active Markets
(Level 1)
 
Other
Observable
Inputs
(Level 2)
 
Unobservable
Inputs
(Level 3)
 
Fair Value
 
(in thousands)
As of December 31, 2018
 
 
 
 
 
 
 
Cash equivalents:
 
 
 
 
 
 
 
Money market funds
$
18,180

 
$

 
$

 
$
18,180

Corporate commercial paper, stock, bonds and notes

 
2,199

 

 
2,199

Municipal bonds

 
135

 

 
135

Short-term investments:
 
 
 
 
 
 
 
Corporate commercial paper, stock, bonds and notes

 
634

 

 
634

Total assets at fair value
$
18,180

 
$
2,968

 
$

 
$
21,148

v3.20.1
Leases and Commitments - Lease Payments (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Future Lease Payments (Topic 842)    
2020 $ 168  
2021 0  
2022 0  
2023 0  
2024 0  
Thereafter 0  
Total lease payments 168  
Less: interest 2  
Present value of operating lease liabilities $ 166  
Future Lease Payments (Topic 840)    
2019   $ 1,002
2020   168
Total minimum payments   $ 1,170
v3.20.1
Property and Equipment, Net - Narrative (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Property, Plant and Equipment [Abstract]    
Depreciation and amortization expense $ 125 $ 177
v3.20.1
Stock Plans and Stock-Based Compensation - Compensation Expense Allocation (Details) - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]    
Total stock-based compensation expense $ 2,658 $ 3,940
Research and development expenses    
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]    
Total stock-based compensation expense 575 1,310
General and administrative expenses    
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]    
Total stock-based compensation expense $ 2,083 $ 2,630
v3.20.1
Subsequent Events - ImmuNext Agreement (Details) - ImmuNext - Subsequent Event
Jan. 06, 2020
USD ($)
Subsequent Event [Line Items]  
Upfront payment $ 1,300,000
Royalty payment obligations expiration period (years) 10 years
Semi-annual maintenance fee payment $ 400,000
Maximum  
Subsequent Event [Line Items]  
Option exercise fee 20,000,000
Potential development milestone payments 4,600,000
Potential regulatory approval milestone payments 84,300,000
Potential sales milestone payments 125,000,000
Reimbursable expenses $ 300,000
v3.20.1
Research and Development Collaborations (Details)
1 Months Ended 3 Months Ended 12 Months Ended
Mar. 06, 2017
USD ($)
Sep. 07, 2016
USD ($)
shares
Apr. 30, 2019
Mar. 31, 2017
USD ($)
Sep. 30, 2016
program
Jan. 31, 2015
USD ($)
product
payment
term
Jun. 30, 2003
USD ($)
Dec. 31, 2019
USD ($)
Sep. 30, 2019
USD ($)
Jun. 30, 2019
USD ($)
Mar. 31, 2019
USD ($)
Dec. 31, 2018
USD ($)
Sep. 30, 2018
USD ($)
Jun. 30, 2018
USD ($)
Mar. 31, 2018
USD ($)
Dec. 31, 2019
USD ($)
program
Dec. 31, 2018
USD ($)
Dec. 31, 2015
USD ($)
shares
Feb. 29, 2020
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                                      
Residual proceeds $ 26,600,000     $ 26,600,000                              
Revenues               $ 3,287,000 $ 2,856,000 $ 2,094,000 $ 1,767,000 $ 2,755,000 $ 2,847,000 $ 2,358,000 $ 2,468,000 $ 10,004,000 $ 10,428,000    
Cost of royalty revenues                               503,000 563,000    
Accounts receivable               3,244,000       2,864,000       3,244,000 2,864,000    
Value of shares of common stock issued               332,000       332,000       $ 332,000 332,000    
Number of programs licensed | program         4                     4      
Number of optional additional terms | term           3                          
Optional additional term           1 year                          
Option fees           $ 7,500,000                          
Number of payments | payment           2                          
Exclusivity payment                               $ 10,000,000      
Research and Development, Net                                      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                                      
Revenues                               100,000 100,000    
Genentech, Inc.                                      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                                      
Amount received for specified clinical development and regulatory objectives               59,000,000               59,000,000      
Percentage of royalty rate decrease             2.00%                        
Cost of royalty revenues                               $ 500,000 600,000    
Cost and expenses of percentage of aggregate royalty earned                               5.00%      
Subject to a decreased percentage of royalties on expiration of patent     5.00%                                
Accounts receivable               3,200,000       $ 2,900,000       $ 3,200,000 2,900,000    
Genentech, Inc. | Gross Royalty Revenue                                      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                                      
Revenues                               $ 10,400,000      
Genentech, Inc. | Australia                                      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                                      
Percentage of direct net sales                               5.00%      
Genentech, Inc. | Maximum                                      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                                      
Eligible to receive contingent cash milestone payments (up to)             $ 115,000,000                        
Percentage of royalty on net sales             7.50%                        
Genentech, Inc. | Minimum                                      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                                      
Percentage of royalty on net sales             5.00%                        
Aurigene Discovery Technologies Limited                                      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                                      
Stock issued for collaboration agreement (shares) | shares                                   3,424,026.2  
Value of shares of common stock issued                                   $ 24,300,000  
Shares issued of common stock in exchange for waived payment (in shares) | shares   2,041,666                                  
Waived payment of milestone and other payments (up to)   $ 24,500,000                                  
Number of products required to commercialize (at least) | product           1                          
Collaboration agreement period           2 years                          
Milestone payments waived               19,500,000               $ 19,500,000      
Aurigene Discovery Technologies Limited | Third and Fourth Programs                                      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                                      
Additional funding   $ 2,000,000                                  
Payments for collaborative arrangements               $ 14,500,000               14,500,000      
Aurigene Discovery Technologies Limited | IRAK4, PD1/VISTA,PD1/TIM3 Program                                      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                                      
Waived payment of milestone and other payments (up to)                               42,500,000      
Aurigene Discovery Technologies Limited | Master Development and Manufacturing Agreement                                      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                                      
Collaboration agreement payment                               1,400,000 600,000    
Curis Royalty, LLC | HealthCare Royalty Partners III, L.P.                                      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                                      
Principal loan amount       $ 45,000,000                              
Interest rate on loan       9.95%                              
Curis Royalty, LLC | BioPharma-II                                      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                                      
Remaining loan obligation       $ 18,400,000                              
Genentech, Inc.                                      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                                      
Research and development collaboration expense                               $ 200,000 $ 100,000    
Subsequent Event | Aurigene Discovery Technologies Limited | Maximum                                      
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                                      
Royalty fees receivable (as a percent)                                     10.00%
v3.20.1
Stock Plans and Stock-Based Compensation - Narrative (Details)
1 Months Ended 12 Months Ended
May 23, 2019
shares
May 29, 2018
Jun. 30, 2018
shares
Dec. 31, 2019
USD ($)
purchase_period
plan
$ / shares
shares
Dec. 31, 2018
USD ($)
$ / shares
shares
Dec. 31, 2017
purchase_period
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Number of shareholder-approved, share-based compensation plans | plan       2    
Stock split ratio   0.2        
Granted (in shares)       4,033,365    
Awarded (dollars per share) | $ / shares       $ 1.97    
Awarded (in shares)       575,500    
Weighted average grant-date fair values of stock options (in dollars per share) | $ / shares       $ 0.85 $ 1.46  
Unrecognized compensation cost, including impact of estimated forfeitures | $       $ 3,400,000    
Weighted average period of when compensation expense is expected to be recognized       2 years 5 months    
Intrinsic values of employee stock options exercised | $       $ 0 $ 0  
Amount of stock-based compensation expense recorded | $       2,658,000 3,940,000  
Fair values of vested stock options | $       2,000,000 4,700,000  
Income tax benefit | $       $ 0 0  
Tranche one            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Percentage of vested shares which are exercisable under stock option       25.00%    
Tranche two            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Percentage of vested shares which are exercisable under stock option       6.25%    
Amended and Restated 2010 Stock Incentive Plan            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Number of shares available for issue (up to)       10,890,000    
Period of time options are exercisable       10 years    
Number of shares under award to be removed from share pool       5,281,115    
Amended and Restated 2010 Stock Incentive Plan | Maximum            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Price charged for award based on fair market value percentage (less than)       100.00%    
2010 Plan            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Additional shares authorized under the plan (in shares)     2,390,000      
Granted (in shares)       2,737,865    
2010 Plan | Non-Employee Directors            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Granted (in shares)       720,000    
Vesting period (years)       1 year    
Awarded (dollars per share) | $ / shares       $ 1.16    
2010 Plan | Tranche one            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Percentage of vested shares which are exercisable under stock option       25.00%    
2010 Plan | Tranche two            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Percentage of vested shares which are exercisable under stock option       6.25%    
