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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
FORM 10-Q
(Mark One)
QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 2020
OR
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from           to
Commission File Number: 001-37449
ALPINE IMMUNE SCIENCES, INC.
(Exact name of registrant as specified in its charter)
Delaware
 
20-8969493
(State or other jurisdiction of
incorporation or organization)
 
(I.R.S. Employer
Identification No.)
 
 
 
188 East Blaine Street, Suite 200
Seattle, WA  98102
(206) 788-4545
(Address, including zip code, and telephone number, including area code, of registrant’s principal executive offices)
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, par value $0.001 per share
 
ALPN
 
The Nasdaq Stock Market LLC
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.    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).    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,” “smaller reporting company,” and “emerging growth company” in Rule 12b-2 of the Exchange Act. 
Large accelerated filer
 
 
Accelerated filer
 
 
 
 
 
Non-accelerated Filer
 
 
Smaller reporting company
 
 
 
 
 
 
 
 
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 Exchange Act).    Yes      No  
As of August 3, 2020, the registrant had 23,784,850 shares of common stock, $0.001 par value per share, outstanding.




ALPINE IMMUNE SCIENCES, INC.
FORM 10-Q
FOR THE QUARTER ENDED JUNE 30,2020
 
TABLE OF CONTENTS
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
In this report, unless otherwise stated or as the context otherwise requires, references to “Alpine,” “the Company,” “we,” “us,” “our” and similar references refer to Alpine Immune Sciences, Inc. “Variant Immunoglobulin Domain”, “vIgD”, “Transmembrane Immunomodulatory Protein”, “TIP”, “Secreted Immunomodulatory Protein”, and “SIP” are registered trademarks of Alpine Immune Sciences, Inc. All rights reserved. This report also contains registered marks, trademarks, and trade names of other companies. All other trademarks, registered marks, and trade names appearing in this report are the property of their respective holders. 





PART I. FINANCIAL INFORMATION
Item 1. Financial Statements (unaudited)
ALPINE IMMUNE SCIENCES, INC.
CONDENSED CONSOLIDATED BALANCE SHEETS
(in thousands, except share and per share amounts)
 
 
 
June 30, 2020
 
December 31, 2019
 
 
(unaudited)
 
 
Assets
 
 

 
 

Current assets:
 
 

 
 

Cash and cash equivalents
 
$
88,220

 
$
16,123

Short-term investments
 
1,998

 
24,397

Restricted cash, current
 

 
132

Prepaid expenses and other current assets
 
1,018

 
1,650

Total current assets
 
91,236

 
42,302

Restricted cash, noncurrent
 
254

 
254

Property and equipment, net
 
1,531

 
1,552

Operating lease, right-of-use asset
 
9,674

 
9,985

Total assets
 
$
102,695

 
$
54,093

Liabilities and stockholders’ equity
 
 
 
 
Current liabilities:
 
 
 
 
Accounts payable
 
$
548

 
$
1,543

Accrued liabilities
 
3,824

 
5,285

Deferred revenue, current
 
23,688

 
1,435

Current portion of long-term debt
 
119

 
418

Total current liabilities
 
28,179

 
8,681

Deferred revenue, noncurrent
 
36,468

 

Operating lease liability, noncurrent
 
11,947

 
11,429

Long-term debt
 
9,873

 
4,509

Total liabilities
 
86,467

 
24,619

Commitments and contingencies
 


 


Stockholders’ equity:
 
 
 
 
Common stock, $0.001 par value per share; 200,000,000 shares authorized at June 30, 2020 and December 31, 2019; 18,641,698 shares issued and 18,591,231 shares outstanding at June 30, 2020; 18,638,359 shares issued and 18,587,892 shares outstanding at December 31, 2019
 
19

 
19

Treasury stock, at cost; 50,467 shares at June 30, 2020 and December 31, 2019
 

 

Additional paid-in capital
 
119,651

 
117,371

Accumulated other comprehensive gain (loss)
 
(55
)
 
10

Accumulated deficit
 
(103,387
)
 
(87,926
)
Total stockholders’ equity
 
16,228

 
29,474

Total liabilities and stockholders’ equity
 
$
102,695

 
$
54,093

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

1



ALPINE IMMUNE SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS AND COMPREHENSIVE INCOME (LOSS)
(in thousands, except share and per share amounts)
 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2020
 
2019
 
2020
 
2019
 
(unaudited)
Collaboration revenue
$
688

 
$
567

 
$
1,779

 
$
567

Operating expenses:
 
 
 
 
 
 
 
Research and development
7,096

 
10,166

 
11,974

 
20,516

General and administrative
3,344

 
2,553

 
5,122

 
4,898

Total operating expenses
10,440

 
12,719

 
17,096

 
25,414

Loss from operations
(9,752
)
 
(12,152
)
 
(15,317
)
 
(24,847
)
Other income (expense):
 
 
 
 
 
 
 
Interest expense
(226
)
 
(61
)
 
(346
)
 
(131
)
Interest income
44

 
357

 
196

 
741

Loss before taxes
(9,934
)
 
(11,856
)
 
(15,467
)
 
(24,237
)
Income tax benefit
6

 

 
6

 

Net loss
$
(9,928
)
 
$
(11,856
)
 
$
(15,461
)
 
$
(24,237
)
Comprehensive income (loss):
 
 
 
 
 
 
 
Unrealized (loss) gain on investments
(1
)
 
17

 
(16
)
 
32

Unrealized gain (loss) on foreign currency translation
64

 
4

 
(49
)
 
(10
)
Comprehensive loss
$
(9,865
)
 
$
(11,835
)
 
$
(15,526
)
 
$
(24,215
)
Weighted-average shares used to compute basic and diluted net loss per share
18,588,993

 
18,576,199

 
18,588,442

 
18,126,556

Basic and diluted net loss per share
$
(0.53
)
 
$
(0.64
)
 
(0.83
)
 
$
(1.34
)
 
The accompanying notes are an integral part of these condensed consolidated financial statements.


2



ALPINE IMMUNE SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF STOCKHOLDERS’ EQUITY (unaudited)
(in thousands, except share amounts)
 
Common Stock
 
Treasury
 
Additional
Paid-in Capital
 
Accumulated
Other Comprehensive Loss
 
Accumulated Deficit
 
Total
Stockholders’ Equity
 
Shares
 
Amount
 
Shares
 
Amount
 
 
 
 
Balance, December 31, 2018
13,854,205

 
$
14

 
50,467

 
$

 
$
90,664

 
$
(13
)
 
$
(46,074
)
 
$
44,591

Issuance of Units in Private Placement, net of offering costs
4,706,700

 
5

 

 

 
23,613

 

 

 
23,618

Exercise of stock options
124

 

 

 

 

 

 

 

Stock-based compensation

 

 

 

 
754

 

 

 
754

Unrealized gain on investments

 

 

 

 

 
15

 

 
15

Unrealized loss on foreign currency translation

 

 

 

 

 
(14
)
 

 
(14
)
Net loss

 

 

 

 

 

 
(12,381
)
 
(12,381
)
Balance, March 31, 2019
18,561,029

 
19

 
50,467

 

 
115,031

 
(12
)
 
(58,455
)
 
56,583

Offering costs associated with Private Placement

 

 

 

 
(20
)
 

 

 
(20
)
Exercise of stock options
23,701

 

 

 

 
11

 

 

 
11

Stock-based compensation

 

 

 

 
682

 

 

 
682

Unrealized gain on investments

 

 

 

 

 
17

 

 
17

Unrealized gain on foreign currency translation

 

 

 

 

 
4

 

 
4

Net loss

 

 

 

 

 

 
(11,856
)
 
(11,856
)
Balance June 30, 2019
18,584,730

 
$
19

 
50,467

 
$

 
$
115,704

 
$
9

 
$
(70,311
)
 
$
45,421

 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
 
Balance, December 31, 2019
18,587,892

 
$
19

 
50,467

 
$

 
$
117,371

 
$
10

 
$
(87,926
)
 
$
29,474

Stock-based compensation

 

 

 

 
986

 

 

 
986

Issuance of warrants

 

 

 

 
60

 

 

 
60

Unrealized loss on investments

 

 

 

 

 
(15
)
 

 
(15
)
Unrealized loss on foreign currency translation

 

 

 

 

 
(113
)
 

 
(113
)
Net loss

 

 

 

 

 

 
(5,533
)
 
(5,533
)
Balance, March 31, 2020
18,587,892

 
19

 
50,467

 

 
118,417

 
(118
)
 
(93,459
)
 
24,859

Exercise of stock options
3,339

 

 

 

 
2

 

 

 
2

Stock-based compensation

 

 

 

 
1,232

 

 

 
1,232

Unrealized loss on investments

 

 

 

 

 
(1
)
 

 
(1
)
Unrealized gain on foreign currency translation

 

 

 

 

 
64

 

 
64

Net loss

 

 

 

 

 

 
(9,928
)
 
(9,928
)
Balance, June 30, 2020
18,591,231

 
$
19

 
50,467

 
$

 
$
119,651

 
$
(55
)
 
$
(103,387
)
 
$
16,228


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

3



ALPINE IMMUNE SCIENCES, INC.
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(in thousands)
 
Six Months Ended
June 30,
 
2020
 
2019
 
(unaudited)
Operating activities
 

 
 

Net loss
$
(15,461
)
 
$
(24,237
)
Adjustments to reconcile net loss to net cash used in operating activities:
 
 
 
Depreciation expense
279

 
229

Amortization of premium/discount on investments
(58
)
 
(185
)
Non-cash interest expense
125

 
67

Stock-based compensation expense
2,218

 
1,436

Changes in operating assets and liabilities:
 
 
 
Prepaid expenses and other current assets
632

 
(415
)
Right-of-use asset
318

 
454

Accounts payable and accrued liabilities
(2,467
)
 
1,829

Deferred revenue
58,721

 
2,108

Lease liabilities
518

 
(386
)
Net cash provided by (used in) operating activities
44,825

 
(19,100
)
Investing activities
 
 
 
Purchases of property and equipment
(254
)
 
(200
)
Purchase of short-term investments
(4,871
)
 
(39,804
)
Maturities of short-term investments
27,312

 
40,125

Proceeds from the sale of short-term investments

 
1,391

Net cash provided by investing activities
22,187

 
1,512

Financing activities
 
 
 
Proceeds from borrowings, net of issuance costs
5,000

 

Proceeds from sale of common stock, net of offering costs

 
23,598

Repayment of debt

 
(1,000
)
Proceeds from exercise of stock options
2

 
11

Net cash provided by financing activities
5,002

 
22,609

Effect of exchange rate on cash, cash equivalents and restricted cash
(49
)
 
(10
)
Net increase in cash and cash equivalents and restricted cash
71,965

 
5,011

Cash and cash equivalents and restricted cash, beginning of period
16,509

 
10,843

Cash and cash equivalents and restricted cash, end of period
$
88,474

 
$
15,854

Supplemental Information
 
 
 
Discount in connection with issuance of debt
$
335

 
$

Cash paid for interest
$
198

 
$
67

Recognition of right-of-use asset
$

 
$
11,757

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

4



ALPINE IMMUNE SCIENCES, INC.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Information as of June 30, 2020 and for the three and six months ended June 30, 2020 and 2019 is unaudited)

1. Description of Business
Alpine Immune Sciences, Inc. (the “Company”, “Alpine”, “we”, “us”, or “our”), together with its consolidated subsidiaries, is a clinical-stage immunotherapy company committed to leading a new wave of immune therapeutics, creating potentially powerful multifunctional immunotherapies to improve patients’ lives via unique protein engineering technologies. Our approach includes a proprietary scientific platform that uses a process known as directed evolution to convert native immune system proteins into multi-targeted therapeutics potentially capable of modulating the human immune system. We were incorporated under the laws of the State of Delaware and are headquartered in Seattle, Washington.
A novel strain of coronavirus, SARS-CoV-2 (“COVID-19”), was first reported in December 2019, and subsequently declared a global pandemic by the World Health Organization in March 2020. As a result of the COVID-19 outbreak, many companies have experienced disruptions in their operations and in markets served.  We have implemented some and may take additional temporary precautionary measures intended to help ensure the well-being of our employees and minimize business disruption. We considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts to our results of operations and financial position at June 30, 2020. The full extent of the future impacts of the COVID-19 outbreak on our operations is uncertain. A prolonged outbreak may adversely impact our business, including our clinical trials.
2. Summary of Significant Accounting Policies
Basis of Presentation and Use of Estimates
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and generally accepted accounting principles in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Significant estimates inherent in the preparation of the accompanying unaudited condensed consolidated financial statements include those used for revenue recognition, accruals for clinical trial activities and other accruals, and the estimated fair value of equity-based awards. We base our estimates and assumptions on historical experience when available and on various factors we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates.
The accompanying unaudited condensed consolidated financial statements as of June 30, 2020 and for the three and six months ended June 30, 2020 and 2019 and the related interim information contained within the notes to the condensed consolidated financial statements are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited financial statements and in the opinion of management, reflect all normal recurring adjustments necessary for a fair statement of our financial position for the interim periods presented. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes for the years December 31, 2019 and 2018 included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 30, 2020 (“Annual Report”). The results of our operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the full year.
Principles of Consolidation
Our unaudited condensed consolidated financial statements include the financial position and results of operations of Alpine Immune Sciences, Inc. and our wholly owned operating company and subsidiary, AIS Operating Co., Inc., and our wholly-owned subsidiary, Alpine Immune Sciences Australia PTY LTD. All inter-company balances and transactions have been eliminated in consolidation. 
Cash and Cash Equivalents and Restricted Cash
We consider all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Cash and cash equivalents consist of deposits with commercial banks in checking and interest-bearing accounts, and highly liquid money market funds.

5



Restricted cash represents cash drawn on lines of credit used to establish collateral to support the security deposit on our operating leases to rent office and laboratory space in Seattle, Washington.
Periodically, we maintain deposits in financial institutions in excess of government insured limits. We believe we are not exposed to significant credit risk as our deposits, which are held at financial institutions, are high credit quality securities such as money market funds, U.S. Treasury securities, and commercial paper. To date, we have not realized any losses on these deposits.
Short-Term Investments
Our short-term investments include funds invested in highly liquid money market funds, U.S. Treasury securities, commercial paper, and corporate debt securities with a final maturity of each security of less than one year. These investments are classified as available-for-sale debt securities, which are recorded at fair value based on quoted prices in active markets.
If the estimated fair value of a debt security is below its amortized cost basis, we evaluate whether it is more likely than not that we will sell the security before its anticipated recovery in market value. If an impairment exists, the security is written down to its estimated fair value and we consider whether credit losses exist for the related securities. A credit loss exists if the present value of expected cash flows is less than the amortized cost basis of the security. Credit-related losses are recognized as an allowance for credit losses on the balance sheet with a corresponding adjustment to earnings. Unrealized gains and losses that are unrelated to credit deterioration are reported in other comprehensive income (loss). Purchase premiums and discounts are recognized as interest income using the interest method over the terms of the securities. Realized gains and losses and declines in fair value deemed to be other than temporary are reflected in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) using the specific-identification method.
Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Our steps for recognizing revenue consist of; (1) identifying the contract, (2) identifying the performance obligations as either distinct or bundled goods and services, (3) determining the transaction price associated with each performance obligation for which we expect to be entitled in exchange for transferring such goods and services, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue upon satisfaction of performance obligations.
Our collaboration agreements principally contain multiple performance obligations, which may include (1) grants of, or options to obtain, intellectual property licenses; (2) research and development services; and/or (3) manufacturing or supply services. Payments typically received under these arrangements include one or more of the following: non-refundable upfront license fees, option exercise fees, payment for research and/or development efforts, amounts due upon the achievement of specified objectives, and/or royalties on future product sales. Our revenue is primarily derived from our collaboration agreements with Adaptimmune Therapeutics plc (“Adaptimmune”) and AbbVie Ireland Unlimited Company (“AbbVie”). See further discussion of our collaboration agreements in Note 8.
We allocate revenue to each performance obligation based on its relative stand-alone selling price. We generally determine stand-alone selling prices at the inception of the contract based on our best estimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone basis. Payments received prior to satisfying the relevant revenue recognition criteria are recorded as deferred revenue in the accompanying Condensed Consolidated Balance Sheets and recognized as revenue when the related revenue recognition criteria are met. We recognize revenue under our collaboration agreements based on employee hours contributed to each performance obligation, or by using a cost-based input method to measure progress toward completion of the performance obligation and to calculate the corresponding revenue to recognize each period.
Our collaboration agreements provide for non-refundable milestone payments. We recognize revenue that is contingent upon the achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. A milestone is considered substantive when the consideration payable to us for such milestone (1) is consistent with our performance necessary to achieve the milestone or the increase in value to the collaboration resulting from our performance; (2) relates solely to our past performance; and (3) is reasonable relative to all of the other deliverables and payments within the arrangement. In making this assessment, we consider all facts and circumstances relevant to the arrangement, including factors such as the scientific, regulatory, commercial, and other risks that must be overcome to achieve the milestone, the level of effort and investment required to achieve the milestone and whether any portion of the milestone consideration is related to future performance or deliverables.
We review the contributed employee hours and progress towards completion for each performance obligation under our collaboration agreements, and adjust the revenue recognized to reflect changes in assumptions relating to the estimated

6



satisfaction of the performance obligation. We could accelerate revenue recognition in the event of early termination of programs or if our expectations change. Alternatively, we could decelerate revenue recognition if programs are extended or delayed. While such changes to our estimates have no impact on our reported cash flows, the timing of revenue recorded in future periods could be materially impacted.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. The objective of the standard is to improve areas of GAAP by removing certain exceptions permitted by ASC Topic 740, Income Taxes, and clarifying existing guidance to facilitate consistent application. The standard will become effective for us beginning on January 1, 2021. We are currently evaluating the new standard to determine the potential impact on our financial condition, results of operations, cash flows, and financial statement disclosures.
Recently Adopted Accounting Pronouncements
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements: Clarifying the Interaction between Topic 808 and Topic 606. This ASU clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration received from a collaborative arrangement participant if the participant is not a customer. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments: Credit Losses, as clarified in ASU 2019-04 and ASU 2019-05. The objective of the standard is to provide information about expected credit losses on financial instruments at each reporting date and to change how other-than-temporary impairments on investment securities are recorded. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures. We will continue to monitor the impact of the COVID-19 outbreak on expected credit losses.
3. Net Loss Per Share
Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. The common stock issuable upon the conversion or exercise of the following dilutive securities has been excluded from the diluted net loss per share calculation because their effect would have been anti-dilutive. Diluted net loss per share, therefore, does not differ from basic net loss per share for the periods presented.
 
June 30,
 
2020
 
2019
 
(unaudited)
Warrants to purchase common stock
1,894,455

 
1,859,733

Stock options and restricted stock units outstanding
4,040,935

 
3,266,572

Total
5,935,390

 
5,126,305


4. Cash Equivalents and Short-Term Investments
The amortized cost and fair value of our cash equivalents and short-term investments are as follows (in thousands):
 
June 30, 2020
Assets:
(unaudited)
 
Amortized Cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Fair market value
Money market funds
$
27,053

 
$

 
$

 
$
27,053

Corporate debt securities and commercial paper
1,998

 

 

 
1,998

Total
$
29,051

 
$

 
$

 
$
29,051


7



 
December 31, 2019
Assets:
Amortized Cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Fair market value
Money market funds
$
9,995

 
$

 
$

 
$
9,995

U.S. treasury bills
5,019

 
2

 

 
5,021

Corporate debt securities and commercial paper
21,862

 
14

 

 
21,876

Total
$
36,876

 
$
16

 
$

 
$
36,892


All short-term investments held as of June 30, 2020 and December 31, 2019 were classified as available-for-sale securities and had contractual maturities of less than one year. There were no realized gains and losses on these securities for the periods presented.
5. Fair Value Measurements
Cash and cash equivalents, restricted cash, receivables, accounts payable and accrued liabilities, which are recorded at invoiced amount or cost, approximate fair value based on the short-term nature of these financial instruments. Fair value is defined as the exchange price received for an asset or paid to transfer a liability, or an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value, is 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 inactive markets, 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 supported by little or no market activity and significant to the fair value of the assets or liabilities.
As of June 30, 2020, and December 31, 2019, cash of $61.2 million and $3.6 million, respectively, is excluded from the fair value table below. The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis (in thousands):
 
June 30, 2020
 
(unaudited)
Assets:
Level 1
 
Level 2
 
Level 3
 
Total
Money market funds
$
27,053

 
$

 
$

 
$
27,053

Corporate debt securities and commercial paper

 
1,998

 

 
1,998

Total
$
27,053

 
$
1,998

 
$

 
$
29,051

 
December 31, 2019
Assets:
Level 1
 
Level 2
 
Level 3
 
Total
Money market funds
$
9,995

 
$

 
$

 
$
9,995

U.S. treasury bills
5,021

 

 

 
5,021

Corporate debt securities and commercial paper

 
21,876

 

 
21,876

Total
$
15,016

 
$
21,876

 
$

 
$
36,892


Our Level 2 assets consist of commercial paper and corporate debt securities. We review trading activity and pricing for our available-for-sale securities as of the measurement date. When sufficient quoted pricing for identical securities is not available, we use market pricing and other observable market inputs for similar securities obtained from various third-party data providers. These inputs either represent quoted prices for similar assets in active markets or have been derived from observable market data.

8



6. Additional Balance Sheet Information
Prepaid expenses and other current assets consist of the following (in thousands):
 
June 30, 2020
 
December 31, 2019
 
(unaudited)
 
 
Prepaid research and development
$
580

 
$
574

Tenant improvement allowance receivable
42

 
586

Prepaid insurance
90

 
301

Prepaid other
285

 
89

Other receivables
21

 
100

Prepaid expenses and other current assets
$
1,018

 
$
1,650



Accrued liabilities consist of the following (in thousands):
 
June 30, 2020
 
December 31, 2019
 
(unaudited)
 
 
Research and development services
$
1,970

 
$
2,543

Employee compensation
1,073

 
1,761

Legal and professional fees
687

 
515

Accrued other
94

 
466

Accrued Liabilities
$
3,824

 
$
5,285


7. Long-term Debt
In December 2016, we entered into a Loan and Security Agreement (the “Original Agreement”), with Silicon Valley Bank (“SVB”), under which we borrowed $5.0 million. The Original Agreement accrued interest at a floating per annum rate equal to the lender’s prime rate minus 1.75%. The Original Agreement had an interest-only period through July 2018.
In August 2019 (the “Effective Date”), we entered into an Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with SVB, pursuant to which SVB agreed to extend term loans to us with an aggregate principal amount of up to $15.0 million (the “Term Loans”). Borrowings under the Loan Agreement consist of up to three separate tranches. The initial tranche of $5.0 million was funded in August 2019, $3.0 million of which was used to repay amounts owing under our Original Agreement. In March 2020, the second tranche of $5.0 million was funded to us. We did not draw down the final tranche of $5.0 million, which expired on July 31, 2020. We intend to use the debt proceeds for working capital and other general corporate purposes, including the advancement of our development programs.
The Term Loans accrue interest at a floating per annum rate of 0.25% above the prime rate, subject to a floor of 5.75%, which interest is payable monthly commencing in September 2019. Upon the occurrence and during the continuance of an event of default, a default interest rate will apply that is 4.0% above the otherwise applicable interest rate. The Term Loans are interest only until September 30, 2020, however, under the Loan Agreement our interest only period automatically extends to June 30, 2021 if we receive aggregate new capital of at least $40.0 million no later than June 30, 2020. We met this milestone in June 2020 in conjunction with the AbbVie agreement, discussed in detail in Note 8. As a result of the interest only extension, the Term Loans will be payable in 25 equal monthly installments of principal plus interest, with the final installment due and payable on July 1, 2023.
We may prepay all of the Term Loans subject to a prepayment fee equal to $75,000, which represents the deferred portion of the final payment due under the Original Agreement, plus the outstanding principal balance under the Term Loans at the time of such prepayment multiplied by a prepayment fee of 2.0% in the first year, 1.0% in the second year, and 0% in the third year and thereafter. Additionally, a final payment in the amount of 5.5% of the funded Term Loans is payable to SVB on the date on which the Term Loans are prepaid, paid or become due and payable in full. The final payment fees are recorded in long-term debt with an offsetting reduction to debt discount on our accompanying Condensed Consolidated Balance Sheets.
The Loan Agreement contains customary representations and warranties, events of default and affirmative and negative covenants, including, among others, covenants that limit or restrict our ability to, among other things, incur additional indebtedness, grant liens, merge or consolidate, make acquisitions, pay dividends or other distributions or repurchase equity,

9



make investments, dispose of assets, engage in any new lines of business, and enter into certain transactions with affiliates, in each case subject to certain exceptions. We assessed the likelihood of the lender accelerating payment of the loan due to a material adverse change in our business, operations, financial, or other condition as remote. We were in compliance with our covenants as of June 30, 2020. As such, as of June 30, 2020, the classification of the loan is split between current and noncurrent based on the timing of payment obligations. As security for its obligations under the Loan Agreement, we granted SVB a first priority security interest on substantially all of our assets, except intellectual property, and subject to certain other exceptions.
In connection with the Loan Agreement, we issued a warrant to SVB to purchase up to 52,083 shares of our common stock at a price of $4.32 per share, 17,361 shares of which became exercisable in August 2019 after we drew down the initial tranche. In March 2020, after we drew down the second tranche of our Term Loan, an additional 17,361 shares became exercisable. The remaining warrants did not vest and expired on July 31, 2020, upon the expiration of the third tranche of our Term Loan. The fair value of the warrants on the date of issuance for the initial tranche and second tranche was $60,000 and $60,000, respectively, determined using the Black-Scholes option-pricing model, and was recorded as a component of equity and as a debt discount on our accompanying Condensed Consolidated Balance Sheets. In connection with Original Agreement, SVB also holds 7,069 fully vested common stock warrants at an exercise price of $12.38 per share.
The Term Loan was accounted for as a debt modification in a non-troubled debt restructuring, rather than a debt extinguishment, based on a comparison of the present value of the cash flows under the terms of the debt immediately before and after the Effective Date of the Term Loan, which resulted in a change of less than 10%. As a result, the remaining unamortized debt discount recorded in connection with the Original Agreement will be amortized to interest expense over the repayment term of Loan Agreement. In connection with the initial and second tranches of the Loan Agreement, we recorded a total debt discount of $812,000, which is being amortized to interest expense using the effective interest method over the repayment term of the loan. Non-cash interest expense associated with the amortization of the discount was $81,000 and $31,000 for the three months ended June 30, 2020 and 2019, respectively, and $125,000 and $67,000 for the six months ended June 30, 2020 and 2019, respectively. The unamortized discount was $632,000 as of June 30, 2020.  
Scheduled principal payments on our outstanding debt as of June 30, 2020 under our Loan Agreement, excluding final fee amounts, are as follows (in thousands):
Year ending December 31,
 
Total
2020 (remainder of year)
 
$

2021
 
2,400

2022
 
4,800

2023
 
2,800

Total future principal payments
 
$
10,000


8. License and Collaboration Agreements
AbbVie
In June 2020, we entered into an option and license agreement with AbbVie (the “AbbVie Agreement”) for the development of ALPN-101. The AbbVie Agreement grants AbbVie the exclusive option to purchase an exclusive worldwide license to ALPN-101 (the “License Option”). The License Option is exercisable by AbbVie at any time and will expire 90 days from the achievement of certain development milestones. If AbbVie exercises the License Option, AbbVie will take over the future development and commercialization. Prior to the exercise of the License Option, we will perform research and development services, including conducting a Phase 2 study in systemic lupus erythematosus, based on an agreed-upon development plan (the “Development Plan”). We will be fully responsible for all costs incurred to conduct the activities under the Development Plan, provided that, AbbVie may be responsible for increased costs under the Development Plan in connection with certain material amendments proposed by AbbVie. We will also be solely responsible, at our sole cost and expense, for manufacturing and regulatory filings for ALPN-101 necessary to complete activities under the Development Plan.
In June 2020, in connection with the execution of the AbbVie Agreement, AbbVie paid us a nonrefundable upfront payment of $60.0 million. Prior to the exercise of the License Option, AbbVie has agreed to make cash payments upon our achievement of certain predefined pre-option development milestones (the “Alpine Development Milestones”) up to an aggregate amount of $75.0 million. If AbbVie exercises the License Option, they will pay a one-time cash payment of $75.0 million. Following the exercise of the License Option, AbbVie has also agreed to make aggregate cash payments of up to $205.0 million upon AbbVie’s achievement of certain development and commercial milestones and additional aggregate cash payments of up to $450.0 million upon AbbVie’s achievement of certain sales-based cash milestones, collectively referred to as

10



(the “AbbVie Milestones”). Subsequent to commercialization, we are also eligible to receive high single-digit to low double-digit percentage royalties on worldwide net sales of licensed products.
For revenue recognition purposes, we determined that our contractual promises in the AbbVie Agreement are not distinct and are interdependent with our performance obligation to provide research and development services under the Development Plan. Thus, all contractual promises related to the upfront payment and Alpine’s Development Milestones were combined into a single performance obligation. We determined the Alpine Development Milestone payments are probable of significant revenue reversal as the achievement is highly dependent on factors outside our control. Therefore, these milestone payments are fully constrained and were not included in the transaction price. We will re-evaluate the transaction price each reporting period and update as uncertain events are resolved or other changes in circumstances occur.
The License Option and the AbbVie Milestones were not determined to be performance obligations at the inception of the contract as they did not represent material rights. If exercised, the License Option and AbbVie Milestones will be accounted for as a separate contract and will be recognized as revenue if and when triggered. Any consideration related to sales-based royalties and profit-sharing payments will be recognized when the related sales occur.
We use a cost-based input method to measure progress toward completion of the performance obligation and to calculate the corresponding revenue to recognize each period. In applying the cost-based input, we use actual costs incurred relative to budgeted costs for the combined performance obligation. These costs consist primarily of internal personnel efforts and third-party contract costs relative to the level of patient enrollment in the study. Revenue will be recognized based on the level of costs incurred relative to the total budgeted costs for the performance obligation. A cost-based input method of revenue recognition requires management to make estimates of costs to complete our performance obligation. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete our performance obligation will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.
We recognized revenue from the AbbVie Agreement of $86,000 for the three and six months ended June 30, 2020. As of June 30, 2020 the remaining balance of the transaction price is $59.9 million and is recorded as current and noncurrent deferred revenue on our accompanying Condensed Consolidated Balance Sheets. We expect to recognize the remaining deferred revenue over the remainder of our Development Plan, which began in June 2020 and ends upon the later of the exercise or expiration of the option.
Adaptimmune
In May 2019, we entered into a collaboration and licensing agreement with Adaptimmune (the “Adaptimmune Collaboration”) to develop next-generation SPEAR T-cell products. Under the Adaptimmune Collaboration, we are to perform certain research services and grant Adaptimmune an exclusive license to programs from our secreted immunomodulatory protein (“SIP”) and transmembrane immunomodulatory protein (“TIP”) technologies. In June 2019, under the terms of the Adaptimmune Collaboration, we received an upfront license payment of $2.0 million, and through June 30, 2020 we have received an additional $1.3 million in research support payments to fund ongoing programs. These payments are recorded as deferred revenue upon receipt and are recognized to revenue based on employee hours contributed to each performance obligation. Under the Adaptimmune Collaboration we have recognized revenue of $602,000 and $142,000 for the three months ended June 30, 2020, and 2019, respectively and $1.7 million and $142,000 for the for the six months ended June 30, 2020 and 2019, respectively. In addition, we are eligible for additional research support payments, one-time payments and downstream development and commercialization milestones of up to $288.0 million, if all pre-specified milestones for each program are achieved. We are also eligible to receive low-single digit percentage royalties on worldwide net sales of the applicable products. As of June 30, 2020, we have $242,000 remaining in current deferred revenue on our Condensed Consolidated Balance Sheets.
9. Stockholders’ Equity
Securities Offerings
In July 2020, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) for a private placement with a select group of institutional investors, pursuant to which we sold 5,139,610 units (the “Common Units”) and 790,710 units (the “Prefunded Warrant Units”), for an aggregate purchase price of $60.0 million. Each Common Unit consists of one share of our common stock plus a warrant to purchase 0.3 shares of common stock (the “Common Stock Warrants”), and each Prefunded Warrant Unit consists of one prefunded warrant to purchase one share of common stock (the “Prefunded Warrants”) plus 0.3 Common Stock Warrants. The Prefunded Warrant Units and the Common Units are collectively referred to

11



as the “Units” and each Unit has a purchase price of $10.1175. The Common Stock Warrants have an exercise price of $12.74 and a term of 3.5 years. The Prefunded Warrants became fully exercisable upon the closing date and have an exercise price of $0.001 per share.
The issuance of the securities sold under the Securities Purchase Agreement have not been registered under the Securities Act of 1933, as amended, or state securities laws and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from such registration requirements. We have agreed to file a registration statement with the SEC covering the resale of the shares of common stock issuable in connection with the Securities Purchase Agreement and upon exercise of the warrants.
In June 2018, we entered into an equity distribution agreement, (“Equity Distribution Agreement”), with Piper Jaffray & Co., (“Piper Jaffray”), pursuant to which we may sell shares of our common stock through an “at the market” equity offering program for up to $50.0 million in gross cash proceeds. Under the Equity Distribution Agreement, we will set the parameters for the sale of shares, including the number of shares to be issued, the time period during which sales are requested to be made, limitation on the number of shares that may be sold in any one trading day and any minimum price below which sales may not be made. We will be unable to sell shares under the Equity Distribution Agreement until a prospectus supplement relating to any sales under the Equity Distribution Agreement is filed with the SEC. As of June 30, 2020, no sales under our Equity Distribution Agreement have occurred.
Equity Incentive Plans
On January 1, 2020, in connection with our 2018 Equity Incentive Plan (the “2018 Plan”) annual increase provision, a total of 929,394 additional shares were automatically added to the shares authorized under the 2018 Plan. In June 2020, in conjunction with our annual meeting of stockholders, our stockholders approved an additional increase of 743,515 shares authorized under our 2018 Plan.
In January 2020, annual stock option grants totaling 1,026,950 shares with a weighted average exercise price of $3.25 per share were issued to eligible employees and board members.
Also in January 2020, we issued 156,328 shares of RSUs at a grant date fair value of $3.23 per share to certain employees in lieu of cash incentive compensation. Half of the shares underlying each RSU vested on June 30, 2020, with the remaining half scheduled to vest on December 31, 2020, subject to each grantee’s continued employment or service to the Company on the applicable vesting dates. In addition, upon a change in control as defined in the 2018 Plan, any unvested shares underlying the RSU will immediately vest.
Stock-Based Compensation Expense 
We use the Black-Scholes option pricing model to estimate the fair value of stock options granted at the grant date. The fair value of RSUs is equal to the closing stock price on the date of grant. We recognize the fair value of stock-based compensation as compensation expense over the requisite service period, which is the vesting period. Stock-based compensation is classified in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) as follows (in thousands): 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2020
 
2019
 
2020
 
2019
 
(unaudited)
Employee:
 
 
 
 
 
 
 
Research and development
$
716

 
$
422

 
$
1,225

 
$
762

General and administrative
507

 
248

 
972

 
631

Non-Employee:
 
 
 
 
 
 
 
Research and development
7

 
11

 
18

 
40

General and administrative
2

 
1

 
3

 
3

Total stock-based compensation expense
$
1,232

 
$
682

 
$
2,218

 
$
1,436


10. Income Taxes
We are subject to income taxes in the United States and Australia and our effective tax rate is calculated quarterly based upon current assumptions relating to the full year’s estimated operating results and various tax-related items. Each

12



quarter an estimate of the annual effective tax rate is updated should we revise our forecast of earnings based upon our operating results. If there is a change in the estimated effective annual tax rate, a cumulative adjustment is made. Our effective tax rate for the six months ended June 30, 2020 and 2019 was (0.04)% and 0.00%, respectively. The difference between the effective tax rate of (0.04)% for the six months ended June 30, 2020, the effective tax rate of 0.00% for the six months ended June 30, 2019, and the U.S. federal statutory rate of 21% was primarily due to recognizing a full valuation allowance on deferred tax assets.  
As of June 30, 2020, we determined that, based on an evaluation of the four sources of income and all available evidence, both positive and negative, including our latest forecasts and cumulative losses in recent years, it was more likely than not that none of our deferred tax assets would be realized and therefore we continued to record a full valuation allowance. No current tax liability or expense has been recorded in the financial statements, with the exception of a minimal amount of state income tax refunded during the three-month period ended June 30, 2020.

13



Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.
You should read the following management’s discussion and analysis of financial condition and results of operations in conjunction with our unaudited condensed consolidated financial statements and notes thereto included in Part I, Item 1 of this Quarterly Report on Form 10-Q and with our audited financial statements and related notes thereto and Management’s Discussion and Analysis of Financial Condition and Results of Operations for the year ended December 31, 2019, included in our Annual Report on Form 10-K, or the “Annual Report”, filed with the SEC on March 30, 2020.
Forward-Looking Statements

This Quarterly Report on Form 10-Q contains forward-looking statements and information within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended, which are subject to the “safe harbor” created by those sections. In some cases you can identify these statements by forward-looking words such as “believe,” “may,” “will,” “estimate,” “continue,” “anticipate,” “intend,” “could,” “would,” “project,” “plan,” “expect,” or similar expressions, or the negative or plural of these words or expressions. You should read these statements carefully because they discuss future expectations, contain projections of future results of operations or financial condition, or state other “forward-looking” information. These statements relate to our future plans, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. These forward-looking statements include, but are not limited to:
 
our ability to identify, develop and commercialize additional products or product candidates;
our estimates regarding our expenses, revenues, anticipated capital requirements and our needs for additional financing;
our ability to obtain funding for our operations;
the implementation of our business model and strategic plans for our business and technology;
the timing of the commencement, progress and receipt of data from any of our preclinical and clinical trials;
the expected results of any preclinical or clinical trial and the impact on the likelihood or timing of any regulatory approval;
the scope of protection we are able to establish and maintain for intellectual property rights covering our technology and product candidates;
the anticipated impact of the COVID-19 pandemic on our business, research and clinical development plans and timeliness and results of operations;
the timing or likelihood of regulatory filings and approvals;
the therapeutic benefits, effectiveness and safety of our product candidates;
the rate and degree of market acceptance and clinical utility of any future products;
our ability to maintain and establish collaborations;
our ability to achieve milestones in our current and any future collaborations;
our expectations regarding market risk, including interest rate changes;
our expectations regarding the sufficiency of our cash and cash equivalents to fund operations for at least the next 12 months;
developments relating to our competitors and our industry; and
our expectations regarding licensing, acquisitions and strategic operations.

These forward-looking statements are subject to certain risks and uncertainties that could cause actual results to differ materially from those anticipated in the forward-looking statements. Factors that might cause such a difference include, but are not limited to, those discussed in this report in Part II, Item 1A — Risk Factors, and elsewhere in this report. Forward-looking statements are based on our management’s beliefs and assumptions and on information currently available to our management. These statements, like all statements in this report, speak only as of their date, and we undertake no obligation to update or revise these statements in light of future developments, except as required by law.