2010 Employee Stock Purchase Plan            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Shares issued under ESPP (in shares)       521,903    
Shares issued under ESPP during period (in shares)       91,013    
Shares available for future purchase under ESPP (in shares)       1,677,934    
Employee Stock Purchase Plan | Amended and Restated 2010 Stock Incentive Plan            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Additional shares authorized under the plan (in shares) 4,700,000          
Employee Stock Purchase Plan | 2010 Employee Stock Purchase Plan            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Price charged for award based on fair market value percentage (less than)       85.00%    
Shares available under plan (in shares)       2,000,000    
Enrollment period       2 years    
Number of purchase periods per year | purchase_period       4   2
Term of purchase periods       6 months   6 months
Amount of stock-based compensation expense recorded | $       $ 49,000 $ 173,000  
Stock Options, or Stock Appreciation Rights | Amended and Restated 2010 Stock Incentive Plan            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Shares removed from available share pool (per share)       1    
Restricted Stock, RSUs, Other Stock-Based Awards, or Performance Awards | Amended and Restated 2010 Stock Incentive Plan            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Shares removed from available share pool (per share)       1.3    
Restricted Stock            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Awarded (dollars per share) | $ / shares       $ 0.00    
Awarded (in shares)       0    
Outstanding RSAs expect to vest (in shares)       30,937 226,250  
Weighted average fair value (dollars per share) | $ / shares       $ 3.45 $ 3.45  
Aggregate fair value | $       $ 100,000    
Restricted Stock | Officers            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Vesting period (years)       4 years    
Awarded (in shares)       30,937    
Restricted Stock | Officers and Non-Employee Directors            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Unrecognized compensation cost, including impact of estimated forfeitures | $       $ 100,000    
Weighted average period of when compensation expense is expected to be recognized       2 years 21 days    
Restricted Stock | Tranche two | Officers            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Percentage of vested shares which are exercisable under stock option       25.00%    
Employee Stock Option            
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]            
Amount of stock-based compensation expense recorded | $       $ 2,700,000 $ 3,900,000  
v3.20.1
Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Cash Flows from Operating Activities:    
Net loss $ (32,141) $ (32,575)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation and amortization 125 177
Non-cash lease expense 956 0
Stock-based compensation expense 2,658 3,940
Amortization of debt issuance costs 8 35
Non-cash imputed interest expense related to the sale of future royalties 287 0
Non-cash interest income on investments (64) (147)
Loss on extinguishment of debt 3,495 0
Loss on disposal of fixed assets 29 7
Changes in operating assets and liabilities:    
Accounts receivable (380) 209
Prepaid expenses and other assets (237) 162
Accounts payable and accrued and other liabilities 60 (1,873)
Operating lease liability (1,001) 0
Total adjustments 5,936 2,510
Net cash used in operating activities (26,205) (30,065)
Cash flows from investing activities:    
Purchases of investments (11,465) (26,741)
Sales and maturities of investments 7,050 48,200
Purchases of property and equipment (41) (85)
Net cash (used in) provided by investing activities (4,456) 21,374
Cash flows from financing activities:    
Proceeds from royalty interest purchase agreement with Oberland Capital Management, LLC 65,000 0
Payment of transaction costs on royalty interest purchase agreement (584) 0
Proceeds from issuance of common stock under the Company’s stock-based compensation plans 68 143
Payment of liability of future royalties, net of imputed interest (2,226) 0
Payment on termination of credit agreement with HealthCare Royalty Partners, III, L.P. (37,162) 0
Payments made on Curis Royalty’s debt (1,825) (6,104)
Net cash provided by (used in) financing activities 23,271 (5,961)
Net (decrease) increase in cash and cash equivalents and restricted cash (7,390) (14,652)
Cash and cash equivalents and restricted cash, beginning of period 23,789 38,441
Cash and cash equivalents and restricted cash, end of period 16,399 23,789
Supplemental cash flow data:    
Cash paid for interest $ 4,716 $ 3,919
v3.20.1
Consolidated Balance Sheets - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Current assets:    
Cash and cash equivalents $ 15,430 $ 23,636
Restricted cash 153  
Investments 5,113 634
Accounts receivable 3,244 2,864
Prepaid expenses and other current assets 1,063 827
Total current assets 25,003 27,961
Property and equipment, net 154 267
Restricted cash 816 153
Operating lease right-of-use asset 149  
Goodwill 8,982 8,982
Other assets 3 2
Total assets 35,107 37,365
Current liabilities:    
Accounts payable 4,465 2,909
Accrued liabilities 1,910 3,457
Operating lease liability 166  
Current portion of long-term debt, net 0 6,884
Total current liabilities 6,541 13,250
Long-term debt, net 0 28,600
Liability related to the sale of future royalties, net 62,477 0
Other long-term liabilities 0 11
Total liabilities 69,018 41,861
Stockholders’ deficit:    
Common stock, $0.01 par value—101,250,000 shares authorized, 33,241,793 shares issued and outstanding at December 31, 2019; 67,500,000 shares authorized, 33,159,253 shares issued and outstanding at December 31, 2018 332 332
Additional paid-in capital 982,738 980,012
Accumulated deficit (1,016,981) (984,840)
Total stockholders’ deficit (33,911) (4,496)
Total liabilities and stockholders’ deficit $ 35,107 $ 37,365
v3.20.1
Common Stock
12 Months Ended
Dec. 31, 2019
Equity [Abstract]  
Common Stock
Common Stock
(a)
Reverse Stock Split
On May 29, 2018 (the “Effective Date”), the Company filed a Certificate of Amendment to the Company’s Restated Certificate of Incorporation with the Secretary of State of the State of Delaware (the “Certificate of Amendment”), which effected, as of 5:00 p.m. Eastern Time on the Effective Date, a 1-for-5 reverse stock split (the “Reverse Stock Split”) of the Company’s issued and outstanding common stock, $0.01 par value per share (the “Common Stock”).
As a result of the Reverse Stock Split, every five shares of Common Stock issued and outstanding was converted into one share of Common Stock. No fractional shares were issued in connection with the Reverse Stock Split. Stockholders who would have otherwise been entitled to a fractional share of Common Stock were instead entitled to receive a proportional cash payment.
The Reverse Stock Split proportionately reduced the number of authorized shares of Common Stock. The Reverse Stock Split did not change the par value of the Common Stock or the authorized number of shares of preferred stock of the Company. All outstanding stock options were adjusted as a result of the Reverse Stock Split, as required by the terms of such stock options.
(b)
Treasury Stock Retirement
Since 2002, the Company has repurchased 244,569 shares of common stock at a total cost of $1.5 million. The shares were repurchased through a combination of a repurchase program of up to $3.0 million approved by the Company's board of directors in 2002 and through employee purchases of common stock upon the exercise of stock options by remittance of shares of Company stock. The Company accounts for its common stock repurchases as treasury stock under the cost method.
In March 2018, the Company retired all 244,569 shares of common stock at a total cost of $1.5 million. This was a non-cash transaction and thus only affected the classifications within the stockholders' equity section of the Company's consolidated balance sheet.
(c)
2015 Sales Agreement with Cowen
On July 2, 2015, the Company entered into a sales agreement with Cowen, pursuant to which the Company could sell from time to time up to $30.0 million of the Company’s common stock through an “at-the-market” equity offering program under which Cowen was to act as sales agent. Subject to the terms and conditions of the sales agreement, Cowen could sell the common stock by methods deemed to be an “at-the-market” offering as defined in Rule 415 promulgated under the Securities Act of 1933, as amended, including sales made directly on the Nasdaq Global Market, on any other existing trading market for the common stock or to or through a market maker other than on an exchange. In addition, with the Company’s prior written approval, Cowen could also sell the common stock by any other method permitted by law, including in negotiated transactions. Pursuant to the terms of the agreement, the aggregate compensation payable to Cowen was 3% of the gross sales price of the common stock sold by Cowen pursuant to the sales agreement. Each party agreed in the sales agreement to provide indemnification and contribution against certain liabilities, including liabilities under the Securities Act, subject to the terms of the sales agreement. The Company did not sell shares of common stock under this sales agreement during the year ended December 31, 2019. The Company sold 420,796 shares of common stock under this sales agreement for net proceeds of $6.2 million during the year ended December 31, 2018.
The shares sold under the sales agreement prior to May 3, 2018 were issued and sold pursuant to the universal shelf registration statement on Form S-3, filed with the Securities and Exchange Commission on July 2, 2015, and any shares sold under the sales agreement after such date were issued and sold pursuant to the currently effective universal shelf registration statement on Form S-3, filed with the Securities and Exchange Commission on May 3, 2018. As of December 31, 2019, the Company sold an aggregate of 420,796 shares of common stock pursuant to this sales agreement, for net proceeds of $6.2 million.
In connection with entering in a new sales agreement with JonesTrading Institutional Services LLC, or JonesTrading, the Company terminated its sales agreement with Cowen and the “at-the-market” equity offering program in March 2020, and the program with Cowen is no longer available for use by the Company. Please refer to Note 17.
(d)
2018 Charter Amendment
On May 15, 2018, the Company's stockholders approved an increase to the number of authorized shares of its common stock from 45,000,000 shares to 67,500,000 shares.
(e)
2019 Charter Amendment
On May 23, 2019, the Company's stockholders approved an increase to the number of authorized shares of its common stock from 67,500,000 shares to 101,250,000 shares.
v3.20.1
Investments
12 Months Ended
Dec. 31, 2019
Investments, Debt and Equity Securities [Abstract]  
Investments
Investments
The amortized cost, unrealized gains and losses and fair value of investments available-for-sale as of December 31, 2019 are as follows:
 
Amortized
Cost
 
Unrealized
Gain
 
Unrealized
Loss
 
Fair Value
Corporate bonds and notes—short-term
$
5,113

 
$

 
$

 
$
5,113

Total investments
$
5,113

 
$

 
$

 
$
5,113


Short-term investments have maturities ranging from one to twelve months with a weighted average maturity of 0.1 years at December 31, 2019.
The amortized cost, unrealized gains and losses and fair value of investments available-for-sale as of December 31, 2018 are as follows:
 
Amortized
Cost
 
Unrealized
Gain
 
Unrealized
Loss
 
Fair Value
Corporate bonds and notes—short-term
$
634

 
$

 
$

 
$
634

Total investments
$
634

 
$

 
$

 
$
634


Short-term investments have maturities ranging from one and twelve months with a weighted average maturity of 0.1 years at December 31, 2018.
Curis held no securities that were in continuous unrealized loss position for more than 12 months at December 31, 2019 or 2018 respectively.
v3.20.1
Liability Related to the Sale of Future Royalties
12 Months Ended
Dec. 31, 2019
Nonmonetary Transactions [Abstract]  
Liability Related to the Sale of Future Royalties
Liability Related to the Sale of Future Royalties
On March 22, 2019, the Company and Curis Royalty entered into the royalty interest purchase agreement (“Oberland Purchase Agreement”) with entities managed by Oberland Capital Management, LLC (the “Purchasers”). The Company sold to the Purchasers a portion of its rights to receive royalties from Genentech on potential net sales of Erivedge. Concurrently with the closing of the Oberland Purchase Agreement Curis Royalty used a portion of the proceeds to terminate and repay the loan with Healthcare Royalty. (see Note 9)
As upfront consideration for the purchase of the royalty rights, at closing the Purchasers paid to Curis Royalty $65.0 million less certain transaction expenses. Curis Royalty will also be entitled to receive up to approximately $70.7 million in milestone payments based on sales of Erivedge as follows: (i) $17.2 million if the Purchasers and Curis Royalty receive aggregate royalty payments pursuant to the Oberland Purchase Agreement in excess of $18.0 million during the calendar year 2021, subject to certain exceptions and (ii) $53.5 million if the Purchasers receive payments pursuant to the Oberland Purchase Agreement in excess of $117.0 million on or prior to December 31, 2026.
The Oberland Purchase Agreement provides that after the occurrence of an event of default as defined under the security agreement by Curis Royalty, the Purchasers shall have the option, for a period of 180 days, to require Curis Royalty to repurchase a portion of certain royalty and royalty related payments, excluding a portion of non-U.S. royalties retained by Curis Royalty, referred to as the Purchased Receivables, at a price, referred to as the Put/Call Price, equal to a percentage, beginning at a low triple digit percentage and increasing over time up to a low mid triple digit percentage of the sum of the upfront purchase price and any portion of the milestone payments paid in a lump sum by the Purchasers, if any, minus certain payments previously received by the Purchasers with respect to the Purchased Receivables. Additionally, Curis Royalty shall have the option at any time to repurchase the Purchased Receivables at the Put/Call Price as of the date of such repurchase.
As a result of the obligation to pay future royalties to Oberland, the Company recorded the proceeds from this transaction as a liability on its Consolidated Balance Sheet that will be accounted for using the interest method over the estimated life of the Oberland Purchase Agreement. As a result, the Company imputes interest on the transaction and records imputed interest expense at the estimated interest rate. The Company's estimate of the interest rate under the agreement is based on the amount of royalty payments expected to be received by Oberland over the life of the arrangement. The Company periodically assesses the expected royalty payments to Curis Royalty from Genentech using a combination of historical results and forecasts from market data sources. To the extent such payments are greater or less than the initial estimates or the timing of such payments is materially different than the original estimates, the Company will adjust the amortization of the liability.
The Company determined the fair value of the liability related to the sale of future royalties at the time of the Oberland Purchase Agreement to be $65.0 million, with a current effective annual imputed interest rate of 8.2%. The Company incurred $0.6 million of transaction costs in connection with the agreement. These transaction costs will be amortized to imputed interest expense over the estimated term of the Oberland Purchase Agreement.
The following table shows the activity with respect to the liability related to the sale of future royalties during the year ended December 31, 2019:
Liability related to sale of future royalties at March 22, 2019
$
65,000

Issuance costs capitalized
(584
)
Imputed interest expense recognized
4,055

Less: Payments made to Oberland Capital, LLC
(5,994
)
Carrying value of liability related to sale of future royalties at December 31, 2019
$
62,477

v3.20.1
Summary of Significant Accounting Policies - Narrative (Details)
12 Months Ended
Dec. 31, 2019
USD ($)
segment
Dec. 31, 2018
USD ($)
Jan. 01, 2019
USD ($)
Dec. 31, 2017
USD ($)
Significant Accounting Policies [Line Items]        
Cash and cash equivalents $ 15,430,000 $ 23,636,000    
Restricted cash 1,000,000 200,000    
Cash and cash equivalents, restricted cash and restricted cash equivalents 16,399,000 23,789,000   $ 38,441,000
Operating lease right-of-use asset 149,000      
Operating lease liability 166,000      
Goodwill $ 8,982,000 8,982,000    
Number of reportable segments | segment 1      
Goodwill impairment charges $ 0 0    
Amount of stock-based compensation expense recorded $ 2,658,000 $ 3,940,000    
Customer concentration risk | Genentech, Inc.        
Significant Accounting Policies [Line Items]        
Total gross revenue 100.00% 100.00%    
Employee Stock Option        
Significant Accounting Policies [Line Items]        
Amount of stock-based compensation expense recorded $ 2,700,000 $ 3,900,000    
Accounting Standards Update 2016-02        
Significant Accounting Policies [Line Items]        
Operating lease right-of-use asset     $ 1,000,000  
Operating lease liability     $ 1,100,000  
v3.20.1
Debt (Tables)
12 Months Ended
Dec. 31, 2019
Debt Disclosure [Abstract]  
Schedule of Debt
he direct costs incurred by the Company as of December 31, 2018 were recorded as contra-debt, which directly reduces the outstanding debt balance on the following table:
 
As of
December 31,
 
2018
Debt, current
$
6,920

Debt issue costs, current
(36
)
Debt, current portion net of issuance costs
$
6,884