14



In addition, statements that “we believe” and similar statements reflect our beliefs and opinions on the relevant subject. These statements are based upon information available to us as of the date of this report, and while we believe such information forms a reasonable basis for such statements, such information may be limited or incomplete, and our statements should not be read to indicate that we have conducted an exhaustive inquiry into, or review of, all potentially available relevant information. These statements are inherently uncertain and investors are cautioned not to unduly rely upon these statements.
Overview
We are a clinical-stage biopharmaceutical company dedicated to discovering and developing innovative, protein-based immunotherapies to treat cancer and autoimmune and inflammatory diseases. Our approach includes a proprietary scientific platform that converts native immune system proteins into differentiated, multi-targeted therapeutics. We believe our strategies are capable of meaningfully modulating the human immune system and significantly improving outcomes in patients with serious diseases.
In June 2020, we entered into an Option and License Agreement with AbbVie Ireland Unlimited Company, or AbbVie, which grants AbbVie an exclusive option to take an exclusive license to our clinical candidate ALPN-101, a dual ICOS and CD28 antagonist intended for the treatment of autoimmune and inflammatory diseases. Preclinical studies with ALPN-101 have demonstrated efficacy in models of systemic lupus erythematosus, or SLE, graft versus host disease, or GVHD, arthritis, inflammatory bowel disease, multiple sclerosis, type 1 diabetes, and Sjögren’s syndrome. We have evaluated ALPN-101 in a Phase 1 healthy volunteer trial. We initiated a Phase 1b/2 study of ALPN-101 in patients with steroid-resistant or steroid-refractory active acute graft-versus-host disease, but terminated this study in June 2020.
Our lead oncology program is ALPN-202, a conditional CD28 costimulator and dual checkpoint inhibitor intended for the treatment of cancer. Preclinical in vivo data have demonstrated monotherapy efficacy in tumor models superior to approved therapies. In addition, ALPN-202 has a unique immuno-modulatory profile and has demonstrated evidence of anti-tumor immunity in preclinical models. Based on ALPN-202’s efficacy in preclinical models and favorable nonclinical safety and development profile, we have initiated NEON-1, a Phase 1 dose escalation and expansion study in patients with advanced malignancies. We intend to continue patient enrollment throughout 2020 and into 2021.
Our third development program is ALPN-303, a dual B-cell cytokine antagonist, designed for the treatment of B-cell mediated diseases. We are currently conducting additional pre-clinical studies and manufacturing activities for ALPN-303 in anticipation of enabling clinical trials by the end of 2021.
Our scientific platform has also generated immune modulatory proteins with the potential of improving engineered cellular therapies, or ECT, such as chimeric antigen receptor T cells, or CAR-T, T cell receptor-engineered T cells, or TCR-T, and tumor infiltrating lymphocytes, or TILs. In May 2019, we signed a collaboration and license agreement with Adaptimmune Therapeutics plc, or Adaptimmune, to develop next-generation SPEAR™ T-cell products which incorporate our secreted and transmembrane immunomodulatory protein (termed SIP™ and TIP™) technology. We intend to continue to leverage our existing pipeline and platform to actively explore and evaluate potential value-creating partnering opportunities.
Our goal is to discover and develop modern therapies to treat patients with serious conditions such as cancer and inflammatory diseases. To achieve our goals, we intend to: 
aggressively move our lead inflammation/autoimmune program ALPN-101 through its development plan including a Phase 2 study for the treatment of SLE;
aggressively move our lead oncology program ALPN-202 through clinical development for the treatment of cancer;
aggressively move ALPN-303 through preclinical development and into clinical studies for the treatment of B-cell mediated diseases; and
maximize the value of our pipeline and platform via potential partnering activities.
Our operations to date have been limited to business planning, raising capital, developing our platform technology, identifying potential immunotherapy candidates, clinical development, and other research and development activities. To date, we have financed operations primarily through private placements of common stock and convertible preferred stock, funds received from license and research agreements, debt financing and assets acquired upon the close of our merger with Nivalis Therapeutics Inc., or Nivalis. We do not have any products approved for sale and have not generated any product sales. Since inception and through June 30, 2020, excluding amounts borrowed through debt financing, we have raised an aggregate of $185.7 million to fund operations, of which $23.6 million was from the sale of common stock, $49.2 million was from the sale of convertible preferred stock, $68.9 million was through our license and collaboration agreements, and $44.1 million in cash, cash equivalents, and marketable securities acquired through the merger with Nivalis. Additionally, in July 2020, we received

15



gross proceeds of $60.0 million related to a securities purchase agreement with a select group of institutional investors. See Note 8 for additional information. As of June 30, 2020, we had cash, cash equivalents, restricted cash, and short-term investments totaling $90.5 million.
Our net loss was $9.9 million and $11.9 million for the three months ended June 30, 2020 and 2019, respectively, and $15.5 million and $24.2 million for the six months ended June 30, 2020 and 2019, respectively. We expect to continue incurring significant expenses and operating losses for at least the next several years as we:
 
initiate and complete clinical trials for product candidates, including ALPN-101, a dual ICOS/CD28 antagonist program targeting autoimmune/inflammatory disorders, ALPN-202, a CD80 vIgD-Fc that mediates PD-L1-dependent CD28 costimulation and inhibits the PD-L1 and CTLA-4 checkpoints targeting cancer and ALPN-303, B-Cell Modulatory Variant TNF Receptor Domains, or vTDs designed to inhibit BAFF and APRIL. BAFF and APRIL are tumor necrosis factor (TNF) superfamily cytokines which play key roles in B cell development, differentiation, and survival, contributing to the pathogenesis of B cell-related autoimmune diseases like systemic lupus erythematosus (SLE);
contract to manufacture and perform additional process development for our product candidates; 
continue research and development efforts to build our pipeline beyond the current product candidates; 
maintain, expand, and protect our intellectual property portfolio; 
hire additional clinical, quality control, scientific, and management personnel; and 
add operational and financial personnel to support our product development efforts and operational capabilities applicable to operating as a public company.
We do not expect to generate product revenue unless and until we successfully complete development of, obtain marketing approval for and commercialize our product candidates, either alone or in collaboration with third parties. We expect these activities will take a number of years and our success in these efforts is subject to significant uncertainty. Accordingly, we will need to raise additional capital prior to the regulatory approval and commercialization of any of our product candidates. Until such time, if ever, as we can generate substantial product revenues, we expect to finance our operating activities through equity or debt financings, collaborations or licenses, capital lease transactions, or other available financing transactions. However, additional capital may not be available on reasonable terms, if at all, and if we raise additional funds through the issuance of additional equity or debt securities, it could result in dilution to our existing stockholders and increased fixed payment obligations.
Financial Overview
Collaboration Revenue
We derive our collaboration revenue primarily from our collaboration and licensing agreements. We may generate revenue in the future from research support or milestone payments received pursuant to our collaboration and licensing agreement with Adaptimmune, or the Adaptimmune Collaboration Agreement, or from our collaboration and license option agreement with AbbVie, or the AbbVie Agreement, or from payments from future license or collaboration agreements, product sales, or government contracts and grants. We expect any revenue we generate, if any, will fluctuate from quarter to quarter.
AbbVie Ireland Unlimited Company
In June 2020, we entered into the AbbVie Agreement for the development of ALPN-101. The AbbVie Agreement grants AbbVie the exclusive option to purchase an exclusive worldwide license to ALPN-101, or the License Option. The License Option is exercisable by AbbVie at any time and will expire 90 days from the achievement of certain development milestones. If AbbVie exercises the License Option, AbbVie will take over the future development and commercialization. Prior to the exercise of the License Option, we will perform research and development services, including conducting a Phase 2 study in SLE, based on an agreed-upon development plan, or the Development Plan. We will be fully responsible for all costs incurred to conduct the activities under the Development Plan, provided that, AbbVie may be responsible for increased costs under the Development Plan in connection with certain material amendments proposed by AbbVie. We will also be solely responsible, at our sole cost and expense, for manufacturing and regulatory filings for ALPN-101 necessary to complete activities under the Development Plan.
In June 2020, in connection with the execution of the AbbVie Agreement, AbbVie paid us a nonrefundable upfront payment of $60.0 million. Prior to the exercise of the License Option, AbbVie has agreed to make cash payments upon our achievement of certain predefined pre-option development milestones, or the Alpine Development Milestones, up to an

16



aggregate amount of $75.0 million. If AbbVie exercises the License Option, they will pay a one-time cash payment of $75.0 million. Following the exercise of the License Option, AbbVie has also agreed to make aggregate cash payments of up to $205.0 million upon AbbVie’s achievement of certain development and commercial milestones and additional aggregate cash payments of up to $450.0 million upon AbbVie’s achievement of certain sales-based cash milestones, collectively referred to as the AbbVie Milestones. Subsequent to commercialization, we are also eligible to receive high single-digit to low double-digit percentage royalties on worldwide net sales of licensed products.
For revenue recognition purposes, we determined that our contractual promises in the AbbVie Agreement are not distinct and are interdependent with our performance obligation to provide research and development services under the Development Plan. Thus, all contractual promises related to the upfront payment and Alpine’s Development Milestones were combined into a single performance obligation. We determined the Alpine Development Milestone payments are probable of significant revenue reversal as the achievement is highly dependent on factors outside our control. Therefore, these milestone payments are fully constrained and were not included in the transaction price. We will re-evaluate the transaction price each reporting period and update as uncertain events are resolved or other changes in circumstances occur.
The License Option and the AbbVie Milestones were not determined to be performance obligations at the inception of the contract as they did not represent material rights. If exercised, the License Option and AbbVie Milestones will be accounted for as a separate contract and will be recognized as revenue if and when triggered. Any consideration related to sales-based royalties and profit-sharing payments will be recognized when the related sales occur.
We use a cost-based input method to measure progress toward completion of the performance obligation and to calculate the corresponding revenue to recognize each period. In applying the cost-based input, we use actual costs incurred relative to budgeted costs for the combined performance obligation. These costs consist primarily of internal personnel efforts and third-party contract costs relative to the level of patient enrollment in the study. Revenue will be recognized based on the level of costs incurred relative to the total budgeted costs for the performance obligation. A cost-based input method of revenue recognition requires management to make estimates of costs to complete our performance obligation. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete our performance obligation will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.
We recognized revenue from the AbbVie Agreement of $86,000 for the three and six months ended June 30, 2020. As of June 30, 2020, the remaining balance of the transaction price is $59.9 million and is recorded as current and noncurrent deferred revenue on our accompanying Condensed Consolidated Balance Sheets. We expect to recognize the remaining deferred revenue over the remainder of our Development Plan, which began in June 2020 and ends upon the later of the exercise or expiration of the option.
Adaptimmune Therapeutics plc
In May 2019, we entered into the Adaptimmune Collaboration Agreement with Adaptimmune, a clinical-stage biopharmaceutical company primarily focused on providing novel cell therapies to patients, particularly for the treatment of solid tumors, to develop next-generation SPEAR T-cell products which incorporate our secreted and transmembrane immunomodulatory protein (termed SIP™ and TIP™) technology. Under the Adaptimmune Collaboration Agreement, we are to perform certain research services and grant Adaptimmune an exclusive license to programs from our SIP and TIP technologies. In June 2019, under the terms of the Adaptimmune Collaboration Agreement, we received an upfront license payment of $2.0 million and as of June 30, 2020 we have received an additional $1.3 million in research support payments to fund ongoing programs. These payments were recorded as deferred revenue and will be recognized to revenue based on employee hours contributed to each performance obligation. We have recognized a total of $3.0 million in revenue through June 30, 2020 related to the Adaptimmune Collaboration Agreement. In addition, we are eligible for additional research support payments, one-time payments and downstream development and commercialization milestones of up to $288.0 million, if all pre-specified milestones for each program are achieved. We are also eligible to receive low-single digit royalties on worldwide net sales of the applicable products.
Research and Development Expenses
We focus our resources on research and development activities, including the conduct of preclinical and clinical studies and product development and expense such costs as they are incurred. Our research and development expenses consist of:
employee-related expenses, including salaries, benefits, taxes, travel, and stock-based compensation expense for personnel in research and development functions;

17



expenses related to process development and production of product candidates paid to contract manufacturing organizations;
costs associated with preclinical activities and regulatory operations, including the cost of acquiring, developing, and manufacturing research material;
clinical trials and activities related to regulatory filings for our product candidates; and
allocation of facilities, overhead, depreciation, and amortization of laboratory equipment and other expenses.
We incurred $7.1 million and $10.2 million in research and development expenses for three months ended June 30, 2020 and 2019, respectively, and $12.0 million and $20.5 million for the six months ended June 30, 2020 and 2019, respectively. We expect our research and development expenses to increase for the foreseeable future as we continue to develop our platform and product candidates.
The successful development of our platform and product candidates is highly uncertain. At this time, we cannot reasonably estimate the nature, timing, or costs of the efforts necessary to finish developing any of our product candidates or the period in which material net cash, if any, from these product candidates may commence. This is due to the numerous risks and uncertainties associated with developing therapeutics, including the uncertainty of:
the scope, rate of progress, expense, and results of clinical trials;
the scope, rate of progress, and expense of process development and manufacturing;
preclinical and other research activities; and
the timing of regulatory approvals.
General and Administrative Expenses
General and administrative expenses consist primarily of salaries and related costs for employees in executive, business development, finance, and administrative functions. Other significant general and administrative expenses include professional fees for accounting and legal services, expenses associated with obtaining and maintaining patents and other intellectual property, and allocation of facility and overhead costs.
We expect general and administrative expenses to increase as we expand infrastructure and continue to prosecute our patents and other intellectual property. Other increases could potentially include increased costs for director and officer liability insurance, costs related to the hiring of additional personnel, and increased fees for directors, outside consultants, lawyers, and accountants. We expect to incur significant costs to comply with corporate governance, internal controls, and similar requirements applicable to public companies.
Interest Expense
Interest expense consists primarily of interest associated with our term loan with Silicon Valley Bank and the amortization of the related debt discount.  
Interest Income
Interest income consists of interest earned on our cash, cash equivalents, and short-term investments.
JOBS Act
On April 5, 2012, the JOBS Act was enacted. Section 107 of the JOBS Act provides that an emerging growth company can take advantage of the extended transition period provided in Section 7(a)(2)(B) of the Securities Act of 1933, as amended, or the Securities Act, for complying with new or revised accounting standards. Thus, an emerging growth company can delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. We have irrevocably elected not to avail ourselves of this extended transition period and, as a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other public companies. In addition, for so long as we are an “emerging growth company,” which is until as late as December 31, 2020, we will, among other things not be required to comply with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley. After we cease to be an “emerging growth company” and for so long as we are not classified as an “accelerated filer” or “large accelerated filer” pursuant to SEC rules, we will continue to be exempt from the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley.

18



Critical Accounting Policies and Estimates
Our management’s discussion and analysis of our financial condition and results of operations is based on our financial statements, which we have prepared in accordance with generally accepted accounting principles in the United States, or GAAP. The preparation of these condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the condensed consolidated financial statements, as well as the reported revenues and expenses during the reporting periods. We evaluate these estimates and judgments on an ongoing basis. We base our estimates on historical experience and on various other factors that we believe are reasonable 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. Our actual results may differ from these estimates under different assumptions or conditions. Our significant accounting policies are more fully described in Note 2 of the accompanying unaudited condensed consolidated financial statements and in Note 2 to the audited financial statements contained in our Annual Report on Form 10-K. There have been no significant or material changes in our significant accounting policies during the six months ended June 30, 2020, as compared to those disclosed in our Annual Report except the following:
Recently Adopted Accounting Pronouncements
In November 2018, the FASB issued Accounting Standards Update, or ASU, No. 2018-18, Collaborative Arrangements: Clarifying the Interaction between Topic 808 and Topic 606. This ASU clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration received from a collaborative arrangement participant if the participant is not a customer. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments: Credit Losses, as clarified in ASU 2019-04 and ASU 2019-05. The objective of the standard is to provide information about expected credit losses on financial instruments at each reporting date and to change how other-than-temporary impairments on investment securities are recorded. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures. We will continue to monitor the impact of the COVID-19 outbreak on expected credit losses.
For information regarding recent accounting pronouncements, see Note 2 of the Notes to Condensed Consolidated Financial Statements under Part I, Item 1 of this report.
Results of Operations

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Comparison of Three Months Ended June 30, 2020 and 2019
The following table summarizes our results of operations for the three months ended June 30, 2020 and 2019 (in thousands):
 
Three Months Ended
June 30,
 
Increase/
(Decrease)
 
2020
 
2019
 
 
(unaudited)
 
 
Collaboration revenue
$
688

 
$
567

 
$
121

Operating expenses:
 
 
 
 
 

Research and development
7,096

 
10,166

 
(3,070
)
General and administrative
3,344

 
2,553

 
791

Total operating expenses
10,440

 
12,719

 
(2,279
)
Loss from operations
(9,752
)
 
(12,152
)
 
2,400

Other income (expense):
 
 
 
 
 
Interest expense
(226
)
 
(61
)
 
(165
)
Interest income
44

 
357

 
(313
)
Loss before taxes
(9,934
)
 
(11,856
)
 
1,922

Income tax benefit
6

 

 
6

Net loss
$
(9,928
)
 
$
(11,856
)
 
$
1,928

Collaboration Revenue
Revenue for the three months ended June 30, 2020 consists of $0.6 million related to the Adaptimmune Collaboration Agreement and $0.1 million related to the AbbVie Agreement. Revenue for the three months ended June 30, 2019 consists of $0.1 million related to the Adaptimmune Collaboration agreement and $0.4 million related to the milestone payment from Laurel from the sale of certain assets.
Research and Development Expenses
The $3.1 million decrease in research and development expenses was primarily attributable to a decrease of $2.1 million in contract manufacturing and process development of our product candidates and a decrease of $1.6 million in direct research activities. These decreases were partially offset by increases of $0.3 million in stock-based compensation, $0.2 million in clinical trial activities, and $0.1 million in allocated overhead and facilities.
General and Administrative Expenses
The $0.8 million increase in general and administrative expenses was primarily attributable to increases of $0.7 million in intellectual property and professional legal services, $0.3 million related to stock-based compensation and $0.1 million in allocated overhead and facilities. These increases were partially offset by a decrease of $0.3 million in personnel-related expenses.

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Comparison of Six Months Ended June 30, 2020 and 2019
The following table summarizes our results of operations for the six months ended June 30, 2020 and 2019 (in thousands):
 
Six Months Ended
June 30,
 
Increase/
(Decrease)
 
2020
 
2019
 
 
(unaudited)
 
 
Collaboration revenue
$
1,779

 
$
567

 
$
1,212

Operating expenses:
 
 
 
 
 
Research and development
11,974

 
20,516

 
(8,542
)
General and administrative
5,122

 
4,898

 
224

Total operating expenses
17,096

 
25,414

 
(8,318
)
Loss from operations
(15,317
)
 
(24,847
)
 
9,530

Other income (expense):
 
 
 
 
 
Interest expense
(346
)
 
(131
)
 
(215
)
Interest income
196

 
741

 
(545
)
Loss before taxes
(15,467
)
 
(24,237
)
 
8,770

Income tax benefit
6

 

 
6

Net loss
$
(15,461
)
 
$
(24,237
)
 
$
8,776

Collaboration Revenue
Revenue for the six months ended June 30, 2020 consists of $1.7 million related to the Adaptimmune Collaboration Agreement and $0.1 million related to the AbbVie Agreement. Revenue for the six months ended June 30, 2019 consists of $0.1 million related to the Adaptimmune Collaboration Agreement and $0.4 million related to the milestone payment from Laurel from the sale of certain assets.
Research and Development Expenses
The $8.5 million decrease in research and development expenses was primarily attributable to decreases of $6.4 million in contract manufacturing and process development of our product candidates, $2.9 million in direct research activities, and $0.1 million in personnel-related expenses. These decreases were partially offset by increases of $0.4 million in stock-based compensation, $0.2 million in clinical trial activity and $0.3 million in allocated overhead and facilities.
General and Administrative Expenses
The $0.2 million increase in general and administrative expenses was primarily attributable to increases of $0.6 million in intellectual property and professional legal services, $0.3 million in stock-based compensation, and $0.1 million in facility costs. These increases were partially offset by a decrease of $0.8 million in personnel-related expenses.
Liquidity and Capital Resources
As of June 30, 2020, we had cash, cash equivalents, restricted cash, and short-term investments totaling $90.5 million. Excluding amounts borrowed through debt financing, as of June 30, 2020, we have raised an aggregate of $185.7 million to fund operations, of which $23.6 million was from the sale of common stock, $49.2 million was from the sale of convertible preferred stock, $68.9 million was through our license and collaboration agreements, and $44.1 million in cash, cash equivalents, and marketable securities acquired through the merger with Nivalis. Additionally, in July 2020, we received gross proceeds of $60.0 million related to a securities purchase agreement with a select group of institutional investors, which gross proceeds are not reflected in the amounts above, as discussed below. In June 2017, August 2019, and March 2020, we drew down term loans from Silicon Valley Bank, or SVB, as discussed below. In addition to our existing cash, cash equivalents, and marketable securities, we are eligible to receive research and development funding and to earn milestone and other contingent payments for the achievement of defined collaboration objectives and certain development and regulatory milestones and royalty payments under our collaborations with Adaptimmune and AbbVie; however, our ability to earn these milestone and contingent payments and the timing of achieving these milestones is uncertain.

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We have incurred operating losses since inception. We expect to continue to incur significant expenses and operating losses for the foreseeable future as we continue our research and preclinical and clinical development of our product candidates; expand the scope of our current studies for our product candidates; initiate additional preclinical, clinical or other studies for our product candidates, including under any collaboration agreements; change or add additional manufacturers or suppliers; seek regulatory and marketing approvals for any of our product candidates that successfully complete clinical studies; seek to identify, evaluate and validate additional product candidates; acquire or in-license other product candidates and technologies; maintain, protect and expand our intellectual property portfolio; attract and retain skilled personnel; and experience any delays or encounter issues with any of the above.
Until such time as we can generate substantial product revenue, if ever, we expect to finance our cash needs through a combination of equity or debt financings and collaboration agreements. Except for any obligations of our collaborators to make milestone payments under our agreements with them, we do not have any committed external sources of capital. To the extent that we raise additional capital through the future sale of equity or debt, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of our existing common stockholders. If we raise additional funds through collaboration agreements in the future, we may have to relinquish valuable rights to our technologies, future revenue streams or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to delay, limit, reduce or terminate our product development or future commercialization efforts or grant rights to develop and market product candidates that we would otherwise prefer to develop and market ourselves.
Our future capital requirements are difficult to forecast and will depend on many factors, including:
the number and characteristics of the future product candidates we pursue either from our internal research efforts or through acquiring or in-licensing other product candidates or technologies;
the scope, progress, results and costs of independently researching and developing any of our future product candidates, including conducting preclinical research and clinical trials;
whether our existing collaborations generate substantial milestone payments and, ultimately, royalties on future approved products for us;
the timing of, and the costs involved in, obtaining regulatory approvals for any future product candidates we develop independently;
the cost of future commercialization activities, if any;
the cost of manufacturing our future product candidates and products, if any;
our ability to maintain our existing collaborations and to establish new collaborations, licensing or other arrangements and the financial terms of such arrangements;
the costs of preparing, filing, prosecuting, maintaining, defending and enforcing patents, including litigation costs and the outcome of such litigation; and
the timing, receipt and amount of sales of, or royalties on, our current or future collaborators’ product candidates, and our future products, if any.
We have considered that our long-term operations anticipate continuing net losses and the need for potential equity or debt financing. We have also considered that new collaborations or selectively partnering our technology or programs may provide other sources of capital. However, there can be no assurances that additional funding or other sources of capital will be available on terms acceptable to us, or at all. Based on our current operating plan, we believe our available cash and cash equivalents and short-term investments, will be sufficient to fund our planned level of operations for at least the next 12 months. We have based this estimate on assumptions that may prove to be wrong, and we could use our capital resources sooner than we expect. Additionally, the process of testing drug candidates in preclinical and clinical studies is costly, and the timing of progress in these studies remains uncertain.

Financing Agreements
In July 2020, we entered into a securities purchase agreement, or the Securities Purchase Agreement, for a private placement with a select group of institutional investors, pursuant to which we sold 5,139,610 units, or the Common Units, and 790,710 units, or the Prefunded Warrant Units, for an aggregate purchase price of $60.0 million. Each Common Unit consists of one share of our common stock plus a warrant to purchase 0.3 shares of common stock, or the Common Stock Warrants, and each Prefunded Warrant Unit consists of one prefunded warrant to purchase one share of common stock, or the Prefunded Warrants, plus one Common Stock Warrant to purchase 0.3 shares of common stock. The Prefunded Warrant Units and the Common Units are collectively referred to as the Units and each Unit has a purchase price of $10.1175. The Common Stock

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Warrants have an exercise price of $12.74 and a term of 3.5 years. The Prefunded Warrants became fully exercisable upon the closing date and have an exercise price of $0.001 per share.
In January 2019, we entered into a securities purchase agreement, or the Purchase Agreement, with a limited number of accredited investors, pursuant to which we sold approximately 4.7 million units, or the Units, for an aggregate purchase price of $25.3 million in a private placement, which we refer to as the Private Placement. Each Unit has a purchase price of $5.37 per Unit and consists of one share of our common stock and a warrant to purchase 0.39 shares of common stock. Pursuant to the terms of the Purchase Agreement, we issued approximately 4.7 million shares of common stock and warrants to purchase an aggregate of approximately 1.8 million shares of common stock. The warrants have an exercise price of $12.74 and have a term of five years.
In June 2018, we entered into an equity distribution agreement, or the Equity Distribution Agreement, with Piper Jaffray & Co., or Piper Jaffray, pursuant to which we may sell shares of our common stock through an “at the market” equity offering program for up to $50.0 million in gross cash proceeds.
Under the Equity Distribution Agreement, we will set the parameters for the sale of shares, including the number of shares to be issued, the time period during which sales are requested to be made, limitation on the number of shares that may be sold in any one trading day and any minimum price below which sales may not be made. As of June 30, 2020, we have made no sales under the Equity Distribution Agreement. We will be unable to sell shares under the Equity Distribution Agreement until a prospectus supplement relating to any sales under the Equity Distribution Agreement is filed with the SEC.
Long-Term Financing
In August 2019, we entered into an Amended and Restated Loan and Security Agreement, or the Loan Agreement, with SVB, pursuant to which SVB agreed to extend term loans to us with an aggregate principal amount of up to $15.0 million, or the Term Loans. Borrowings under the Loan Agreement consist of up to three separate tranches. The initial tranche of $5.0 million was funded in August 2019, $3.0 million of which was used to repay amounts owing under a previous agreement. In March 2020, the second tranche of $5.0 million was funded to us. We did not draw down the third and final tranche of $5.0 million, which expired on July 31, 2020. We intend to use the debt proceeds for working capital and other general corporate purposes, including the advancement of our development programs. Each term loan advance, other than the final term loan advance, must be in the amount of not less than $0.5 million and, after repayment, no term loan advance may be re-borrowed. The Term Loans were interest only until September 30, 2020, however, under the Loan Agreement our interest only period automatically extends to June 30, 2021 if we receive aggregate new capital of at least $40.0 million no later than June 30, 2020. We met this milestone in June 2020 in conjunction with the AbbVie agreement, discussed in detail in Note 8. As a result of the interest only extension, the Term Loans will be payable in 25 equal monthly installments of principal plus interest, with the final installment due and payable on July 1, 2023.
See Note 7 for further discussion of our Term Loans.
Cash Flows
The following is a summary of our cash flows (in thousands):
 
Six Months Ended
June 30,
 
2020
 
2019
 
(unaudited)
Net cash provided by (used in) operating activities
$
44,825

 
$
(19,100
)
Net cash provided by investing activities
22,187

 
1,512

Net cash provided by financing activities
5,002

 
22,609

Net Cash Provided by (Used in) Operating Activities:
Net cash provided by operating activities was $44.8 million during the six months ended June 30, 2020 and consisted of an increase of $57.7 million in our net operating assets and liabilities. This increase was primarily driven by the receipt of a $60.0 million upfront payment from AbbVie, which was recorded as current and noncurrent deferred revenue on our accompanying Condensed Consolidated Balance Sheets. Additionally, we had a $2.6 million increase in our net non-cash adjustments, which primarily relate to stock-based compensation, depreciation and amortization. These increases were partially offset by our net loss of $15.5 million.

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Net cash used in operating activities was $19.1 million during the six months ended June 30, 2019, and consisted primarily of our net loss of $24.2 million. This was offset by increases of $3.1 million in our net operating assets and liabilities and $2.0 million in our net non-cash adjustments, which primarily relate to stock-based compensation, depreciation and amortization.
Net Cash Provided by Investing Activities:
Cash flows from investing activities primarily reflect cash used to purchase short-term investments and proceeds from the maturities and sales of short-term investments, thus causing a shift between our cash and cash equivalents, and short-term investment balances. We manage our cash usage with respect to our total cash, cash equivalents and short-term investments.
Net cash provided by investing activities was $22.2 million during the six months ended June 30, 2020 and consisted primarily of our net purchases and maturities of short-term investments in U.S. Treasury securities, commercial paper, and corporate debt securities as well as purchases of property and equipment, primarily lab equipment, to support our research and development efforts.
Net cash provided by investing activities was $1.5 million during the six months ended June 30, 2019 and consisted primarily of our net purchases, maturities and sales of short-term investments in U.S. Treasury securities, commercial paper, and corporate debt securities as well as the purchases of property and equipment, primarily lab equipment, to support research and development efforts.
Net Cash Provided by Financing Activities:
Net cash provided by financing activities was $5.0 million during the six months ended June 30, 2020 and consisted primarily of the proceeds received from the draw down of the second tranche of our Loan Agreement in March 2020.
Net cash provided by financing activities was $22.6 million during the six months ended June 30, 2019 and consisted primarily of the net proceeds of $23.6 million related to the sale of approximately 4.7 million Units under our Purchase Agreement, partially offset by $1.0 million related to principal payments on our debt.
Contractual Obligations and Contingent Liabilities
As a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, we are not required to provide additional information on our contractual obligations and contingent liabilities pursuant to Item 303 of Regulation S-K.
Off-Balance Sheet Arrangements
We did not have during the periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.
Item 3. Quantitative and Qualitative Disclosures about Market Risk.
As a “smaller reporting company,” as defined by Rule 12b-2 of the Exchange Act, and pursuant to Item 305 of Regulation S-K, we are not required to provide quantitative and qualitative disclosures about market risk.
Item 4. Controls and Procedures
Evaluation of Disclosure Controls and 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 defined in Rules 13a-15(e) and 15d-15(e) of the Exchange Act), as of the end of the period covered by this report. Based upon the evaluation, our Chief Executive Officer and Chief Financial Officer concluded that, as of the end of the period covered by this report, our disclosure controls and procedures were effective, in design and operation, at the reasonable assurance level.
Changes in Internal Control over Financial Reporting
Our management, including our Chief Executive Officer and Chief Financial Officer, evaluated any changes in our internal control over financial reporting during the period ended June 30, 2020, and has concluded that there were no changes that materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

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Inherent Limitation on the Effectiveness of Internal Control
The effectiveness of any system of internal control over financial reporting, including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable, not absolute assurances. In addition, 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. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

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PART II: OTHER INFORMATION
Item 1. Legal Proceedings
From time to time, we may become involved in legal proceedings or be subject to claims arising in the ordinary course of our business. We are not presently a party to any legal proceedings that, in the opinion of our management, would reasonably be expected to have a material adverse effect on our business, financial condition, operating results or cash flows if determined adversely to us. Regardless of the outcome, litigation can have an adverse impact on us because of defense and settlement costs, diversion of management resources and other factors.
Item 1A. Risk Factors
You should carefully consider the following risk factors, in addition to the other information contained in this Quarterly Report on Form 10-Q, including Management’s Discussion and Analysis of Financial Condition and Results of Operations included in Part I, Item 2, and our condensed consolidated financial statements and related notes. If any of the events described in the following risk factors and the risks described elsewhere in this report occurs, our business, operating results and financial condition could be seriously harmed. This report on Form 10-Q also contains forward-looking statements that involve risks and uncertainties. Our actual results could differ materially from those anticipated in the forward-looking statements as a result of factors that are described below and elsewhere in this report.
Risks Related to Our Financial Position, Capital Needs and Business
We will need to raise substantial additional funds to advance development of our therapeutic candidates, and we cannot guarantee we will have sufficient funds available in the future to develop and commercialize our current or future therapeutic candidates.
We will need to raise substantial additional funds to expand our development, regulatory, manufacturing, marketing, and sales capabilities or contract with other organizations to provide these capabilities to us. We have used substantial funds to develop our therapeutic candidates and will require significant funds to conduct further research and development, preclinical testing, and clinical trials of our therapeutic candidates, to seek regulatory approvals for our therapeutic candidates, and to manufacture and market products, if any are approved for commercial sale. As of June 30, 2020, we had $90.5 million in cash and cash equivalents, restricted cash, and short-term investments. Based on our current operating plan, we believe our available cash and cash equivalents, will be sufficient to fund our planned level of operations for at least the next 12 months. Our future capital requirements and the period for which we expect our existing resources to support our operations may vary significantly from what we expect. Our monthly spending levels vary based on new and ongoing development and corporate activities. Because the length of time and activities associated with successful development of our therapeutic candidates are highly uncertain, we are unable to estimate the actual funds we will require for development and any approved marketing and commercialization activities. To execute our business plan, we will need, among other things:
to obtain the human and financial resources necessary to develop, test, obtain regulatory approval for, manufacture, and market our therapeutic candidates;
to build and maintain a strong intellectual property portfolio and avoid infringing intellectual property of third parties;
to establish and maintain successful licenses, collaborations, and alliances;
to satisfy the requirements of clinical trial protocols, including patient enrollment;
to establish and demonstrate the clinical efficacy and safety of our therapeutic candidates;
to obtain regulatory approvals;
to manage our spending as costs and expenses increase due to preclinical studies, clinical trials, regulatory approvals, manufacturing scale-up, and commercialization;
to obtain additional capital to support and expand our operations; and
to market our products to achieve acceptance and use by the medical community in general.
If we are unable to obtain necessary funding on a timely basis or on acceptable terms, we may have to delay, reduce, or terminate our research and development programs, preclinical studies, or clinical trials, if any, limit strategic opportunities, or undergo reductions in our workforce or other corporate restructuring activities. We also could be required to seek funds through arrangements with collaborators or others requiring us to relinquish rights to some of our technologies or therapeutic

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candidates we would otherwise pursue on our own. We do not expect to realize revenue from product sales, or royalties in the foreseeable future, if at all. Our revenue sources are, and will remain, extremely limited unless and until our therapeutic candidates are clinically tested, approved for commercialization, and successfully marketed.
To date, we have financed our operations primarily through the sale of equity securities, debt, and payments received under our collaboration agreements, including our June 2020 option and license agreement with AbbVie. We will be required to seek additional funding in the future and intend to do so through a combination of public or private equity offerings, debt financings, credit and loan facilities, research collaborations, and license agreements. Our ability to raise additional funds from these or other sources will depend on financial, economic, and other factors, many of which are beyond our control. Additional funds may not be available to us on acceptable terms or at all.
If we raise additional funds by issuing equity securities, our stockholders will suffer dilution, and the terms of any financing may adversely affect the rights of our stockholders. For example, in January 2019, we issued in a private placement 4,706,700 shares of common stock and warrants to purchase an additional 1,835,610 shares of common stock for gross proceeds of approximately $25.3 million. In July 2020, we issued in a private placement 5,139,610 shares of common stock, prefunded warrants to purchase 790,710 shares of common stock and warrants to purchase an additional 1,779,096 shares of common stock for gross proceeds of approximately $60.0 million. We also have an Equity Distribution Agreement in place with Piper Jaffray to sell up to $50.0 million of our common stock, from time to time, through an “at the market” equity offering program under which Piper Jaffray acts as sales agent; however, until a new prospectus supplement relating to any sales under the Equity Distribution Agreement is filed with the SEC, the equity offering program will not be available to us.
In addition, as a condition to providing additional funds to us, future investors may demand, and may be granted, rights superior to those of existing stockholders. Debt financing, if available, may involve restrictive covenants limiting our flexibility in conducting future business activities, and, in the event of a liquidation or insolvency, debt holders would be repaid before holders of equity securities receive any distribution of corporate assets. Our failure to raise capital or enter into such other arrangements within a reasonable timeframe would have a negative impact on our financial condition, and we may have to delay, reduce, or terminate our research and development programs, preclinical or clinical trials, or undergo reductions in our workforce or other corporate restructuring activities.
We are an early stage biopharmaceutical company with a history of losses, we expect to continue to incur significant losses for the foreseeable future, we may never achieve or maintain profitability, and we have a limited operating history that may make it difficult for investors to evaluate the potential success of our business.
We are a clinical-stage immunotherapy company, with a limited operating history, focused on developing treatments for autoimmune/inflammatory diseases and cancer. Since inception, we have devoted our resources to developing novel protein-based immunotherapies primarily using our proprietary directed evolution platform, which converts native immune system proteins into potential differentiated, multi-targeted therapeutics designed to modulate the immune system. We have had significant operating losses since inception. For the six months ended June 30, 2020, our net loss was $15.5 million. Substantially all of our losses have resulted from expenses incurred in connection with our research programs and from general and administrative costs associated with our operations. Our technologies and therapeutic candidates are in early stages of development, and we are subject to the risks of failure inherent in the development of therapeutic candidates based on novel technologies.
We have historically generated revenue primarily from the receipt of research funding and upfront payments under our collaboration agreements, including our option and license agreement with AbbVie. We have not generated, and do not expect to generate, any revenue from product sales for the foreseeable future, and we expect to continue to incur significant operating losses for the foreseeable future due to the cost of research and development, preclinical studies, clinical trials, and the regulatory approval process for therapeutic candidates. The amount of future losses is uncertain. Our ability to achieve profitability, if ever, will depend on, among other things, our or our existing collaborators, or any future collaborators, successfully developing therapeutic candidates, obtaining regulatory approvals to market and commercialize therapeutic candidates, manufacturing any approved products on commercially reasonable terms, establishing a sales and marketing organization or suitable third party alternatives for any approved product, and raising sufficient funds to finance business activities. If we or our existing collaborators, or any future collaborators, are unable to develop and commercialize one or more of our therapeutic candidates or if sales revenue from any therapeutic candidate receiving approval is insufficient, we will not achieve profitability, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.