Debt, long-term
28,696

Debt issue costs, long-term
(96
)
Debt, net of current portion and issuance costs
$
28,600

v3.20.1
Debt - Narrative (Details) - USD ($)
1 Months Ended 12 Months Ended
Mar. 22, 2019
Mar. 06, 2017
Mar. 31, 2017
Dec. 31, 2019
Dec. 31, 2018
Debt Instrument [Line Items]          
Residual proceeds   $ 26,600,000 $ 26,600,000    
Loss on debt extinguishment       $ 3,495,000 $ 0
Payments on debt       1,825,000 6,104,000
Current portion of long-term debt, net       0 6,884,000
Long-term debt, net       0 28,600,000
Interest expense related to loan       791,000 3,926,000
BioPharma II and HealthCare Royalty Partners III          
Debt Instrument [Line Items]          
Accrued interest on debt         200,000
Total debt issuance costs       0 0
BioPharma II and HealthCare Royalty Partners III | BioPharma-II          
Debt Instrument [Line Items]          
Interest expense related to loan       800,000 3,900,000
HealthCare Royalty Partners III, L.P.          
Debt Instrument [Line Items]          
Repayments of debt, principal $ 33,800,000        
Prepayment fees 3,400,000        
Loss on debt extinguishment $ 100,000        
Curis Royalty, LLC | BioPharma II and HealthCare Royalty Partners III          
Debt Instrument [Line Items]          
Payments on debt       39,900,000 10,000,000
Curis Royalty, LLC | BioPharma II and HealthCare Royalty Partners III | Principal          
Debt Instrument [Line Items]          
Payments on debt       $ 35,600,000 $ 6,100,000
Curis Royalty, LLC | HealthCare Royalty Partners III, L.P.          
Debt Instrument [Line Items]          
Loan received     $ 45,000,000    
Stated interest rate     9.95%    
Curis Inc and Curis Royalty, LLC | HealthCare Royalty Partners III, L.P.          
Debt Instrument [Line Items]          
Loan received   $ 45,000,000.0      
Stated interest rate   9.95%      
Remaining loan obligation   $ 18,400,000      
v3.20.1
Stock Plans and Stock-Based Compensation - Key Assumptions (Details)
12 Months Ended
Dec. 31, 2019
Dec. 31, 2018
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]    
Minimum risk-free interest rate (percent) 1.50% 2.50%
Maximum risk-free interest rate (percent) 2.60% 3.00%
Minimum volatility (percent) 76.00% 66.00%
Maximum volatility (percent) 79.00% 73.00%
Dividends (percent) 0.00% 0.00%
Employees    
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]    
Expected term (years) 5 years 6 months 5 years 6 months
Directors    
Deferred Compensation Arrangement with Individual, Share-based Payments [Line Items]    
Expected term (years) 5 years 6 months  
v3.20.1
Nature of Business
12 Months Ended
Dec. 31, 2019
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Nature of Business
Nature of Business
Curis, Inc. is a biotechnology company focused on the development of first-in-class and innovative therapeutics for the treatment of cancer. Throughout this Annual Report on Form 10-K, Curis, Inc. and our wholly owned subsidiaries are collectively referred to as “the Company,” “Curis,” “we,” “us,” or “our.”
The Company conducts its research and development programs both internally and through strategic collaborations. The Company’s clinical stage drug candidates are CA-4948, CI-8993, and fimepinostat:

CA-4948, which is being tested in a dose escalating clinical trial in patients with non-Hodgkin lymphomas, including those with myeloid differentiation primary response 88, or MYD88, alterations. The Company reported preliminary clinical data from the study in the fourth quarter of 2019. The Company is currently planning to initiate a separate Phase 1 trial for acute myeloid leukemia and myelodysplastic syndromes patients in the first half of 2020.

CI-8993, a monoclonal antibody designed to antagonize the V-domain Ig suppressor of T cell activation (“VISTA”) signaling pathway, which the Company plans to begin clinical testing in a Phase 1a/1b trial in 2020.

Fimepinostat, which is currently being explored in clinical studies in patients with MYC-altered diffuse large B-cell lymphoma (DLBCL) and solid tumors and has been granted Orphan Drug Designation and Fast Track Designation for the treatment of DLBCL by the U.S. Food and Drug Administration (“FDA”) in April 2015 and May 2018, respectively. The Company has begun enrollment in a Phase 1 combination study with venetoclax in DLBCL patients, including patients with translocations in both MYC and the BCL2 gene, also referred to as double-hit lymphoma, or high-grade B-cell lymphoma (“HGBL”). The Company reported preliminary clinical data from this combination study in the fourth quarter of 2019. In March 2020, the Company announced that although it observed no significant drug-drug interaction in its Phase 1 study of fimepinostat in combination with venetoclax, the Company did not see an efficacy signal that would warrant continuation of the study. Accordingly, no further patients will be enrolled in this study. The Company is currently evaluating future studies for fimepinostat.

The Company's pipeline includes CA-170, for which the Company announced initial data from a clinical study in patients with mesothelioma, in conjunction with the Society of lmmunotherapy of Cancer conference in November 2019. Based on this data, no further patients will be enrolled in the study. The Company is currently evaluating future studies for CA-170.
The Company’s pipeline also includes CA-327, which is a pre-Investigational New Drug (“IND”) stage oncology drug candidate.
The Company is party to a collaboration with Genentech Inc. (“Genentech”), a member of the Roche Group, under which F. Hoffmann-La Roche Ltd (“Roche”) and Genentech are commercializing Erivedge® (vismodegib), a first-in-class orally administered small molecule Hedgehog signaling pathway inhibitor. Erivedge is approved for the treatment of advanced basal cell carcinoma (“BCC”).
In January 2015, and as amended in September 2016 and February 2020, the Company entered into a collaboration, option and license agreement focused on immuno-oncology and selected precision oncology targets with Aurigene Discovery Technologies Limited (“Aurigene”).
The collaboration with Aurigene is comprised of multiple programs, and the Company has the option to exclusively license each program, including data, intellectual property and compounds associated therewith, once a development candidate is nominated within such program. In October 2015, the Company exercised options to license two programs under this collaboration. The first licensed program is in the immuno-oncology field and the Company has named CA-170, an orally available small molecule antagonist of two immune checkpoints, V-domain Ig suppressor of T-cell activation (“VISTA”) and programmed death ligand-1 (“PDL1”), as the development candidate from this program. The second licensed program is in the precision oncology field and the Company has named CA-4948, an orally available small molecule inhibitor of Interleukin-1 receptor-associated kinase 4 (“IRAK4”) as the development candidate. In October 2016, the Company exercised its option to license a third program in the collaboration, and designated CA-327, a distinct orally available small molecule antagonist of two immune checkpoints PDL1 and T-cell immunoglobulin and mucin domain containing protein-3 (“TIM3”) as the development candidate from this program. In March 2018, the Company exercised its option to license a fourth program, which is an immuno-oncology program.
In January 2020, Curis entered into an option and license agreement with ImmuNext, Inc. Pursuant to the terms of the option and license agreement, the Company has the option, exercisable for a specified period as set forth in the option and license agreement, to obtain an exclusive license to develop and commercialize certain VISTA antagonizing compounds, including ImmuNext's lead compound, CI-8993, and products containing these compounds in the field of oncology.
The Company is subject to risks common to companies in the biotechnology industry as well as risks that are specific to the Company’s business, including, but not limited to: the Company’s ability to advance and expand its research and development programs; the Company’s reliance on Aurigene to successfully discover and preclinically develop drug candidates under the parties’ collaboration agreement; the Company’s reliance on Roche and Genentech to successfully commercialize Erivedge in the approved indication of advanced BCC and to progress its clinical development in indications other than BCC; the Company’s ability to obtain adequate financing to fund its operations; the ability of the Company and its wholly owned subsidiary, Curis Royalty, LLC (“Curis Royalty”) to satisfy the terms of the royalty interest purchase agreement (the “Oberland Purchase Agreement”) with TPC Investments I LP and TPC Investments II LP, referred to as the Purchasers, each of which is a Delaware limited partnership managed by Oberland Capital Management, LLC, and Lind SA LLC, referred to as the Agent, a Delaware limited liability company managed by Oberland Capital Management, LLC, as collateral agent for the Purchasers; the Company’s ability to obtain and maintain necessary intellectual property protection; development by the Company’s competitors of new or better technological innovations; the Company's dependence on key personnel; the Company’s ability to comply with regulatory requirements; the Company's ability to obtain and maintain applicable regulatory approvals and commercialize any approved product candidates, and the Company’s ability to execute on its overall business strategies.
The Company’s future operating results will largely depend on the progress of drug candidates currently in its development pipeline and the magnitude of payments that it may receive and make under its current and potential future collaborations. The results of the Company’s operations have varied and will likely continue to vary significantly from year to year and quarter to quarter and depend on a number of factors, including, but not limited to: the timing, outcome and cost of the Company’s preclinical studies and clinical trials for its drug candidates; Aurigene’s ability to successfully discover and develop preclinical programs under the Company’s collaboration with Aurigene, as well as the Company’s decision to exclusively license and further develop programs under this collaboration; Roche and Genentech’s ability to successfully commercialize Erivedge; and positive results in Roche and Genentech’s ongoing clinical trials.
The Company has incurred losses and negative cash flows from operations since its inception. As of December 31, 2019, the Company had an accumulated deficit of approximately $1.0 billion, incurred a loss of $32.1 million and used $26.2 million of cash in operations. The Company expects to continue to generate operating losses in the foreseeable future. The Company anticipates that its $20.5 million of existing cash, cash equivalents and investments at December 31, 2019 should enable it to maintain its planned operations into the second half of 2020. Based on the Company's available cash resources, recurring losses and cash outflows from operations since inception, an expectation of continuing operating losses and cash outflows from operations for the foreseeable future and the need to raise additional capital to finance our future operations, the Company concluded it does not have sufficient cash on hand to support current operations within the next 12 months from the date of filing this Annual Report on Form 10-K. These factors raise substantial doubt regarding the Company’s ability to continue as a going concern. The Company expects to finance its operations through its common stock purchase agreement with Aspire Capital Fund LLC, or Aspire Capital, and its at-the-market sales agreement with JonesTrading Institutional Services LLC, or JonesTrading or other potential equity financings, debt financings or other capital sources. However, the Company may not be successful in securing additional financing on acceptable terms, or at all. The Company’s ability to raise additional funds will depend, among other factors, on financial, economic and market conditions, many of which are outside of its control and it may be unable to raise financing when needed, or on terms favorable to the Company. If necessary funds are not available, the Company will have to delay, reduce the scope of, or eliminate some of its development programs, potentially delaying the time to market for or preventing the marketing of any of its product candidates.
Reverse Stock Split
On May 29, 2018, the Company effected a 1-for-5 reverse stock split of its common stock. All references to shares of common stock outstanding, average number of shares outstanding and per share amounts for all periods presented in the accompanying financial statements and notes thereto have been adjusted retroactively, where applicable, to reflect this reverse stock split on a retroactive basis (see Note 12).
v3.20.1
Consolidated Balance Sheets (Parenthetical) - $ / shares
Dec. 31, 2019
Dec. 31, 2018
Statement of Financial Position [Abstract]    
Common stock, par value (in dollars per share) $ 0.01 $ 0.01
Common stock, shares authorized (in shares) 101,250,000 67,500,000
Common stock, shares issued (in shares) 33,241,793 33,159,253
Common stock, shares outstanding (in shares) 33,241,793 33,159,253
v3.20.1
Property and Equipment, Net
12 Months Ended
Dec. 31, 2019
Property, Plant and Equipment [Abstract]  
Property and Equipment, Net
Property and Equipment, Net
Property and equipment consist of the following:
 
December 31,
 
2019
 
2018
Laboratory equipment, computers and software
$
1,725

 
$
1,753

Leasehold improvements
185

 
185

Office furniture and equipment
331

 
354

 
2,241

 
2,292

Less—Accumulated depreciation and amortization
(2,087
)
 
(2,025
)
Total
$
154

 
$
267


The Company recorded depreciation and amortization expense of $0.1 million and $0.2 million for the years ended December 31, 2019 and 2018.
v3.20.1
Income Taxes
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Income Taxes
Income Taxes
For the years ended December 31, 2019 and 2018, the Company did not record any federal or state income tax expense given its continued operating losses.
A reconciliation between income tax benefit and the expected tax benefit at the statutory rate for the years ended December 31, 2019 and 2018 are as follows:
 
For the Year Ended
December 31,
 
2019
 
2018
Statutory federal income tax rate
21.0
 %
 
21.0
 %
State income taxes, net of federal benefit
6.1
 %
 
5.9
 %
Research and development tax credits
2.7
 %
 
3.8
 %
Orphan drug tax credits
4.6
 %
 
3.2
 %
Expiration of NOLs/Credits
(4.0
)%
 
(13.5
)%
Permanent adjustments and other
(0.6
)%
 
(1.1
)%
Change in valuation allowance
(29.8
)%
 
(19.3
)%
Effective income tax rate
 %
 
 %

The principle components of the Company’s deferred tax assets at December 31, 2019 and 2018, respectively, are as follows:
 
December 31,
 
2019
 
2018
Deferred Tax Assets:
 
 
 
NOL carryforwards
$
58,654

 
$
67,068

Research and development tax credit carryforwards
15,408

 
15,825

Orphan drug tax credit carryforwards
18,088

 
16,625

Depreciation and amortization
9,671

 
10,672

Capitalized research and development expenditures
34,487

 
33,993

Stock options
6,329

 
5,783

Accrued expenses and other
131

 
259

Oberland agreement
17,022

 

Lease liability ASC 842
45

 

Total gross deferred tax asset
159,835

 
150,225

Valuation allowance
(159,794
)
 
(150,225
)
Net deferred tax asset
$
41

 
$

 
 
 
 
Deferred tax liabilities:
 
 
 
Right of use asset ASC 842
(41
)
 

Total gross deferred tax liabilities
$
(41
)

$

 
 
 
 