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Our approach to the discovery and development of innovative therapeutic treatments based on our technology is unproven and may not result in marketable products.
We plan to develop novel protein-based immunotherapies in part via our proprietary directed evolution platform for the treatment of cancer and autoimmune/inflammatory diseases. The potential to create therapies capable of working within and/or modulating an immune synapse, forcing a synapse to occur, or preventing a synapse from occurring is an important, novel attribute of the majority of our approaches. However, the scientific research forming the basis of our efforts to develop therapeutic candidates based on our platform is relatively new. Further, the scientific evidence to support the feasibility of developing therapeutic treatments based on our platform is both preliminary and limited.
Relatively few therapeutic candidates based on immunoglobulin superfamily, or IgSF, domains, or tumor necrosis factor receptor super family, or TNFRSF, domains, have been tested in animals or humans, and a number of clinical trials conducted by other companies using IgSF or TNFRSF domain technologies have not been successful. We may discover the therapeutic candidates developed using our scientific platform do not possess certain properties required for the therapeutic candidate to be effective, such as the ability to remain stable or active in the human body for the period of time required for the therapeutic candidate to reach the target tissue and/or cell. We currently have only limited data, and no conclusive evidence, to suggest we can introduce these necessary therapeutic properties into variant Ig domain, or vIgD or variant TNF(R) domain, or vTD, based therapeutic candidates. We may spend substantial funds attempting to introduce these properties and may never succeed in doing so. In addition, vIgDs or vTDs may demonstrate different chemical and pharmacological properties in human subjects or patients than they do in laboratory studies. Even if our programs have successful results in animal studies, they may not demonstrate the same chemical and pharmacological properties in humans and may interact with human biological systems in unforeseen, ineffective, or harmful ways. For example, in the context of immunotherapies, in a Phase 1 clinical trial of TeGenero AG’s product candidate TGN1412, healthy volunteer subjects receiving the product candidate experienced a systemic inflammatory response resulting in renal and pulmonary failure requiring interventions such as dialysis and critical care support. Following this experience, regulatory agencies now ask for evaluation of immunomodulatory antibodies with a number of in vitro assays with human cells. While we continue to evaluate our vIgDs and vTDs preclinically and clinically, the risk profile in humans is still being fully assessed. Undesirable side effects that may be caused by our therapeutic candidates could cause us or regulatory authorities to interrupt, delay or halt clinical trials and could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or other comparable foreign authorities. Such side effects could also affect patient recruitment or the ability of enrolled patients to complete clinical trials or result in potential product liability claims. Any of these occurrences may harm our business, financial condition and prospects significantly. As a result, we may never succeed in developing a marketable therapeutic, we may not become profitable, and the value of our common stock will decline.
Further, we believe that the FDA has no prior experience with vIgDs or vTDs and no regulatory authority has granted approval to any person or entity, including our company, to market and commercialize therapeutics using vIgDs or vTDs, which may increase the complexity, uncertainty, and length of the regulatory approval process for our therapeutic candidates. Our company and our current collaborators, or any future collaborators, may never receive approval to market and commercialize any therapeutic candidate. Even if our company or a collaborator obtains regulatory approval, the approval may be for disease indications or patient populations not as broad as we intended or desired or may require labeling, including significant use or distribution restrictions or safety warnings. Our company or a collaborator may be required to perform additional or unanticipated clinical trials to obtain approval or be subject to post-marketing testing requirements to maintain regulatory approval. If therapeutic candidates we develop using our scientific platform prove to be ineffective, unsafe, or commercially unviable, our entire platform and pipeline would have little, if any, value, which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
The market may not be receptive to our therapeutic products based on a novel therapeutic modality, and we may not generate any future revenue from the sale or licensing of therapeutic products.
Even if approval is obtained for a therapeutic candidate, we may not generate or sustain revenue from sales of the therapeutic product due to factors such as whether the therapeutic product can be sold at a competitive price and otherwise accepted in the market. Therefore, any revenue from sales of the therapeutic product may not offset the costs of development. The therapeutic candidates we are developing are based on new technologies and therapeutic approaches. Market participants with significant influence over acceptance of new treatments, such as physicians and third-party payors, may not adopt a treatment based on our therapeutic products, and we may not be able to convince the medical community and third-party payors to accept and use, or to provide favorable coverage or reimbursement for, any therapeutic products developed by our company, our existing collaborator, or any future collaborators. Market acceptance of our therapeutic products will depend on, among other factors:
the timing of our receipt of any marketing and commercialization approvals;

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the terms of any approvals and the countries in which approvals are obtained;
the safety and efficacy of our therapeutic products;
the prevalence and severity of any adverse side effects associated with our therapeutic products;
the prevalence and severity of any adverse side effects associated with therapeutics of the same type or class as our therapeutic products;
limitations or warnings contained in any labeling approved by the FDA or other regulatory authority;
relative convenience and ease of administration of our therapeutic products;
the willingness of patients to accept any new methods of administration;
the success of our physician education programs;
the availability of adequate government and third-party payor coverage and reimbursement;
the pricing of our products, particularly as compared to alternative treatments;
our ability to compliantly market and sell our products; and
availability of alternative effective treatments for the disease indications our therapeutic products are intended to treat and the relative risks, benefits, and costs of those treatments.
With our focus on engineering wild-type IgSF or TNF(R)SF proteins, these risks may increase to the extent this field becomes more competitive or less favored in the commercial marketplace. Additional risks apply in relation to any disease indications we pursue which are classified as rare diseases and allow for orphan drug designation by regulatory agencies in major commercial markets, such as the United States, European Union, and Japan. Because of the small patient population for a rare disease, if pricing is not approved or accepted in the market at an appropriate level for an approved therapeutic product with orphan drug designation, such drug may not generate enough revenue to offset costs of development, manufacturing, marketing, and commercialization despite any benefits received from the orphan drug designation, such as market exclusivity, assistance in clinical trial design, or a reduction in user fees or tax credits related to development expense. Market size is also a variable in disease indications classified as rare. Our estimates regarding potential market size for any rare indication may be materially different from what we discover to exist at the time we commence commercialization, if any, for a therapeutic product, which could result in significant changes in our business plan and have a material adverse effect on our business, financial condition, results of operations, and prospects.
If a therapeutic product with orphan drug designation subsequently receives the first FDA approval for the indication for which it has such designation, the therapeutic product is entitled to orphan product exclusivity, which means the FDA may not approve any other applications to market the same therapeutic product for the same indication, except in very limited circumstances, for seven years. Orphan drug exclusivity, however, could also block the approval of one of our therapeutic products for seven years if a competitor obtains approval of the same therapeutic product as defined by the FDA or if our therapeutic product is determined to be within the same class as the competitor’s therapeutic product for the same indication or disease.
As in the United States, we may apply for designation of a therapeutic product as an orphan drug for the treatment of a specific indication in the European Union before the application for marketing authorization is made. Sponsors of orphan drugs in the European Union can enjoy economic and marketing benefits, including up to ten years of market exclusivity for the approved indication unless another applicant can show its therapeutic product is safer, more effective, or otherwise clinically superior to the orphan-designated therapeutic product. The respective orphan designation and exclusivity frameworks in the United States and in the European Union are subject to change, and any such changes may affect our ability to obtain EU or U.S. orphan designations in the future.
Our therapeutic candidates are in early stages of development and may fail in development or suffer delays that materially and adversely affect their commercial viability.
We have no products on the market and all of our therapeutic candidates are in early stages of development. Our ability to achieve and sustain profitability depends on obtaining regulatory approval and Institutional Review Board, or IRB, approval to conduct clinical trials at particular sites, obtaining regulatory approvals to market our therapeutic candidates and successfully commercializing our therapeutic candidates, either alone or with third parties, such as our collaborators. Before obtaining regulatory approval for the commercial distribution of our therapeutic candidates, we or a collaborator must conduct extensive preclinical tests and clinical trials to demonstrate the safety and efficacy in humans of our therapeutic candidates. Preclinical testing and clinical trials are expensive, difficult to design and implement, can take many years to complete, and are uncertain as to outcome. For example, we are currently advancing the development of ALPN-101, ALPN-202 and ALPN-303;

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however, even with the significant investment of time and funding to advance these product candidates, we cannot guarantee that our clinical and pre-clinical development efforts will be successful. The start or end of a clinical study is often delayed or halted due to delays in or failure to obtain regulatory approval to commence the study, delays in or failure to reach agreement on acceptable terms with prospective contract research organizations or clinical trial sites, delays in or failure to obtain IRB approval at each site, changing regulatory requirements, manufacturing challenges, clinical sites or contract research organizations deviating from the trial protocol or failing to comply with regulatory requirements or meet contractual obligations, slower than anticipated patient enrollment, changing standards of care, availability or prevalence of use of a comparative therapeutic or required prior therapy, clinical outcomes, failure of patients to complete the trial or return for post-treatment follow-up, or financial constraints. For instance, delays or difficulties in patient enrollment or difficulties in retaining trial participants can result in increased costs, longer development times, or termination of a clinical trial. Clinical trials of a new therapeutic candidate require the enrollment of a sufficient number of patients, which may include patients who are suffering from the disease the therapeutic candidate is intended to treat and who meet other eligibility criteria. Rates of patient enrollment are affected by many factors, including the size of the patient population, the eligibility criteria for the clinical trial, the age and condition of the patients, the stage and severity of disease, the nature of the protocol, the proximity of patients to clinical sites, and the availability of effective treatments or competing academic and other clinical trials for the relevant disease.
A therapeutic candidate can unexpectedly fail at any stage of preclinical and clinical development. The historical failure rate for therapeutic candidates is high due to scientific feasibility, safety, efficacy, changing standards of medical care, and other variables. The novelty of our platform may mean our failure rates are higher than historical norms. The results from preclinical testing or early clinical trials of a therapeutic candidate may not predict the outcome of later phase clinical trials of the therapeutic candidate, particularly in immuno-oncology and autoimmune/inflammatory disorders. We will have to conduct additional trials in our proposed indications to verify the results obtained to date in our preclinical and clinical studies and to support any future regulatory submissions. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles despite promising results in earlier, smaller clinical trials. Moreover, clinical data are often susceptible to varying interpretations and analyses. We do not know whether Phase 1, Phase 2, Phase 3, or other clinical trials we may conduct will demonstrate consistent or adequate efficacy and safety with respect to the proposed indication for use sufficient to receive regulatory approval or market our therapeutic candidates.
We, the FDA, an IRB, an independent ethics committee, or other applicable regulatory authorities may suspend clinical trials of a therapeutic candidate at any time for various reasons, including a belief that subjects participating in such trials are being exposed to unacceptable health risks or adverse side effects. Similarly, an IRB or ethics committee may suspend a clinical trial at a particular trial site. We may not have the financial resources to continue development of, or to enter into collaborations for, a therapeutic candidate if we experience any problems or other unforeseen events delaying or preventing clinical development or regulatory approval of, or our ability to commercialize, therapeutic candidates, including:
negative or inconclusive results from our clinical trials, or the clinical trials of others for therapeutic candidates similar to ours, leading to a decision or requirement to conduct additional preclinical testing or clinical trials or abandon a program;
serious and unexpected drug-related side effects experienced by participants in our clinical trials or by individuals using therapeutics similar to our therapeutic candidates;
serious drug-related side effects experienced in the past by individuals using therapeutics similar to our therapeutic candidates;
delays in submitting Investigational New Drug, or IND, applications or clinical trial applications, or comparable foreign applications, or delays or failure in obtaining the necessary approvals from regulators or IRBs to commence a clinical trial, or a suspension or termination of a clinical trial once commenced;
conditions imposed by the FDA or comparable foreign authorities, such as the European Medicines Agency, or EMA, regarding the scope or design of our clinical trials;
delays in enrolling research subjects in clinical trials;
high drop-out rates of research subjects;
inadequate supply or quality of therapeutic candidate or therapeutic candidate components, or materials or other supplies necessary for the conduct of our clinical trials, including those owned, manufactured, or provided by companies other than ours;
greater than anticipated clinical trial costs, including the cost of any approved drugs used in combination with our therapeutic candidates;
poor effectiveness of our therapeutic candidates during clinical trials;

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unfavorable FDA or other regulatory agency inspection and review of a clinical trial site;
failure of our third-party contractors or investigators to comply with regulatory requirements or otherwise meet their contractual obligations in a timely manner, or at all;
delays and changes in regulatory requirements, policies, and guidelines, including the imposition of additional regulatory oversight around clinical testing generally or with respect to our technology in particular; or
varying interpretations of data by the FDA and similar foreign regulatory agencies.
Product development involves a lengthy and expensive process with an uncertain outcome, and results of earlier pre-clinical and clinical trials may not be predictive of future clinical trial results.
Clinical testing is expensive and generally takes many years to complete, and the outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. The results of pre-clinical trials and early clinical trials of our product candidates may not be predictive of the results of larger, later-stage controlled clinical trials. Product candidates showing promising results in early-stage clinical trials may still suffer significant setbacks in subsequent clinical trials. We have evaluated ALPN-101 in a Phase 1 healthy volunteer trial and previously initiated a Phase 1b/2 study of ALPN-101 in patients with steroid-resistant or steroid-refractory active acute graft-versus-host disease, or SR-aGVHD. We terminated this Phase 1b/2 SR-aGVHD study in June 2020. The proposed Phase 2 study in SLE will materially increase our anticipated research and development spending. SLE is a challenging indication and a number of trials conducted by other companies have failed after significant investment of time and funding . We cannot predict whether our efforts in this indication will be successful. If we are unsuccessful, it is unlikely that AbbVie would exercise its option for ALPN-101 pursuant to our option and license agreement and, as a result, we would not receive the option payment pursuant to this agreement and we would not be eligible for future milestones and royalties. In addition, we have initiated our Phase 1 study of ALPN-202 and are conducting additional preclinical studies and manufacturing activities for ALPN-303 in anticipation of enabling a clinical trial by the end of 2021. We will have to conduct additional preclinical studies and human trials in our proposed indications to verify the results obtained to date and to support any regulatory submissions for further clinical development. A number of companies in the biopharmaceutical industry have suffered significant setbacks in advanced clinical trials due to lack of efficacy or adverse safety profiles despite promising results in earlier, smaller clinical trials. Moreover, clinical data are often susceptible to varying interpretations and analyses. We do not know whether Phase 1, Phase 2, Phase 3, or other clinical trials we may conduct will demonstrate consistent or adequate efficacy and safety with respect to the proposed indication for use sufficient to receive regulatory approval or market our therapeutic candidates.
Additionally, disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed by necessary government agencies, which would adversely affect our business. For example, over the last several years, the U.S. government has shut down multiple times and certain regulatory agencies, such as the FDA, have had to furlough critical FDA and other government employees. If a prolonged government shutdown occurs, 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.
To date, our revenue has been primarily derived from our collaboration agreements, and our success will be dependent, in part, on our collaborators’ efforts to develop our therapeutic candidates.
Our success is dependent, in part, on our collaborators’ efforts to develop our therapeutic candidates and, historically, our revenue has been primarily derived from our agreements with collaborators. For example, in October 2015, we entered into an exclusive, worldwide license and research agreement with Kite Pharma, Inc., or Kite, to research, develop, and commercialize engineered autologous T cell therapies incorporating two targets from our technology. In October 2017, Kite was acquired by Gilead Pharma, Inc. and in May 2019, Kite provided notice to us of termination of the research and license agreement, which was effective in June 2019. In May 2019, we entered into a collaboration agreement with Adaptimmune to develop next-generation SPEAR T-cell products.
In June 2020, we entered into an option and license agreement with AbbVie for ALPN-101. Pursuant to the terms of the option and license agreement, we received an upfront payment of $60.0 million in cash and are eligible to receive up to $75.0 million in development milestones, an additional $75.0 million if AbbVie exercises its option with respect to ALPN-101 following our completion of certain development activities, additional development, commercial and sales-based milestones up to an aggregate of $655.0 million and royalties on any future net sales.
Pursuant to our option and license agreement with AbbVie, we will conduct certain development activities under a development plan that provides for, among other things, the generation of a data package in order for AbbVie to evaluate exercising its option, including all activities reasonably necessary to complete our planned Phase 2 study of ALPN-101 in SLE. If we successfully complete these activities, AbbVie may not exercise its option, which would make achievement of future

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milestones and receipt of future royalties unattainable. If AbbVie exercises its option, our realization of additional milestones and royalty payments will depend upon the efforts of AbbVie. AbbVie will have discretion in determining and directing the efforts and resources for future development activities and, if approval is obtained, commercialization and marketing of the approved drug. AbbVie may not be effective in obtaining approvals for ALPN-101 or marketing or arranging for necessary supply, manufacturing, or distribution relationships for any approved products. AbbVie may also change its strategic focus or pursue alternative technologies in a manner resulting in reduced, delayed, or no additional payments to us. If AbbVie fails to develop, obtain regulatory approval for, or ultimately commercialize ALPN-101 or if AbbVie terminates the collaboration, our business, financial condition, results of operations, and prospects could be materially and adversely affected. In addition, any dispute or litigation proceedings we may have with AbbVie in the future could delay development programs, create uncertainty as to ownership of intellectual property rights, distract management from other business activities and generate substantial expense.
Continued advancement of our other product candidates and other development efforts depends, in part, upon the efforts of our current or future collaborators. If our collaborators do not dedicate sufficient resources to the development of product candidates that are the subject of our agreements, such product candidates may never be successful and we may be ineligible to receive additional milestone payments or royalties pursuant to the terms of our arrangements, which could have a material adverse impact on our financial results and operations. Even if we and our collaborators dedicate sufficient resources to our collaboration agreements, neither we nor our collaborators may be effective in obtaining approvals for any therapeutic candidates or, if approved, the successful commercialization of any approved products. Collaborators may change their strategic focus or pursue alternative technologies after entering into a collaboration agreement with us, which could result in reduced, delayed or no revenue to us. Disputes regarding collaboration agreements, including disputes pertaining to ownership of intellectual property, may also arise and if we and our collaborators are unable to resolve such disputes, litigation proceedings may occur, which could further delay development, distract management and generate substantial expenses, any of which could materially and negatively impact our business.
If third parties on which we depend to conduct our clinical or preclinical studies, or any future clinical trials, do not perform as expected, fail to satisfy regulatory or legal requirements, or miss expected deadlines, our development program could be delayed, which may result in materially adverse effects on our business, financial condition, results of operations, and prospects.
We rely, in part, on third party clinical investigators, contract research organizations, or CROs, clinical data management organizations, and consultants to design, conduct, supervise, and monitor clinical trials and preclinical studies of our therapeutic candidates and may do the same for future clinical trials. Because we rely on third parties to conduct preclinical studies or clinical trials, we have less control over the timing, quality, compliance, and other aspects of preclinical studies and clinical trials than we would if we conducted all preclinical studies and clinical trials on our own. These investigators, CROs, and consultants are not our employees and we have limited control over the amount of time and resources they dedicate to our programs. These third parties may have contractual relationships with other entities, some of which may be our competitors, which may draw their time and resources away from our programs. The third parties with which we contract might not be diligent, careful, compliant, or timely in conducting our preclinical studies or clinical trials, resulting in the preclinical studies or clinical trials being delayed or unsuccessful. Further, if any of our relationships with third-party CROs terminate, we may not be able to enter into arrangements with alternative CROs or to do so on commercially reasonable terms.
If we cannot contract with acceptable third parties on commercially reasonable terms, or at all, or if these third parties do not carry out their expected duties, satisfy legal and regulatory requirements for the conduct of preclinical studies or clinical trials, or meet expected deadlines, our clinical development programs could be delayed and otherwise adversely affected. In all events, we are responsible for ensuring each of our preclinical studies and clinical trials is conducted in accordance with the general investigational plan and protocols for the trial and with legal, regulatory and scientific standards. The FDA and certain foreign regulatory authorities, such as the EMA, require preclinical studies to be conducted in accordance with applicable Good Laboratory Practices, or GLPs, and clinical trials to be conducted in accordance with applicable FDA regulations and Good Clinical Practices, or GCPs, including requirements for conducting, recording, and reporting the results of preclinical studies and clinical trials to assure data and reported results are credible and accurate and the rights, integrity, and confidentiality of clinical trial participants are protected. Our reliance on third parties we do not control does not relieve us of these responsibilities and requirements. If we or any of our CROs fail to comply with applicable GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA, the EMA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory authority will determine that any of our clinical trials comply with GCP regulations. In addition, our clinical trials must be conducted with product produced under current good manufacturing practice, or cGMP, regulations. Our failure to comply with these regulations may require us to repeat clinical trials, which would delay the regulatory approval process. Any such event could have a material adverse effect on our business, financial condition, results of operations, and prospects.

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In addition, switching or adding additional CROs involves additional cost and requires management time and focus. There is also a natural transition period when a new CRO commences work. As a result, delays may occur, which could materially impact our ability to meet our desired clinical development timelines. There can be no assurance that we will not encounter such challenges or delays in the future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.
The COVID-19 coronavirus could adversely impact our business, including our clinical trials.
In December 2019, a novel strain of coronavirus, SARS-CoV-2, the causative agent of coronavirus disease 2019, or COVID-19, was first reported. Since then, SARS-CoV-2 has spread globally, including countries in which we have planned or active clinical trial sites. We have experienced and will likely continue to experience disruptions that could severely impact our business and clinical trials, including:
delays or difficulties in enrolling patients in our clinical trials;
delays or difficulties in clinical site initiation, including difficulties in recruiting clinical site investigators and clinical site staff;
diversion of healthcare resources away from the conduct of clinical trials, including the diversion of hospitals serving as our clinical trial sites and hospital staff supporting the conduct of our clinical trials;
interruption of key clinical trial activities, such as clinical trial site monitoring, due to limitations on travel imposed or recommended by federal or state governments, employers and others;
limitations in employee resources that would otherwise be focused on the conduct of our clinical trials, including because of sickness of employees or their families or the desire of employees to avoid contact with large groups of people;
delays in receiving approval from local regulatory authorities and ethics committees to initiate our planned clinical trials;
delays in clinical sites receiving the supplies and materials needed to conduct our clinical trials;
interruption in global shipping that may affect the transport of clinical trial materials, such as investigational drug product used in our clinical trials;
changes in local regulations as part of a response to the COVID-19 coronavirus outbreak which may require us to change the ways in which our clinical trials are conducted, which may result in unexpected costs, or to discontinue the clinical trials altogether;
delays in necessary interactions with local regulators, ethics committees and other important agencies and contractors due to limitations in employee resources or forced furlough of government employees; and
refusal of the FDA to accept data from clinical trials whose conduct has been affected by the COVID-19 outbreak, such as due to missing data.
The global outbreak of the COVID-19 coronavirus continues to rapidly evolve. The extent to which the COVID-19 coronavirus may impact our business and clinical trials will depend on future developments, which are highly uncertain and cannot be predicted with confidence, such as the ultimate geographic spread of the disease, the duration of the outbreak, travel restrictions and social distancing in the United States and other countries, business closures or business disruptions and the effectiveness of actions taken in the United States and other countries to contain and treat the disease.
We face risks related to health epidemics and other outbreaks, which could significantly disrupt our operations and/or business.
Our business could be adversely impacted by the effects of the COVID-19 outbreak originating in China, or by other epidemics. Our supply chain for raw materials, drug substance or drug product is worldwide, including China, and accordingly could be subject to disruption. There may be restrictions on the export or shipment of raw materials, drug substance or drug product that could materially delay our business or clinical trials.

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Certain of our research and development efforts are also conducted globally, for example the NEON-1 clinical trial includes investigative sites in Australia. A health epidemic or other outbreak, including the current COVID-19 outbreak, may materially and adversely affect our business, financial condition and results of operations. The extent to which the outbreak impacts our results will depend on future developments, which are highly uncertain and cannot be predicted, including new information which may emerge concerning the severity of the outbreak and the actions to contain the outbreak or treat its impact, among others.
Because we rely on third party manufacturing and supply partners, our supply of clinical trial materials may become limited or interrupted or may not be of satisfactory quantity or quality, and our dependence on these third parties may impair the advancement of our research and development programs.
We have established in-house recombinant protein generation capabilities for producing sufficient protein materials to enable a portion of our current preclinical studies. We rely on third party supply and manufacturing partners to supply the materials, components, and manufacturing services for a portion of preclinical studies and also rely on such third parties for all our clinical trial drug supplies. We do not own manufacturing facilities or supply sources for such components and materials for clinical trial supplies and our current manufacturing facilities are insufficient to supply such components and materials for all of our preclinical studies. Certain raw materials necessary for the manufacture of our therapeutic products, such as cell lines, are available from a single or limited number of source suppliers on a purchase order basis. There can be no assurance our supply of research and development, preclinical study, and clinical trial drugs and other materials will not be limited, interrupted, restricted in certain geographic regions, of satisfactory quality or quantity, or continue to be available at acceptable prices. In particular, any replacement of our therapeutic substance manufacturer could require significant effort and expertise and could result in significant delay of our preclinical or clinical activities because there may be a limited number of qualified replacements.
The manufacturing process for a therapeutic candidate is subject to FDA and foreign regulatory authority review, and the facilities used by our contract manufacturers to manufacture our therapeutic candidates must be approved by the FDA pursuant to inspections that will be conducted after we submit our marketing application(s) to the FDA. Suppliers and manufacturers must meet applicable manufacturing requirements and undergo rigorous facility and process validation tests required by regulatory authorities in order to comply with cGMP regulations or other regulatory standards. In the event any of our suppliers or manufacturers fails to comply with such requirements or to perform its obligations to us in relation to quality, timing, or otherwise, or if our supply of components or other materials becomes limited or interrupted for other reasons, we may experience shortages resulting in delayed shipments, supply constraints, and/or stock-outs of our products, be forced to manufacture the materials alone, for which we currently do not have the capabilities or resources, or enter into an agreement with another third party, which we may not be able to do on reasonable terms, if at all. In some cases, the technical skills or technology required to manufacture our therapeutic candidates may be unique or proprietary to the original manufacturer and we may have difficulty, or there may be contractual and intellectual property restrictions prohibiting us from, transferring such skills or technology to another third party and a feasible alternative may not exist. These factors may increase our reliance on such manufacturer or require us to obtain a license from such manufacturer in order to have another third party manufacture our therapeutic candidates. If we are required to change manufacturers for any reason, we will be required to verify the new manufacturer maintains facilities and procedures complying with quality standards and with all applicable regulations. The delays associated with the verification of a new manufacturer could negatively affect our ability to develop therapeutic candidates in a timely manner, within budget, or at all.
We expect to continue to rely on third party manufacturers if we receive regulatory approval for any therapeutic candidate. To the extent we have existing, or enter into future, manufacturing arrangements with third parties, we will depend on these third parties to perform their obligations in a timely manner consistent with contractual and regulatory requirements, including those related to quality control and assurance. If we are unable to obtain or maintain third-party manufacturing for therapeutic candidates, or to do so on commercially reasonable terms, we may not be able to develop and commercialize our therapeutic candidates successfully. Our, or a third party’s, failure to execute on our manufacturing requirements could adversely affect our business in a number of ways, including as a result of:
an inability to initiate or continue preclinical studies or clinical trials of therapeutic candidates under development;
delay in submitting regulatory applications, or receiving regulatory approvals, for therapeutic candidates;
the loss of the cooperation of a collaborator;
subjecting manufacturing facilities of our therapeutic candidates to additional inspections by regulatory authorities;
requirements to cease distribution or to recall batches of our therapeutic candidates; and

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in the event of approval to market and commercialize a therapeutic candidate, an inability to meet commercial demands for our products.
We may not successfully engage in strategic transactions, including any additional collaborations we seek, which could adversely affect our ability to develop and commercialize therapeutic candidates, impact our cash position, increase our expenses, and present significant distractions to our management.
From time to time, we may consider strategic transactions, such as collaborations, acquisitions of companies, asset purchases or divestitures, and out- or in-licensing of therapeutic candidates or technologies. In particular, we intend to evaluate and, if strategically attractive, seek to enter into additional collaborations, including with major biotechnology or pharmaceutical companies. The competition for collaborative partners is intense, and the negotiation process is time-consuming and complex. Any new collaboration may be on suboptimal terms for us, and we may be unable to maintain any new or existing collaboration if, for example, development or approval of a therapeutic candidate is delayed, sales of an approved therapeutic product do not meet expectations, or the collaborator terminates the collaboration. Any such collaboration, or other strategic transaction, may require us to incur non-recurring or other charges, increase our near- and long-term expenditures and pose significant integration or implementation challenges or disrupt our management or business.
These transactions would entail numerous operational and financial risks, including:
exposure to unknown liabilities;
disruption of our business and diversion of our management’s time and attention in order to manage a collaboration or develop acquired therapeutic candidates, or technologies;
incurrence of substantial debt or dilutive issuances of equity securities to pay transaction consideration or costs;
higher than expected collaboration, acquisition, or integration costs;
write-downs of assets or goodwill, or incurring impairment charges or increased amortization expenses; and
difficulty and cost in facilitating the collaboration or combining the operations and personnel of any acquired business or impairment of relationships with key suppliers, manufacturers, or customers of any acquired business due to changes in management and ownership and the inability to retain key employees of any acquired business.
Accordingly, although there can be no assurance we will undertake or successfully complete any transactions of the nature described above, any transactions we do complete may be subject to the foregoing or other risks and have a material adverse effect on our business, results of operations, financial condition, and prospects. Conversely, any failure to enter any collaboration or other strategic transaction beneficial to us could delay the development and potential commercialization of our therapeutic candidates and have a negative impact on the competitiveness of any therapeutic candidate reaching market.
We face competition from entities that have developed or may develop therapeutic candidates for our target disease indications, including companies developing novel treatments and technology platforms based on modalities and technology similar to us. If these companies develop technologies or therapeutic candidates more rapidly than we do, or their technologies, including delivery technologies, are more effective, our ability to develop and successfully commercialize therapeutic candidates may be adversely affected.
We participate in the highly competitive sector of biotechnology and pharmaceuticals and in the subsector of immune modulation. This subsector has undergone tremendous technological advancement over the last decade due to advancements in understanding the role of the immune system across multiple therapeutic areas, including oncology and autoimmune/inflammatory disease. While we believe our novel technology platform, discovery programs, knowledge, experience, and scientific resources offer competitive advantages, we face competition from major pharmaceutical and biotechnology companies, academic institutions, governmental agencies, public and private research institutions, and others.

Any products we successfully develop and commercialize will face competition from currently approved therapies and new therapies potentially available in the future.

The availability of reimbursement from government and other third-party payors will also significantly affect the pricing and competitiveness of our products. Our competitors also may obtain FDA or other regulatory approval for their products more rapidly than we may obtain approval for our products, which could result in our competitors establishing a strong market position before we are able to enter the market.

Many of the companies we compete against may have significantly greater financial resources and expertise in research and development, manufacturing, pre-clinical testing, conducting clinical trials, obtaining regulatory approvals, and

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marketing approved products. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large and established companies. These competitors also compete with us in recruiting and retaining qualified scientific and management personnel and establishing clinical trial sites and patient registration for clinical trials, as well as in acquiring technologies complementary to, or necessary for, our programs.

Specifically, our competitors include companies developing therapies with the same target(s) as ALPN-101, ALPN-202 and ALPN-303 as well as companies building novel platforms to generate multi-specific antibody or non-antibody-based targeting proteins.
ICOSL/CD28 Competitors
The competitors listed below have programs targeting either ICOS or CD28 (or one of their ligands). To our knowledge, there are currently no competitors with a single molecule targeting ICOS and CD28 simultaneously.
an anti-BAFF, anti-ICOSL bispecific antibody being developed by Amgen, Inc (rozibafusp alfa (AMG570/MEDI0700));
an anti-CD28 monoclonal antibody fragment being developed by OSE ImmunoTherapeutics SA (FR104);
an anti-CD28 peptide being developed by AtoxBio, Inc (reltecimod (AB-103)); and
an anti-CD28 monoclonal antibody being development by TherMAB (TAB08).
ALPN-202 Program Competitors
There are numerous clinical trials for immuno-oncology products used as a single agent or in combination. One of the potentially novel attributes of the ALPN-202 program is it combines inhibitory receptor antagonism and activating costimulation with a single molecule interacting with multiple immune targets.

Examples of additional multi-target compounds for immuno-oncology are highlighted below. To our knowledge, there are currently no competitors with a single molecule capable of dual PD-L1/CTLA-4 antagonism and PD-L1-dependent CD28 agonism.
wild-type CD80-Fc being developed by Five Prime Therapeutics, Inc. (FPT155);
bispecific antibodies being developed by Regeneron targeting tumor specific antigens and CD28 (REGN5678 anti-PSMAxCD28, REGN5668 anti-MUC16xCD28, and REGN7075 anti-EGFRxCD28);
trispecific antibodies being developed by Sanofi (CD3xCD38xCD28) (SAR442257);
bifunctional fusion protein composed of monoclonal antibody against PD-L1 fused to the extracellular domain of human transforming growth factor-ß, or TGF-ß, receptor II being developed by EMD Serono, Inc. and GlaxoSmithKline plc (bintrafusp alfa, or M7824);
bifunctional fusion protein composed of PD-1 and OX40L developed by Shattuck Labs, Inc. (SL-279252);
bispecific fusion protein targeting 4-1BB and PD-L1 being developed by Pieris Pharmaceuticals, Inc. (PRS-344);
bispecific monoclonal antibodies being developed by Xencor, Inc. including XmAb20717 targeting CTLA-4 and PD-1, XmAb22841 targeting CTLA-4 and LAG-3, and XmAb23104 targeting PD-1 and ICOS;
bispecific constructs called “DARTs” being developed by Macrogenics Inc., including MGD013 targeting PD-1 and LAG-3 and MGD019 targeting PD-1 and CTLA-4;
bispecific monoclonal antibody being developed by Tesaro, Inc., which was purchased by GlaxoSmithKline plc, targeting PD-1 and LAG-3;
small molecule antagonists being developed by Aurigene Ltd and Curis, Inc., including CA-170 targeting PD-L1 and VISTA and CA-327 targeting PD-L1 and TIM-3;
FS118, a bispecific monoclonal antibody targeting PD-L1 and LAG-3 being developed by F-star Biotechnology, Ltd.;
various combinations of separate anti PD-1/L1 and anti-CTLA-4 monoclonal antibodies; and

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various combinations of separate anti PD-1/L1 and costimulatory monoclonal antibodies such as OX-40, 4-1BB, and others.
ALPN-303 Program Competitors
The competitors listed below have programs targeting either the TACI, BCMA, or BAFF pathway for autoimmune disease.
Anti-BAFF antibody marketed by GSK plc (belimumab);
TACI-Fc being developed by EMD Serono, Inc. (atacicept);
TACI-Fc being developed by RemeGen Ltd. (telitacicept);
Anti-BAFFr IgG1 being developed by Novartis AG (lanalumab);
an anti-BAFF, anti-ICOSL bispecific antibody being developed by Amgen, Inc. (rozibafusp alfa (AMG570/MEDI0700)); and
an anti-APRIL antibody being developed by Chinook Therapeutics, Inc. (BION-1301).
Novel Platform Competitors
Multifunctional therapeutic protein platforms potentially competitive with our platform include:
Amgen, Inc. (BiTE®): fusion proteins consisting of two single-chain variable fragments to link T-cells to tumors;
Macrogenics, Inc. (DART®): Dual-Affinity Re-Targeting and Trident technology platforms bind multiple targets with a single molecule;
Xencor, Inc. (XmAb Bispecific): Optimized Fc domains for improved potency, half-life and stability;
Zymeworks, Inc. (Azymetric™): Proprietary amino acid modifications to facilitate interaction of distinct heavy chains;
Pieris Pharmaceuticals, Inc. (Anticalin®): Engineered proteins derived from natural lipocalins found in blood plasma;
Compass Therapeutics, LLC (Targeted Immunomodulation™, StitchMabs™): Antibody discovery targeting the tumor-immune synapse;
Harpoon Therapeutics, Inc.: TriTAC™ (Tri-specific T cell Activating Construct) contain CD3 binding domain, half-life extension domain, and antigen-binding domain;
Shattuck Labs, Inc.: Agonist Redirected Antibody platform claimed to bind tumor-necrosis factor (“TNF”) and checkpoint targets;
Ablynx NV (Nanobody®), purchased by Sanofi Pharma, Inc.: Platform technology of single-domain, heavy-chain antibody fragments derived from camelidae (e.g., camels and llamas);
Regeneron, Inc.: VEGF Trap and VelociSuite® antibody technology platforms; and
Five Prime Therapeutics, Inc.: Proprietary protein library and rapid protein production and testing platform.
Additionally, there are a number of other therapies for autoimmune/inflammatory diseases or cancer approved or in development that are also competitive with our lead program and other programs in development. Many of the other therapies include other types of immunotherapies with different targets than our programs. Other potentially competitive therapies work in ways distinct from our development programs.
Many of our competitors have significantly greater financial, technical, manufacturing, marketing, sales, and supply resources or experience than we have. If we successfully obtain approval for any therapeutic candidate, we will face competition based on many different factors, including safety and effectiveness, ease with which our products can be administered and the extent to which patients accept relatively new routes of administration, timing and scope of regulatory approvals, availability and cost of manufacturing, marketing and sales capabilities, price, reimbursement coverage, and patent position of our products. Competing products could present superior treatment alternatives, including by being more effective, safer, less expensive, or marketed and sold more effectively than any products we may develop. Competitive products may make any products we develop obsolete or noncompetitive before we recover the expense of developing and commercializing our therapeutic candidates. Competitors could also recruit our employees, which could negatively impact our ability to execute our business plan.

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Any inability to attract and retain qualified key management and technical personnel would impair our ability to implement our business plan.
Our success largely depends on the continued service of key management and other specialized personnel, including Mitchell H. Gold, M.D., our Executive Chairman and Chief Executive Officer, Stanford Peng, M.D., Ph.D., our President and Head of Research and Development, and Paul Rickey, our Senior Vice President and Chief Financial Officer.
The loss of one or more members of our management team or other key employees or advisors could delay our research and development programs and materially harm our business, financial condition, results of operations, and prospects. The relationships our key managers have cultivated within our industry make us particularly dependent upon their continued employment with us. We are dependent on the continued service of our technical personnel because of the highly technical nature of our therapeutic candidates and technologies, and the specialized nature of the regulatory approval process. Because our management team and key employees are not obligated to provide us with continued service, they could terminate their employment with us at any time without penalty. We do not maintain key person life insurance policies on any of our management team members or key employees. Our future success will depend in large part on our continued ability to attract and retain other highly qualified scientific, technical, and management personnel, as well as personnel with expertise in clinical testing, manufacturing, governmental regulation, and commercialization. We face competition for personnel from other companies, universities, public and private research institutions, government entities, and other organizations, including significant competition in the Seattle employment market.
As our therapeutic candidates advance into clinical trials, we may experience difficulties in managing our growth and expanding our operations.
We have limited experience in therapeutic development and very limited experience with clinical trials of therapeutic candidates. As our therapeutic candidates enter and advance through preclinical studies and clinical trials, we will need to expand our development, regulatory, and manufacturing capabilities or contract with other organizations to provide these capabilities for us. For example, as we prepare to initiate our Phase 2 study in SLE, we will need to hire additional personnel in clinical operations. We also must manage relationships with collaborators or partners, suppliers, and other organizations. Our ability to manage our operations and future growth will require us to continue to improve our operational, financial, and management controls, reporting systems, and procedures. We may not be able to implement improvements to our management information and control systems in an efficient or timely manner and may discover deficiencies in existing systems and controls.
If any of our therapeutic candidates are approved for marketing and commercialization and we are unable to develop sales, marketing and distribution capabilities on our own or enter into agreements with third parties to perform these functions on acceptable terms, we may be unable to successfully commercialize any such future products.
We currently have no sales, marketing, or distribution capabilities or experience. If any of our therapeutic candidates are approved, we will need to develop internal sales, marketing, and distribution capabilities to commercialize such products, which may be expensive and time-consuming, or enter into collaborations with third parties to perform these services. If we decide to market our products directly, we will need to commit significant financial, legal, and managerial resources to develop a marketing and sales force with technical expertise and supporting distribution, administration, and compliance capabilities. If we rely on third parties with such capabilities to market our approved products, or decide to co-promote products with collaborators, we will need to establish and maintain marketing and distribution arrangements with third parties, and there can be no assurance we will be able to enter into such arrangements on acceptable, compliant terms or at all. In entering into third-party marketing or distribution arrangements, any revenue we receive will depend upon the efforts of the third parties and there can be no assurance such third parties will establish adequate sales and distribution capabilities or be successful in gaining market acceptance of any approved therapeutic. If we are not successful in commercializing any therapeutic approved in the future, either on our own or through third parties, our business, financial condition, results of operations, and prospects could be materially and adversely affected.
If we fail to comply with U.S. and foreign regulatory requirements, regulatory authorities could limit or withdraw any marketing or commercialization approvals we may receive and subject us to other penalties that could materially harm our business.
Our company, our therapeutic candidates, our suppliers, and our contract manufacturers, distributors, and contract testing laboratories are subject to extensive regulation by governmental authorities in the European Union, the United States, and other countries, with regulations differing from country to country.

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Even if we receive marketing and commercialization approval of a therapeutic candidate, we and our third-party service providers will be subject to continuing regulatory requirements, including a broad array of regulations related to establishment registration and product listing, manufacturing processes, risk management measures, quality and pharmacovigilance systems, post-approval clinical studies, labeling and packaging, advertising and promotional activities, record keeping, distribution, adverse event reporting, import and export of pharmaceutical products, pricing, sales, and marketing, and fraud and abuse requirements.
We are required to submit safety and other post market information and reports, and are subject to continuing regulatory review, including in relation to adverse patient experiences with the product and clinical results reported after a product is made commercially available, both in the United States and in any foreign jurisdiction in which we seek regulatory approval. The FDA and certain foreign regulatory authorities, such as the EMA, have significant post-market authority, including the authority to require labeling changes based on new safety information and to require post-market studies or clinical trials to evaluate safety risks related to the use of a product or to require withdrawal of the product from the market.
The FDA also has the authority to require a Risk Evaluation and Mitigation Strategies, or REMS, plan either before or after approval, which may impose further requirements or restrictions on the distribution or use of an approved therapeutic. The EMA now routinely requires risk management plans, or RMPs, as part of the marketing authorization application process, and such plans must be continually modified and updated throughout the lifetime of the product as new information becomes available. In addition, the relevant governmental authority of any EU member state can request an RMP whenever there is a concern about the risk/benefit balance of the product.
The manufacturers and manufacturing facilities we use to make a future product, if any, will also be subject to periodic review and inspection by the FDA and other regulatory agencies, including for continued compliance with cGMP requirements. The discovery of any new or previously unknown problems with our third-party manufacturers, manufacturing processes or facilities may result in restrictions on the product, manufacturers or facilities, including withdrawal of the product from the market. If we rely on third-party manufacturers, we will have limited control over compliance with applicable rules and regulations by such manufacturers.
If we or our collaborators, manufacturers, or service providers fail to comply with applicable continuing regulatory requirements in the U.S. or foreign jurisdictions in which we seek to market our products, we may be subject to, among other things, fines, warning and untitled letters, clinical holds, a requirement to conduct additional clinical trials, delay or refusal by the FDA or foreign regulatory authorities to approve pending applications or supplements to approved applications, suspension, refusal to renew or withdrawal of regulatory approval, product recalls, seizures, or administrative detention of products, refusal to permit the import or export of products, operating restrictions, inability to participate in government programs including Medicare and Medicaid, and total or partial suspension of production or distribution, injunction, restitution, disgorgement, debarment, civil penalties, and criminal prosecution.
Imposed price controls may adversely affect our future profitability.
In most countries, the pricing of prescription drugs is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after receipt of marketing approval for a product. In addition, there can be considerable pressure by governments and other stakeholders on prices and reimbursement levels, including as part of cost containment measures. Political, economic, and regulatory developments may further complicate pricing and reimbursement negotiations, and pricing negotiations may continue after reimbursement has been obtained.
Reference pricing used by various EU member states and parallel distribution, or arbitrage between low-priced and high-priced member states, can further reduce prices. In some countries, we or our collaborators may be required to conduct a clinical trial or other studies comparing the cost-effectiveness of our therapeutic candidates to other available therapies in order to obtain or maintain reimbursement or pricing approval. Publication of discounts by third-party payors or authorities may lead to further pressure on the prices or reimbursement levels within the country of publication and other countries. If reimbursement of any product candidate approved for marketing is unavailable or limited in scope or amount, or if pricing is set at unsatisfactory levels, our business, financial condition, results of operations, or prospects could be adversely affected.
Our business entails a significant risk of product liability and our inability to obtain sufficient insurance coverage could harm our business, financial condition, results of operations, or prospects.
Our business exposes us to significant product liability risks inherent in the development, testing, manufacturing, and marketing of therapeutic treatments. Product liability claims could delay or prevent completion of our development programs. If we succeed in marketing products, such claims could result in an investigation by certain regulatory authorities, such as FDA or foreign regulatory authorities, of the safety and effectiveness of our products, our manufacturing processes and facilities, or

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our marketing programs and potentially a recall of our products or more serious enforcement action, limitations on the approved indications for which they may be used, or suspension or withdrawal of approvals. Regardless of the merits or eventual outcome, liability claims may also result in decreased demand for our products, injury to our reputation, costs to defend the related litigation, a diversion of management’s time and our resources, substantial monetary awards to trial participants or patients, and a decline in our valuation. We currently have product liability insurance we believe is appropriate for our stage of development and may need to obtain higher levels of product liability insurance prior to marketing any therapeutic candidates. Any insurance we have or may obtain may not provide sufficient coverage against potential liabilities. Furthermore, clinical trial and product liability insurance is becoming increasingly expensive. As a result, we may be unable to obtain sufficient insurance at a reasonable cost to protect us against losses caused by product liability claims with a potentially material adverse effect on our business.
Our employees may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements, which could have a material adverse effect on our business.
We are exposed to the risk of employee fraud or other misconduct. Misconduct by employees could include, but is not limited to:
intentional failures to comply with FDA or U.S. health care laws and regulations, or applicable laws, regulations, guidance, or codes of conduct set by foreign governmental authorities or self-regulatory industry organizations;
a provision of inaccurate information to any governmental authorities such as FDA;
noncompliance with manufacturing standards we may establish;
noncompliance with federal and state healthcare fraud and abuse laws and regulations; and
a failure to report financial information or data accurately or a failure to disclose unauthorized activities to us.
In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws, regulations, guidance and codes of conduct intended to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws, regulations, guidance statements, and codes of conduct may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive program, health care professional, and other business arrangements.
Employee misconduct could also involve the improper use of information obtained in the course of clinical trials, which could result in regulatory sanctions, including debarment or disqualification of those employees from participation in FDA regulated activities and serious harm to our reputation. This could include violations of provisions of the U.S. federal Health Insurance Portability and Accountability Act, or HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act, or HITECH, other U.S. federal and state law, and requirements of non-U.S. jurisdictions, including the European Union Data Protection Directive.
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, regulations, guidance or codes of conduct. If any such actions are instituted against us, and we are not successful in defending such actions or asserting our rights, those actions could have a significant impact on our business, including the imposition of significant fines, exclusion from government programs, or other sanctions.
Our business involves the use of hazardous materials and we and our third-party manufacturers must comply with environmental laws and regulations, which may be expensive and restrict how we conduct business.
Our third-party manufacturers’ activities and our own activities involve the controlled storage, use and disposal of hazardous and flammable materials, including the components of our pharmaceutical product candidates, test samples and reagents, biological materials and other hazardous compounds. We and our manufacturers are subject to federal, state, local, and foreign laws and regulations governing the use, generation, manufacture, storage, handling, and disposal of these hazardous materials. Although we believe our safety procedures for handling and disposing of these materials and waste products comply with the standards prescribed by these laws and regulations, we cannot eliminate the risk of accidental injury or contamination from the use, storage, handling, or disposal of hazardous materials. In the event of an accident, state, or federal or other applicable authorities may curtail our use of these materials and/or interrupt our business operations. In addition, if an accident or environmental discharge occurs, or if we discover contamination caused by prior operations, including by prior owners and operators of properties we acquire, we could be liable for cleanup obligations, damages, and fines. If such unexpected costs are substantial, this could significantly harm our financial condition and results of operations.

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Compliance with governmental regulations regarding the treatment of animals used in research could increase our operating costs, which would adversely affect the commercialization of our technology.
The Animal Welfare Act, or AWA, is the federal law covering the treatment of certain animals used in research. Currently, the AWA imposes a wide variety of specific regulations governing the humane handling, care, treatment, and transportation of certain animals by producers and users of research animals, most notably relating to personnel, facilities, sanitation, cage size and feeding, watering, and shipping conditions. Third parties with whom we contract are subject to registration, inspections, and reporting requirements under the AWA. Furthermore, some states have their own regulations, including general anti-cruelty legislation, which establish certain standards in handling animals. Comparable rules, regulations, and or obligations exist in many foreign jurisdictions. If we or our contractors fail to comply with regulations concerning the treatment of animals used in research, we may be subject to fines and penalties and adverse publicity, and our operations could be adversely affected.
Our business and operations could suffer in the event of system failures.
Computer system, network or telecommunications failures due to events such as damage from malware, unauthorized access, terrorism, war, or natural disasters could interrupt our internal or partner operations. For example, the loss of pre-clinical trial data, data from completed or ongoing clinical trials for our product candidates or other confidential information could result in delays in our regulatory filings and development efforts, significantly increase our costs and result in other adverse impacts to our business. To the extent that any disruption or cybersecurity breach was to result in a loss of or damage to our data, or inappropriate disclosure of confidential or proprietary information, we could incur liability and other remediation costs, and the development of our product candidates could be delayed. While we have implemented security measures, our internal computer systems and the external systems and services used by our third-party CMOs, third-party CROs, or other contractors, consultants, directors and partners remain potentially vulnerable to damage from these events.
Our information technology systems could face serious disruptions adversely affecting our business.
Our information technology and other internal infrastructure systems, including corporate firewalls, servers, leased lines, and connection to the Internet, face the risk of systemic failure potentially disruptive to our operations. A significant disruption in the availability of our information technology and other internal infrastructure systems could cause interruptions in our collaborations with our partners and delays in our research and development work.
Our current operations are concentrated in one location and any events affecting this location may have material adverse consequences.
Our current operations are located in facilities situated in Seattle. Any unplanned event, such as flood, fire, explosion, earthquake, extreme weather condition, medical epidemics, power shortage, power outage, telecommunication failure, or other natural or manmade accidents or incidents resulting in our company being unable to fully utilize the facilities, may have a material adverse effect on our ability to operate our business, particularly on a daily basis, and have significant negative consequences on our financial and operating conditions. Loss of access to these facilities may result in increased costs, delays in the development of our therapeutic candidates, or interruption of our business operations. As part of our risk management policy, we maintain insurance coverage at levels we believe are appropriate for our business. However, in the event of an accident or incident at these facilities, we cannot assure you the amounts of insurance will be sufficient to satisfy any damages and losses or that the insurance covers all risks. If our facilities are unable to operate because of an accident or incident or for any other reason, even for a short period of time, any or all of our research and development programs may be harmed. Any business interruption may have a material adverse effect on our business, financial position, results of operations, and prospects.
The investment of our cash, cash equivalents, and fixed income in marketable securities is subject to risks which may cause losses and affect the liquidity of these investments.
As of June 30, 2020, we had $90.5 million in cash and cash equivalents, restricted cash, and short-term investments. We expect to invest our excess cash in marketable securities. These investments are subject to general credit, liquidity, market and interest rate risks, including potential future impacts similar to the impact of U.S. sub-prime mortgage defaults previously affecting various sectors of the financial markets and which caused credit and liquidity issues. We may realize losses in the fair value of these investments, an inability to access cash in these investments for a potentially meaningful period, or a complete loss of these investments, which would have a negative effect on our financial statements.

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Changes in accounting rules and regulations, or interpretations thereof, could result in unfavorable accounting charges or require us to change our compensation policies.
Accounting methods and policies for biopharmaceutical companies, including policies governing revenue recognition, research and development and related expenses, and accounting for stock-based compensation, are subject to review, interpretation, and guidance from our auditors and relevant accounting authorities, including the SEC. Changes to accounting methods or policies, or interpretations thereof, may require us to reclassify, restate, or otherwise change or revise our financial statements.
Our business may be materially affected by changes to fiscal and tax policies. Negative or unexpected tax consequences could adversely affect our results of operations.
New tax laws, statutes, rules, regulations or ordinances could be enacted at any time, which could adversely affect our business operations, and our business and financial performance. Further, existing tax laws, statutes, rules, regulations or ordinances could be interpreted, changed, modified or applied adversely to us. For example, the Tax Cuts and Jobs Act of 2017, or TCJA, enacted in December 2017, as modified by the Coronavirus Aid, Relief, and Economic Security Act, or the CARES Act, enacted in April 2020, significantly changed the U.S. Internal Revenue Code. Such changes include a reduction in the corporate tax rate and limitations on certain corporate deductions and credits, among other changes. We have generally accounted for changes related to the TCJA in accordance with our understanding of the legislation and guidance available as of the date of this filing as described in more detail in our financial statements and will continue to monitor and assess the impact of the federal legislation on our business and the extent to which various states conform to the newly enacted federal tax law. In addition, adverse changes in the financial outlook of our operations or further changes in tax laws or regulations could lead to changes in our valuation allowances against deferred tax assets on our consolidated balance sheets, which could materially affect our results of operations.
Nivalis’ pre-merger net operating loss carryforwards and certain other tax attributes are likely subject to limitations. The pre-merger net operating loss carryforwards and certain other tax attributes of Alpine and of the combined organization may also be subject to limitations as a result of ownership changes resulting from the merger.
In general, a corporation that undergoes an “ownership change” is subject to limitations on its ability to utilize its pre-change net operating loss carryforwards, or NOL carryforwards, to offset future taxable income. In general, an ownership change occurs if the aggregate stock ownership of certain stockholders, generally stockholders beneficially owning five percent or more of a corporation’s common stock, applying certain look-through and aggregation rules, increases by more than 50 percentage points over such stockholders’ lowest percentage ownership during the testing period, generally three years. Nivalis may have experienced ownership changes in the past and may experience ownership changes in the future. In addition, the closing of the merger in 2017 likely resulted in an ownership change for Nivalis. It is likely that, due to the method by which limitations on the utilization of NOL carryforwards are calculated, we will not be able to utilize any of Nivalis’ NOL carryforwards and certain other tax attributes. It is also possible that Alpine’s NOL carryforwards and certain other tax attributes may be subject to limitation as a result of ownership changes in the past and/or the closing of the merger. In addition, the TCJA, as modified by the CARES Act, imposed further limitations on our ability to utilize Alpine’s and Nivalis’ NOL carryforwards and certain other tax attributes. Consequently, even if we achieve profitability, we may not be able to utilize a material portion of Alpine’s, or any of Nivalis’ NOL carryforwards and certain other tax attributes, which could have a material adverse effect on cash flow and results of operations.
 Provisions of our debt instruments may restrict our ability to pursue our business strategies.
Our term loan agreement requires us, and any debt financing we may obtain in the future may require us, to comply with various covenants that limit our ability to, among other things: 
dispose of assets;
complete mergers or acquisitions;
incur indebtedness;
encumber assets;
pay dividends or make other distributions to holders of our capital stock;
make specified investments;
engage in any new line or business; and

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engagement in certain transactions with our affiliates.
These restrictions could inhibit our ability to pursue our business strategies. If we default under our term loan agreement, including a material adverse change in our business, operations or condition (financial or otherwise), and such event of default is not cured or waived, the lenders could terminate commitments to lend and cause all amounts outstanding with respect to the debt to be due and payable immediately, which in turn could result in cross defaults under other debt instruments. Our assets and cash flow may not be sufficient to fully repay borrowings under our outstanding debt instruments if some or all of these instruments are accelerated upon a default. We may incur additional indebtedness in the future. The debt instruments governing such indebtedness could contain provisions that are as, or more, restrictive than our existing debt instruments. If we are unable to repay, refinance or restructure our indebtedness when payment is due, the lenders could proceed against the collateral granted to them to secure such indebtedness or force us into bankruptcy or liquidation.
Our business may be affected by litigation and government investigations.
We may from time to time receive inquiries and subpoenas and other types of information requests from government authorities and others and we may become subject to claims and other actions related to our business activities. While the ultimate outcome of investigations, inquiries, information requests, and legal proceedings is difficult to predict, defense of litigation claims can be expensive, time-consuming and distracting, and adverse resolutions or settlements of those matters may result in, among other things, modification of our business practices, costs, and significant payments, any of which could have a material adverse effect on our business, financial condition, results of operations, and prospects.
We believe our development programs and platform have a particular mechanism of action, but this mechanism of action has not been proven conclusively.
Our scientific platform is novel, and the underlying science is not exhaustively understood nor conclusively proven. In particular, the interaction of vIgDs with the immune synapse, the ability of vIgDs to slow, stop, restart, or accelerate immune responses, and the ability of vIgD domains to interact with multiple counter structures is still largely theoretical. Graphical representations of proposed mechanisms of action of our therapies, the size, actual or relative, of our therapeutics, and how our therapeutics might interface with other cells within the human body, inside the immune synapse, or inside the disease and/or the tumor microenvironment are similarly theoretical and not yet conclusively proven. The lack of a proven mechanism of action may adversely affect our ability to raise sufficient capital, complete preclinical studies, adequately manufacture drug product, obtain regulatory clearance for clinical trials, gain marketing approval, or conclude collaborations, or interfere with our ability to market our product to patients and physicians or achieve reimbursement from payors.
Any inability to present our data in scientific journals or at scientific conferences could adversely impact our business and stock price.
We may from time to time submit data related to our research and development activities in peer-reviewed scientific publications or apply to present data related to our research and development activities at scientific or other conferences. We have no control over whether these submissions or applications are accepted. Even if accepted for a conference, we have no control over whether presentations at scientific conferences will be accepted for oral presentation, poster presentation, or abstract publication only. Even when accepted for publication, we have no control over the timing of the release of the publication. Rejection by publications, delays in publication, rejection for presentation, or a less-preferred format for a presentation may adversely impact our stock price, ability to raise capital, and business.
Our business may be affected by adverse scientific publications or editorial or discussant opinions.
We may from time to time publish data related to our research and development activities in peer-reviewed scientific publications or present data related to our research and development activities at scientific or other conferences. Editorials or discussants unrelated to us may provide opinions on our presented data unfavorable to us. In addition, scientific publications or presentations may be made which are critical of our science or research or the field of immunotherapy in general. This may adversely affect our ability to raise necessary capital, complete clinical and preclinical studies, adequately manufacture drug product, obtain regulatory clearance for clinical trials, or approval for marketing, or interfere with our ability to market our product to patients and physicians or achieve reimbursement from payors.

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Risks Related to Our Intellectual Property
If we are not able to obtain and enforce patent protection for our technology, including therapeutic candidates, therapeutic products, and platform technology, development of our therapeutic candidates and platform, and commercialization of our therapeutic products may be materially and adversely affected.
Our success depends in part on our ability to obtain and maintain patents and other forms of intellectual property rights, including in-licenses of intellectual property rights of others, for our technology, including platform and therapeutic candidates and products, methods used to manufacture our therapeutic candidates and products, and methods for treating patients using our therapeutic candidates and products, as well as our ability to preserve our trade secrets, to prevent third parties from infringing upon our proprietary rights, and to operate without infringing upon the proprietary rights of others. Our scientific platform and substantially all of our intellectual property have been developed internally. As of June 30, 2020, our patent portfolio consists of over 130 pending patent applications. We may not be able to apply for patents on certain aspects of our technology, including therapeutic candidates and products, in a timely fashion or at all. Any future patents we obtain may not be sufficiently broad to prevent others from using our technology or from developing competing therapeutics and technology. There is no guarantee that any of our pending patent applications will result in issued or granted patents, any of our issued or granted patents will not later be found to be invalid or unenforceable, or any issued or granted patents will include claims sufficiently broad to cover our technology, including therapeutic candidates and products, or to provide meaningful protection from our competitors. Moreover, the patent position of pharmaceutical and biotechnology companies can be highly uncertain because it involves complex legal and factual questions. We will be able to protect our proprietary rights from unauthorized use by third parties only to the extent our current and future technology, including therapeutic candidates and products, are covered by valid and enforceable patents or are effectively maintained as trade secrets. If third parties disclose or misappropriate our proprietary rights, it may materially and adversely impact our competitive position in the market.
The U.S. Patent and Trademark Office, or USPTO, and various foreign governmental patent agencies require compliance with a number of procedural, documentary, fee payment, and other provisions during the patent process. There are situations in which noncompliance can result in abandonment or lapse of a patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. In such an event, competitors might be able to enter the market earlier than would otherwise have been the case. Further, the standards applied by the USPTO and foreign patent offices in granting patents are not always applied uniformly or predictably. For example, there is no uniform worldwide policy regarding patentable subject matter or the scope of claims allowable in biotechnology and pharmaceutical patents. As such, we do not know the degree of future protection we will have on our technology, including therapeutic candidates and products. While we will endeavor to try to protect our technology, including therapeutic candidates and products, with intellectual property rights such as patents, as appropriate, the process of obtaining patents is time-consuming, expensive, and sometimes unpredictable, and we can provide no assurances our technology, including therapeutic candidates and products, will be adequately protected in the future against unauthorized uses or competing claims by third parties.
In addition, recent and future changes to the patent laws and to the rules of the USPTO or other foreign patent offices may have a significant impact on our ability to protect our technology, including therapeutic candidates and products, and enforce our intellectual property rights. For example, the Leahy-Smith America Invents Act enacted in 2011 involves significant changes in patent legislation. In addition, we cannot assure that court rulings or interpretations of any court decision will not adversely impact our patents or patent applications. In addition to increasing uncertainty with regard to our ability to obtain patents in the future, there also may be uncertainty with respect to the value of patents, once obtained. Depending on decisions by the U.S. Congress, the federal courts, the USPTO, or made in foreign jurisdictions, the laws and regulations governing patents could change in unpredictable ways that would weaken our ability to obtain new patents or to enforce our existing patents and patents we might obtain in the future.
Once granted, patents may remain open to opposition, interference, re-examination, post-grant review, inter partes review, nullification, or derivation action in court or before patent offices or similar proceedings before or after allowance or grant, during which time third parties can raise objections against such initial grant. In the course of such proceedings, which may continue for a protracted period of time, the patent owner may be compelled to limit the scope of the pending, allowed or granted claims thus attacked or may lose the allowed or granted claims altogether. Our patent risks include that:
others may, or may be able to, make, use, offer to sell, or sell compounds that are the same as or similar to our therapeutic candidates and products but that are not covered by the claims of the patents we own or license;
we or our licensors, collaborators, or any future collaborators may not be the first to file patent applications covering certain aspects of our technology, including therapeutic candidates and products;
others may independently develop similar or alternative technology or duplicate any of our technology without infringing our intellectual property rights;

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a third party may challenge our patents and, if challenged, a court may not hold that our patents are valid, enforceable, or that a third party is infringing;
a third party may challenge our patents in various patent offices and, if challenged, we may be compelled to limit the scope of our pending, allowed or granted claims or lose the allowed or granted claims altogether;
any issued patents we own or have licensed may not provide us with any competitive advantages, or may be challenged by third parties;
we may not develop additional proprietary technologies that are patentable;
the patents of others could harm our business; and
our competitors could conduct research and development activities in countries where we do not or will not have enforceable patent rights and then use the information learned from such activities to develop competitive products for sale in major commercial markets where we do not or will not have enforceable patent rights.
We may license patent rights from third-party owners or licensees. If such owners or licensees do not properly or successfully obtain, maintain or enforce the patents underlying such licenses, or if they retain or license to others any competing rights, our competitive position and business prospects may be materially and adversely affected.
We may rely upon intellectual property rights licensed from third parties to protect our technology, including platform technology and therapeutic candidates and products. To date, we have in-licensed some intellectual property on a non-exclusive basis relating to commercially-available cell lines involved in the manufacture of our vIgD programs; however, we may also license additional third-party intellectual property in the future, to protect our technology, including intellectual property relating to our platform technology and therapeutic candidates and products. Our success will depend in part on the ability of our licensors to obtain, maintain, and enforce patent protection for our licensed intellectual property, in particular those patents to which we have secured exclusive rights. Our licensors may elect not to prosecute, or may be unsuccessful in prosecuting, any patent applications licensed to us. Even if patents issue or are granted, our licensors may fail to maintain these patents, may determine not to pursue litigation against other companies infringing these patents, or may pursue litigation less aggressively than we would. Further, any licenses we enter into may be non-exclusive and we may not be able to obtain exclusive rights, which would potentially allow third parties to develop competing products or technology. Without protection for, or exclusive right to, any intellectual property we may license, other companies might be able to offer substantially identical or similar product for sale, which could adversely affect our competitive business position and harm our business prospects. In addition, we may sublicense any rights we have under third-party licenses to current or future collaborators or any future strategic partners. Any impairment of these sublicensed rights could result in reduced revenue under or result in termination of an agreement by one or more of our collaborators or any future strategic partners.
We may be unable to protect our patent intellectual property rights throughout the world.
Obtaining a valid and enforceable issued or granted patent covering our technology, including therapeutic candidates and products, in the United States and worldwide can be extremely costly. In jurisdictions where we have not obtained patent protection, competitors may use our technology, including therapeutic candidates and products, to develop their own products, and further, may commercialize such products in those jurisdictions and export otherwise infringing products to territories where we have not obtained patent protection. In certain instances, a competitor may be able to export otherwise infringing products in territories where we will obtain patent protection. In jurisdictions outside the United States where we will obtain patent protection, it may be more difficult to enforce a patent as compared to the United States. Competitor products may compete with our future products in jurisdictions where we do not or will not have issued or granted patents or where our issued or granted patent claims or other intellectual property rights are not sufficient to prevent competitor activities in these jurisdictions. The legal systems of certain countries, particularly certain developing countries, make it difficult to enforce patents and such countries may not recognize other types of intellectual property protection, particularly relating to biopharmaceuticals. This could make it difficult for us to prevent the infringement of our patents or marketing of competing products in violation of our proprietary rights generally in certain jurisdictions. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial cost and divert our efforts and attention from other aspects of our business.
We generally file a provisional patent application first (a priority filing) at the USPTO. An international application under the Patent Cooperation Treaty, or PCT, is usually filed within twelve months after the priority filing, at times with a United States filing. Based on the PCT filing, national and regional patent applications may be filed in various international jurisdictions, such as in Europe, Japan, Australia, Canada, and the United States. We have so far not filed for patent protection in all national and regional jurisdictions where such protection may be available. In addition, we may decide to abandon national and regional patent applications before they are granted. Finally, the grant proceeding of each national or regional patent is an independent proceeding which may lead to situations in which applications might in some jurisdictions be refused

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by the relevant registration authorities, while granted by others. It is also quite common that, depending on the country, various scopes of patent protection may be granted on the same therapeutic candidate, product, or technology. The laws of some jurisdictions do not protect intellectual property rights to the same extent as the laws in the United States, and many companies have encountered significant difficulties in protecting and defending such rights in such jurisdictions. If we or our licensors encounter difficulties in protecting, or are otherwise precluded from effectively protecting, the intellectual property rights important for our business in such jurisdictions, the value of these rights may be diminished, and we may face additional competition from others in those jurisdictions. Many countries have compulsory licensing laws under which a patent owner may be compelled to grant licenses to third parties. In addition, many countries limit the enforceability of patents against government agencies or government contractors. In these countries, the patent owner may have limited remedies, which could materially diminish the value of such patent. If we or any of our licensors are forced to grant a license to third parties with respect to any patents relevant to our business, our competitive position in the relevant jurisdiction may be impaired and our business and results of operations may be adversely affected.
We or our licensors, collaborators, or any future strategic partners may become subject to third party claims or litigation alleging infringement of patents or other proprietary rights or seeking to invalidate patents or other proprietary rights, and we may need to resort to litigation to protect or enforce our patents or other proprietary rights, all of which could be costly, time consuming, delay or prevent the development of our therapeutic candidates and commercialization of our therapeutic products, or put our patents and other proprietary rights at risk.
We or our licensors, licensees, collaborators, or any future strategic partners may be subject to third-party claims for infringement or misappropriation of patent or other proprietary rights. We are generally obligated under our license or collaboration agreements to indemnify and hold harmless our licensors, licensees, or collaborators for damages arising from intellectual property infringement by us. If we or our licensors, licensees, collaborators, or any future strategic partners are found to infringe a third-party patent or other intellectual property rights, we could be required to pay damages, potentially including treble damages, if we are found to have willfully infringed. In addition, we or our licensors, licensees, collaborators, or any future strategic partners may choose to seek, or be required to seek, a license from a third party, which may not be available on acceptable terms, if at all. Even if a license can be obtained on acceptable terms, the rights may be non-exclusive, which could give our competitors access to the same technology or intellectual property rights licensed to or from us. If we fail to obtain a required license, we or our licensee or collaborator, or any future licensee or collaborator, may be unable to effectively market therapeutic products based on our technology, which could limit our ability to generate revenue or achieve profitability and possibly prevent us from generating revenue sufficient to sustain our operations. In addition, we may find it necessary to pursue claims or initiate lawsuits to protect or enforce our patent or other intellectual property rights. The cost to us in defending or initiating any litigation or other proceeding relating to patent or other proprietary rights, even if resolved in our favor, could be substantial, and litigation would divert our management’s attention. Some of our competitors may be able to sustain the costs of complex patent litigation more effectively than we can because they have substantially greater resources. Uncertainties resulting from the initiation and continuation of patent litigation or other proceedings could delay our research and development efforts and limit our ability to continue our operations.
Although we do not believe our technology infringes the intellectual property rights of others, we are aware of one or more patents or patent applications that may relate to our technology, and third parties may assert against our claims alleging infringement of their intellectual property rights regardless of whether their claims have merit. Infringement claims could harm our reputation, may result in the expenditure of significant resources to defend and resolve such claims, and could require us to pay monetary damages if we are found to have infringed the intellectual property rights of others.
If we were to initiate legal proceedings against a third party to enforce a patent covering our technology, including therapeutic candidates and products, the defendant could counterclaim that our patent is invalid or unenforceable. In patent litigation in the United States, defendant counterclaims alleging invalidity or unenforceability are commonplace. Grounds for a validity challenge could be an alleged failure to meet any of several statutory requirements, for example, patent ineligibility, lack of novelty, lack of written description, obviousness, or non-enablement. Grounds for an unenforceability assertion could be an allegation someone connected with prosecution of the patent withheld relevant information from the USPTO, or made a misleading statement, during prosecution. The outcome following legal assertions of invalidity and unenforceability during patent litigation is unpredictable. With respect to the validity question, for example, we cannot be certain there is no invalidating prior art, of which we and the patent examiner were unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity or unenforceability, we would lose at least part, and perhaps all, of the patent protection on our technology, including therapeutic candidates and products. Such a loss of patent protection could have a material adverse impact on our business. Patents and other intellectual property rights also will not protect our technology, including therapeutic candidates and products, if competitors design around our protected technology, including therapeutic candidates and products, without legally infringing our patents or other intellectual property rights.

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It is also possible we have failed to identify relevant third-party patents or applications. For example, patent applications in the United States and elsewhere are published approximately 18 months after the earliest filing for which priority is claimed, with such earliest filing date being commonly referred to as the priority date. Therefore, patent applications covering our technology, including therapeutic candidates and products, could have been filed by others without our knowledge. Additionally, pending patent applications which have been published can, subject to certain limitations, be later amended in a manner that could cover our technology, including therapeutic candidates and products. Third party intellectual property rights holders may also actively bring infringement claims against us. We cannot guarantee we will be able to successfully settle or otherwise resolve such infringement claims. If we are unable to successfully settle future claims on terms acceptable to us, we may be required to engage in or continue costly, unpredictable, and time-consuming litigation and may be prevented from, or experience substantial delays in, marketing our technology, including therapeutic candidates and products. If we fail in any such dispute, in addition to being forced to pay damages, we may be temporarily or permanently prohibited from commercializing our technology, including a therapeutic product, held to be infringing. We might, if possible, also be forced to redesign therapeutic candidates or products so we no longer infringe the third-party intellectual property rights. Any of these events, even if we were ultimately to prevail, could require us to divert substantial financial and management resources we would otherwise be able to devote to our business.
If we fail to comply with our obligations under any license, collaboration, or other agreements, we may be required to pay damages and could lose intellectual property rights necessary for developing and protecting our technology, including our platform technology, therapeutic candidates, and therapeutic products, or we could lose certain rights to grant sublicenses, either of which could have a material adverse effect on our results of operations and business prospects.
Our current licenses impose, and any future licenses we enter into are likely to impose, various development, commercialization, funding, milestone, royalty, diligence, sublicensing, insurance, patent prosecution and enforcement, and other obligations on us. If we breach any of these obligations, or use the intellectual property licensed to us in an unauthorized manner, we may be required to pay damages and the licensor may have the right to terminate the license, which could result in us being unable to develop, manufacture, and sell or offer to sell products covered by the licensed technology or enable a competitor to gain access to the licensed technology. Moreover, our licensors may own or control intellectual property that has not been licensed to us and, as a result, we may be subject to claims, regardless of their merit, that we are infringing or otherwise violating the licensor’s rights. In addition, while we cannot currently determine the amount of the royalty obligations we would be required to pay on future sales of licensed products, if any, the amounts may be significant. The amount of our future royalty obligations will depend on the technology and intellectual property we use in therapeutic products we successfully develop and commercialize, if any. Therefore, even if we successfully develop and commercialize therapeutic products, we may be unable to achieve or maintain profitability.
If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.
In addition to seeking patent protection for certain aspects of our technology, including platform technology and therapeutic candidates and products, we also consider trade secrets, including confidential and unpatented know-how, important to the maintenance of our competitive position. We protect trade secrets and confidential and unpatented know-how, in part, by entering into non-disclosure and confidentiality agreements with parties who have access to such knowledge, such as our employees, corporate collaborators, outside scientific collaborators, CROs, contract manufacturers, consultants, advisors, and other third parties. We also enter into confidentiality and invention or patent assignment agreements with our employees and consultants obligating them to maintain confidentiality and assign their inventions to us. Despite these efforts, any of these parties may breach the agreements and disclose our proprietary information, including our trade secrets, and we may not be able to obtain adequate remedies for such breaches. We also cannot guarantee that we have entered into such agreements with each party that may have or has had access to our trade secrets or proprietary technology and processes. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret is difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, some courts in the United States and certain foreign jurisdictions are less willing or unwilling to protect trade secrets. If any of our trade secrets were to be lawfully obtained or independently developed by a competitor, we would have no right to prevent them from using that technology or information to compete with us. If any of our trade secrets were to be disclosed to or independently developed by a competitor, our competitive position would be harmed.
We are also subject both in the United States and outside the United States to various regulatory schemes regarding requests for the information we provide to regulatory authorities, which may include, in whole or in part, trade secrets or confidential commercial information. While we are likely to be notified in advance of any disclosure of such information and would likely object to such disclosure, there can be no assurance our challenge to the request would be successful.
We may be in the future subject to claims we or our employees or consultants have wrongfully used or disclosed alleged trade secrets of our employees’ or consultants’ former employers or their clients. These claims may be costly to defend and if

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we do not successfully do so, we may be required to pay monetary damages, may be prohibited from using some of our research and development and may lose valuable intellectual property rights or personnel.
Many of our employees were previously employed at universities or biotechnology or pharmaceutical companies, including our current and potential competitors. We may receive correspondence from other companies alleging the improper use or disclosure, and have received, and may in the future receive, correspondence from other companies regarding the use or disclosure, by certain of our employees who have previously been employed elsewhere in our industry, including with our competitors, of their former employer’s trade secrets or other proprietary information. Responding to these allegations can be costly and disruptive to our business, even when the allegations are without merit, and can be a distraction to management. We may be subject to claims in the future that our employees have, or 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. If we fail in defending current or future claims, in addition to paying monetary damages, we may lose valuable intellectual property rights, personnel, or the ability to use some of our research and development. A loss of intellectual property, key research personnel, or their work product could hamper our ability to commercialize, or prevent us from commercializing, our therapeutic candidates, which could severely harm our business. Even if we are successful in defending against these claims, litigation could result in substantial costs and be a distraction to management.
If our trademarks and trade names are not adequately protected, then we may not be able to build name recognition in our markets of interest and our business may be materially and adversely affected.
Our trademarks or trade names may be challenged, infringed, circumvented, or declared generic or determined to be infringing on other marks. Any trademark litigation could be expensive. We may not be able to protect our rights to these trademarks and trade names or may be forced to stop using these names, which we need for name recognition by potential partners or customers in our markets of interest. If we are unable to establish name recognition based on our trademarks and trade names, we may not be able to compete effectively, and our business may be materially and adversely affected.
Third parties may independently develop similar or superior technology.
There can be no assurance others will not independently develop, or have not already developed, similar or more advanced technologies than our technology or that others will not design around, or have not already designed around, aspects of our technology or our trade secrets developed therefrom. If third parties develop technology similar or superior to our technology, or they successfully design around our current or future technology, our competitive position, business prospects, and results of operations could be materially and adversely affected.
Breaches of our internal computer systems, or those of our contractors, vendors, or consultants, may place our patents or proprietary rights at risk.
The loss of clinical or preclinical data or data from any future clinical trial involving our technology, including therapeutic candidates and products, could result in delays in our development and regulatory filing efforts and significantly increase our costs. In addition, theft or other exposure of data may interfere with our ability to protect our intellectual property, including trade secrets, and other information critical to our operations. We have experienced in the past, and may experience in the future, unauthorized intrusions into our internal computer systems, including portions of our internal computer systems storing information related to our platform technology, therapeutic candidates and products, and we can provide no assurances that certain sensitive and proprietary information relating to one or more of our therapeutic candidates or products has not been, or will not in the future be, compromised. Although we have invested significant resources to enhance the security of our computer systems, there can be no assurances we will not experience additional unauthorized intrusions into our computer systems, or those of our CROs, vendors, contractors, and consultants, that we will successfully detect future unauthorized intrusions in a timely manner, or that future unauthorized intrusions will not result in material adverse effects on our financial condition, reputation, or business prospects. Payments related to the elimination of ransomware may materially affect our financial condition and results of operations.
Certain data breaches must also be reported to affected individuals and the government, and in some cases to the media, under provisions of HIPAA, as amended by HITECH, other U.S. federal and state law, and requirements of non-U.S. jurisdictions, including the European Union Data Protection Directive, and financial penalties may also apply.