Net deferred tax assets (liabilities)
$

 
$


For the years ended December 31, 2019 and 2018, the Company had federal net operating losses (“NOL”), of $251.2 and $282.0 million, respectively. The operating losses generated prior to 2018 will expire in years 2020 through 2037, unless previously utilized. The federal operating loss carryforward generated in 2018 and later can be carried forward indefinitely and can be used to offset up to 80% of taxable income of each future tax year. For the years ended December 31, 2019 and 2018, the Company had state NOLs of $93.6 and $124.0 million, respectively. The operating losses will expire in years 2020 through 2038, unless previously utilized.
For the years ended December 31, 2019 and 2018, the Company had federal research and development credit carryforwards of $11.9 and $12.3 million, respectively. The credits will expire in the years 2020 through 2039.
For the years ended December 31, 2019 and 2018, the Company had state research and development credit carryforwards of $4.4 and $4.5 million, respectively. The credits will expire in the years 2020 through 2034, unless previously utilized.
For the years ended December 31, 2019 and 2018, the Company had orphan drug tax credit carryforwards of $18.1 and $16.6 million, these credits, if any, relate to qualified expenses incurred for CUDC-907 since receiving the Orphan Drug designation.
As required by U.S. GAAP, the Company’s management has evaluated the positive and negative evidence bearing upon the realizability of its deferred tax assets, and has determined that it is more likely than not that the Company will not recognize the benefits of the deferred tax assets. Accordingly, a valuation allowance of approximately $159.8 million has been established at December 31, 2019.
The valuation allowance increased approximately $9.6 million and $6.3 million during the years ended December 31, 2019 and 2018. The current year increase in the valuation allowance is primarily due to an increase in net deferred tax assets with an offsetting valuation allowance related to income recorded for tax related to the Oberland royalty purchase agreement. The increase in 2018 is primarily due to the current year net operating loss offset by the valuation allowance.
Utilization of the NOL may be subject to a substantial annual limitation under Section 382 of the Internal Revenue Code of 1986 due to ownership change limitations that have occurred previously or that could occur in the future. These ownership changes may limit the amount of NOL carryforwards that can be utilized annually to offset future taxable income and tax, respectively. The Company completed a §382 study in 2019 and determined no ownership changes have occurred and no limitation on NOLs through December 31, 2018. There could be additional ownership changes in the future, which may result in additional limitations in the utilization of the carryforward NOLs and credits, and the Company does not expect to have any taxable income for the foreseeable future.
An individual tax position must satisfy for some or all of the benefits of that position to be recognized in a company’s financial statements. At December 31, 2019 and 2018, the Company had no unrecognized tax benefits. The Company has not, as yet, conducted a study of its R&D credit carryforwards. This study may result in an adjustment to the Company’s R&D credit carryforwards, however, until a study is completed and any adjustment is known, no amounts are being presented as an uncertain tax position under FASB Codification Topic 740 Income Taxes. A full valuation allowance has been provided against the Company’s R&D credits and, if an adjustment is required, this adjustment would be offset by an adjustment to the valuation allowance. Thus, there would be no impact to the consolidated balance sheet or statement of operations if an adjustment were required.
The tax years 2004 through 2019 remain open to examination by major taxing jurisdictions to which the Company is subject, which are primarily in the U.S., as carryforward attributes generated in years past may still be adjusted upon examination by the Internal Revenue Service (“IRS”) or state tax authorities if they have or will be used in a future period. The Company is currently not under examination by the IRS or any other jurisdictions for any tax years. The Company recognizes both accrued interest and penalties related to unrecognized benefits in income tax expense. The Company has not recorded any interest or penalties on any unrecognized tax benefits since its inception.
v3.20.1
Stock Plans and Stock-Based Compensation
12 Months Ended
Dec. 31, 2019
Share-based Payment Arrangement [Abstract]  
Stock Plans and Stock-Based Compensation
Stock Plans and Stock-Based Compensation
As of December 31, 2019, the Company had two shareholder-approved, stock-based compensation plans: (i) the Amended and Restated 2010 Employee Stock Purchase Plan, (“ESPP”), adopted by the Board of Directors in April 2017 and approved by shareholders in June 2017, and (ii) the Third Amended and Restated 2010 Stock Incentive Plan, (“2010 Plan”), adopted by the Board of Directors in March 2018 and approved by shareholders in June 2018, which was amended to, among other things, add an additional 2,390,000 shares under the 2010 Plan, and set a new expiration date of May 14, 2028 for the 2010 Plan. New employees are typically issued options as an inducement equity award under Nasdaq Listing Rule 5635(c)(4) outside of the 2010 Plan. Effective May 29, 2018, the number of shares of common stock available for issuance under the plans and the number of shares of common stock issuable upon the exercise of then outstanding options have been adjusted to reflect a 1-for-5 reverse stock split (see Note 12).
The Third Amended and Restated 2010 Stock Incentive Plan
The 2010 Plan permits the granting of incentive and non-qualified stock options and stock awards to employees, officers, directors, and consultants of the Company and its subsidiaries at prices determined by the Company’s Board of Directors. On May 23, 2019 the Company's stockholders approved an amendment to the Company's Third Amended and Restated 2010 Stock Incentive Plan to reserve an additional 4,700,000 shares of common stock for issuance under the 2010 Plan. The Company can issue up to 10,890,000 shares of its common stock pursuant to awards granted under the 2010 Plan. Options become exercisable as determined by the Board of Directors and expire up to ten years from the date of grant. The 2010 Plan uses a “fungible share” concept under which each share of stock subject to awards granted as options and stock appreciation rights (“SARs”), will cause one share per share under the award to be removed from the available share pool, while each share of stock subject to awards granted as restricted stock, restricted stock units, other stock-based awards or performance awards where the price charged for the award is less than 100% of the fair market value of the Company’s common stock will cause 1.3 shares per share under the award to be removed from the available share pool. As of December 31, 2019, the Company had only granted options to purchase shares of the Company’s common stock with an exercise price equal to the closing market price of the Company’s common stock on the Nasdaq Global Market on the grant date. As of December 31, 2019, 5,281,115 shares remained available for grant under the 2010 Plan.
During the year ended December 31, 2019, the Company’s board of directors granted options to purchase 2,737,865 shares of the Company’s common stock to officers and employees of the Company under the 2010 Plan. These options vest and become exercisable as to 25% of the shares underlying the award after the first year and as to an additional 6.25% of the shares underlying the award in each subsequent quarter, based upon continued employment over a four-year period, and are exercisable at a price equal to the closing price of the Company’s common stock on the Nasdaq Global Market on the grant dates.
During the first quarter of 2019, the Company’s board of directors granted options to its non-employee directors to purchase 720,000 shares of common stock under the 2010 Plan, which will vest and become exercisable in one year from the date of grant. These options were granted at an exercise price of $1.16 per share, which equals the closing market price of the Company’s common stock on the Nasdaq Global Market on the grant date. There were no additional non-employee grants made in the current quarter.
During the year ended December 31, 2019, the Company’s board of directors did not grant any restricted stock awards (“RSA”) to officers of the Company. There remain RSAs for an aggregate amount of 30,937 shares outstanding of the Company's common stock previously issued under the 2010 Plan. These RSAs will vest as to 25% of the shares underlying the RSA on the first anniversary of the date of grant and as to an additional 25% annually thereafter until all such shares become vested, based upon continued service to the Company over a four-year period.
Nonstatutory Inducement Grants
For certain new employees the Company issued options as an inducement equity award under Nasdaq Listing Rule 5635(c)(4) outside of the 2010 Plan. The option will vest as to 25% of the shares underlying the option on the first anniversary of the grant date, and as to an additional 6.25% of the shares underlying the option on each successive three-month period thereafter. During the year ended December 31, 2019, the Company’s board of directors granted inducement equity awards of 575,500 shares of common stock. These options were granted at a weighted average exercise price of $1.97, which is based on the closing market price of the Company’s common stock on the Nasdaq Global Market on the grant date.
Employee and Director Grants
Vesting Tied to Service Conditions
In determining the fair value of stock options, the Company generally uses the Black-Scholes option pricing model. As discussed below, for employee stock options with market performance conditions, the Company uses a Monte Carlo simulation valuation model. The Black-Scholes option pricing model employs the following key assumptions for employee and director options awarded during each of the following years: 
 
For the Year Ended
December 31,
 
2019
 
2018
Expected term (years)—Employees and Officers
5.5

 
5.5

Expected term (years)—Directors
5.5

 
N/A

Risk-free interest rate
1.5-2.6%

 
2.5-3.0%

Expected volatility
76-79%

 
66-73%

Expected dividend yield
None

 
None


The following table summarizes details regarding stock options granted under the Company's equity incentive plans for the year ended December 31, 2019:
 
Number of
Options
 
Weighted
Average
Exercise
Price per
Share
 
Weighted
Average
Remaining Contractual Life
 
Aggregate Intrinsic Value
Outstanding, December 31, 2018
3,714,394

 
$
7.68

 
6.38
 

Granted
4,033,365

 
1.30

 

 

Exercised

 

 

 

Canceled
(1,589,733
)
 
7.97

 

 

Outstanding, December 31, 2019
6,158,026

 
$
3.43

 
8.33
 
$
1,657

Exercisable at December 31, 2019
1,561,926

 
$
8.44

 
6.47
 
$
26

Vested and unvested expected to vest
5,540,023

 
$
3.64

 
8.25
 
$
1,451


At December 31, 2019, the weighted average fair values of stock options granted with standard vesting terms during the years ended December 31, 2019 and 2018 were $0.85 and $1.46 per share of common stock underlying such stock options, respectively. As of December 31, 2019, there was approximately $3.4 million, including the impact of estimated forfeitures, of unrecognized compensation cost related to unvested employee stock option awards outstanding under the Company’s 2010 Plan that is expected to be recognized as expense over a weighted average period of 2.4 years. There were no employee stock options exercised during the year ended December 31, 2019. As there were no employee stock options exercised during either 2019 or 2018, the intrinsic value of employee stock options exercised during the year ended was zero.
The following table presents a summary of outstanding RSAs under the 2010 Plan as of December 31, 2019:
 
Number of
Shares
 
Weighted
Average
Grant Date Fair Value
Unvested, December 31, 2018
226,250

 
3.45

Awarded

 

Vested
(195,313
)
 
3.45

Forfeited

 

Unvested, December 31, 2019
30,937

 
3.45


As of December 31, 2019, there were 30,937 shares outstanding covered by RSAs that are expected to vest. The weighted average fair value of these shares of restricted stock was $3.45 per share and the aggregate fair value of these shares of restricted stock was approximately $0.1 million. As of December 31, 2019, there were approximately $0.1 million of unrecognized compensation costs, net of estimated forfeitures, related to RSAs granted to officers and non-employee directors, which are expected to be recognized as expense over a remaining weighted average period of 2.06 years.
Second Amended and Restated 2010 Employee Stock Purchase Plan (ESPP)
The Company has reserved 2,000,000 of its shares of common stock for issuance under the ESPP. Eligible employees may purchase shares of the Company’s common stock at 85% of the lower closing market price of the common stock at the beginning of the enrollment period or ending date of the any purchase period within a two-year enrollment period, as defined. The Company has four six-month purchase periods per each two-year enrollment period. If, within any one of the four purchase periods in an enrollment period, the purchase period ending stock price is lower than the stock price at the beginning of the enrollment period, the two-year enrollment resets at the new lower stock price. This aspect of the plan was amended in 2017. Prior to 2017, the plan included two six-month purchase period per year with no defined enrollment period. As of December 31, 2019, 521,903 shares were issued under the ESPP, of which 91,013 were issued during 2019. As of December 31, 2019, there were 1,677,934 shares available for future purchase under the ESPP.
For the years ended December 31, 2019 and 2018, the Company recorded compensation expense related to its ESPP and calculated the fair value of shares expected to be purchased under the ESPP using the Black-Scholes models with the following assumptions:
 