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Risks Related to Government Regulation
We may be unable to obtain U.S. or foreign regulatory approval and, as a result, may be unable to commercialize our therapeutic candidates.
Our therapeutic candidates are subject to extensive governmental regulations relating to, among other things, research, development, testing, manufacture, quality control, approval, labeling, packaging, promotion, storage, record-keeping, advertising, distribution, sampling, pricing, sales and marketing, safety, post-approval monitoring and reporting, and export and import of drugs. Rigorous preclinical testing and clinical trials and an extensive regulatory approval process are required to be completed successfully in the United States and in many foreign jurisdictions before a new therapeutic can be marketed. Satisfaction of these and other regulatory requirements is costly, time consuming, uncertain, and subject to unanticipated delays. We have not obtained regulatory approval for any therapeutic candidates, and it is possible none of the therapeutic candidates we may develop will obtain the regulatory approvals necessary for us or our collaborators to begin selling them.
We have very limited experience in conducting and managing the clinical trials necessary to obtain regulatory approvals, including approval by the FDA as well as foreign regulatory authorities, such as the EMA. The time required to obtain FDA and foreign regulatory approvals is unpredictable but typically takes many years following the commencement of clinical trials, depending upon the type, complexity, and novelty of the therapeutic candidate, and at the substantial discretion of the regulatory authorities. The standards the FDA and its foreign counterparts use when regulating us are not always applied predictably or uniformly and can change. Any analysis we perform of data from preclinical and clinical activities is subject to confirmation and interpretation by regulatory authorities, who could delay, limit, or prevent regulatory approval. We may also encounter unexpected delays or increased costs due to new government regulations, future legislation or administrative action, or from changes in the policy of FDA or foreign regulatory authorities during the period of product development, clinical trials, and regulatory review by the FDA or foreign regulatory authorities. It is impossible to predict whether legislative changes will be enacted, or whether FDA or foreign, regulations, guidance, or interpretations will be changed, or what the impact of such changes, if any, may be.
Because the therapeutic candidates we are developing may represent a new class of therapeutics, we are not aware of any definitive policies, practices, or guidelines that the FDA or its foreign counterparts have established in relation to these drugs. While we believe the therapeutic candidates we are currently developing are regulated as new biological products under the Public Health Service Act, or PHSA, the FDA could decide to regulate them or other products we may develop as drugs under the Federal Food, Drug, and Cosmetic Act, or FDCA. The lack of policies, practices, or guidelines may hinder or slow review by the FDA or foreign regulatory authorities of any regulatory filings we may submit. Moreover, the FDA or foreign regulatory authorities may respond to these submissions by defining requirements we may not have anticipated. Such responses could lead to significant delays in the clinical development of our therapeutic candidates.
Our therapeutic candidates could fail to receive regulatory approval for many reasons, including the following:  
the FDA or comparable foreign regulatory authorities may disagree with the design or implementation of our clinical trials;
we may be unable to demonstrate to the satisfaction of the FDA or comparable foreign regulatory authorities that a therapeutic candidate is safe and effective for its proposed indication;
the results of clinical trials may not meet the level of statistical significance required by the FDA or comparable foreign regulatory authorities for approval;
we may be unable to demonstrate that a therapeutic candidate’s clinical and other benefits outweigh its safety risks;
the FDA or comparable foreign regulatory authorities may disagree with our interpretation of data from pre-clinical studies or clinical trials;
the data collected from clinical trials of our therapeutic candidates may not be sufficient to support the submission of a Biologics License Application, or BLA, or other submission or to obtain regulatory approval in the United States, the European Union or elsewhere;
the FDA or comparable foreign regulatory authorities may fail to approve the manufacturing processes or facilities of third-party manufacturers with which we contract for clinical and commercial supplies; and
the approval policies or regulations of the FDA or comparable foreign regulatory authorities may significantly change in a manner rendering our clinical data insufficient for approval.
Any delay or failure in obtaining required approvals could have a material adverse effect on our ability to generate revenues from the particular therapeutic candidate for which we are seeking approval. The FDA, the EMA and other regulatory

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authorities have substantial discretion in the approval process, and in determining when or whether regulatory approval will be obtained for any of our therapeutic candidates. Even if we believe the data collected from preclinical and clinical trials of our therapeutic candidates are promising, such data may not be sufficient to support approval by the FDA, the EMA or any other regulatory authority. Furthermore, any regulatory approval to market a product may be subject to limitations on the approved uses for which we may market the product or in the product labeling or be subject to other restrictions. Regulatory authorities also may impose requirements for costly post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the therapeutic. In addition, the FDA has the authority to require a REMS plan as part of the approval of a BLA or New Drug Application, or NDA, or after approval, which may impose further requirements or restrictions on the distribution or use of an approved drug or biologic, such as limiting prescribing to certain physicians or medical centers that have undergone specialized training, limiting treatment to patients who meet certain safe-use criteria, and requiring treated patients to enroll in a registry. These limitations and restrictions may limit the size of the market for the therapeutic and affect coverage and reimbursement by third-party payors.
We are also subject to numerous foreign regulatory requirements governing, among other things, the conduct of clinical trials, manufacturing, marketing authorization, pricing, and third-party reimbursement. The foreign regulatory approval process varies among countries and may include all of the risks associated with FDA approval described above as well as risks attributable to the satisfaction of local regulations in foreign jurisdictions. Moreover, the time required to obtain approval may differ from that required to obtain FDA approval. Approval by the FDA does not ensure approval by regulatory authorities outside the U.S. and vice versa.
If we fail to obtain orphan drug designation or obtain or maintain orphan drug exclusivity for certain of our products, our competitors may sell products to treat the same conditions and our revenue may be reduced.
Under the Orphan Drug Act, the FDA may designate a product as an orphan drug if it is intended to treat a rare disease or condition, defined as a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug will be recovered from sales in the United States. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. In addition, if a therapeutic product with orphan drug designation subsequently receives the first FDA approval for the indication for which it has such designation, the therapeutic product is entitled to orphan product exclusivity, which means the FDA may not approve any other applications to market the same therapeutic product for the same indication for seven years, except in limited circumstances such as a showing of clinical superiority over the product with orphan exclusivity or where the manufacturer is unable to assure sufficient product quantity.
As in the United States, we may apply for designation of a therapeutic candidate as an orphan drug for the treatment of a specific indication in the European Union before the application for marketing authorization is made. In the European Union, the EMA’s Committee for Orphan Medicinal Products, grants orphan drug designation to promote the development of products that are intended for the diagnosis, prevention or treatment of a life-threatening or chronically debilitating condition affecting not more than five in 10,000 persons in the European Union. Additionally, designation is granted for products intended for the diagnosis, prevention or treatment of a life-threatening, seriously debilitating or serious and chronic condition when, without incentives, it is unlikely that sales of the drug in the European Union would be sufficient to justify the necessary investment in developing the drug or biological product or where there is no satisfactory method of diagnosis, prevention or treatment, or, if such a method exists, the medicine must be of significant benefit to those affected by the condition. Sponsors of orphan drugs in the European Union can enjoy economic and marketing benefits, including reduction of fees or fee waivers and up to ten years of market exclusivity for the approved indication unless another applicant can show its therapeutic product is safer, more effective, or otherwise clinically superior to the orphan-designated therapeutic product. This period may be reduced to six years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable not to justify maintenance of market exclusivity.
We may seek orphan drug designation from the FDA and the EMA for certain of our product candidates. However, we may never receive such designation. Even if we are able to obtain orphan designation, we may not be the first to obtain marketing approval for any particular orphan indication due to the uncertainties associated with developing pharmaceutical products. In addition, exclusive marketing rights in the United States may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition. Even after an orphan drug is approved, regulatory authorities may subsequently approve the same drug with the same active moiety for the same condition if they conclude that the later drug is safer, more effective, or makes a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review time of a

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product candidate nor gives the product candidate any advantage in the regulatory review or approval process. In addition, orphan drug exclusivity could block the approval of one of our therapeutic candidates if a competitor obtains approval of the same therapeutic product as defined by the FDA before we do, or if our therapeutic candidate is determined to be within the same class as the competitor’s therapeutic product for the same indication or disease.
The respective orphan designation and exclusivity frameworks in the United States and in the European Union are subject to change, and any such changes may affect our ability to obtain EU or U.S. orphan designations in the future.
If we or our existing or future collaborators, manufacturers, or service providers fail to comply with healthcare laws and regulations, we or such other parties could be subject to enforcement actions, which could adversely affect our ability to develop, market, and sell our therapeutics and may harm our reputation.
Although we do not currently have any products on the market, once we begin commercializing our therapeutic candidates, if approved, we will be subject to additional healthcare statutory and regulatory requirements and enforcement by the federal, state, and foreign governments of the jurisdictions in which we conduct our business. Healthcare providers, physicians, and third-party payors play a primary role in the recommendation and prescription of any therapeutic candidates for which we obtain marketing approval. Our future arrangements with third-party payors and customers may expose us to broadly applicable fraud, abuse, and other healthcare laws and regulations constraining the business or financial arrangements and relationships through which we market, sell, and distribute the therapeutic candidates for which we obtain marketing approval. Restrictions under applicable federal and state healthcare laws and regulations include the following:
the U.S. federal Anti-Kickback Statute, which prohibits, among other things, persons from soliciting, receiving, offering, or providing remuneration, directly or indirectly, to induce either the referral of an individual for a healthcare item or service, or the purchasing or ordering of an item or service, for which payment may be made, in whole or in part, under a federal healthcare program such as Medicare or Medicaid;
the U.S. federal False Claims Act, which imposes criminal and civil penalties, including through civil whistleblower or qui tam actions, against individuals or entities for knowingly presenting, or causing to be presented, to the federal government, false or fraudulent claims for payment or making a false statement to avoid, decrease, or conceal an obligation to pay money to the federal government. In addition, the government may assert a claim including items and services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the False Claims Act;
state all-payor fraud laws, which impose criminal and civil liability for executing a scheme to defraud any healthcare benefit program, or 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; similar to the federal Anti-Kickback Statute, a person or entity does not need to have actual knowledge of the statute or specific intent to violate it in order to have committed a violation;
HIPAA, HITECH, and their implementing regulations, which impose obligations on certain covered entity healthcare providers, health plans, and healthcare clearinghouses as well as their business associates performing certain services involving the use or disclosure of individually identifiable health information, including mandatory contractual terms, with respect to safeguarding the privacy, security, and transmission of individually identifiable health information, and require notification to affected individuals and regulatory authorities of certain breaches of security of individually identifiable health information;
the federal Physician Payment Sunshine Act and its implementing regulations, also referred to as “Open Payments,” issued under the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Affordability Reconciliation Act, or ACA, and any subsequent amending legislation or executive actions, which require manufacturers of pharmaceutical and biological drugs reimbursable under Medicare, Medicaid, and Children’s Health Insurance Programs to report to the Department of Health and Human Services all consulting fees, travel reimbursements, research grants, and other payments, transfers of value or gifts made to physicians and teaching hospitals with limited exceptions; and
analogous state laws and regulations, such as, state anti-kickback and false claims laws potentially applicable 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, and state laws governing the privacy and security of health information in certain circumstances, many of which differ from each other in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.

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Ensuring our future business arrangements with third-parties comply with applicable healthcare laws and regulations could involve substantial costs. If our operations are found to be in violation of any such requirements, we may be subject to penalties, including civil or criminal penalties, monetary damages, the curtailment or restructuring of our operations, or exclusion from participation in government contracting, healthcare reimbursement, or other government programs, including Medicare and Medicaid, any of which could adversely affect our financial results. Although effective compliance programs can mitigate the risk of investigation and prosecution for violations of these laws, these risks cannot be entirely eliminated. Any action against us for an alleged or suspected violation could cause our company to incur significant legal expenses and could divert our management’s attention from the operation of our business, even if our defense is successful. In addition, achieving and sustaining compliance with applicable laws and regulations may be costly to us in terms of money, time, and resources.
If we or our current or future collaborators, manufacturers, or service providers fail to comply with applicable federal, state, or foreign laws or regulations, we could be subject to enforcement actions, which could affect our ability to develop, market, and sell our therapeutics successfully and could harm our reputation and lead to reduced acceptance of our therapeutics by the market. These enforcement actions include, among others:
adverse regulatory inspection findings;
warning or untitled letters;
voluntary product recalls with public notification or medical product safety alerts to healthcare professionals;
restrictions on, or prohibitions against, marketing our therapeutics;
restrictions on, or prohibitions against, importation or exportation of our therapeutics;
suspension of review or refusal to approve pending applications or supplements to approved applications;
exclusion from participation in government-funded healthcare programs;
exclusion from eligibility for the award of government contracts for our therapeutics;
FDA debarment;
suspension or withdrawal of therapeutic approvals;
seizures or administrative detention of therapeutics;
injunctions; and
restitution, disgorgement of profits, or civil and criminal penalties and fines.
Enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of our therapeutic candidates.
The policies of the FDA or similar regulatory authorities may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. For example, in 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 biologics and spur innovation, but it is still being implemented and its ultimate implementation is unclear. If we or our collaborators are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we or our collaborators are not able to maintain regulatory compliance, our therapeutic candidates may not obtain or maintain regulatory approval, and we may not achieve or sustain profitability, which would adversely affect our business.
We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States 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, 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. 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 or future executive actions impose constraints on FDA’s ability to engage in oversight and implementation activities in the normal course, our business may be negatively impacted.

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Any therapeutics we develop may become subject to unfavorable pricing regulations, third-party coverage and reimbursement practices, or healthcare reform initiatives, thereby harming our business.
The regulations governing marketing approvals, pricing, coverage, and reimbursement for new drugs and biologics vary widely from country to country. Many 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 product licensing approval is granted. In some foreign markets, prescription pharmaceutical pricing remains subject to continuing governmental control even after initial approval is granted. Although we intend to monitor these regulations, our programs are currently in the early stages of development and we will not be able to assess the impact of price regulations for a number of years. As a result, we might obtain regulatory approval for a product in a particular country but then be subject to price regulations delaying our commercial launch of the product and negatively impacting the revenues we are able to generate from the sale of the product in that country.
Our ability to commercialize any therapeutics successfully also will depend in part on the extent to which coverage and reimbursement for these products and related treatments will be available from government health administration authorities, private health insurers, and other organizations. However, there may be significant delays in obtaining coverage for newly-approved therapeutics. Moreover, eligibility for coverage does not necessarily signify a therapeutic will be reimbursed in all cases or at a rate covering our costs, including research, development, manufacture, sale, and distribution costs. Also, interim payments for new therapeutics, if applicable, may be insufficient to cover our costs and may not be made permanent. Thus, even if we succeed in bringing one or more therapeutics to the market, these products may not be considered cost-effective, and the amount reimbursed for any of them may be insufficient to allow us to sell them on a competitive basis. Because our programs are in the early stages of development, we are unable at this time to determine their cost effectiveness, coverage prospects, potential compendia listings, or the likely level or method of reimbursement, if covered. It is equally difficult for us to predict how Medicare coverage and reimbursement policies will be applied to our products in the future, and coverage and reimbursement under different federal healthcare programs are not always consistent. Medicare reimbursement rates may also reflect budgetary constraints placed on the Medicare program.
Third-party payors often rely upon Medicare coverage policies and payment limitations in setting their own reimbursement rates. These coverage policies and limitations may rely, in part, on compendia listings for approved therapeutics. Our inability to promptly obtain relevant compendia listings, coverage, and adequate reimbursement from both government-funded and private payors for new therapeutics we develop and for which we obtain regulatory approval could have a material adverse effect on our operating results, our ability to raise capital needed to commercialize products, and our financial condition.
We believe the efforts of governments and third-party payors to contain or reduce the cost of healthcare, and legislative and regulatory proposals to broaden the availability of healthcare, will continue to affect the business and financial condition of pharmaceutical and biopharmaceutical companies. A number of legislative and regulatory changes in the healthcare system in the United States and other major healthcare markets have been proposed, and such efforts have expanded substantially in recent years. These developments could, directly or indirectly, affect our ability to sell our products, if approved, at a favorable price. In addition, third-party payors who reimburse patients or healthcare providers, such as government and private insurance plans, are seeking greater upfront discounts, additional rebates, and other concessions to reduce the prices for therapeutics. If the price we are able to charge for any therapeutics we develop, or the reimbursement provided for such products, is inadequate, our return on investment could be adversely affected.
Pursuant to health reform legislation and related initiatives, the Centers for Medicare and Medicaid Services, or CMS, are working with various healthcare providers to develop, refine, and implement Accountable Care Organizations, or ACOs, and other innovative models of care for Medicare and Medicaid beneficiaries, including the Bundled Payments for Care Improvement Initiative, the Comprehensive Primary Care Initiative, the Duals Demonstration, and other models. The continued development and expansion of ACOs and other innovative models of care will have an uncertain impact on any future reimbursement we may receive for approved therapeutics administered by such organizations.
In addition, in recent years, the U.S. Congress has enacted various laws seeking to reduce the federal debt level and contain healthcare expenditures. For example, as a result of the Budget Control Act of 2011 and the Bipartisan Budget Act of 2015, an annual 2% reduction to Medicare payments that took effect in 2013 has been extended through 2025. These across-the-board spending cuts could adversely affect our future revenues, earnings, and cash flows.
From time to time, legislation is drafted, introduced, and passed in Congress that could significantly change the statutory provisions governing coverage, reimbursement, and marketing of products regulated by CMS or other government agencies. In addition to new legislation, CMS coverage and reimbursement policies are often revised or interpreted in ways that may significantly affect our business and our products. In particular, we expect the current U.S. presidential administration and Congress will seek to modify, repeal, or otherwise invalidate all, or certain provisions of, U.S. healthcare legislation. A number of additional executive orders have been issued affecting, or potentially affecting, the ACA and other aspects of the healthcare market in the United States. There is a high degree of uncertainty with respect to the impact President Trump’s Administration

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and Congress may have, and any changes will likely take time to unfold. Such reforms could have an adverse effect on anticipated revenues from therapeutic candidates we may successfully develop and for which we may obtain regulatory approval and may affect our overall financial condition and ability to develop therapeutic candidates. However, we cannot predict the ultimate content, timing, or effect of any healthcare reform legislation or executive orders or the impact of potential legislation and executive orders on us.
The healthcare industry is heavily regulated in the U.S. at the federal, state, and local levels, and our failure to comply with applicable requirements may subject us to penalties and negatively affect our financial condition.
As a healthcare company, our operations, clinical trial activities, and interactions with healthcare providers will be subject to extensive regulation in the United States, particularly if we receive FDA approval for any of our products in the future. For example, if we receive FDA approval for a therapeutic for which reimbursement is available under a federal healthcare program, it would be subject to a variety of federal laws and regulations, including those prohibiting the filing of false or improper claims for payment by federal healthcare programs, prohibiting unlawful inducements for the referral of business reimbursable by federal healthcare programs, and requiring disclosure of certain payments or other transfers of value made to U.S.-licensed physicians and teaching hospitals. We are not able to predict how government authorities will interpret these laws. They may challenge our practices and activities under one or more of these laws. If our past or present operations are found to be in violation of any of these laws, we could be subject to civil and criminal penalties, which could hurt our business, operations, and financial condition.
Similarly, some state laws prohibit, among other offenses, knowingly and willfully executing a scheme to defraud any health care benefit program, including private payors, or falsifying, concealing, or covering up a material fact or making any materially false, fictitious, or fraudulent statement in connection with the delivery of or payment for items or services under a health care benefit program. We may also be subject to the privacy and security provisions of HIPAA, as amended by HITECH, which restricts the use and disclosure of patient-identifiable health information, mandates the adoption of standards relating to the privacy and security of patient-identifiable health information, and requires the reporting of certain security breaches to healthcare provider customers with respect to such information. Additionally, many states have enacted similar laws imposing more stringent requirements on entities like us. Failure to comply with applicable laws and regulations could result in substantial penalties and adversely affect our financial condition and results of operations.
Our ability to obtain services, reimbursement, or funding from the federal government may be impacted by possible reductions in federal spending.
The U.S. federal budget remains in flux and could, among other things, cut Medicare payments to providers. The Medicare program is frequently mentioned as a target for spending cuts. The full impact on our business of any future cuts in Medicare or other programs is uncertain. In addition, we cannot predict any impact President Trump’s administration and Congress may have on the federal budget. If federal spending is reduced, anticipated budgetary shortfalls may also impact the ability of relevant agencies such as the FDA or the National Institutes of Health to continue to function at current levels. Amounts allocated to federal grants and contracts may be reduced or eliminated. These reductions may also impact the ability of relevant agencies to timely review and approve drug research and development, manufacturing, and marketing activities, which may delay our ability to develop, market, and sell any therapeutics we may develop.
If any of our therapeutic candidates receives marketing approval and we or others later identify undesirable side effects caused by the therapeutic product, our ability to market and derive revenue from the therapeutic products could be compromised.
In the event any of our therapeutic candidates receive regulatory approval and we or others identify undesirable side effects, adverse events, or other problems caused by one of our therapeutics, any of the following adverse events could occur, which could result in the loss of significant revenue to us and materially and adversely affect our results of operations and business:
regulatory authorities may withdraw their approval of the product and require us to take the product off the market or seize the product;
we may need to recall the therapeutic or change the way the therapeutic is administered to patients;
additional restrictions may be imposed on the marketing and promotion of the particular therapeutic or the manufacturing processes for the therapeutic or any component thereof;
we may not be able to secure or maintain adequate coverage and reimbursement for our proprietary therapeutic products from government (including U.S. federal health care programs) and private payors;

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we may lose or see adverse alterations to compendia listings or treatment protocols specified by accountable care organizations;
we may be subject to fines, restitution, or disgorgement of profits or revenues, injunctions, or the imposition of civil penalties or criminal prosecution;
regulatory authorities may require the addition of labeling statements, such as a “black box” warning, or equivalent, or a contraindication;
regulatory authorities may require us to implement a REMS plan, or to conduct post-marketing studies or clinical trials and surveillance to monitor the safety or efficacy of the product;
we may be required to create a Medication Guide outlining the risks of such side effects for distribution to patients;
we could be sued and held liable for harm caused to patients;
the therapeutic may become less competitive; and
our reputation may suffer.
Our therapeutic candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.
The Patient Protection and Affordable Care Act, signed into law in 2010, includes a subtitle called the Biologics Price Competition and Innovation Act of 2009, or BPCIA, which created an abbreviated approval pathway for biological products that are biosimilar to or interchangeable with an FDA-licensed reference biological product. Under the BPCIA, an application for a biosimilar product may not be submitted to the FDA until four years following the date that the reference product was first licensed by the FDA. In addition, the approval of a biosimilar product may not be made effective by the FDA until 12 years from the date on which the reference product was first licensed. During this 12-year period of exclusivity, another company may still market a competing version of the reference product if the FDA approves a full BLA for the competing product containing the sponsor’s own pre-clinical data and data from adequate and well-controlled clinical trials to demonstrate the safety, purity and potency of their product. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological products.
We believe that any of our therapeutic candidates approved as a biological product under a BLA should qualify for the 12-year period of exclusivity. However, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our therapeutic candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. Other aspects of the BPCIA, some of which may impact the BPCIA exclusivity provisions, have also been the subject of recent litigation. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.
Significant developments stemming from the United Kingdom’s recent withdrawal from the European Union could have a material adverse effect on us.
In June 2016, the United Kingdom held a referendum and voted in favor of leaving the European Union, and in January 2020, the United Kingdom officially left the European Union, with a transitional period scheduled to end on December 31, 2020. The United Kingdom’s withdrawal from the European Union and ongoing negotiations related to the United Kingdom’s future trade and other relationships with the European Union have created political and economic uncertainty, particularly in the United Kingdom and the European Union. Any business we conduct, now and in the future, in the United Kingdom, the European Union, and worldwide could be affected during this period of uncertainty, and perhaps longer, by the impact of the United Kingdom’s decision to withdraw from the European Union. There are many ways in which our business could be affected, only some of which we can identify as of the date of this filing.
The decision of the United Kingdom to withdraw from the European Union has caused and, along with events that could occur in the future as a consequence of the United Kingdom’s withdrawal, may continue to cause significant volatility in global financial markets, including in global currency and debt markets. This volatility could cause a slowdown in economic activity in the United Kingdom, Europe, or globally, which could adversely affect our operating results and growth prospects. In addition, our business could be negatively affected by new trade agreements or data transfer agreements between the United

55



Kingdom and other countries, including the United States, and by the possible imposition of trade or other regulatory barriers in the United Kingdom.
It is currently unknown how regulations affecting clinical trials, the approval of our future products, and the sale of these products in the United Kingdom or elsewhere in Europe will be affected by the United Kingdom’s withdrawal from the European Union.
These possible negative impacts, and others resulting from the United Kingdom’s withdrawal from the European Union, may adversely affect our operating results and growth prospects.
Risks Related to Ownership of Our Common Stock
Our stock price may be volatile, and an active, liquid, and orderly trading market may not develop for our common stock. As a result, stockholders may not be able to resell shares at or above their purchase price.
Although our common stock is listed on Nasdaq, an active trading market for our common stock may not develop or, if it develops, may not be sustained. The lack of an active market may impair the ability of our stockholders to sell their shares at the time they wish to sell them or at a price that they consider reasonable, which may reduce the fair market value of their shares. Further, an inactive market may also impair our ability to raise capital by selling our common stock should we determine additional funding is required.
The market price of our common stock could be subject to significant fluctuations. Market prices for securities of early-stage pharmaceutical, biotechnology, and other life sciences companies have historically been particularly volatile. Some of the factors that may cause the market price of our common stock to fluctuate include:
our and our collaborators’ ability to obtain regulatory approvals for product candidates, and delays or failures to obtain such approvals;
the failure of any of our product candidates, if approved, to achieve commercial success;
issues in manufacturing our approved products, if any, or product candidates;
the results of current, and any future, preclinical or clinical trials of our product candidates;
our ability to achieve development milestones and receive associated milestone payments pursuant to the terms of our collaboration agreements;
the entry into, or termination of, key agreements, including key licensing, collaboration or acquisition agreements;
the initiation or material developments in, or conclusion of, litigation to enforce or defend any of our intellectual property rights or defend against the intellectual property rights of others;
announcements by commercial partners or competitors of new commercial products, clinical progress (or the lack thereof), significant contracts, commercial relationships, or capital commitments;
adverse publicity relating to our markets, including with respect to other products and potential products in such markets;
adverse publicity about our company, employees, therapeutic candidates, and/or therapeutic products in the media or on social media;
the impact of COVID-19 on our company or the economy generally;
the introduction of technological innovations or new therapies competing with our potential products;
the loss of key employees;
changes in estimates or recommendations by securities analysts, if any, who cover our common stock;
general and industry-specific economic conditions potentially affecting our research and development expenditures;
changes in the structure of health care payment systems;
unanticipated serious safety concerns related to the use of any of our product candidates;
failure to meet or exceed financial and development projections we may provide to the public;
failure to meet or exceed the financial and development projections of the investment community;

56



the perception of the pharmaceutical industry by the public, legislators, regulators, and the investment community;
adverse regulatory decisions;
disputes or other developments relating to proprietary rights, including patents, litigation matters, and our ability to obtain patent protection for our technologies;
commencement of, or our involvement in, litigation;
sales of our common stock by us or our stockholders in the future;
trading volume of our common stock;
period-to-period fluctuations in our financial results; and
the other factors described in this “Risk Factors” section.
Moreover, the stock markets in general have experienced substantial volatility that has often been unrelated to the operating performance of individual companies or the biotechnology sector. These broad market fluctuations may also adversely affect the trading price of our common stock.
In the past, following periods of volatility in the market price of a company’s securities, stockholders have often instituted class action securities litigation against those companies. Such litigation, if instituted, could result in substantial costs and diversion of management attention and resources, which could significantly harm our business and reputation.
Our officers and directors, and their respective affiliates, have a controlling influence over our business affairs and may make business decisions with which stockholders disagree and which may adversely affect the value of their investment.
Our executive officers and directors together with their respective affiliates, beneficially own approximately 76% of our common stock as of June 30, 2020. As a result, if some of these persons or entities act together, they will have the ability to exercise significant influence over matters submitted to the stockholders for approval, including the election of directors, amendments to the certificate of incorporation and bylaws and the approval of any strategic transaction requiring the approval of the stockholders. These actions may be taken even if they are opposed by other stockholders. This concentration of ownership may also have the effect of delaying or preventing a change of control of our company or discouraging others from making tender offers for our shares, which could prevent our stockholders from receiving a premium for their shares. Some of these persons or entities who make up our principal stockholders may have interests different from other stockholders. The significant concentration of stock ownership may adversely affect the trading price of our common stock due to investors’ perception that conflicts of interest may exist or arise.
Future sales, or the perception of future sales, of a substantial amount of our common stock could depress the trading price of our common stock.
Our stock price could decline as a result of sales of a large number of shares of our common stock or the perception that these sales could occur. These sales, or the possibility that these sales may occur, also might make it more difficult for us to sell equity securities in the future at a time and at a price that we deem appropriate.
For example, in connection with our January 2019 private placement, we entered into a registration rights agreement with the private placement investors that required us to prepare and file a registration statement in March 2019. The resale registration statement was declared effective by the SEC in April 2019 and permits the resale by the private placement investors of approximately 4.7 million shares of our common stock as well as approximately 1.8 million shares of common stock issuable upon the exercise of warrants issued in the private placement. Similarly, in connection with our July 2020 private placement, we entered into a registration rights agreement with the private placement investors that requires us to prepare and file a registration statement on the date we file our Quarterly Report on Form 10-Q for the quarter ended June 30, 2020, which we expect to be August 11, 2020. This resale registration statement, once declared effective by the SEC, will permit the resale by the private placement investors of approximately 5.1 million shares of our common stock as well as approximately 2.6 million shares of common stock issuable upon the exercise of prefunded warrants and warrants issued in the July 2020 private placement. The shares subject to outstanding options and warrants, of which options and warrants to purchase 1.8 million shares and 1.9 million shares (which excludes the approximately 2.6 million shares underlying the prefunded warrants and warrants issued in our July 2020 private placement), respectively, were exercisable as of June 30, 2020, and the shares reserved for future issuance under our equity incentive plans will become available for sale immediately upon the exercise of such options.

57



We also register the offer and sale of all shares of common stock that we may issue under our equity incentive plans. Once we register the offer and sale of shares for the holders of registration rights and option holders, they can be freely sold in the public market upon issuance, subject to any related lock-up agreements or applicable securities laws.
In addition, in the future, we may issue additional shares of common stock or other equity or debt securities convertible into common stock in connection with a financing, acquisition, litigation settlement, employee arrangements or otherwise. Any such future issuance could result in substantial dilution to our existing stockholders and could cause our stock price to decline.
We have broad discretion over the use of the proceeds to us from our financing activities and may apply the proceeds to uses that do not improve our operating results or the value of your securities.
We have broad discretion over the use of proceeds to us from our financing activities and our stockholders rely solely on the judgment of our board of directors and management regarding the application of these proceeds. Our use of proceeds may not improve our operating results or increase the value of our common stock. Any failure to apply these proceeds effectively could have a material adverse effect on our business, delay the development of our product candidates and cause the market price of our common stock to decline.
The JOBS Act allows us to postpone the date by which we must comply with certain laws and regulations intended to protect investors and to reduce the amount of information we provide in our reports filed with the SEC. We cannot be certain if this reduced disclosure will make our common stock less attractive to investors.
The JOBS Act is intended to reduce the regulatory burden on “emerging growth companies.” As defined in the JOBS Act, we qualify as an “emerging growth company” and could remain an “emerging growth company” until as late as December 31, 2020. For so long as we are an “emerging growth company,” we will, among other things:
not be required to comply with the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley;
not be required to hold a nonbinding advisory stockholder vote on executive compensation pursuant to Section 14A of the Securities Exchange Act of 1934, as amended, or the Exchange Act;
not be required to seek stockholder approval of any golden parachute payments not previously approved pursuant to Section 14A of the Exchange Act;
be exempt from any rule adopted by the Public Company Accounting Oversight Board, requiring mandatory audit firm rotation or a supplemental auditor discussion and analysis; and
be subject to reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements.
We have previously decided to opt out of an extended transition period under the JOBS Act that permits an emerging growth company to delay the adoption of certain accounting standards until those standards would otherwise apply to private companies. Our decision is irrevocable. As a result, we will adopt new or revised accounting standards on the relevant dates on which adoption of such standards is required for other companies.
Furthermore, if we take advantage of some or all of the reduced disclosure requirements above, investors may find our common stock less attractive, which may result in a less active trading market for our common stock and greater stock price volatility. While we will be required to comply with certain additional disclosure and accounting requirements once we cease to be an “emerging growth company,” for so long as we are not classified as an “accelerated filer” or “large accelerated filer” pursuant to SEC rules, we will continue to be exempt from the auditor attestation requirements of Section 404(b) of Sarbanes-Oxley.
If we fail to maintain proper and effective internal controls, our ability to produce accurate financial statements on a timely basis could be impaired.
We are subject to the reporting requirements of the Exchange Act, the Sarbanes-Oxley Act and the rules and regulations of The Nasdaq Stock Market LLC. The Sarbanes-Oxley Act requires, among other things, that we maintain effective disclosure controls and procedures and internal control over financial reporting. We must perform system and process evaluation and testing of our internal control over financial reporting to allow management to report on the effectiveness of our internal controls over financial reporting in our Annual Report on Form 10-K filing for that year, as required by Section 404 of the Sarbanes-Oxley Act.

58



We may discover weaknesses in our system of internal financial and accounting controls and procedures that could result in a material misstatement of our financial statements. Our internal control over financial reporting will not prevent or detect all errors and all fraud. An internal control system, no matter how well designed and operated, can provide only reasonable, not absolute, assurance that the internal control system’s objectives will be met. Because of the inherent limitations in all internal control systems, no evaluation of internal controls can provide absolute assurance that misstatements due to error or fraud will not occur or that all internal control issues and instances of fraud will be detected.
If we are not able to comply with the requirements of Section 404 of the Sarbanes-Oxley Act, or if we are unable to maintain proper and effective internal controls, we may not be able to produce timely and accurate financial statements. If that were to happen, the market price of our common stock could decline and we could be subject to sanctions or investigations by The Nasdaq Stock Market LLC, the SEC, or other regulatory authorities.
Our disclosure controls and procedures may not prevent or detect all errors or acts of fraud.
Our disclosure controls and procedures are designed to reasonably ensure that information required to be disclosed by us in reports we file or submits under the Exchange Act is accumulated and communicated to management and recorded, processed, summarized and reported within the time periods specified in the rules and forms of the SEC. We believe that any disclosure controls and procedures as well as internal controls and procedures, no matter how well-conceived and operated, can provide only reasonable, not absolute, assurance that the objectives of the control system are and will be met. These inherent limitations include the realities that judgments in decision-making can be faulty and that breakdowns can occur because of simple error or mistake. Additionally, controls can be circumvented by the individual acts of some persons, by collusion of two or more people or by an unauthorized override of the controls. Accordingly, because of the inherent limitations in our control system, misstatements due to error or fraud may occur and not be detected.
We will continue to incur costs and demands upon management as a result of complying with the laws and regulations affecting public companies.
We will incur significant legal, accounting, and other expenses associated with public company reporting requirements. We will also incur costs associated with corporate governance requirements, including requirements under the Sarbanes-Oxley Act, as well as new rules implemented by the SEC and The Nasdaq Stock Market LLC. Although the JOBS Act may for a limited period of time somewhat lessen the cost of complying with these additional regulatory and other requirements, we nonetheless expect that these rules and regulations will increase our legal and financial compliance costs and to make some activities more time-consuming and costlier. For example, our management team consists in part of the executive officers of Alpine prior to the merger, some of whom may not have previously managed and operated a public company. These executive officers and other personnel will need to devote substantial time to gaining expertise regarding operations as a public company and compliance with applicable laws and regulations. These rules and regulations may also make it difficult and expensive for us to obtain directors and officer’s liability insurance. As a result, it may be more difficult for us to attract and retain qualified individuals to serve on our board of directors or as executive officers of our company, which may adversely affect investor confidence in us and could cause our business or stock price to suffer.
Anti-takeover provisions in our charter documents and under Delaware or Washington law could discourage, delay or prevent a change in control of our company, limit attempts by our stockholders to replace or remove our current management and may affect the trading price of our common stock.
Our corporate documents contain provisions that may delay or discourage transactions involving an actual or potential change in our control or change in our management, including transactions in which stockholders might otherwise receive a premium for their shares, or transactions that our stockholders might otherwise deem to be in their best interests. Therefore, these provisions could adversely affect the price of our stock. Among other things, our certificate of incorporation and bylaws:
stagger the terms of our board of directors and require 66 and 2/3% stockholder voting to remove directors, who may only be removed for cause;
provide that the authorized number of directors may be changed only by resolution of the board of directors;
provide that all vacancies, including newly-created directorships, may, except as otherwise required by law, be filled by the affirmative vote of a majority of directors then in office, even if less than a quorum;
authorize our board of directors to issue “blank check” preferred stock and to determine the rights and preferences of those shares, which may be senior to our common stock, without prior stockholder approval;
establish advance notice requirements for nominating directors and proposing matters to be voted on by stockholders at stockholders’ meetings;

59



prohibit our stockholders from calling a special meeting and prohibit stockholders from acting by written consent;
require 66 and 2/3% stockholder voting to effect certain amendments to our certificate of incorporation and bylaws; and
prohibit cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates.
In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporation Law, which generally prohibits a Delaware corporation from engaging in any of a broad range of business combinations with any “interested” stockholder for a period of three years following the date on which the stockholder became an “interested” stockholder. Likewise, because our principal executive offices are located in Washington, the anti-takeover provisions of the Washington Business Corporation Act may apply to us under certain circumstances now or in the future. These provisions prohibit a “target corporation” from engaging in any of a broad range of business combinations with any stockholder constituting an “acquiring person” for a period of five years following the date on which the stockholder became an “acquiring person.” These provisions could discourage, delay or prevent a transaction involving a change in control of our company. These provisions could also discourage proxy contests and make it more difficult for stockholders to elect directors of their choosing and cause us to take other corporate actions our stockholders desire.
Claims for indemnification by our directors and officers may reduce our available funds to satisfy successful third-party claims against us and may reduce the amount of available cash.
Our amended and restated certificate of incorporation provides that we will indemnify our directors to the fullest extent permitted by Delaware law.
In addition, as permitted by Section 145 of the DGCL, our amended and restated bylaws and our indemnification agreements that we have entered into with our directors and officers provide that:
we will indemnify our directors and officers for serving us in those capacities or for serving other business enterprises at our request, to the fullest extent permitted by Delaware law. Delaware law provides that a corporation may indemnify such person if such person acted in good faith and in a manner such person reasonably believed to be in or not opposed to the best interests of the corporation and, with respect to any criminal proceeding, had no reasonable cause to believe such person’s conduct was unlawful.
we may, in our discretion, indemnify other employees and agents in those circumstances where indemnification is permitted by applicable law.
we are required to advance expenses, as incurred, to our directors and officers in connection with defending a proceeding, except that such directors or officers shall undertake to repay such advances if it is ultimately determined that such person is not entitled to indemnification.
we will not be obligated pursuant to our amended and restated bylaws to indemnify any director or officer in connection with any proceeding (or part thereof) initiated by such person unless the proceeding was authorized in the specific case by our board of directors or such indemnification is required to be made pursuant to our amended and restated bylaws.
the rights conferred in our amended and restated bylaws are not exclusive, and we are authorized to enter into indemnification agreements with our directors, officers, employees and agents and to obtain insurance to indemnify such persons.
we may not retroactively amend our amended and restated bylaw provisions to reduce our indemnification obligations to our directors or officers.
As a result, if we are required to indemnify one or more of our directors or officers, it may reduce our available funds to satisfy successful third-party claims against us, may reduce the amount of available cash and may have a material adverse effect on our business and financial condition.
Our amended and restated certificate of incorporation designates the Court of Chancery of the State of Delaware as the sole and exclusive forum for certain types of actions and proceedings that may be initiated by our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers, employees or agents.
Our amended and restated certificate of incorporation provides that, unless we consent in writing to an alternative forum, the Court of Chancery of the State of Delaware will be the sole and exclusive forum for any derivative action or

60



proceeding brought on our behalf, any action asserting a claim of breach of a fiduciary duty owed by any of our directors, officers, employees or agents to us or our stockholders, any action asserting a claim arising pursuant to any provision of the DGCL, our amended and restated certificate of incorporation or our amended and restated bylaws or any action asserting a claim that is governed by the internal affairs doctrine, in each case subject to the Court of Chancery having personal jurisdiction over the indispensable parties named as defendants therein and the claim not being one which is vested in the exclusive jurisdiction of a court or forum other than the Court of Chancery or for which the Court of Chancery does not have subject matter jurisdiction. Any person purchasing or otherwise acquiring any interest in any shares of our common stock shall be deemed to have notice of and to have consented to this provision of our amended and restated certificate of incorporation. This choice of forum provision may limit our stockholders’ ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers, employees or agents, which may discourage such lawsuits against us and our directors, officers, employees and agents even though an action, if successful, might benefit our stockholders. Stockholders who do bring a claim in the Court of Chancery could face additional litigation costs in pursuing any such claim, particularly if they do not reside in or near Delaware. The Court of Chancery may also reach different judgments or results than would other courts, including courts where a stockholder considering an action may be located or would otherwise choose to bring the action, and such judgments or results may be more favorable to us than to our stockholders. Alternatively, if a court were to find this provision of our amended and restated certificate of incorporation inapplicable to, or unenforceable in respect of, one or more of the specified types of actions or proceedings, we may incur additional costs associated with resolving such matters in other jurisdictions, which could have a material adverse effect on our business, financial condition or results of operations.
We do not expect to pay any dividends on our common stock for the foreseeable future.
We currently expect to retain all future earnings, if any, for future operations and expansion, and have no current plans to pay any cash dividends to holders of our common stock for the foreseeable future. Any decision to declare and pay dividends in the future will be made at the discretion of our board of directors and will depend on, among other things, our results of operations, financial condition, cash requirements, contractual restrictions and other factors that our board of directors may deem relevant. As a result, stockholders may not receive any return on an investment in our common stock unless stockholders sell our common stock for a price greater than that which they paid for it.
If equity research analysts do not publish research or reports, or publish unfavorable research or reports, about us, our business or our market, our stock price and trading volume could decline.
The trading market for our common stock will be influenced by the research and reports that equity research analysts publish about us and our business. Equity research analysts may elect not to provide research coverage of our common stock or discontinue existing research coverage, and such lack of research coverage may adversely affect the market price of our common stock. We do not have any control over the analysts, or the content and opinions included in their reports. The price of our common stock could decline if one or more equity research analysts downgrade our stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of us or fails to publish reports regularly, demand for our common stock could decrease, which in turn could cause our stock price or trading volume to decline.
Nasdaq may delist our common stock from its exchange, which could limit investors’ ability to make transactions in our securities and subject us to additional trading restrictions.
Our common shares are listed on Nasdaq under the trading symbol “ALPN.” Our securities may fail to meet the continued listing requirements to be listed on Nasdaq. If Nasdaq delists our common shares from trading on its exchange, we could face significant material adverse consequences, including:
significant impairment of the liquidity for our common stock, which may substantially decrease the market price of our common stock;
a limited availability of market quotations for our securities;
a determination that our common stock qualifies as a “penny stock” which will require brokers trading in our common stock to adhere to more stringent rules and possibly resulting in a reduced level of trading activity in the secondary trading market for our common stock;
a limited amount of news and analyst coverage for our company; and
a decreased ability to issue additional securities or obtain additional financing in the future.

61



Item 2. Unregistered Sales of Equity Securities and Use of Proceeds
None.
Item 3. Defaults Upon Senior Securities
None.
Item 4. Mine Safety Disclosures
Not applicable.
Item 5. Other Information
None.

62



Item 6. Exhibits
Exhibit
Number
Exhibit Description
 
Incorporation by Reference
 
Filed
Herewith
Form
 
File No.
 
Exhibit
 
Filing
Date
 
 
 
 
 
 
 
 
 
 
 
 
 
10.1+
 
8-K
 
001-37449
 
10.1
 
6/17/2020
 
 
 
 
 
 
 
 
 
 
 
 
 
 
10.2†
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
31.1
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
31.2
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
32.1*
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
32.2*
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
101.INS
Inline XBRL Instance Document
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
101.SCH
Inline XBRL Taxonomy Extension Schema Linkbase Document
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
101.CAL
Inline XBRL Taxonomy Extension Calculation Linkbase Document
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
101.DEF
Inline XBRL Taxonomy Extension Definition Linkbase Document
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
101.LAB
Inline XBRL Taxonomy Extension Label Linkbase Document
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
101.PRE
Inline XBRL Taxonomy Extension Presentation Linkbase Document
 
 
 
 
 
 
 
 
 
X
 
 
 
 
 
 
 
 
 
 
 
 
104
Cover page formatted as Inline XBRL and contained in Exhibit 101
 
 
 
 
 
 
 
 
 
 
 
*
The certifications attached as Exhibits 32.1 and 32.2 that accompany this Quarterly Report on Form 10-Q are not deemed filed with the Securities and Exchange Commission and are not to be incorporated by reference into any filing of Alpine Immune Sciences, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended, whether made before or after the date of this Form 10-Q, irrespective of any general incorporation language contained in such filing.

Certain portions of this exhibit have been omitted because they are not material and would likely cause competitive harm to the registrant if disclosed.
+
Indicates a management contract or a compensatory plan, contract or arrangement.

63



SIGNATURES
Pursuant to the requirements 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.
 
 
 
ALPINE IMMUNE SCIENCES, INC.
 Date: August 11, 2020
 
By:
/s/ Mitchell H.Gold, M.D.
 
 
Name:
Mitchell H. Gold, M.D.
 
 
Title:
Executive Chairman and Chief Executive Officer
 
 
 
 
ALPINE IMMUNE SCIENCES, INC.
 Date: August 11, 2020
 
By:
/s/ Paul Rickey
 
 
Name:
Paul Rickey
 
 
Title:
Senior Vice President and Chief Financial Officer

64
Exhibit

CERTAIN INFORMATION HAS BEEN EXCLUDED FROM THIS EXHIBIT BECAUSE IT IS BOTH NOT MATERIAL AND WOULD LIKELY CAUSE COMPETITIVE HARM TO THE REGISTRANT IF PUBLICLY DISCLOSED. OMISSIONS ARE DESIGNATED AS [†].
Exhibit 10.2
Execution Version




OPTION AND LICENSE AGREEMENT
between
ALPINE IMMUNE SCIENCES INC.
and
ABBVIE IRELAND UNLIMITED COMPANY
Dated as of June 17, 2020






TABLE OF CONTENTS

ARTICLE 1 DEFINITIONS    1
ARTICLE 2 LICENSOR ACTIVITIES    22
2.1
Pre-Option Development    22
2.2
Regulatory Matters    25
2.3
Manufacturing    25
2.4
Exclusivity    26
2.5
Change in Control of Licensor    26
ARTICLE 3 GOVERNANCE    27
3.1
Joint Governance Committee    27
ARTICLE 4 OPTION AND OPTION EXERCISE    31
4.1
AbbVie Option    31
4.2
Option Exercise    31
4.3
HSR    31
4.4
Effects of Option Exercise    32
4.5
Post-Option Licensor Development Activities    33
4.6
Sublicenses    33
4.7
Sublicense Survival    34
4.8
In‑License Agreements    34
4.9
No Implied Licenses    35
ARTICLE 5 POST-OPTION ACTIVITIES    35
5.1
Technology Transfer    35
5.2
Development    36
5.3
Regulatory Matters    36
5.4
Safety Data Exchange Agreement    37
5.5
Manufacturing    37
5.6
AbbVie Commercialization    39
5.7
AbbVie Diligence    40
5.8
Compliance with Applicable Law    40
ARTICLE 6 PAYMENTS AND RECORDS    41
6.1
Upfront Payment    41
6.2
Development Milestones by Licensor    41
6.3
Development Milestones by AbbVie    41
6.4
Option Exercise Fee    42
6.5
Sales-Based Milestones    42
6.6
Royalties    42
6.7
Royalty Payments and Reports    44
6.8
Mode of Payment; Offsets    44




6.9
Withholding Taxes    45
6.10
Indirect Taxes    45
6.11
Interest on Late Payments    46
6.12
Audit    46
6.13
Audit Dispute    46
6.14
Confidentiality    46
6.15
No Other Compensation    47
6.16
No Limitation    47
ARTICLE 7 INTELLECTUAL PROPERTY RIGHTS    47
7.1
Ownership of Intellectual Property Rights    47
7.2
Prosecution of Patents    48
7.3
Enforcement of Patents    52
7.4
Infringement Claims by Third Parties    54
7.5
Invalidity, Unpatentability or Unenforceability Defenses or Actions    55
7.6
Third Party Licenses and Patents    56
7.7
Product Trademarks    56
7.8
International Nonproprietary Name    57
7.9
Inventor's Remuneration    57
7.10
AbbVie Patents    57
7.11
Common Interest    57
ARTICLE 8 DATA PRIVACY AND SECURITY    58
8.1
Data Privacy and Security    58
8.2
Data Agreements    59
8.3
Security Breach Notification    59
ARTICLE 9 CONFIDENTIALITY AND NON-DISCLOSURE    59
9.1
[†]    59
9.2
Confidentiality Obligations    60
9.3
Permitted Disclosures    61
9.4
Use of Name    62
9.5
Public Announcements    62
9.6
Publications    63
9.7
Return of Confidential Information    63
9.8
Survival    64
ARTICLE 10 REPRESENTATIONS AND WARRANTIES    64
10.1
Mutual Representations and Warranties    64
10.2
Additional Representations, Warranties and Covenants of Licensor    64
10.3
DISCLAIMER OF WARRANTIES    69
ARTICLE 11 INDEMNITY    69
11.1
Indemnification of Licensor    69
11.2
Indemnification of AbbVie.    70
11.3
Notice of Claim    70




11.4
Control of Defense    71
11.5
Special, Indirect, and Other Losses    72
11.6
Insurance    72
ARTICLE 12 TERM AND TERMINATION    73
12.1
Term    73
12.2
Termination for Material Breach    74
12.3
Termination Right by AbbVie For Convenience    74
12.4
Termination for Insolvency    74
12.5
Rights in Bankruptcy    75
12.6
Termination for Failure or Delay to Obtain HSR Clearance    75
12.7
AbbVie Rights in Lieu of Termination    75
12.8
Termination in Entirety    76
12.9
Termination of Terminated Territory    77
12.10
Remedies    77
12.11
Accrued Rights; Surviving Obligations    78
ARTICLE 13 MISCELLANEOUS    79
13.1
Subcontracting    79
13.2
Force Majeure    79
13.3
Export Control    79
13.4
Assignment    80
13.5
Severability    80
13.6
Governing Law, Jurisdiction and Service    81
13.7
Dispute Resolution    81
13.8
Notices    82
13.9
Entire Agreement; Amendments    83
13.10
English Language    83
13.11
Equitable Relief    83
13.12
Waiver and Non-Exclusion of Remedies    83
13.13
No Benefit to Third Parties    84
13.14
Further Assurance    84
13.15
Relationship of the Parties    84
13.16
Counterparts; Facsimile Execution    84
13.17
References    84
13.18
Schedules    84
13.19
Construction    84







SCHEDULES

Schedule 1.14:
ALPN-101
Schedule 1.97-A:
[]
Schedule 1.97-B:
[]
Schedule 1.97-C:
[]
Schedule 1.120:
Option Exercise Data Package
Schedule 1.121:
Option Exercise Data Package Trigger Event
Schedule 1.157:
[] Success Completion Criteria
Schedule 2.1.1:
Initial Development Plan
Schedule 4.2:
Option Exercise Disclosure Schedule
Schedule []:
[]
Schedule []:
[]
Schedule 9.5:
Press Release
Schedule 10.2:
Licensor Disclosure Schedule
Schedule 10.2.1:
Existing Licensor Product Patents
Schedule 13.1:
Approved Third Party Providers
Schedule 13.7.1:
ADR Procedures








OPTION AND LICENSE AGREEMENT
This Option and License Agreement (the “Agreement”) is made and entered into effective as of June 17, 2020 (the “Effective Date”) by and between Alpine Immune Sciences Inc., a Delaware corporation having its principal place of business at 188 East Blaine St, Suite 200, Seattle, WA 98102, United States (“Licensor”), and AbbVie Ireland Unlimited Company, an Irish private unlimited company (“AbbVie”). Licensor and AbbVie are sometimes referred to herein individually as a “Party” and collectively as the “Parties.”
RECITALS
WHEREAS, Licensor Controls (as defined herein) certain intellectual property rights with respect to the Licensed Compound (as defined herein) and Licensed Products (as defined herein) in the Territory (as defined herein); and
WHEREAS, Licensor wishes to grant, and AbbVie wishes to take, an exclusive option to take an exclusive license under such intellectual property rights to research, develop, manufacture, commercialize and otherwise exploit Licensed Compounds and Licensed Products in the Field in the Territory, in each case in accordance with the terms and conditions set forth below.
NOW, THEREFORE, in consideration of the premises and the mutual promises and conditions hereinafter set forth, and other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged, the Parties, intending to be legally bound, do hereby agree as follows:
ARTICLE 1
DEFINITIONS
Unless otherwise specifically provided herein, the following terms shall have the following meanings:
1.1    AbbVie” has the meaning set forth in the preamble hereto.
1.2    AbbVie Grantback Know-How” means, as used in connection with a terminated Licensed Compound or Licensed Product and any related grant back license provided in Section 12.8 (Termination in Entirety) or 12.9 (Termination of Terminated Territory), that certain AbbVie Know-How that is (a) Controlled by AbbVie as of the effective date of the applicable termination of this Agreement (in its entirety or with respect to one (1) or more countries or other jurisdictions), (b) not generally known and (c) [] for the Development or Commercialization of, such terminated Licensed Compound or Licensed Product, but solely with respect to any such Licensed Product that (i) is the subject of Development or Commercialization in the Territory as of the date of such termination, (ii) is [] as such Licensed Product [] as of the date of such termination, and (iii) contains the Licensed Compound as the sole active ingredient.
1.3    AbbVie Grantback Patents” means, as used in connection with a terminated Licensed Compound or Licensed Product and any related grant back license provided in Section 12.8 (Termination in Entirety) or 12.9 (Termination of Terminated Territory), those certain AbbVie Patents that are (a) Controlled by AbbVie as of the effective date of the applicable termination of this Agreement (in its entirety or with respect to one (1) or more countries or other jurisdictions), and (b) [] such terminated Licensed Compound or Licensed Product, but solely with respect to any such Licensed Product that (i) is the subject of Development or Commercialization in the Territory as of the date of such termination, (ii) is [] such Licensed Product [] as of the date of such termination, and (iii) contains the Licensed Compound as the sole active ingredient.





1.4    AbbVie Indemnitees” has the meaning set forth in Section 11.2 (Indemnification of AbbVie).
1.5    AbbVie Know-How means all Information that is (a) Controlled by AbbVie or any of its Affiliates during the Term, (b) developed by AbbVie or any of its Affiliates or Sublicensees after the Effective Date and during the Term as a result of performance under this Agreement, (c) not generally known and (d) necessary or reasonably useful for the Development, Manufacture or Commercialization of the Licensed Compound or a Licensed Product, but excluding Joint Know-How or any Information published in AbbVie Patents or Joint Patents.
1.6    AbbVie Patents means all of the Patents that (a) are Controlled by AbbVie or any of its Affiliates during the Term, (b) claim inventions made or conceived by or on behalf of AbbVie or any of its Affiliates after the Effective Date and during the Term as a result of performance under this Agreement and (c) are necessary or reasonably useful (or, with respect to patent applications, would be necessary or reasonably useful if such patent applications were to issue as patents) for the Development, Manufacture or Commercialization of the Licensed Compound or a Licensed Product, but excluding any Joint Patents.
1.7    AbbVie Prosecuted Infringements” has the meaning set forth in Section 7.3.1(b) (Enforcement of Licensor Patents).
1.8    Accounting Standards” means, with respect to a Party, that such Party shall maintain records and books of accounts in accordance with (a) United States Generally Accepted Accounting Principles or (b) to the extent applicable, International Financial Reporting Standards as issued by the International Accounting Standards Board, in each case, consistently applied.
1.9    Affiliate means, with respect to a Party, any Person that, directly or indirectly, through one (1) or more intermediaries, controls, is controlled by or is under common control with such Party. For purposes of this definition, “control” and, with correlative meanings, the terms “controlled by” and “under common control with” means (a) the possession, directly or indirectly, of the power to direct the management or policies of a Person, whether through the ownership of voting securities, by contract relating to voting rights or corporate governance, or otherwise; or (b) the ownership, directly or indirectly, of more than fifty percent (50%) of the voting securities or other ownership interest of a Person (or, with respect to a limited partnership or other similar entity, its general partner or controlling entity). The Parties acknowledge that in the case of certain entities organized under the laws of certain countries outside of the United States, the maximum percentage ownership permitted by law for a foreign investor may be less than fifty percent (50%), and that in such case such lower percentage shall be substituted in the preceding sentence, provided that such foreign investor has the power to direct the management or policies of such entity.
1.10    Agreement has the meaning set forth in the preamble hereto.
1.11    aGVHD” means acute graft-versus-host disease.
1.12    aGVHD Clinical Study” means BALANCE, the Licensor’s Phase I/II, open-label, dose escalation and expansion Clinical Study of ALPN-101 in patients with steroid-resistant or steroid-refractory active aGVHD (NCT number 04227938).
1.13    Alliance Manager” has the meaning set forth in Section 3.1.7 (Alliance Manager).
1.14    ALPN-101” means the fusion protein described on Schedule 1.14 (ALPN-101).
1.15    “[]” has the meaning set forth in [].





1.16    Annual Net Sales-Based Milestone Payment” has the meaning set forth in Section 6.5 (Sales-Based Milestones).
1.17    Annual Net Sales-Based Milestone Payment Date” has the meaning set forth in Section 6.5 (Sales-Based Milestones).
1.18    Annual Net Sales-Based Milestone Table” has the meaning set forth in Section 6.5 (Sales-Based Milestones).
1.19    Annual Net Sales Milestone Threshold” has the meaning set forth in Section 6.5 (Sales-Based Milestones).
1.20    Applicable Law means federal, state, local, national and supra-national laws, statutes, rules and regulations, including any rules, regulations, regulatory guidelines or other requirements of the Regulatory Authorities, major national securities exchanges or major securities listing organizations that may be in effect from time to time during the Term and applicable to a particular activity or country or other jurisdiction hereunder.
1.21    Audit Arbitrator” has the meaning set forth in Section 6.13 (Audit Dispute).
1.22    Bankruptcy Code” has the meaning set forth in Section 12.5.1 (Applicability of 11 U.S.C. § 365(n)).
1.23    Biosimilar Application” has the meaning set forth in Section 7.3.3 (Biosimilar Applications).
1.24    Biosimilar Product” means, with respect to a Licensed Product and on a country-by-country basis, a biologic product marketed for commercial sale (a) whose licensing, approval or marketing authorization, or whose application for such licensing, approval or marketing authorization, relied in whole or in part on a prior approval, licensing or marketing authorization granted to such Licensed Product, or (b) that is determined by the FDA (or a foreign counterparty thereof) to be biosimilar to or interchangeable with such Licensed Product, as set forth at 42 USC 262(k) (or foreign equivalent thereof). A biological product licensed, marketed, sold, manufactured, or produced by AbbVie, its Affiliates or Sublicensees under the same Drug Approval Application for the Licensed Product shall not constitute a Biosimilar Product.
1.25    BLA” has the meaning set forth in the definition of “Drug Approval Application.”
1.26    Board of Directors” has the meaning set forth in the definition of “Change in Control.”
1.27    Breach Determination” has the meaning set forth in Section 12.2.1 (Material Breach).
1.28    Breaching Party” has the meaning set forth in Section 12.2.1 (Material Breach).
1.29    []
1.30    Business Day” means a day other than a Saturday or Sunday on which banking institutions in Chicago, Illinois are open for business.
1.31    Calendar Quarter” means each successive period of three (3) calendar months commencing on January 1, April 1, July 1 and October 1, except that the first Calendar Quarter of the Term





shall commence on the Effective Date and end on the day immediately prior to the first to occur of January 1, April 1, July 1 or October 1 after the Effective Date, and the last Calendar Quarter shall end on the last day of the Term.
1.32    Calendar Year” means each successive period of twelve (12) calendar months commencing on January 1 and ending on December 31, except that the first Calendar Year of the Term shall commence on the Effective Date and end on December 31 of the year in which the Effective Date occurs and the last Calendar Year of the Term shall commence on January 1 of the year in which the Term ends and end on the last day of the Term.
1.33    CDA” means that certain Mutual Nondisclosure Agreement by and between AbbVie Inc. and Alpine Immune Sciences, Inc. dated November 25, 2018, as may be amended from time to time.
1.34    Centralized Approval Procedure” means the procedure through which a MAA filed with the EMA results in a single marketing authorization valid throughout the European Union.
1.35    Change in Control”, with respect to Licensor, shall be deemed to have occurred if any of the following occurs after the Effective Date:
1.35.1    any “person” or “group” (as such terms are defined below but excluding any group of stockholders currently represented on Licensor’s Board of Directors) (a) is or becomes the “beneficial owner” (as defined below), directly or indirectly, of shares of capital stock or other interests (including partnership interests) of Licensor then outstanding and normally entitled (without regard to the occurrence of any contingency) to vote in the election of the directors, managers or similar supervisory positions (“Voting Stock”) of Licensor representing fifty percent (50%) or more of the total voting power of all outstanding classes of Voting Stock of Licensor or (b) has the power, directly or indirectly, to elect a majority of the members of Licensor’s board of directors, or similar governing body (“Board of Directors”); []; or
1.35.2    Licensor enters into a merger, consolidation or similar transaction with another Person (whether or not Licensor is the surviving entity) and as a result of such merger, consolidation or similar transaction (a) the members of the Board of Directors of Licensor immediately prior to such transaction constitute less than a majority of the members of the Board of Directors of Licensor or such surviving Person immediately following such transaction or (b) the Persons that beneficially owned, directly or indirectly, the shares of Voting Stock of Licensor immediately prior to such transaction cease to beneficially own, directly or indirectly, shares of Voting Stock of Licensor representing at least a majority of the total voting power of all outstanding classes of Voting Stock of the surviving Person in substantially the same proportions as their ownership of Voting Stock of Licensor immediately prior to such transaction; or
1.35.3    Licensor sells or transfers to any Third Party, in one (1) or more related transactions, properties or assets representing all or substantially all of Licensor’s total assets to which this Agreement relates, excluding any assignment or transfer to any Third Party of Licensor’s rights to receive royalty or other payments hereunder as a means of financing Licensor’s operations; or
1.35.4    the holders of capital stock of Licensor approve a plan or proposal for the liquidation or dissolution of Licensor.
1.35.5    For the purpose of this definition of Change in Control, (a) “person” and “group” have the meanings given such terms under Section 13(d) and 14(d) of the United States Securities Exchange Act of 1934 and the term “group” includes any group acting for the purpose of acquiring, holding or disposing of securities within the meaning of Rule 13d-5(b)(1) under the said Act; (b) a “beneficial owner” shall be determined in accordance with Rule 13d-3 under the aforesaid Act; and (c) the terms “beneficially owned” and “beneficially own” shall have meanings correlative to that of “beneficial owner.”





1.36    Clinical Data” means all Information with respect to any Licensed Compound or Licensed Product and made, collected or otherwise generated under or in connection with Clinical Studies, including any data (including raw data), reports and results with respect thereto.
1.37    Clinical Studies” means Phase 0, Phase I, Phase II, Phase III and such other tests and studies in human subjects that are required by Applicable Law, or otherwise recommended by the Regulatory Authorities, to obtain or maintain any Regulatory Approval for a Licensed Compound or Licensed Product for one (1) or more Indications, including tests or studies that are intended to expand the Product Labeling for such Licensed Compound or Licensed Product with respect to such Indication.
1.38    CMC Working Group” has the meaning set forth in Section 3.1.9(b) (CMC Working Group).
1.39    Combination Product” means a Licensed Product containing one (1) or more Licensed Compounds and one (1) or more Other Active Ingredients. By way of example, and not meant to limit the foregoing definition, a Combination Product includes:
1.39.1    a Licensed Product that contains []; and
1.39.2    a Licensed Product that contains [].
1.40    Commercialization means any and all activities directed to the preparation for sale of, offering for sale of, or sale of a Licensed Product, including activities related to marketing, promoting, distributing, importing and exporting such Licensed Product, and interacting with Regulatory Authorities or other governmental authorities regarding any of the foregoing. When used as a verb, “to Commercialize” and “Commercializing” means to engage in Commercialization, and “Commercialized” has a corresponding meaning.
1.41    Commercially Reasonable Efforts means, with respect to the performance of Development, Commercialization or Manufacturing activities with respect to the Licensed Compound or a Licensed Product by a Party, the carrying out of such activities using efforts and resources comparable to the efforts and resources that such Party would typically devote to compounds or products of similar market potential at a similar stage in development or product life, taking into account all scientific, commercial and other factors that such Party would take into account, including issues of safety and efficacy, expected and actual cost and time to develop, expected and actual profitability (including royalties and other payments required hereunder), expected and actual competitiveness of alternative Third Party products (including generic or biosimilar products) in the marketplace, the nature and extent of expected and actual market exclusivity (including patent coverage and regulatory exclusivity), the expected likelihood of regulatory approval, the expected and actual reimbursability and pricing, and the expected and actual amounts of marketing and promotional expenditures required. Further, to the extent that [] shall be taken into account in determining whether such Party has used its Commercially Reasonable Efforts to perform any such affected obligations.
1.42    Competing Product” means any product (a) that is labeled, advertised, marketed, promoted or intended for use in the Territory for the diagnosis, treatment, palliation or prevention of [] and (b) that [], as measured by [].
1.43    Competitive Activities” has the meaning set forth in Section 2.4 (Exclusivity).
1.44    Confidential Information” means any Information or data provided orally, visually, in writing or other form by or on behalf of one (1) Party (or an Affiliate or representative of such Party) to the other Party (or to an Affiliate or representative of such Party) in connection with this Agreement, whether prior





to, on or after the Effective Date, including Information relating to the terms of this Agreement, the Licensed Compound or any Licensed Product (including the Regulatory Documentation and Regulatory Data), any Exploitation of the Licensed Compound or any Licensed Product, any know-how with respect thereto developed by or on behalf of the disclosing Party or its Affiliates (including Licensor Know-How), or the scientific, regulatory or business affairs or other activities of either Party. In addition, each Party’s confidential information under the CDA shall be deemed to be such Party’s Confidential Information under this Agreement.
1.45    Control means, subject to Section 4.8 (In-License Agreements), with respect to any item of Information, Regulatory Documentation, material, Patent or other property right, the possession of the right, whether directly or indirectly, and whether by ownership, license, covenant not to sue or otherwise (other than by operation of the license and other grants in Sections 4.1 (AbbVie Option) or 4.4.1 (License Grants to AbbVie)), to grant a license, sublicense or other right (including the right to reference Regulatory Documentation) to or under such Information, Regulatory Documentation, material, Patent or other property right as provided for herein without violating the terms of any agreement or other arrangement with any Third Party.
1.46    Convicted Entity” has the meaning set forth in Section 10.2.16(d) (Additional Representations and Warranties of Licensor).
1.47    Convicted Individual” has the meaning set forth in Section 10.2.16(d) (Additional Representations and Warranties of Licensor).
1.48    Data Breach” has the meaning set forth in Section 8.3 (Security Breach Notification).
1.49    Data Security and Privacy Laws” means all Applicable Laws relating to the privacy, Processing and security of Personal Data.
1.50    Debarred Entity” has the meaning set forth in Section 10.2.16(b) (Additional Representations and Warranties of Licensor).
1.51    Debarred Individual” has the meaning set forth in Section 10.2.16(a) (Additional Representations and Warranties of Licensor).
1.52    Default Notice” has the meaning set forth in Section 12.2.1 (Material Breach).
1.53    Development” means all activities related to research, pre-clinical and other non-clinical testing, test method development and stability testing, toxicology, formulation, process development, manufacturing scale-up, qualification and validation, quality assurance/quality control, Clinical Studies, including Manufacturing in support thereof, statistical analysis and report writing, the preparation and submission of Drug Approval Applications, regulatory affairs with respect to the foregoing and all other activities necessary or reasonably useful or otherwise requested or required by a Regulatory Authority as a condition or in support of obtaining or maintaining a Regulatory Approval. When used as a verb, “Develop” means to engage in Development. For purposes of clarity, Development shall include any submissions and activities required in support thereof required by Applicable Laws or a Regulatory Authority as a condition or in support of obtaining a pricing or reimbursement approval for an approved Licensed Product.
1.54    Development Activities” has the meaning set forth in Section 2.1.1 (Development Plan and Activities).
1.55    Development Plan” means the development plan set forth on Schedule 2.1.1 (Development Plan), as such development plan may be amended from time to time in accordance with this Agreement.





1.56    Dispute has the meaning set forth in Section 13.7 (Dispute Resolution).
1.57    DOJ” means the Antitrust Division of the United States Department of Justice, and any successor entity thereto.
1.58    Dollars” or “$” means United States Dollars.
1.59    Drug Approval Application” means a Biologics License Application (a “BLA”) as defined in the PHSA, or any corresponding foreign application in the Territory, including, with respect to the European Union, a Marketing Authorization Application (a “MAA”) filed with the EMA pursuant to the Centralized Approval Procedure or with the applicable Regulatory Authority of a country in Europe with respect to the mutual recognition or any other national approval procedure.
1.60    Effective Date means the effective date of this Agreement as set forth in the preamble hereto.
1.61    EMA means the European Medicines Agency and any successor agency(ies) or authority having substantially the same function.
1.62    European Union” or “E.U.” means the economic, scientific and political organization of member states known as the European Union, as its membership may be altered from time to time, and any successor thereto.
1.63    Excluded Entity” has the meaning set forth in Section 10.2.16(c) (Additional Representations and Warranties of Licensor).
1.64    Excluded Individual” has the meaning set forth in Section 10.2.16(c) (Additional Representations and Warranties of Licensor).
1.65    Existing Patents” means (a) as of the Effective Date, all Licensor Patents existing as of the Effective Date and (b) as of the date of delivery by Licensor to AbbVie of the Option Exercise Data Package, all Licensor Patents existing as of such date of delivery.
1.66    Existing Regulatory Documentation” means the Regulatory Documentation Controlled by Licensor or any of its Affiliates as of the Effective Date or at any time during the Term prior to the Option Effective Date.
1.67    Exploit” or “Exploitation” means to make, have made, import, have imported, export, have exported, use, have used, sell, have sold, offer for sale or otherwise exploit, including to research, Develop, Commercialize, register, modify, enhance, improve, Manufacture, have Manufactured, hold, keep (whether for disposal or otherwise) or otherwise dispose of.
1.68    FDA means the United States Food and Drug Administration and any successor agency(ies) or authority having substantially the same function.
1.69    FFDCA means the United States Federal Food, Drug, and Cosmetic Act, 21 U.S.C. § 301 et seq., as amended from time to time, together with any rules, regulations and requirements promulgated thereunder (including all additions, supplements, extensions and modifications thereto).
1.70    Field” means [].





1.71    First Commercial Sale” means, with respect to a Licensed Product and a country, the first sale for monetary value for use or consumption by the end user of such Licensed Product in such country after all Regulatory Approvals for such Licensed Product has been obtained in such country. [] shall not be construed as a First Commercial Sale.
1.72    FTC” means the United States Federal Trade Commission, and any successor entity thereto.
1.73    FTE” means the equivalent of the work of one (1) employee full time for one (1) Calendar Year (consisting of at least a total of [] per Calendar Year) of work performing Development or Manufacturing activities for a Licensed Compound or Licensed Product. No additional payment shall be made with respect to any person who works more than [] per Calendar Year and any person who devotes less than [] per Calendar Year (or such other number as may be agreed by the JGC) shall be treated as an FTE on a pro rata basis based upon the actual number of hours worked divided by [].
1.74    FTE Costs” means, with respect to Licensor for any period, the FTE Rate multiplied by the applicable number of FTEs of Licensor performing Development or Manufacturing activities during such period in accordance with the Development Plan.
1.75    FTE Rate” has the meaning set forth in Section 5.5.2 (Manufacturing Technology Transfer Upon AbbVie’s Request).
1.76    HSR Act” means the Hart‑Scott‑Rodino Antitrust Improvements Act of 1976, as amended, and the rules and regulations promulgated thereunder.
1.77    HSR Clearance” means the earlier of (a) notification to the Parties from the FTC or DOJ of early termination of the applicable waiting period under the HSR Act with respect to the HSR Filings, or (b) expiration of the applicable waiting period under the HSR Act with respect to the HSR Filings; provided, however, that if the FTC or DOJ commences any investigation by means of a Second Request or otherwise, HSR Clearance means the termination of such investigation or expiration of the applicable waiting period under the HSR Act with respect to the HSR Filings, without action to prevent the Parties from implementing the transactions contemplated by this Agreement with respect to the United States.
1.78    HSR Extension Period” has the meaning set forth in Section 4.3.1 (HSR).
1.79    HSR Filings” means the filings by Licensor and AbbVie with the FTC and the DOJ of a Notification and Report Form for Certain Mergers and Acquisitions (as that term is defined in the HSR Act) with respect to the matters set forth in this Agreement, together with all required documentary attachments thereto.
1.80    In-License Agreement” means any agreement between Licensor or its Affiliate, on one hand, and a Third Party on the other hand under which AbbVie is granted a sublicense or other right under this Agreement as provided in Section 4.8 (In‑License Agreements).
1.81    IND” means an application filed with a Regulatory Authority for authorization to commence Clinical Studies, including (a) an Investigational New Drug Application as defined in the FFDCA or any successor application or procedure filed with the FDA, (b) any equivalent of a United States IND in other countries or regulatory jurisdictions (i.e., clinical trial application (CTA)) and (c) all supplements, amendments, variations, extensions and renewals thereof that may be filed with respect to the foregoing.





1.82    Indemnification Claim Notice has the meaning set forth in Section 11.3 (Notice of Claim).
1.83    Indemnified Party has the meaning set forth in Section 11.3 (Notice of Claim).
1.84    Independent Affiliate” means, with respect to a Change in Control of Licensor, an Affiliate of Licensor that was not an Affiliate of Licensor prior to such Change in Control and is not a successor in interest to any Affiliate of Licensor that was an Affiliate of Licensor prior to such Change in Control.
1.85    Indication” means, with respect to a product, a use to which such product is intended to be put for the treatment, prevention or cure of a distinct recognized disease or condition, or of a manifestation of a recognized disease or condition, which, if approved in the U.S., would be reflected in the “Indications and Usage” section of labeling pursuant to 21 C.F.R. §201.57(c)(2) or, to the extent applicable, any comparable labeling section outside the U.S., subject to the following: (a) [] are not different Indications; (b) [] are not different Indications, even if []; (c) [] are not different Indications (e.g., []); (d) [] are not different Indications; (e) [] are not different Indications (e.g., []); and (f) [] are not different Indications.
1.86    Indirect Taxes” has the meaning set forth in Section 6.10 (Indirect Taxes).
1.87    Information” means all knowledge of a technical, scientific, business and other nature, including know-how, technology, means, methods, processes, practices, formulae, instructions, skills, techniques, procedures, experiences, ideas, technical assistance, designs, drawings, assembly procedures, computer programs, apparatuses, specifications, data, results and other material, Regulatory Data and other biological, chemical, pharmacological, toxicological, pharmaceutical, physical and analytical, pre-clinical, clinical, safety, manufacturing and quality control data and information, including study designs and protocols, reagents (e.g., plasmids, proteins, cell lines, assays and compounds) and biological methodology; in each case (whether or not confidential, proprietary, patented or patentable, of commercial advantage or not) in written, electronic or any other form now known or hereafter developed.
1.88    Initial Development Plan” has the meaning set forth in Section 2.1.1 (Development Plan and Activities).
1.89    Initiation” or “Initiate” means, with respect to a Clinical Study, the first enrollment of the first human subject in such Clinical Study.
1.90    Intellectual Property” has the meaning set forth in Section 12.5.1 (Applicability of 11 U.S.C. § 365(n)).
1.91    Joint Governance Committee” or “JGC” has the meaning set forth in Section 3.1.1 (Formation).
1.92    Joint Intellectual Property Rights” has the meaning set forth in Section 7.1.2 (Ownership of Joint Patents and Joint Know-How).
1.93    Joint Know-How” has the meaning set forth in Section 7.1.2 (Ownership of Joint Patents and Joint Know-How).
1.94    Joint Patents” has the meaning set forth in Section 7.1.2 (Ownership of Joint Patents and Joint Know-How).