For the Year Ended December 31,
 
2019
 
2018
Compensation expense recognized under ESPP
$
49

 
$
173

Expected term
6-24 months

 
6-24 months

Risk-free interest rate
1.5-2.1%

 
2.1-2.7%

Volatility
92-97%

 
79-104%

Dividends
None

 
None


Employee Stock-Based Compensation Expense
Stock-based compensation for employee and director stock option grants for the years ended December 31, 2019 and 2018 of $2.7 million and $3.9 million, respectively, was calculated using the above valuation models and has been included in the Company’s results of operations. The total fair value of vested stock options for the years ended December 31, 2019 and 2018 was $2.0 million and $4.7 million, respectively.
Total Stock-Based Compensation Expense
For the years ended December 31, 2019 and 2018, the Company recorded employee and non-employee stock-based compensation expense to the following line items in its Costs and Expenses section of the Consolidated Statements of Operations and Comprehensive Loss: 
 
For the Year Ended December 31,
 
2019
 
2018
Research and development expenses
$
575

 
$
1,310

General and administrative expenses
2,083

 
2,630

Total stock-based compensation expense
$
2,658

 
$
3,940


No income tax benefits have been recorded for the years ended December 31, 2019 or 2018, as the Company has recorded a full valuation allowance and management has concluded that it is more likely than not that the net deferred tax assets will not be realized (see Note 9).
v3.20.1
Nature of Business (Details)
$ in Thousands
3 Months Ended 12 Months Ended
May 29, 2018
Dec. 31, 2019
USD ($)
Sep. 30, 2019
USD ($)
Jun. 30, 2019
USD ($)
Mar. 31, 2019
USD ($)
Dec. 31, 2018
USD ($)
Sep. 30, 2018
USD ($)
Jun. 30, 2018
USD ($)
Mar. 31, 2018
USD ($)
program
Dec. 31, 2019
USD ($)
Dec. 31, 2018
USD ($)
Oct. 31, 2016
program
Oct. 31, 2015
program
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                          
Accumulated deficit   $ 1,016,981       $ 984,840       $ 1,016,981 $ 984,840    
Net loss   8,609 $ 6,436 $ 7,213 $ 9,884 $ 5,941 $ 7,223 $ 8,664 $ 10,747 32,141 32,575    
Net cash used in operating activities                   26,205 $ 30,065    
Cash, cash equivalents, and investments   $ 20,500               $ 20,500      
Stock split ratio 0.2                        
Aurigene Discovery Technologies Limited                          
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]                          
Collaboration agreement, number of programs licensed | program                 4     3 2
v3.20.1
Income Taxes (Tables)
12 Months Ended
Dec. 31, 2019
Income Tax Disclosure [Abstract]  
Effective Income Tax Rate Reconciliation
A reconciliation between income tax benefit and the expected tax benefit at the statutory rate for the years ended December 31, 2019 and 2018 are as follows:
 
For the Year Ended
December 31,
 
2019
 
2018
Statutory federal income tax rate
21.0
 %
 
21.0
 %
State income taxes, net of federal benefit
6.1
 %
 
5.9
 %
Research and development tax credits
2.7
 %
 
3.8
 %
Orphan drug tax credits
4.6
 %
 
3.2
 %
Expiration of NOLs/Credits
(4.0
)%
 
(13.5
)%
Permanent adjustments and other
(0.6
)%
 
(1.1
)%
Change in valuation allowance
(29.8
)%
 
(19.3
)%
Effective income tax rate
 %
 
 %
Components of Deferred Tax Assets
The principle components of the Company’s deferred tax assets at December 31, 2019 and 2018, respectively, are as follows:
 
December 31,
 
2019
 
2018
Deferred Tax Assets:
 
 
 
NOL carryforwards
$
58,654

 
$
67,068

Research and development tax credit carryforwards
15,408

 
15,825

Orphan drug tax credit carryforwards
18,088

 
16,625

Depreciation and amortization
9,671

 
10,672

Capitalized research and development expenditures
34,487

 
33,993

Stock options
6,329

 
5,783

Accrued expenses and other
131

 
259

Oberland agreement
17,022

 

Lease liability ASC 842
45

 

Total gross deferred tax asset
159,835

 
150,225

Valuation allowance
(159,794
)
 
(150,225
)
Net deferred tax asset
$
41

 
$

 
 
 
 
Deferred tax liabilities:
 
 
 
Right of use asset ASC 842
(41
)
 

Total gross deferred tax liabilities
$
(41
)

$

 
 
 
 
Net deferred tax assets (liabilities)
$

 
$

v3.20.1
Subsequent Events
12 Months Ended
Dec. 31, 2019
Subsequent Events [Abstract]  
Subsequent Events
Subsequent Events
(a) ImmuNext Agreement
On January 6, 2020, the Company entered into an option and license agreement with ImmuNext (the “ImmuNext Agreement”). Under the terms of the ImmuNext Agreement, the Company agreed to engage in a collaborative effort with ImmuNext, and to conduct a Phase 1a/1b clinical trial of CI-8993. In exchange, ImmuNext granted the Company an exclusive option, exercisable until the earlier of (a) four years after January 6, 2020 and (b) 90 days after database lock for the first Phase 1a/1b trial in which the endpoints are satisfied (the “Option Period”), to obtain an exclusive, worldwide license to develop and commercialize certain VISTA antagonizing compounds and products containing these compounds in the field of oncology.
A joint steering committee composed of representatives from each of the parties will manage the non-clinical and clinical
development of the VISTA Compounds and Products during the Option Period, including, but not limited to, the approval of
the plan for the Phase 1a/1b trial.
During the Option Period, the Company will conduct the Phase 1a/1b trial and ImmuNext will conduct certain agreed upon non-clinical research activities to support the Phase 1a/1b trial. During the Option Period, the Company is obligated to assign to ImmuNext all right, title and interest in and to, inventions made by the Company alone or jointly with ImmuNext in conducting clinical and non-clinical activities under the ImmuNext Agreement during the Option Period and any patent rights covering those inventions. Effective as of the option exercise date (if any), ImmuNext is obligated to assign to the Company (i) all such inventions that were made solely by the Company and any patent rights covering those inventions that were assigned by the Company to ImmuNext during the Option Period and (ii) a joint ownership interest in all such inventions that were made jointly by the Company and ImmuNext and patent rights covering those inventions that were assigned by the Company to ImmuNext during the Option Period, except for any of those inventions that relates to compounds as to which ImmuNext has retained exclusive rights.
In consideration of the grant of the option, the Company has agreed to make an upfront payment to ImmuNext of $1.3 million.
If the Company elects to exercise the option, the Company has agreed to pay to ImmuNext an option exercise fee of $20.0 million.
If the Company elects to exercise the option, ImmuNext will be eligible to receive up to $4.6 million in potential development milestones, up to $84.3 million in potential regulatory approval milestones, and up to $125.0 million in potential sales milestone payments from the Company. In addition, ImmuNext is eligible to receive tiered royalties on annual net sales on a product-by-product and country-by-country basis, at percentage rates ranging from high single digits to low double digits, subject to specified adjustments.
The royalty payment obligations under the ImmuNext Agreement with respect to a product in a country will expire on the later of (i) expiration of the last-to-expire valid claim of the ImmuNext patents or jointly owned patents covering the manufacture, use or sale of such product in such country, (ii) the expiration of all regulatory exclusivity for such product in such country, and (iii) 10 years from the first commercial sale of such product in such country.
In partial consideration for drug substance, technical advice, and maintenance of ImmuNext’s existing IND and access to ImmuNext’s technology, the Company has agreed to make semi-annual maintenance fee payments of $0.4 million to ImmuNext during the Option Period. In addition, the Company has agreed to reimburse ImmuNext for certain documented external costs and expenses incurred by ImmuNext in carrying out non-clinical research activities approved by the joint steering committee, up to $0.3 million per calendar year, unless otherwise agreed to by both parties in writing.
In addition, the Company has agreed to pay ImmuNext a low double-digit percentage of sublicense revenue received by the Company or its Affiliates.
Unless earlier terminated, will expire upon either: (a) expiration of the Option Period if the Company has not exercised the option; or (b) expiration of all royalty payment obligations for any and all products. Upon expiration (but not on earlier termination) of the ImmuNext Agreement after exercise of the option, the license granted by ImmuNext to the Company shall automatically become fully paid-up, royalty-free, irrevocable and perpetual.
(b) Aspire Capital Fund, LLC
On February 26, 2020, the Company entered into a common stock purchase agreement (the “Agreement”) for the sale of up to $30.0 million with Aspire Capital Fund, LLC (“Aspire Capital”).
Under the terms of the Agreement, Aspire Capital has made an initial investment of $3.0 million via purchase of 2,693,965 common shares of the Company. In addition, Aspire Capital has committed to purchasing up to an additional $27.0 million in shares of the Company's common stock at the Company’s request, from time to time during a 30-month period at prices based on the market price at the time of each sale, subject to specified terms and limitations. There are no warrants, derivatives, or other share classes associated with this Agreement. The Company will control the timing and amount of the further sale of its common stock to Aspire Capital.
The Company plans to use the proceeds for any sales made pursuant to the Agreement for general corporate purposes, including research and development, clinical trial activity and working capital. There are no restrictions on future financings and there are no financial covenants, participation rights, rights of first refusal, or penalties in the Agreement. The Company has the right to terminate the Agreement at any time without any additional cost or penalty.
As consideration for Aspire Capital’s obligation under the Agreement, the Company issued 646,551 shares of common stock to Aspire Capital as a commitment fee. The Company also entered into a Registration Rights Agreement with Aspire Capital in connection with its entry into the Agreement.
(c) Termination of 2015 Sales Agreement with Cowen
The Company terminated its sales agreement with Cowen and the “at-the-market” equity offering program in March 2020, and the program is no longer available for use by the Company.
(d) JonesTrading Institutional Services LLC
On March 4, 2020, the Company entered into a Capital on Demand™ Sales Agreement (the “Sales Agreement”) with JonesTrading to sell from time to time up to $30.0 million of the Company’s common stock, par value $0.01 per share (the “Shares”), through an “at the market offering” program (the “Offering”) under which JonesTrading will act as sales agent.
In accordance with the terms of the Sales Agreement, upon delivery of a placement notice and subject to the terms and conditions of the Sales Agreement, JonesTrading may sell the Shares by any method deemed to be an “at the market offering” as defined in Rule 415 promulgated under the Securities Act of 1933, as amended (the “Securities Act”), including sales made through the Nasdaq Global Market, on any other existing trading market for the Common Stock or to or through a market maker. In addition, with the Company’s prior written approval, JonesTrading may also sell the Shares in privately negotiated transactions.
JonesTrading will use its commercially reasonable efforts consistent with its normal trading and sales practices and applicable state and federal laws, rules and regulations and the rules of the Nasdaq Global Market to sell on the Company’s behalf all of the shares requested to be sold by the Company.
The Company has no obligation to sell any of the Shares under the Sales Agreement. Either the Company or JonesTrading may at any time suspend solicitations and offers under the Sales Agreement upon notice to the other party.
The aggregate compensation payable to JonesTrading shall be equal to 3% of the gross proceeds from sales of the Shares sold by JonesTrading pursuant to the Sales Agreement. In addition, the Company has agreed to reimburse a portion of the expenses of JonesTrading in connection with the offering up to a maximum of $30.0 thousand.
The Sales Agreement contains customary representations and warranties, covenants of each party, and conditions to the sale of any Shares by JonesTrading thereunder. Additionally, each party has agreed in the Sales Agreement to provide indemnification and contribution against certain liabilities, including liabilities under the Securities Act, subject to the terms of the Sales Agreement.
The Sales Agreement will terminate upon the earlier of (i) the issuance and sale of all of the Shares through JonesTrading on the terms and conditions set forth therein, or (ii) termination of the Sales Agreement as permitted therein. JonesTrading may terminate the Sales Agreement at any time in specified circumstances, including: in connection with the occurrence of a material adverse change with respect to the Company that, in JonesTrading’s reasonable judgment, may materially impair its ability to sell the Shares; due to the Company’s inability, refusal or failure to perform specified conditions of the Sales Agreement, subject, in certain circumstances, to the Company’s right to cure within a period of 30 days; if any other condition to JonesTrading’s obligations is not fulfilled; or any suspension of trading in the Shares or in securities generally on the Nasdaq Global Market shall have occurred. The Company and JonesTrading each has the right to terminate the Sales Agreement in its sole discretion at any time upon five days’ notice.
v3.20.1
Investments (Tables)
12 Months Ended
Dec. 31, 2019
Investments, Debt and Equity Securities [Abstract]  
Schedule of Amortized Cost, Unrealized Gains and Losses and Fair Value of Investments Available-for-Sale
The amortized cost, unrealized gains and losses and fair value of investments available-for-sale as of December 31, 2018 are as follows:
 
Amortized
Cost
 
Unrealized
Gain
 
Unrealized
Loss
 
Fair Value
Corporate bonds and notes—short-term
$
634

 
$

 
$

 
$
634

Total investments
$
634

 
$

 
$

 
$
634

The amortized cost, unrealized gains and losses and fair value of investments available-for-sale as of December 31, 2019 are as follows:
 
Amortized
Cost
 
Unrealized
Gain
 
Unrealized
Loss
 
Fair Value
Corporate bonds and notes—short-term
$
5,113

 
$

 
$

 
$
5,113

Total investments
$
5,113

 
$

 
$

 
$
5,113

v3.20.1
Leases and Commitments - Balance Sheet and Income Statement (Details)
$ in Thousands
12 Months Ended
Dec. 31, 2019
USD ($)
Lessee, Lease, Description [Line Items]  
Operating lease right-of-use asset $ 149
Operating lease liability 166
Operating lease cost 1,002
Research and development  
Lessee, Lease, Description [Line Items]  
Operating lease cost 651
General and administrative  
Lessee, Lease, Description [Line Items]  
Operating lease cost $ 351
v3.20.1
Property and Equipment, Net - Schedule (Details) - USD ($)
$ in Thousands
Dec. 31, 2019
Dec. 31, 2018
Property, Plant and Equipment [Line Items]    
Property and equipment $ 2,241 $ 2,292
Less—Accumulated depreciation and amortization (2,087) (2,025)
Total 154 267
Laboratory equipment, computers and software    
Property, Plant and Equipment [Line Items]    
Property and equipment 1,725 1,753
Leasehold improvements    
Property, Plant and Equipment [Line Items]    
Property and equipment 185 185
Office furniture and equipment    
Property, Plant and Equipment [Line Items]    
Property and equipment $ 331 $ 354
v3.20.1
Related Party Transactions (Details)
12 Months Ended
Oct. 17, 2018
USD ($)
Dec. 31, 2019
USD ($)
day
Dec. 31, 2018
USD ($)
Related Party Transaction [Line Items]      
Retainer for advisory services   $ 35,000  
Severance costs   300,000  
Epi-Cure Pharmaceuticals, Inc. | Affiliated Entity      
Related Party Transaction [Line Items]      
Total related party expenses for agreement for the period   300,000 $ 100,000
Cash paid during period   300,000 $ 100,000
Agreement With Head of Research and Development | Epi-Cure Pharmaceuticals, Inc. | Affiliated Entity      
Related Party Transaction [Line Items]      
Upfront payment to related party $ 100,000    
Research and development expense   $ 500,000  
Days to exercise option to license program compounds | day   60  
License payment if option is exercised   $ 2,000,000  
Milestone payments   $ 63,000,000  
Minimum days notice to terminate agreement | day   60  
Development Costs and Profits | Epi-Cure Pharmaceuticals, Inc. | Affiliated Entity      
Related Party Transaction [Line Items]      
Cost and profit split (percent)   50.00%  
Right to Terminate the Agreement for Uncured Material Breach | Executive Officer      
Related Party Transaction [Line Items]      
Days to cure material breach of agreement | day   5  
v3.20.1
Subsequent Events - Aspire Capital Fund, LLC Agreement (Details) - USD ($)
Feb. 26, 2020
Dec. 31, 2019
Dec. 31, 2018
Subsequent Event [Line Items]      
Common stock, shares issued (in shares)   33,241,793 33,159,253
Aspire Capital Fund, LLC | Subsequent Event      
Subsequent Event [Line Items]      
Net proceeds from sale of shares $ 3,000,000    
Common stock, shares issued (in shares) 2,693,965    
Common Stock | Aspire Capital Fund, LLC | Subsequent Event      
Subsequent Event [Line Items]      
Authorized purchase program amount $ 30,000,000    
Remaining purchase program amount $ 27,000,000    
Purchase program period (in months) 30 months    
Commitment fee (in shares) 646,551