1.95    Late Phase Development Activities” means the activities described in the Development Plan as “Late Phase Development Activities.” Late Phase Development Activities shall be Development Activities pursuant to the Development Plan in the event AbbVie requests completion of such activities as further described in Section 2.1.1 (Development Plan and Activities).
1.96    LIBOR” means the London Interbank Offered Rate for deposits in United States Dollars having a maturity of one (1) month published by the British Bankers’ Association, as adjusted from time to time on the first London Business Day of each month.
1.97    Licensed Compound means (a) the fusion protein known as ALPN-101 and (b) any other molecule that (i) is owned or Controlled by Licensor or its Affiliates as of the Effective Date or at any time during the Term and (ii) [], as measured by [] (such molecules in clause (b), “Other Licensed Molecules”). A technical description of any Other Licensed Molecules existing or that are under Development by Licensor or its Affiliates as of the Effective Date are set forth on Schedule 1.97-A [], which schedule shall be updated by Licensor from time to time ([]) to reflect all additional Licensed Compounds; provided that, for clarity, the failure of a fusion protein or molecule which meets the criteria for an Other Licensed Molecule to be included on Schedule 1.97-A [] shall not affect whether such fusion protein or molecule is determined to be a Licensed Compound under this Agreement. It is expressly understood that Licensor’s proprietary fusion protein known as [] as of the Effective Date, as described on Schedule 1.97-C [], shall not be deemed a “Licensed Compound” hereunder.
1.98    Licensed Product means any product, or portion thereof, containing a Licensed Compound, alone or in combination with one (1) or more Other Active Ingredients, in any and all forms, presentations, delivery systems, dosages and formulations.
1.99    Licensor” has the meaning set forth in the preamble hereto.
1.100    Licensor Acquirer” means any Person that becomes an Independent Affiliate of Licensor due to and upon a Change in Control of Licensor.
1.101    Licensor Indemnitees” has the meaning set forth in Section 11.1 (Indemnification of Licensor).
1.102    Licensor Know-How” means all Information that is (a) owned or Controlled by Licensor or any of its Affiliates as of the Effective Date or at any time during the Term, (b) not generally known and (c) necessary or reasonably useful for the Development, Manufacture, Commercialization or Exploitation of any Licensed Compound or Licensed Product, but excluding Joint Know-How or Information published in Licensor Patents.
1.103    Licensor Patents” means all of the Patents that are (a) Controlled by Licensor or any of its Affiliates as of the Effective Date or at any time during the Term and (b) that claim any Licensed Compound, any Licensed Product or any composition containing a Licensed Compound, or the Development, Manufacture, Commercialization or Exploitation of any of the foregoing, or are necessary for or otherwise used by either Party in activities under this Agreement for, the Development, Manufacture, Commercialization or Exploitation of any Licensed Compound or Licensed Product. For clarity, the Licensor Patents include the Existing Patents, Licensor Product Patents and Licensor Platform Patents, but exclude Joint Patents.
1.104    Licensor Platform Patents” means all of the Licensor Patents that are not Licensor Product Patents.





1.105    Licensor Product Patents” means all of the Licensor Patents that (a) as of the Option Effective Date, [], in each case of (i)-(iii) wherein []; or (b) are deemed to be “Licensor Product Patents” under Section 7.2.2 (Maintenance and Prosecution of Licensor Platform Patents). For clarity, a Licensor Patent that discloses (but does not claim) any of the foregoing molecule, product, composition or Exploitation described in clause (a) shall not be deemed a “Licensor Product Patent”. Licensor Product Patents as of the Effective Date include those Patents set forth in Schedule 10.2.1 (Existing Licensor Product Patents), provided that the failure to include a Licensor Patent that otherwise meets the foregoing definition on Schedule 10.2.1 (Existing Licensor Product Patents) does not render such patent not a Licensor Product Patent.
1.106    “[]” has the meaning set forth in [].
1.107    Losses” has the meaning set forth in Section 11.1 (Indemnification of Licensor).
1.108    MAA has the meaning set forth in the definition of Drug Approval Application.
1.109    Major Market” means each of the United States, United Kingdom, Germany, France, Spain and Italy.
1.110    Manufacture” and “Manufacturing” means all activities related to the synthesis, making, production, processing, purifying, formulating, filling, finishing, packaging, labeling, shipping and holding of the Licensed Compound, any Licensed Product or any intermediate thereof, including process development, process qualification and validation, scale-up, pre-clinical, clinical and commercial production and analytic development, product characterization, stability testing, quality assurance and quality control.
1.111    Manufacturing Process” has the meaning set forth in Section 5.5.2 (Manufacturing Technology Transfer Upon AbbVie’s Request).
1.112    Manufacturing Technology Transfer” has the meaning set forth in Section 5.5.2 (Manufacturing Technology Transfer Upon AbbVie’s Request).
1.113    Material Amendment” means any material amendment or other modification to the Development Plan, including (a) a change to the scope, timing or resource allocation of any Development Activities that would result in an increase in the timeline included in such Development Plan, (b) budgetary changes that, together with any prior amendments, would result in a cumulative increase or decrease of [] or more from the aggregate budget set forth in the Initial Development Plan for all Development Activities other than the Late Phase Development Activities ([] and []), (c) the imposition of any obligation on AbbVie, (d) the removal or material reduction of any of the Development Activities specifically identified in the then-current Development Plan to be conducted by or on behalf of Licensor, (e) a material decrease in Licensor’s level of efforts with respect to Development Activities, or (f) any material modifications to Licensor’s reporting and data summary requirements under the Development Plan.
1.114    Mono Product” has the meaning set forth in the definition of “Net Sales.”
1.115    Net Sales” means, with respect to a Licensed Product for any period, the total amount billed or invoiced on sales of such Licensed Product during such period by AbbVie, its Affiliates or Sublicensees (each, a “Selling Party”) in the Territory to Third Parties (including wholesalers or distributors) in bona fide arm’s length transactions, less the following deductions, in each case [] the Selling Party:
(a)    [];
(b)    [];





(c)    [];
(d)    [];
(e)    [];
(f)    [];
(g)    [];
(h)    [];
(i)    []; and
(j)    [].
Net Sales shall not include []. Net Sales shall include []. Net Sales shall not include [].
Net Sales shall be calculated in accordance with the standard internal policies and procedures of the Selling Party, which must be in accordance with Accounting Standards.
For purposes of calculating Net Sales, all Net Sales shall be converted into Dollars in accordance with Section 6.8 (Mode of Payment; Offsets).
In the event that a Licensed Product is sold in any country or other jurisdiction in the form of a Combination Product, the Net Sales for such Combination Product shall be calculated as follows:
(i)    If a product containing as its sole active ingredient a Licensed Compound contained in such Combination Product (the “Mono Product”) and products containing as their sole active ingredients Other Active Ingredients in such Combination Product are separately sold in such country or other jurisdiction, the Net Sales attributable to such Combination Product shall be calculated by []: [], for products that contain as their sole active ingredients Other Active Ingredients in such Combination Product.
(ii)    If the Mono Product is separately sold in such country or other jurisdiction, but products containing as their sole active ingredients Other Active Ingredients in such Combination Product are not separately sold in such country or other jurisdiction, the Net Sales attributable to such Combination Product shall be calculated by []: [] to which the Net Sales calculation applies for such Combination Product.
(iii)    If the Mono Product is not separately sold in such country or other jurisdiction, but products containing as their sole active ingredients Other Active Ingredients contained in such Combination Product are separately sold in such country or other jurisdiction, the Net Sales attributable to such Combination Product shall be calculated by []: [] to which the Net Sales calculation applies for products that contain as their sole active ingredients Other Active Ingredients in such Combination Product.
(iv)    If both the Mono Product and Other Active Ingredients or ingredients in such Combination Product are not separately sold in such country or other jurisdiction, []. If the Parties cannot [].
1.116    New License Agreement” has the meaning set forth in Section 4.7 (Sublicense Survival).





1.117    Non-Breaching Party” has the meaning set forth in Section 12.2.1 (Material Breach).
1.118    Option” has the meaning set forth in Section 4.1 (AbbVie Option).
1.119    Option Effective Date” means the date upon which AbbVie delivers to Licensor the Option Exercise Notice with respect to the Option in accordance with Section 13.8 (Notices); provided that, if AbbVie reasonably determines in good faith prior to the delivery of the Option Exercise Notice for the Option that the transactions to be consummated upon the exercise of the Option require HSR Filings, the Option Effective Date shall mean the Business Day following the date on which HSR Clearance occurs.
1.120    Option Exercise Data Package” means a data package containing the information set forth on Schedule 1.120 (Option Exercise Data Package).
1.121    Option Exercise Data Package Trigger Event” has the meaning set forth on Schedule 1.121 (Option Exercise Data Package Trigger Event).
1.122    Option Exercise Fee” has the meaning set forth in Section 6.4 (Option Exercise Fee).
1.123    Option Exercise Notice” has the meaning set forth in Section 4.2 (Option Exercise).
1.124    Option Exercise Period” means the period of time beginning on the Effective Date and, subject to Section 4.2 (Option Exercise) and Section 4.3 (HSR), ending ninety (90) days following the date that Licensor provides AbbVie with the Option Exercise Data Package; provided that, if Licensor has not provided AbbVie with the Option Exercise Data Package by [], the JGC shall promptly confer and discuss the facts underlying such delay, including whether any clinical hold has been placed on the program, and any potential resolution.
1.125    Other Active Ingredient” means any component that provides pharmacological activity or other direct therapeutic effect in the Field or that therapeutically affects the structure or any function of the body whereby such component is not Controlled by Licensor.
1.126    Other Licensed Molecules” has the meaning set forth in Section 1.97 (Licensed Compound).
1.127    Party and Parties has the meaning set forth in the preamble hereto.
1.128    Patents” means (a) all national, regional and international patents and patent applications, including provisional patent applications and rights to claim priority from any of such patents or patent applications, (b) all patent applications filed either from such patents, patent applications or provisional applications or from an application claiming priority from the foregoing patents and patent applications in (a), including divisionals, continuations, continuations-in-part, provisionals, converted provisionals and continued prosecution applications, (c) any and all patents that have issued or in the future issue from the foregoing patent applications ((a) and (b)), including utility models, petty patents and design patents and certificates of invention, (d) any and all extensions or restorations by existing or future extension or restoration mechanisms, including revalidations, reissues, re-examinations and extensions (including any patent term extensions, supplementary protection certificates, pediatric exclusivities and the like) of the foregoing patents or patent applications ((a), (b) and (c)), and (e) any similar rights, including so-called pipeline protection or any importation, revalidation, confirmation or introduction patent or registration patent or patent of additions to any of such foregoing patent applications and patents.





1.129    Person means an individual, sole proprietorship, partnership, limited partnership, limited liability partnership, corporation, limited liability company, business trust, joint stock company, trust, unincorporated association, joint venture or other similar entity or organization, including a government or political subdivision, department or agency of a government.
1.130    Personal Data” means (a) all information identifying, or in combination with other information, identifiable to an individual, including pseudonymized (key-coded) Clinical Data containing such information; and (b) any other information that is governed, regulated or protected by one or more Data Security and Privacy Laws.
1.131    Phase 0” means an exploratory, first-in-human trial conducted in accordance with the FDA 2006 Guidance on Exploratory Investigational New Drug Studies (or the equivalent in any country or other jurisdiction outside of the United States) and designed to expedite the development of therapeutic or imaging agents by establishing very early on whether the agent behaves in human subjects as was anticipated from pre-clinical studies.
1.132    Phase I” means a human clinical trial of a Licensed Compound or Licensed Product, the principal purpose of which is a preliminary determination of safety, tolerability, pharmacological activity or pharmacokinetics in healthy individuals or patients or similar clinical study prescribed by the Regulatory Authorities, including the trials referred to in 21 C.F.R. §312.21(a), as amended.
1.133    Phase II” means a human clinical trial of a Licensed Compound or Licensed Product, the principal purpose of which is a determination of safety and efficacy in the target patient population, which is prospectively designed to generate sufficient data that may permit commencement of pivotal clinical trials, or a similar clinical study prescribed by the Regulatory Authorities, from time to time, pursuant to Applicable Law or otherwise, including the trials referred to in 21 C.F.R. §312.21(b), as amended.
1.134    Phase II SLE Clinical Study” means a Phase II of a Licensed Compound or Licensed Product for the treatment of SLE that has the minimum characteristics set forth in the Development Plan.
1.135    Phase III” means a human clinical trial of a Licensed Compound or Licensed Product on a sufficient number of subjects in an indicated patient population that is designed to establish that a Licensed Compound or Licensed Product is safe and efficacious for its intended use and to determine the benefit/risk relationship, warnings, precautions and adverse reactions that are associated with such product in the dosage range to be prescribed, which trial is intended to support marketing approval of such Licensed Compound or Licensed Product, including all tests and studies that are required by the FDA from time to time, pursuant to Applicable Law or otherwise, including the trials referred to in 21 C.F.R. §312.21(c), as amended.
1.136    PHSA” means the United States Public Health Service Act, as amended from time to time.
1.137    Privacy and Security Obligations” has the meaning set forth in Section 10.2.22 (Additional Representations and Warranties of Licensor).
1.138    Processing” (or its conjugates) means any operation or set of operations that is performed upon Personal Data, whether or not by automatic means, such as collection, recording, organization, storage, adaptation or alternation, retrieval, consultation, use, disclosure by transmission, dissemination or otherwise making available, alignment or combination, blocking, erasure or destruction.
1.139    “[]” has the meaning set forth in [].





1.140    Product Infringement” has the meaning set forth in Section 7.3.1 (Enforcement of Licensor Patents).
1.141    Product Labeling means, with respect to a Licensed Product in a country or other jurisdiction in the Territory, (a) the Regulatory Authority‑approved full prescribing information for such Licensed Product for such country or other jurisdiction, including any required patient information, and (b) all labels and other written, printed or graphic matter upon a container, wrapper or any package insert utilized with or for such Licensed Product in such country or other jurisdiction.
1.142    Product Trademarks” means the Trademark(s) to be used by AbbVie or its Affiliates or its or their respective Sublicensees for the Development, Commercialization or Exploitation of Licensed Products in the Territory and any registrations thereof or any pending applications relating thereto in the Territory (excluding, in any event, any trademarks, service marks, names or logos that include any corporate name or logo of the Parties or their Affiliates).
1.143    Proposed In-Licensed Rights” has the meaning set forth in Section 4.8.1 (In-License Agreements Prior to Option Exercise).
1.144    Regulatory Approval” means, with respect to a country or other jurisdiction in the Territory, the approvals (including Drug Approval Applications), licenses, registrations or authorizations of any Regulatory Authority necessary to Commercialize a Licensed Product in such country or other jurisdiction, including, where applicable, pricing or reimbursement approval in such country or other jurisdiction, and where required by Applicable Law, (a) pre- and post-approval marketing authorizations (including any prerequisite Manufacturing approval or authorization related thereto) and (b) approval of Product Labeling.
1.145    Regulatory Authority” means any applicable supra-national, federal, national, regional, state, provincial or local governmental or regulatory authority, agency, department, bureau, commission, council or other entities (e.g., the FDA and EMA) regulating or otherwise exercising authority with respect to activities contemplated in this Agreement, including the Exploitation of the Licensed Products in the Territory.
1.146    Regulatory Data” has the meaning set forth in Section 5.3 (Regulatory Matters).
1.147    Regulatory Documentation” means all (a) applications (including all INDs and Drug Approval Applications), registrations, licenses, authorizations and approvals (including Regulatory Approvals), (b) correspondence and reports submitted to or received from Regulatory Authorities (including minutes and official contact reports relating to any communications with any Regulatory Authority) and all supporting documents with respect thereto, including all regulatory drug lists, advertising and promotion documents, adverse event files and complaint files, and (c) Clinical Data, non-clinical data and CMC data contained or relied upon in any of the foregoing, in each case ((a), (b) and (c)) relating to a Licensed Product.
1.148    Regulatory Exclusivity” means, with respect to any country or other jurisdiction in the Territory, an additional market protection, other than Patent protection or other patent-related exclusivity, granted by a Regulatory Authority in such country or other jurisdiction which confers an exclusive Commercialization period during which AbbVie or its Affiliates or Sublicensees have the exclusive right to market and sell, and any other Third Party is prevented from marketing or selling, a Licensed Product in such country or other jurisdiction.
1.149    Royalty Term” means, with respect to each Licensed Product and each country or other jurisdiction in the Territory, the period beginning on the date of the First Commercial Sale of such Licensed Product in such country or other jurisdiction, and ending on the later to occur of (a) the expiration, invalidation,





revocation, cancellation, dedication to the public, disclaimer or abandonment date of the last Licensor Patent that includes a Valid Claim claiming the Licensed Compound contained in such Licensed Product in such country or other jurisdiction; (b) the expiration of Regulatory Exclusivity in such country or other jurisdiction for such Licensed Product; and (c) the tenth (10th) anniversary of the First Commercial Sale of such Licensed Product in such country or other jurisdiction.
1.150    Safety Data Exchange Agreement” has the meaning set forth in Section 5.4.1 (Safety Data Exchange Agreement).
1.151    Second Request” has the meaning set forth in Section 12.6 (Termination of Failure or Delay to Obtain HSR Clearance).
1.152    Selling Party” has the meaning set forth in the definition of “Net Sales.”
1.153    Senior Officer” means, with respect to Licensor, its [] or any of their designees, and with respect to AbbVie, its [] or his/her designee.
1.154    SLE” means systematic lupus erythematosus.
1.155    Sublicense Agreement has the meaning set forth in Section 4.6 (Sublicenses).
1.156    Sublicensee means a Person, other than an Affiliate, that is granted a sublicense by AbbVie under the grants in Section 4.4.1 (License Grants to AbbVie) as provided in Section 4.6 (Sublicenses), excluding any Third Party to which AbbVie or its Affiliate has granted such sublicense as a result of a settlement for a dispute involving Licensor Patents or Joint Patents.
1.157    Successful Completion of the []” means the achievement of the success criteria set forth on Schedule 1.157 ([] Success Completion Criteria).
1.158    Term” has the meaning set forth in Section 12.1 (Term).
1.159    Terminated Territory” means each (a) Major Market with respect to which this Agreement is terminated by Licensor pursuant to Section 12.2.2 (Material Breach Related to Diligence in a Major Market), (b) each country or other jurisdiction with respect to which this Agreement is terminated by AbbVie pursuant to Section 12.3 (Termination Right by AbbVie For Convenience), or, (c) if this Agreement is terminated in its entirety, the entire Territory.
1.160    Territory means the entire world.
1.161    Third Party means any Person other than Licensor, AbbVie and their respective Affiliates.
1.162    Third Party Claims has the meaning set forth in Section 11.1 (Indemnification of Licensor).
1.163    Third Party Payments” has the meaning set forth in Section 6.6.3(c) (Reductions).
1.164    Third Party Provider” has the meaning set forth in Section 13.1 (Subcontracting).
1.165    Trademark means any word, name, symbol, color, designation or device or any combination thereof that functions as a source identifier, including any trademark, trade dress, brand mark,





service mark, trade name, brand name, logo, business symbol or domain names, whether or not registered, and any registrations thereof or any pending applications relating thereto.
1.166    United States” or “U.S.” means the United States of America and its territories and possessions (including the District of Columbia and Puerto Rico).
1.167    Valid Claim” means (a) a claim of any issued and unexpired Patent whose validity, enforceability or patentability has not been affected by any of the following: (i) irretrievable lapse, abandonment, revocation, cancellation, dedication to the public or disclaimer; or (ii) a holding, finding or decision of invalidity, unenforceability or non-patentability by a court, governmental agency, national or regional patent office, or other appropriate body that has competent jurisdiction, such holding, finding or decision being final and unappealable or unappealed within the time allowed for appeal; or (b) a claim of a pending patent application that is filed and being prosecuted in good faith, provided that if such claim does not issue as a valid and enforceable claim within [] from its earliest priority date, such claim shall cease to be a Valid Claim unless and until it is actually issued. For clarity, a holding, finding or decision that is final and unappealable or unappealed means a holding, finding or decision from which no appeal (other than a petition to the United States Supreme Court for a writ of certiorari or a similar appeal the consideration of which is subject to the discretion of the higher court) can be or has been taken.
1.168    Voting Stock” has the meaning set forth in the definition of “Change in Control.”
1.169    Withholding Amount” has the meaning set forth in Section 6.9.1 (Withholding Taxes).
1.170    Withholding Party” has the meaning set forth in Section 6.9.1 (Withholding Taxes).
1.171    “[]” has the meaning set forth in [].
1.172    Working Group” has the meaning set forth in Section 3.1.9(a) (Working Groups).

ARTICLE 2
LICENSOR ACTIVITIES
2.1    Pre-Option Development.
2.1.1    Development Plan and Activities. At all times during the Term prior to the Option Effective Date, Licensor shall conduct its Development efforts under a development plan (as may be amended pursuant to this Agreement from time to time, the “Development Plan”), which shall contain, at a minimum, all activities reasonably necessary to generate the Option Exercise Data Package and a reasonably itemized budget for such activities, including (a) all activities reasonably necessary to complete the Phase II SLE Clinical Study, (b) all non-clinical toxicology activities of the Licensed Compound reasonably necessary to conduct the other activities set forth in the Development Plan and (c) all CMC activities reasonably necessary to result in the Successful Completion of the [] (subject to Section 1.95 (“Late Phase Development Activities”), such activities, along with any other activities under the Development Plan, the “Development Activities”). Notwithstanding the foregoing, the performance of the Late Phase Development Activities shall only be initiated, conducted and completed by Licensor upon request by AbbVie, in its sole discretion. The Parties have agreed upon an initial version of such Development Plan (and topline budget), which is set forth as of the Effective Date on Schedule 2.1.1 (Initial Development Plan) (such initial Development Plan, the “Initial Development Plan”). Licensor shall (i) perform all activities set forth in the Development Plan and any updated or amended





versions thereof (except to the extent any such activity relies on the success or other outcome of a prior activity and such prior activity was not successful or did not achieve such outcome) and (ii) use Commercially Reasonable Efforts to (A) achieve the objectives set forth in the Development Plan and (B) achieve such objectives set forth in the Development Plan on the applicable timelines set forth therein, in each case ((A)-(B)), at Licensor’s sole cost and expense, subject to Section 2.1.4 (Budget Increases) and at all times in accordance with the terms of this Agreement and the Development Plan; provided that, with respect to cost allocation, []. The JGC shall review the Development Plan [] for the purpose of review and comment in order to evaluate whether any amendments to the Development Plan should be approved; provided that the JGC shall also review the Development Plan to evaluate whether any amendments to the Development Plan should be approved promptly following receipt of key datasets from the Development Activities (e.g., data from GLP toxicity studies, new formulation data, PK/PD data from a Phase II Clinical Study). If Licensor desires to conduct any Development of a Licensed Compound or Licensed Product (including in any additional Indications) other than the aGVHD Clinical Study that is not contemplated by the Development Plan, it may propose to the JGC the conduct of such Development activity, which [], and the JGC shall in good faith consider such proposal. For clarity, Licensor shall not conduct any Development of a Licensed Compound or Licensed Product other than the aGVHD Clinical Study that is not contemplated by the Development Plan or approved by the JGC.
2.1.2    Amendments to Development Plan. During the Term prior to the Option Effective Date, the Parties shall, through the JGC, and in accordance with Section 2.1.1 (Development Plan and Activities), review the then-current Development Plan, and as appropriate, propose any amendment, including a Material Amendment, to the then-current Development Plan through the JGC, so long as such amendment, if approved, would amend the Development Plan in a manner consistent with the requirements of this Agreement, including those set forth in Section 2.1.1 (Development Plan and Activities). The JGC shall discuss any such proposed amendment in good faith, and each Party shall ensure that its JGC representatives reasonably consider any concerns and opinions of the other Party’s JGC representatives in good faith when deciding whether to approve such proposed amendment to the Development Plan. If the JGC cannot, or does not, reach consensus on such amendment, such dispute shall be subject to the dispute resolution provisions set forth in Section 3.1.5 (Dispute Resolution). Without limiting any other provision in this Agreement, including this Section 2.1.2 (Amendments to Development Plan) and Section 3.1 (Joint Governance Committee), if the FDA requests that Licensor amend, or Licensor reasonably determines as a result of feedback provided by the FDA that it is necessary to amend, the clinical portion of the Development Plan, then Licensor shall promptly notify AbbVie of the need for such amendment, keep AbbVie reasonably informed during the period when Licensor is making such amendment and, for the avoidance of doubt, Licensor shall consider any comments of AbbVie to such amendment in good faith.
2.1.3    []. During the Term prior to the Option Effective Date, either Party may submit a request to the JGC that the Development Plan be amended to []. For clarity, any such amendment shall be considered as a Material Amendment to the Development Plan, and shall be subject to and Section 2.1.4 (Budget Increases) and Section 3.1.5(b) (Dispute Resolution).
2.1.4    Budget Increases. To the extent that (a) any Material Amendment initially proposed by AbbVie (other than a Material Amendment addressed in clause (b) below) is a Material Amendment as described in clause (b) of Section 1.113 (“Material Amendment”) and is approved by the JGC, AbbVie shall pay Licensor [], in arrears, within [] of receipt of Licensor’s invoice therefor an amount equal to the cost overage for the aggregate budget for the Development Activities under the Development Plan as amended by such Material Amendment as compared to the Development Plan immediately prior to such Material Amendment and (b) any Material Amendment [] pursuant to Section 2.1.3 ([]) is approved which causes the overall budget for the Development Activities for such [] to increase by [] from the budget for the [] in the Initial Development Plan ([]), such budgeted cost overages (i.e., in excess of [] of []) shall be payable by AbbVie by increasing the [] payment under Section 6.2 (Development Milestone by Licensor) by an amount equal to such budgeted





cost overages (in excess of [] of []) and AbbVie shall pay such increased milestone payment in accordance with Section 6.2 (Development Milestone by Licensor).
2.1.5    Compliance. Licensor shall perform all Development Activities in good scientific manner and in compliance with all Applicable Law.
2.1.6    Reporting. During any period of time during the Term during which Licensor is performing Development Activities, on a [] basis, Licensor shall provide to AbbVie a reasonably detailed written report reflecting the progress of the Development Activities and the aGVHD Clinical Study including, at a minimum, []. Such reports shall be provided to AbbVie in conjunction with meetings and other communications between the representatives of Licensor and AbbVie on the JGC. AbbVie shall maintain all Confidential Information of Licensor disclosed to AbbVie under this Section 2.1.6 (Reporting) in confidence in accordance with ARTICLE 9 (Confidentiality and Non-Disclosure).
2.1.7    Records. Licensor shall, and shall ensure that its Affiliates and Third Party Providers, maintain records in sufficient detail and in good scientific manner appropriate for patent and regulatory purposes, and in compliance with Applicable Law, which shall be complete and accurate and shall properly reflect all work done and results achieved in the performance of the Development Activities. Such records shall be retained by Licensor for at least [] after the termination or expiration of this Agreement, or for such longer period as may be required by Applicable Law. Upon AbbVie’s request, Licensor shall provide copies of the records it has maintained pursuant to this Section 2.1.7 (Records) to AbbVie. AbbVie shall have the right, during normal business hours and upon reasonable notice, to inspect and copy all records of Licensor maintained pursuant to Section 2.1.7 (Records). Upon AbbVie’s request, Licensor shall also promptly procure AbbVie with access to relevant premises, books, records (including raw data and any correspondence with any Regulatory Authority), databases, staff and consultants of Licensor working for Licensor for the purposes of undertaking due diligence on the Licensed Compound and Licensed Products in Development by Licensor and shall provide to AbbVie copies of all agreements and other documents related to the Licensed Compound and Licensed Products that are material to the Development or Commercialization of the Licensed Compound and Licensed Products in the Territory. AbbVie shall maintain all Confidential Information of Licensor disclosed to AbbVie under this Section 2.1.7 (Records) in confidence in accordance with ARTICLE 9 (Confidentiality and Non-Disclosure).
2.2    Regulatory Matters. During the Term prior to the Option Effective Date, Licensor or its designated Affiliates shall have the right and obligation to, at its sole cost and expense, (a) prepare, file and maintain Regulatory Documentation (including Regulatory Approvals) and (b) communicate with Regulatory Authorities, in each case ((a)-(b)), with respect to the Licensed Compound and Licensed Products in the Field in the Territory. Licensor shall notify the JGC prior to any communication or interaction with a Regulatory Authority with respect to the Licensed Compound or Licensed Products, or any product with a common IND to a Licensed Product, and shall implement any reasonable advice or comments of AbbVie or its representatives on the JGC as to such communication or interaction. Generally, Licensor shall, to the extent practicable, permit AbbVie a reasonable period of time (but in no event less than [], except to the extent required due to timelines set by Regulatory Authorities) to review and comment on any communications with a Regulatory Authority with respect to the Licensed Compound or Licensed Products prior to submission of such communication. Prior to the Option Effective Date, Licensor shall provide AbbVie with prior written notice of any scheduled meetings, conferences or discussions with a Regulatory Authority relating to a Licensed Compound or Licensed Product reasonably promptly after Licensor first receives notice of the scheduling of such meeting, conference or discussion. To the extent permitted by Applicable Law, AbbVie shall have the right to have [] its employees attend as an observer in all material meetings, conferences and discussions between Licensor and Regulatory Authorities and to observe meetings of clinical investigators, data and safety





monitoring boards and clinical advisory boards, in each case with respect to Licensed Compounds or Licensed Products in the Field in the Territory. Licensor shall provide AbbVie access to or copies of Licensor’s Regulatory Documentation (including Regulatory Approvals) and communications with Regulatory Authorities with respect to the Licensed Compound and Licensed Products in the Field in the Territory, and shall permit AbbVie’s employees and agents access to the premises of Licensor and its Affiliates, at reasonable times during normal business hours and upon reasonable notice, to audit such Regulatory Documentation and communications.
2.3    Manufacturing. Licensor shall have the obligation to, at its sole cost and expense, Manufacture and supply the Licensed Compound and Licensed Products necessary to complete the Development Activities in a manner consistent with the Development Plan, either itself or through one or more Affiliates or Third Parties selected by Licensor in its sole discretion; provided that (a) any amendment of an existing supply arrangement with respect to the Licensed Compound or Licensed Products or (b) any execution of any new supply agreement with respect to the Licensed Compound or Licensed Products, in each case ((a)-(b)), shall require AbbVie’s prior written consent. The Parties agree that any quantities of Licensed Compound or Licensed Product that (i) are manufactured pursuant to the Development Plan and (ii) are remaining following the completion of the Development Activities (other than the Late Phase Development Activities) shall be used for the Late Phase Development Activities, and if such remaining quantities of Licensed Compound or Licensed Product are no longer required to conduct Late Phase Development Activities, at AbbVie’s election, (x) such remaining quantities of Licensed Compound or Licensed Product shall be [] or (y) the costs of such remaining quantities of Licensed Compound or Licensed Product shall be []. If AbbVie does not exercise the Option, the Parties shall negotiate in good faith Licensor’s repurchase of any Licensed Compound or Licensed Product [], regardless of whether such inventory has been transferred to AbbVie. At AbbVie’s election, the Parties shall negotiate in good faith to enter into a separate form of supply agreement and quality agreement with respect to the supply of Licensed Compound and Licensed Product from Licensor to AbbVie, which agreements shall contain reasonable and customary provisions consistent with industry practice.
2.4    Exclusivity. During the Term, Licensor shall not, and shall cause its Affiliates not to, (a) directly or indirectly, develop, commercialize, manufacture or otherwise exploit any Competing Product in any country in the Territory, or (b) license, authorize, appoint or otherwise enable any Third Party to, directly or indirectly, develop, commercialize, manufacture or otherwise exploit any Competing Product in any country in the Territory; provided that in no event shall this Section 2.4 (Exclusivity) apply to any Licensor Acquirer; provided further that in the event that a Licensor Acquirer is engaged, directly or indirectly, in any activities that, if carried out by Licensor or its Affiliates, would be in violation of any of the restrictions set forth above in this Section 2.4 (Exclusivity) (such activities, the “Competitive Activities”), then, following the applicable Change in Control of Licensor, Licensor shall ensure that such Competitive Activities are subject to appropriate firewall procedures to prevent the use of AbbVie’s Confidential Information in the exploitation of a Competing Product, including ensuring that (i) no personnel that perform development, manufacturing or commercialization activities with such Competing Product have access to AbbVie’s Confidential Information and (ii) no personnel of Licensor or any of its Affiliates that perform Development or Manufacturing activities with the Licensed Compound or Licensed Products have access to non-public plans or Information relating to the development, manufacture or commercialization of such Competing Product.
2.5    Change in Control of Licensor. If Licensor undergoes a Change in Control during the Term, then:
2.5.1    Licensor shall notify AbbVie thereof immediately upon the closing of the Change in Control;





2.5.2    AbbVie shall have the right, in its sole and absolute discretion, by written notice delivered to Licensor (or its successor) at any time following the written notice contemplated by the foregoing Section 2.5.1 (Change in Control of Licensor), to continue this Agreement as modified by this Section 2.5.2 (Change in Control of Licensor), in which case, effective as of the date AbbVie delivers such notice to Licensor: (a) AbbVie shall have the right to conduct any activities allocated to Licensor under the Development Plan and all such activities under such plan shall be deemed to be allocated to AbbVie for the purposes of this Agreement, (b) [], and (c) in the event the Option has not been exercised under this Agreement, [] shall apply, mutatis mutandis, as if AbbVie had exercised the Option;
2.5.3    In the event that AbbVie delivers notice to Licensor of its exercise of the right to conduct activities allocated to Licensor under the Development Plan prior to the Option Effective Date, Licensor hereby grants, and shall cause its Affiliates to grant, to AbbVie an exclusive license (including with regard to Licensor and its Affiliates existing immediately prior to such Change in Control), with the right to grant sublicenses through multiple tiers, under the Licensor Patents, the Licensor Know-How and the interest of Licensor and its Affiliates in the Joint Know-How and Joint Patents solely to conduct activities allocated to Licensor (and now AbbVie) under the Development Plan;
2.5.4    AbbVie shall have the right, at AbbVie’s sole election, to disband the JGC and terminate the activities of the JGC and thereafter undertake all activities assigned by this Agreement to the JGC solely and exclusively by itself;
2.5.5    AbbVie shall have the right, in its sole and absolute discretion, by written notice delivered to Licensor (or its successor) at any time within [] following the written notice contemplated by the foregoing Section 2.5 (Change in Control of Licensor), to (a) terminate any or all provisions of this Agreement providing for any delivery by AbbVie to Licensor of Confidential Information of AbbVie relating to activities contemplated by this Agreement, save only for the provisions of Section 5.2.2 (Reporting), but removing other than factual statements relating to such status, ARTICLE 6 (Payments and Records); and (b) require Licensor and the Licensor Acquirer to adopt reasonable procedures, proposed by AbbVie and to be agreed upon by the Parties in writing, to prevent disclosure of Confidential Information of AbbVie to the Licensor Acquirer; or
2.5.6    Licensor covenants that, subject to the foregoing Section 2.5.2 (Change in Control of Licensor) and 2.5.3 (Change in Control of Licensor), there shall be no material change in the level or nature of efforts or resources expended by Licensor and its Affiliates or the qualifications and experience of Licensor’s assigned personnel (including with respect to the allocation of their time), in each case, which material change would reasonably be expected to adversely impact (a) Licensor’s ability to perform its obligations under this Agreement or (b) the Exploitation of any Licensed Product by AbbVie.  Without limiting the foregoing, Licensor shall ensure that, if such Change in Control occurs prior to the expiration of the Option Exercise Period, each employee or consultant of Licensor or any of its Affiliates who worked on any material portion of the Development Plan during the [] immediately prior to such Change in Control or who would reasonably be expected to work on any material portion of the Development Plan thereafter, shall continue to work on such plan until the Development Activities are completed for so long as such Person remains an employee or consultant of Licensor or any of its Affiliates; provided that any employee or consultant of Licensor or any of its Affiliates who (i) in the [] immediately prior to such Change in Control spent more than [] in the performance of Development Activities or (ii) was reasonably expected to spend more than [] in the performance of Development Activities in the [] following such Change in Control (if such Change in Control had not occurred) shall be deemed to have worked on a material portion of the Development Plan.
ARTICLE 3
GOVERNANCE





3.1    Joint Governance Committee.
3.1.1    Formation. Within [] after the Effective Date, the Parties shall establish a joint governance committee (the “Joint Governance Committee” or “JGC”). The JGC shall consist of three (3) representatives from each of the Parties, each with the requisite experience and seniority to enable such person to make decisions on behalf of the Parties with respect to the issues falling within the jurisdiction of the JGC. From time to time, each Party may substitute one (1) or more of its representatives to the JGC on written notice to the other Party. AbbVie shall select from its representatives the chairperson for the JGC. From time to time, AbbVie may change the representative who shall serve as chairperson on written notice to Licensor.
3.1.2    Specific Responsibilities. The JGC shall:
(a)    oversee and monitor the performance of the Development Activities and the aGVHD Clinical Study and address any issues that arise in connection therewith, including the approval of Clinical Study protocols for the Phase II SLE Clinical Study;
(b)    review and discuss Information (including Clinical Data) arising from the performance of the Development activities set forth in the Development Plan and the aGVHD Clinical Study;
(c)    review and discuss any safety issues arising from the performance of the Development Activities or the aGVHD Clinical Study;
(d)    review, discuss and determine whether to approve any amendments (including Material Amendments) to the Development Plan, including whether to [];
(e)    discuss communications and interactions with Regulatory Authorities with respect to the Licensed Compound or Licensed Products or any product with a common IND to a Licensed Product;
(f)    discuss the scope, logistics and details regarding any Manufacturing Technology Transfer;
(g)    establish, oversee, manage and resolve disputes within Working Groups;
(h)    establish secure access methods (including secure databases) for each Party to access the Confidential Information of the other Party; and
(i)    perform such other functions as are set forth herein or as the Parties may mutually agree in writing, except where in conflict with any provision of this Agreement.
3.1.3    Meetings and Minutes. The JGC shall meet [], or as otherwise agreed to by the Parties, with the location of such meetings alternating between locations designated by Licensor and locations designated by AbbVie. The chairperson of the JGC shall be responsible for calling meetings on no less than [] notice. Each Party shall make all proposals for agenda items and shall provide all appropriate information with respect to such proposed items at least [] in advance of the applicable meeting; provided that under exigent circumstances requiring input by the JGC, a Party may provide its agenda items to the other Party within a shorter period of time in advance of the applicable meeting, or may propose that there not be a specific agenda for a particular meeting, so long as the other Party consents to such later addition of such agenda items or the absence of a specific agenda for such meeting, such consent not to be unreasonably withheld or delayed. The chairperson of the JGC shall prepare and circulate for review and approval of the Parties minutes of each meeting





within [] after the meeting. The Parties shall agree on the minutes of each meeting promptly, but in no event later than the next meeting of the JGC.
3.1.4    Procedural Rules. The JGC shall have the right to adopt such standing rules as shall be necessary for its work, to the extent that such rules are not inconsistent with this Agreement. A quorum of the JGC shall exist whenever there is present at a meeting at least one (1) representative appointed by each Party. Representatives of the Parties on the JGC may attend a meeting either in person or by telephone, video conference or similar means in which each participant can hear what is said by, and be heard by, the other participants. Representation by proxy shall be allowed. The JGC shall take action by consensus of the representatives present at a meeting at which a quorum exists, with each Party having a single vote irrespective of the number of representatives of such Party in attendance, or by a written resolution signed by at least one (1) representative appointed by each Party. Employees or consultants of either Party that are not representatives of the Parties on the JGC may attend meetings of the JGC; provided that such attendees (a) shall not vote or otherwise participate in the decision-making process of the JGC, and (b) are bound by obligations of confidentiality and non-disclosure equivalent to those set forth in ARTICLE 9 (Confidentiality and Non-Disclosure).
3.1.5    Dispute Resolution.
(a)    If the JGC cannot, or does not, reach consensus on an issue at a meeting or within a period of [] thereafter or such other period as the Parties may agree, then the dispute shall first be referred to the Senior Officers of the Parties, who shall confer in good faith on the resolution of the issue. Any final decision mutually agreed to by the Senior Officers shall be conclusive and binding on the Parties.
(b)    If the Senior Officers are not able to agree on the resolution of any such issue within [] after such issue was first referred to them, then the status quo shall prevail; provided that (i) Licensor shall have final decision-making authority with respect to [] and (ii) AbbVie shall have final decision-making authority with respect to [] and []. Disputes arising between the Parties in connection with or relating to this Agreement or any document or instrument delivered in connection herewith, and that are outside of the jurisdiction of the JGC, shall be resolved pursuant to Section 13.7 (Dispute Resolution).
3.1.6    Limitations on Authority. Each Party shall retain the rights, powers and discretion granted to it under this Agreement and no such rights, powers or discretion shall be delegated to or vested in the JGC unless such delegation or vesting of rights is expressly provided for in this Agreement or the Parties expressly so agree in writing. The JGC shall have no power to amend, modify or waive compliance with this Agreement, which may only be amended or modified as provided in Section 13.9 (Entire Agreement; Amendments) or compliance with which may only be waived as provided in Section 13.12 (Waiver and Non-Exclusive Remedies).
3.1.7    Alliance Manager. Each Party shall appoint a person who shall oversee contact between the Parties for all matters between meetings of each JGC and shall have such other responsibilities as the Parties may agree in writing after the Effective Date (each, an “Alliance Manager”). Each Party may replace its Alliance Manager at any time by notice in writing to the other Party. Following the disbandment of the JGC, the Alliance Managers shall continue to act as a liaison between the Parties and shall be responsible for providing and receiving Information that is to be exchanged under the terms of this Agreement.
3.1.8    Discontinuation of the JGC. AbbVie may disband the JGC, at its sole discretion, after the Option Effective Date upon written notice to Licensor. Once AbbVie has provided such written notice, the JGC shall be terminated and shall have no further rights or obligations under this Agreement, and thereafter, (a) any requirement of a Party to provide Information or other materials to the JGC shall be deemed a requirement to provide such Information or other materials to the other Party and (b) any matters





delegated to the JGC shall be made by mutual agreement of the Parties, subject to the dispute resolution provisions under Section 13.7 (Dispute Resolution).
3.1.9    Working Groups.
(a)    From time to time, the JGC may establish and delegate duties to sub-committees or directed teams (each, a “Working Group”) on an “as-needed” basis to oversee particular projects or activities. Each Working Group shall be constituted and shall operate as the JGC determines; provided that each Working Group shall have equal representation from each Party, unless otherwise mutually agreed. Working Groups may be established on an ad hoc basis for purposes of a specific project or on such other basis as the JGC may determine. Each Working Group and its activities shall be subject to the oversight, review and approval of, and shall report to, the JGC. In no event shall the authority of any Working Group exceed that specified for the JGC under this ARTICLE 3 (Governance). All decisions of a Working Group shall be by consensus. Any disagreement between the designees of AbbVie and Licensor on a Working Group shall be referred to the JGC for resolution.
(b)    CMC Working Group. Subject to Section 3.1.9(a) (Working Groups), the JGC shall establish a CMC Working Group (the “CMC Working Group”) promptly after the JGC’s formation that shall be responsible for Manufacturing and supply matters delegated to it by the JGC. The CMC Working Group shall consist of an equal (and agreed upon) number of representatives from each of the Parties, each with the requisite experience and seniority to enable such person to oversee and make decisions regarding CMC activities and matters under this Agreement. From time to time, each Party may substitute one (1) or more of its representatives to the CMC Working Group on written notice to the other Party. The CMC Working Group shall meet [], or as otherwise mutually agreed to by the Parties, with the location of such meetings to be mutually agreed by the Parties. The CMC Working Group shall be subject to the oversight, review and approval of, and shall report to, the JGC. All decisions of the CMC Working Group shall be by consensus and any disagreements among the representatives of the CMC Working Group shall be referred to the JGC for resolution.
3.1.10    Expenses. Each Party shall be responsible for all travel and related costs and expenses for its members and other representatives to attend meetings of, and otherwise participate on, the JGC or other Working Groups.
ARTICLE 4
OPTION AND OPTION EXERCISE
4.1    AbbVie Option. Effective as of the Effective Date, Licensor hereby grants, and shall cause its Affiliates to hereby grant, to AbbVie an exclusive option to obtain an exclusive (including with regard to Licensor and its Affiliates) license, with the right to grant sublicenses through multiple tiers, under the Licensor Patents and the Licensor Know-How, and Licensor’s and its Affiliates’ interests in the Joint Patents and Joint Know-How, to Exploit the Licensed Compound and Licensed Products in the Field in the Territory (the “Option”).
4.2    Option Exercise. AbbVie may, in its sole discretion, exercise the Option at any time prior to the expiration of the Option Exercise Period, subject to Section 4.3 (HSR), by providing written notice of such to Licensor (“Option Exercise Notice”). Promptly following the Option Exercise Data Package Trigger Event, Licensor shall provide AbbVie with the Option Exercise Data Package, an updated disclosure schedule with respect to Licensor’s representations and warranties, to be set forth on Schedule 4.2 (Option Exercise





Disclosure Schedule) and an updated list of Licensor Product Patents that are Existing Patents. Following AbbVie’s receipt of the Option Exercise Data Package until the expiration of the Option Exercise Period, AbbVie shall have the opportunity to review and inspect the Option Exercise Data Package, request access to all Information generated in the performance of the activities set forth in the Development Plan (which Licensor shall provide to AbbVie as soon as possible following such request), and to ask questions of and receive timely answers from Licensor related thereto; provided, however, that Licensor shall not be obligated to provide access to any Information that would (A) result in the loss of the protection of any attorney-client privilege held by Licensor or (B) violate any Applicable Law. If, during the Option Exercise Period, AbbVie provides written notice to Licensor that it does not believe the Option Exercise Data Package provided contains the required information then (a) the Option Exercise Period shall be tolled, (b) Licensor shall provide to AbbVie an updated Option Exercise Data Package containing the required information as promptly as practicable, and (c) the Option Exercise Period shall commence following the date of delivery of the updated Option Exercise Data Package containing the required information; provided that if Licensor in good faith believes that the Option Exercise Data Package is complete after the first extension, then the dispute shall be []. If the resolution of such dispute is that the Option Exercise Data Package is complete, the Option Exercise Data Package shall be deemed to be complete, and the Option Exercise Period shall expire on the later of: (i) the expiration date of the original Option Exercise Period, as tolled under clause (a) above, and (ii) [] following the date that the Parties receive written notice of such decision.
4.3    HSR.
4.3.1    If AbbVie reasonably determines in good faith prior to the delivery of the Option Exercise Notice for the Option that the transactions to be consummated upon the exercise of the Option requires HSR Filings and AbbVie wishes to provide an Option Exercise Notice for the Option, AbbVie shall provide the Option Exercise Notice for the Option to Licensor prior to the end of the Option Exercise Period, which notice shall include AbbVie’s binding commitment to complete the exercise of the Option, subject only to HSR Clearance and the terms of this Section 4.3 (HSR), and the Option Exercise Period shall automatically be extended for [] for AbbVie to obtain HSR Clearance (the “HSR Extension Period”).
4.3.2    In connection with the Parties’ activities under this Section 4.3 (HSR), AbbVie and Licensor shall each use commercially reasonable efforts to resolve as promptly as practicable any objections that may be asserted by the FTC or the DOJ with respect to the transactions notified in the HSR Filings. Nothing in this Section 4.3 (HSR) or otherwise in this Agreement shall require either Party to (a) offer, accept or agree to sell, divest (including through a license or a reversion of licensed or assigned rights), hold separate, transfer, or dispose of any assets, operations, rights, product lines, or businesses, or interests therein, of itself or any of its Affiliates (or consent to any of the foregoing actions), (b) offer, accept or agree to any restraint, prohibition or limitation on the ownership, operation or conduct of all or any portion of the businesses or assets of itself or any of its Affiliates in any part of the world, or (c) litigate or otherwise formally oppose any determination (whether judicial or administrative in nature) by a governmental authority seeking to impose any of the restrictions referenced in clause (a) or (b) above; provided that neither Party shall agree to or effectuate any remedy without the prior written consent of the other Party.
4.3.3    AbbVie shall be responsible for all filing fees in connection with the filing of submissions to the FTC and DOJ under the HSR Act, and each Party shall be responsible for its costs and expenses, including attorneys’ fees, incurred by it in preparing submissions or responses or responding to any Second Request or other action by the FTC or DOJ under the HSR Act. If HSR Filings are required, each Party shall use commercially reasonable efforts to prepare and file its respective HSR Filing as promptly as is practicable and advisable, with the goal of filing the HSR Filings within [] after Licensor receiving the Option Exercise Notice for the Option or promptly thereafter. In connection with obtaining HSR Clearance, each of





AbbVie and Licensor shall (a) cooperate with each other in connection with any investigation or other inquiry relating to an HSR Filing and the transactions contemplated by this Agreement; (b) keep the other Party or its counsel informed of any material communication received from or given to the FTC or DOJ relating to the HSR Filings and the transactions contemplated by this Agreement (and provide a copy to the other Party if such material communication is in writing); and (c) permit the other Party or its counsel to review in advance, and in good faith consider the views of the other Party or its counsel concerning, any submission, filing or communication (and documents submitted therewith) intended to be given to the FTC or DOJ.
4.3.4    Tolling of Obligations. If the exercise by AbbVie of the Option under Section 4.2 (Option Exercise) requires the making of filings under the HSR Act, then all rights and obligations related to the exercise of the Option (including payment of any Option Exercise Fee) and the granting of any licenses in connection therewith shall be tolled until the HSR Clearance.
4.4    Effects of Option Exercise. Effective upon the Option Effective Date:
4.4.1    License Grants to AbbVie. Licensor hereby grants, and shall cause its Affiliates (subject to Section 13.4 (Assignment)) to grant, to AbbVie an exclusive license (including with regard to Licensor and its Affiliates except with respect to the retained rights set forth in Section 4.5 (Post-Option Licensor Development Activities)), with the right to grant sublicenses through multiple tiers, under the Licensor Patents, the Licensor Know-How and the interest of Licensor and its Affiliates in the Joint Know-How and Joint Patents to Exploit the Licensed Compound and Licensed Products in the Field in the Territory.
4.4.2    Transfer of Regulatory Documentation. As of the Option Effective Date, Licensor hereby assigns to AbbVie all of its rights, title and interests in and to all Existing Regulatory Documentation (including any existing Regulatory Approvals). Licensor shall duly execute and deliver, or cause to be duly executed and delivered, such instruments and shall do and cause to be done such acts and things, including the filing of such assignments, agreements, documents and instruments, as may be necessary under, or as AbbVie may reasonably request in connection with, or to carry out more effectively the purpose of, or to better assure and confirm unto AbbVie its rights under, this Section 4.4.2 (Transfer of Regulatory Documentation). Without limiting the foregoing, Licensor shall, within [] of the Option Effective Date, provide to AbbVie, in such form and format as AbbVie may reasonably request, (a) copies of all material correspondence to and from any Regulatory Authority that relates to the Licensed Compound or Licensed Products, and (b) all Regulatory Documentation assigned to AbbVie pursuant to this Section 4.4.2 (Transfer of Regulatory Documentation).
4.4.3    Right of Reference. Licensor hereby grants to AbbVie, its Affiliates and sublicensees, an exclusive license and right of reference (including with regard to Licensor and its Affiliates), with the right to grant sublicenses and further rights of reference through multiple tiers, under all Regulatory Approvals and any other Regulatory Documentation that Licensor or its Affiliates may Control with respect to the Licensed Compounds or Licensed Products as necessary or useful for purposes of Exploiting the Licensed Compound and Licensed Products in the Field in the Territory.
4.5    Post-Option Licensor Development Activities. Within [] following the Option Effective Date, AbbVie may, in its sole discretion, request that Licensor finish performing the Development Activities and, upon any such request, Licensor shall finish performing such Development Activities, at Licensor’s sole cost and expense, in accordance with the terms and conditions of this Agreement and the Development Plan. If Licensor is conducting Development Activities following the Option Effective Date, AbbVie may [] by written notice to Licensor [] that results in (a) [] in such Development Plan as such budget relates to Licensor’s activities, (b) [] with respect to activities under such Development Plan, or (c) [] to





require the written consent of each Party. Licensor shall retain rights under the license granted to AbbVie in Section 4.4.1 (License Grants to AbbVie) solely to the extent necessary to conduct any Development Activities to be conducted post-Option Effective Date under and pursuant to this Section 4.5 (Post-Option Licensor Development Activities).
4.6    Sublicenses. AbbVie shall have the right to grant sublicenses (or further rights of reference), through multiple tiers of sublicensees, under the licenses and rights of reference granted to AbbVie under Section 4.4.1 (License Grants to AbbVie) to its Affiliates and other Persons; provided that any such sublicenses shall be consistent with the terms and conditions of this Agreement. Within [] following the grant of any such sublicenses other than sublicenses that are with Third Party subcontractors performing activities hereunder on behalf of AbbVie or its Affiliate or are non-exclusive sublicenses in the normal course of business that do not grant commercialization rights to the Sublicensee, AbbVie shall notify Licensor of the grant of such sublicense, which notice shall include []. Each Sublicensee shall be bound by a written sublicense agreement with AbbVie (each, a “Sublicense Agreement”). AbbVie shall remain responsible for the performance of all of its obligations under this Agreement, whether or not delegated to or performed by a Sublicensee, including payment of all amounts owed to Licensor pursuant to this Agreement in connection with activities of a Sublicensee, regardless of whether the terms of any Sublicense Agreement provide for such amount to be paid by the Sublicensee directly to Licensor.
4.7    Sublicense Survival. As of and following the Option Effective Date, upon termination of this Agreement for any reason other than by AbbVie pursuant to Section 12.3 (Termination Right by AbbVie for Convenience), upon the request of any Sublicensee of AbbVie, Licensor shall enter into a direct license with such Sublicensee on, subject to this Section 4.7 (Sublicense Survival), the same terms as this Agreement, taking into account any differences in license scope, territory and duration of the sublicense grant (each a “New License Agreement”), provided that such Sublicensee is not at the time of such termination in breach of its Sublicense Agreement with AbbVie. Under any such New License Agreement between Licensor and such former Sublicensee, such former Sublicensee shall be required to [] pursuant to this Agreement on account of such former Sublicensee’s Development or Commercialization of Licensed Products []. Under such New License Agreement, Licensor shall not be bound by any grant of rights broader than, and shall not be required to perform any obligation other than those rights and obligations contained in this Agreement, and all applicable rights of Licensor set forth in this Agreement shall be included in such New License Agreement. Notwithstanding the foregoing, Licensor shall not be obligated to enter into a New License Agreement with a Sublicensee of AbbVie unless such Sublicensee notifies Licensor within [] after such termination of this Agreement that it wishes to enter into a New License Agreement.
4.8    In‑License Agreements.
4.8.1    In-License Agreements Prior to Option Exercise. If Licensor or its Affiliate enters into an agreement with a Third Party prior to the Option Effective Date under which Licensor or its Affiliate obtains a license or rights to Patents or know-how that are necessary or useful for the Exploitation of any Licensed Compound or Licensed Product in the Field in the Territory, then Licensor shall inform AbbVie of any such Third Party agreement and shall provide AbbVie with a copy of such license, sublicense or other agreement (“Proposed In-Licensed Rights”) promptly following execution of such agreement but in no event later than the submission of the Option Exercise Data Package. Following the Option Effective Date, AbbVie shall notify Licensor within [] of such exercise as to whether it wishes to be bound by or assume the rights and obligations of the Proposed In-Licensed Rights as they apply to AbbVie and this Agreement; provided that, as between the Parties, []. If AbbVie wishes to be so bound, then (a) the Proposed In-Licensed Rights shall automatically be included in the Licensor Know‑How and Licensor Patents (as applicable) hereunder; (b) [],





AbbVie agrees to abide by all applicable terms and conditions of such license, sublicense or other agreement, as it relates to AbbVie and this Agreement; and (c) such license, sublicense or other agreement shall be an “In-License Agreement” hereunder. Otherwise, notwithstanding anything to the contrary in this Agreement, the Proposed In-Licensed Rights shall not be included within the Licensor Know‑How or Licensor Patents and such license, sublicense or other agreement shall not be an “In-License Agreement” hereunder. For clarity, neither Licensor nor its Affiliate shall, with respect to any Proposed In-Licensed Rights, before the earlier of (i) the conclusion of the Option Exercise Period without the exercise of the Option by AbbVie or (ii) the conclusion of the [] period following the Option Effective Date without AbbVie notifying Licensor that it wishes to be bound by or assume the rights and obligations of the Proposed In-Licensed Rights pursuant to this Section 4.8.1 (In-License Agreements Prior to Option Exercise), take any action that would put conditions on, restrict or otherwise diminish such Proposed In-Licensed Rights disclosed to AbbVie hereunder.
4.8.2    Procedure for In-License Agreements Following Option Exercise. Following the Option Effective Date, if Licensor or its Affiliate is planning to enter into an agreement with a Third Party under which Licensor or its Affiliate obtains a license or rights to Patents or know-how that are necessary or useful for the Exploitation of the Licensed Compound or Licensed Product in the Field in the Territory, then Licensor shall provide AbbVie with written notice thereof. Within [] of receipt of such notice by AbbVie, AbbVie may request that the Parties discuss whether it would be preferable and practicable for AbbVie to obtain a license or rights to such Patents or know-how for the Exploitation of the Licensed Compound or Licensed Product in the Field in the Territory within a scope consistent with AbbVie’s exclusive license hereunder and upon such request by AbbVie, the Parties shall discuss such possibility in good faith and use reasonable efforts to reach agreement. If the Parties disagree as to whether AbbVie should obtain such rights, Licensor shall have the final decision-making authority as to how to proceed; provided that Licensor shall not unreasonably withhold, delay or condition its consent to AbbVie obtaining such rights and the Parties acknowledge and agree that [].
4.8.3    In-License Agreements Following Option Exercise. Following the Option Effective Date, if Licensor or any of its Affiliates becomes a party to a license, sublicense or other agreement for additional rights, with the right to sublicense, that are necessary or useful for the Exploitation of the Licensed Compound or Licensed Product in the Field in the Territory as permitted under Section 4.8.2 (Procedure for In-License Agreements Following Option Exercise), then Licensor shall inform AbbVie and shall provide AbbVie with a copy of the Proposed In-Licensed Rights. If AbbVie notifies Licensor in writing that it wishes to be bound by or assume the rights and obligations of the Proposed In-Licensed Rights as they apply to AbbVie and this Agreement, then (a) the Proposed In-Licensed Rights shall automatically be included in the Licensor Know‑How and Licensor Patents (as applicable) hereunder, provided that, if such inclusion results in any payment obligation due to such Third Party, [] ; (b) AbbVie agrees to abide by all applicable terms and conditions of such license, sublicense or other agreement, as it relates to AbbVie and this Agreement; and (c) such license, sublicense or other agreement shall be an “In-License Agreement” hereunder. Otherwise, notwithstanding anything to the contrary in this Agreement, the Proposed In-Licensed Rights shall not be included within the Licensor Know‑How or Licensor Patents and such license, sublicense or other agreement shall not be an “In-License Agreement” hereunder.
4.9    No Implied Licenses. No Party shall be deemed by estoppel or implication to have granted to the other Party any other licenses or right with respect to any intellectual property that are not expressly granted herein.
ARTICLE 5
POST-OPTION ACTIVITIES





5.1    Technology Transfer. Promptly following the Option Effective Date, but in no event later than [] thereafter, Licensor shall, at its sole cost and expense, use reasonable good faith efforts to disclose and transfer to AbbVie or its designee, in whatever form AbbVie may reasonably request, all Licensor Know-How. Thereafter during the Term, Licensor shall, at its sole cost and expense, disclose and make available to AbbVie or its designee, in whatever form AbbVie may reasonably request, any additional Licensor Know-How that has not been previously transferred to AbbVie and is necessary or useful for AbbVie to perform its obligations or exercise its rights under this Agreement. Without limiting the generality of the foregoing, from time to time at AbbVie’s reasonable request, [], Licensor shall make available its qualified scientific and technical personnel on a reasonable basis to consult with AbbVie as necessary for Licensor to transfer the Licensor Know-How to AbbVie and thereby enable the Development and Commercialization of the Licensed Product as contemplated by this Agreement.
5.2    Development.
5.2.1    General. Following the Option Effective Date, subject to the terms of this Agreement, AbbVie (itself or through its Affiliates, Sublicensees or Third Party Providers) shall have sole authority over the Development of the Licensed Compound and Licensed Products. At AbbVie’s request, Licensor shall provide reasonable assistance to AbbVie in connection with such Development, including by providing AbbVie with any Licensor Know-How and materials Controlled by Licensor that would be necessary or useful for such activities.
5.2.2    Reporting. Following the Option Effective Date, and until the First Commercial Sale of a Licensed Product in a Major Market, AbbVie shall provide to Licensor, following disbandment of the JGC, reports within [] after each [] summarizing the key Development activities undertaken and summarizing the results achieved with respect to the Licensed Products in all Major Markets during such []. Prior to the disbandment of the JGC, AbbVie shall provide the JGC with interim updates on such activities and results at regularly scheduled meetings of the JGC. Licensor shall maintain all information disclosed to Licensor under this Section 5.2.2 (Reporting) in confidence in accordance with ARTICLE 9 (Confidentiality and Non-Disclosure).
5.3    Regulatory Matters.
5.3.1    During the Term following the Option Effective Date, except to the extent that Licensor is performing any regulatory activities in connection with Development Activities under Section 4.5 (Post-Option Exercise Licensor Development Activities), subject to the terms of this Agreement (including Section 5.7 (AbbVie Diligence)), AbbVie (itself or through its Affiliates or Sublicensees) shall be solely responsible for, at its sole cost and expense, (a) preparing, filing and maintaining Regulatory Documentation (including Regulatory Approvals) and (b) communicating with Regulatory Authorities, in each case ((a)-(b)), with respect to the Licensed Compound and Licensed Products in the Field in the Territory.
5.3.2    During the Term following the Option Effective Date, all Regulatory Documentation (including all Regulatory Approvals and Product Labeling) relating to the Licensed Compound or Licensed Products in the Field in the Territory shall be owned by, and shall be the sole property and held in the name of, AbbVie or its designated Affiliate, Sublicensee or designee.
5.3.3    During the Term following the Option Effective Date, Licensor shall promptly provide to AbbVie copies of or access to all non-clinical data and Clinical Data, and other Information, results and analyses with respect to any Development Activities that are Controlled by Licensor or any of its Affiliates (collectively, “Regulatory Data”), when and as such Regulatory Data becomes available.





5.3.4    During the Term following the Option Effective Date, Licensor shall support AbbVie and its Affiliates as may be reasonably necessary or appropriate, in obtaining all Regulatory Approvals for the Licensed Products, including providing necessary documents or other materials required by Applicable Law to obtain all Regulatory Approvals.
5.4    Safety Data Exchange Agreement.
5.4.1    Within [] after the Option Effective Date, the Parties shall enter into a safety data exchange agreement (the “Safety Data Exchange Agreement”) to initiate a process for the exchange of adverse event safety data in a mutually agreed format, including those that occur during Clinical Studies and post-marketing spontaneous reports received by either Party or its Affiliates, in order to monitor the safety of any Licensed Compound or Licensed Product and to meet reporting requirements with any applicable Regulatory Authority.
5.4.2    Notwithstanding the forgoing, if any adverse event safety data is received or otherwise generated by a Party prior to the execution of the Safety Data Exchange Agreement, such Party shall, within []of receiving or otherwise generating such data, provide such data to the other Party by email to: (a) if to AbbVie, at [] or such other email that AbbVie may notify Licensor of; or (b) if to Licensor, at [] or such other email that Licensor may notify AbbVie of.
5.5    Manufacturing.
5.5.1    Manufacturing Activities. During the Term following the Option Effective Date and the completion of Manufacturing Technology Transfer, except to the extent that Licensor is performing any Manufacturing activities under Section 4.5 (Post-Option Exercise Licensor Development Activities), AbbVie (itself or through its Affiliates, Sublicensees or Third Party Providers) shall be responsible for, at its sole cost and expense, the Manufacture and supply of the Licensed Compounds and Licensed Products necessary to perform Development and Commercialization of Licensed Compounds and Licensed Products under this Agreement.
5.5.2    Manufacturing Technology Transfer Upon AbbVie’s Request. AbbVie shall have the right, following the interim analysis as described in the Development Plan through the date that is [] following the date of the Option Exercise Notice, to require Licensor to effect a full transfer to AbbVie or its designee (which designee may be an Affiliate or a Third Party manufacturer, and which Third Party manufacturer [] of Licensed Compound or Licensed Products) of Licensor Know-How necessary or reasonably useful for the conduct of the then-current process for the Manufacture of the Licensed Compound or Licensed Products (the “Manufacturing Process”) and to implement the Manufacturing Process at facilities designated by AbbVie (such transfer and implementation, as more fully described in this Section 5.5.2 (Manufacturing Technology Transfer Upon AbbVie’s Request), the “Manufacturing Technology Transfer”). Notwithstanding the foregoing, if Licensor effects such Manufacturing Technology Transfer prior to the Option Effective Date, and if AbbVie elect not to exercise the Option, AbbVie shall promptly effect a full transfer of all such Licensor Know-How transferred to AbbVie back to Licensor. If requested by AbbVie, such assistance shall include facilitating the entering into of agreements with applicable Third Party suppliers relating to the Licensed Compound or Licensed Products. Without limitation to the foregoing, in connection with each Manufacturing Technology Transfer, upon AbbVie’s reasonable request, and subject to Section 5.5.2(f) (Manufacturing Technology Transfer Upon AbbVie’s Request):
(a)    Licensor shall make available, and shall use commercially reasonable efforts to cause its Third Party manufacturers to make available (including by using commercially reasonable





efforts to [] following the Effective Date), to AbbVie (or its Affiliate or designated Third Party manufacturer, as applicable) from time to time as AbbVie may request and to the extent then-available, all Manufacturing-related Licensor Know-How, Information and materials relating to the Manufacturing Process, and all documentation [], that has not been included as part of the Manufacturing Technology Transfer but that AbbVie has identified in its review of such materials made available thereunder as being necessary or reasonably useful to enable AbbVie (or its Affiliate or designated Third Party manufacturer, as applicable) to use and practice the Manufacturing Process as permitted under this Agreement;
(b)    Licensor shall cause appropriate employees and representatives of Licensor and its Affiliates to meet with, and shall use commercially reasonable efforts to cause appropriate employees and representatives of its Third Party manufacturers to meet with (including by using commercially reasonable efforts to [] following the Effective Date), employees or representatives of AbbVie (or its Affiliate or designated Third Party manufacturer, as applicable) at the applicable manufacturing facility at mutually convenient times to assist with the working up and use of the Manufacturing Process and with the training of the personnel of AbbVie (or its Affiliate or designated Third Party manufacturer, as applicable) to the extent necessary or reasonably useful to enable AbbVie (or its Affiliate or designated Third Party manufacturer, as applicable) to use and practice the Manufacturing Process;
(c)    Without limiting the generality of clause (b) above, Licensor shall cause appropriate analytical and quality control laboratory employees and representatives of Licensor and its Affiliates to meet with, and shall use commercially reasonable efforts to cause appropriate analytical and quality control employees and representatives of its Third Party manufacturers to meet with (including by using commercially reasonable efforts to [] following the Effective Date), employees or representatives of AbbVie (or its Affiliate or designated Third Party manufacturer, as applicable) at the applicable manufacturing facility and make available all necessary equipment, at mutually convenient times, to support and execute the transfer of all applicable analytical methods and the validation thereof (including []);
(d)    Licensor shall take such steps, and shall use commercially reasonable efforts to cause its Third Party manufacturers to take such steps (including by using commercially reasonable efforts to [] following the Effective Date, but not including any obligation to so amend any contracts entered into as of the Effective Date), as are necessary or reasonably useful to assist in reasonable respects AbbVie (or its Affiliate or designated Third Party manufacturer, as applicable) in obtaining any necessary licenses, permits or approvals from Regulatory Authorities with respect to the Manufacture of the Licensed Compound and Licensed Products at the applicable facilities; and
(e)    Licensor shall provide, and shall use commercially reasonable efforts to cause its Third Party manufacturers to provide (including by using commercially reasonable efforts to [] following the Effective Date), such other assistance as AbbVie (or its Affiliate or designated Third Party manufacturer, as applicable) may reasonably request to enable AbbVie (or its Affiliate or designated Third Party manufacturer, as applicable) to use and practice the Manufacturing Process and otherwise to Manufacture Licensed Compounds and Licensed Products.
(f)    The first [] of assistance provided by Licensor to AbbVie under this Section 5.5.2 (Manufacturing Technology Transfer Upon AbbVie’s Request) and Section 5.5.3 (Subsequent Manufacturing Technology Transfer) shall be provided without charge. If AbbVie requests any such assistance in excess of such [], AbbVie shall reimburse Licensor’s reasonable FTE Costs at the hourly rate of [] per FTE (the “FTE Rate”).
5.5.3    Subsequent Manufacturing Technology Transfer. Without limiting the foregoing, during the [] following AbbVie’s request for the Manufacturing Technology Transfer pursuant to





Section 5.5.2 (Manufacturing Technology Transfer Upon AbbVie’s Request), in the event that there is any invention, discovery or improvement included in the Licensor Know-How relating to the Manufacture of a Licensed Compound or Licensed Products developed, invented or reduced to practice, Licensor shall promptly disclose such invention, discovery or improvement to AbbVie and shall, at AbbVie’s reasonable request, and subject to Section 5.5.2(f) (Manufacturing Technology Transfer Upon AbbVie’s Request), perform technology transfer with respect to such invention, discovery or improvement in the same manner as provided in Section 5.5.2 (Manufacturing Technology Transfer Upon AbbVie’s Request).
5.6    AbbVie Commercialization. During the Term following the Option Effective Date, subject to Section 5.7 (AbbVie Diligence),
5.6.1    Commercialization Activities. AbbVie (itself or through its Affiliates, Sublicensees or Third Party Providers) shall be solely responsible for, at its sole cost and expense, the Commercialization of the Licensed Products in the Field in the Territory.
5.6.2    Booking of Sales; Distribution. AbbVie (itself or through its Affiliates, Sublicensees or Third Party Providers) shall be solely responsible for, at its sole cost and expense, invoicing and booking sales, establishing all terms of sale (including pricing and discounts) and warehousing, and distributing the Licensed Products in the Territory and to perform or cause to be performed all related services. AbbVie shall handle all returns, recalls or withdrawals, order processing, invoicing, collection, distribution and inventory management with respect to the Licensed Products in the Territory.
5.6.3    Product Trademarks. AbbVie shall be solely responsible for, [], determining the Product Trademarks to be used with respect to the Exploitation of the Licensed Products on a worldwide basis and AbbVie shall own such Product Trademarks.
5.6.4    Commercialization Reports. No less than [] prior to the anticipated First Commercial Sale of the first Licensed Product in a Major Market and each [] of the First Commercial Sale thereafter for the next [], AbbVie shall provide Licensor with a written [] report that [] Commercialization activities performed during such time period with respect to each Major Market; provided that such reporting obligation shall [].
5.7    AbbVie Diligence.
5.7.1    During the Term as of and following the Option Effective Date, AbbVie (itself or through its Affiliates, Sublicensees or Third Party Providers) shall use Commercially Reasonable Efforts to (a) Develop and seek Regulatory Approval for one (1) Licensed Product in one (1) Indication in each of the United States and one (1) additional Major Market in the Territory, and (b) following receipt of Regulatory Approval for such Licensed Product for the first Indication in the United States or such Major Market, Commercialize such Licensed Product for such Indication in such country.
5.7.2    Licensor acknowledges and agrees that, in addition to the foregoing, (a) AbbVie shall have the right to satisfy its diligence obligations under this Section 5.7 (AbbVie Diligence) through its Affiliates or Sublicensees, and (b) nothing in this Section 5.7 (AbbVie Diligence) is intended, or shall be construed, to require AbbVie to Develop, seek Regulatory Approval for and Commercialize a specific Licensed Product.
5.7.3    In the event that AbbVie decides to discontinue its diligence obligations under this Section 5.7 (AbbVie Diligence) with respect to a Licensed Product in favor of another Licensed Product,





its diligence obligations under this Section 5.7 (AbbVie Diligence) shall cease with respect to such initial Licensed Product in favor of such other Licensed Product.
5.7.4    Licensor further acknowledges that AbbVie is in the business of Exploiting products and nothing in this Agreement shall be construed as restricting such business or imposing on AbbVie the duty to Exploit any Licensed Product for which royalties are payable hereunder to the exclusion of, or in preference to, any other product, or in any way other than in accordance with its normal commercial practices. If at any time Licensor has a reasonable basis to believe that AbbVie is in material breach of its material obligations under this Section 5.7 (AbbVie Diligence), then Licensor shall so notify AbbVie, specifying the basis for its belief, and the Parties shall meet within [] after such notice to discuss in good faith Licensor’s concerns and AbbVie’s plans with respect to the Licensed Products.
5.8    Compliance with Applicable Law. AbbVie shall perform its activities under this ARTICLE 5 (Post-Option Activities) in compliance with all Applicable Law.
ARTICLE 6
PAYMENTS AND RECORDS
6.1    Upfront Payment. No later than [] following the Effective Date, AbbVie shall pay Licensor an upfront amount equal to Sixty Million Dollars ($60,000,000). Such payment shall be noncreditable against any other payments due hereunder.
6.2    Development Milestones by Licensor. In partial consideration of the rights granted by Licensor to AbbVie hereunder and subject to the terms and conditions set forth in this Agreement, AbbVie shall pay to Licensor the amounts set forth below within [] after the first achievement of each of the following milestone events by Licensor prior to the Option Effective Date:
Development Milestone
Development Payment
[]
[]
[]
[]
[]
[]
Each milestone payment in this Section 6.2 (Development Milestones by Licensor) shall be payable only upon the first achievement of such milestone and no amounts shall be due for subsequent or repeated achievements of such milestone, whether for the same or a different Licensed Compound or Licensed Product. The maximum aggregate amount payable by AbbVie pursuant to this Section 6.2 (Development Milestones by Licensor) is Seventy-Five Million Dollars ($75,000,000).
6.3    Development Milestones by AbbVie. In partial consideration of the rights granted by Licensor to AbbVie hereunder and subject to the terms and conditions set forth in this Agreement, AbbVie shall pay to Licensor the amounts set forth below within [] after the first achievement of each of the following milestone events by AbbVie, its Affiliate or Sublicensee following the Option Effective Date:





Development Milestone
Development Payment
[]
[]
[]
[]
[]
[]
[]
[]
Each milestone payment in this Section 6.3 (Development Milestones by AbbVie) shall be payable only upon the first achievement of such milestone and no amounts shall be due for subsequent or repeated achievements of such milestone, whether for the same or a different Licensed Compound or Licensed Product. The maximum aggregate amount payable by AbbVie pursuant to this Section 6.3 (Development Milestones by AbbVie) is Two Hundred and Five Million Dollars ($205,000,000).
6.4    Option Exercise Fee. Within [] after the Option Effective Date, AbbVie shall pay Licensor a one-time payment of Seventy-Five Million Dollars ($75,000,000) (the “Option Exercise Fee”).
6.5    Sales-Based Milestones. In partial consideration of the rights granted by Licensor to AbbVie hereunder, subject to Section 6.5 (Sales-Based Milestones), in the event that the Net Sales of a particular Licensed Product made by AbbVie or any of its Affiliates or Sublicensees in a given Calendar Year exceeds a threshold (each, an “Annual Net Sales Milestone Threshold”) set forth in the left-hand column of the table immediately below (the “Annual Net Sales-Based Milestone Table”), AbbVie shall pay to Licensor a milestone payment (each, an “Annual Net Sales-Based Milestone Payment”) in the corresponding amount set forth in the right-hand column of the Annual Net Sales-Based Milestone Table. In the event that in a given Calendar Year more than one (1) Annual Net Sales Milestone Threshold is exceeded, AbbVie shall pay to Licensor a separate Annual Net Sales-Based Milestone Payment with respect to each Annual Net Sales Milestone Threshold that is exceeded in such Calendar Year. Each such milestone payment shall be due within [] of the end of the Calendar Year in which such milestone was achieved (each, a “Annual Net Sales-Based Milestone Payment Date”).
Annual Net Sales Milestone Threshold
Payment Amount
[]
[]
[]
[]
[]
[]

Notwithstanding anything contained in Section 6.5 (Sales-Based Milestones), each milestone payment in this Section 6.5 (Sales-Based Milestones) shall be payable only upon the first achievement of such milestone in a Calendar Year, and no amounts shall be due for subsequent or repeated achievements of such milestone in subsequent Calendar Years. The maximum aggregate amount payable by AbbVie pursuant to this Section 6.5 (Sales-Based Milestones) is Four Hundred and Fifty Million Dollars ($450,000,000).
6.6    Royalties.
6.6.1    Royalty Rates. As further consideration for the rights granted to AbbVie hereunder, subject to Section 6.6.3 (Reductions), commencing upon the First Commercial Sale of a Licensed Product in the Territory, on a Licensed Product-by-Licensed Product and country-by-country or other jurisdiction-by-other jurisdiction basis, AbbVie shall pay to Licensor a royalty on Net Sales of each Licensed





Product in each country or other jurisdiction in the Territory (excluding Net Sales of each Licensed Product in any country or other jurisdiction in the Territory for which the Royalty Term for such Licensed Product in such country or other jurisdiction has expired) during each Calendar Year at the following rates:
Net Sales in the Territory of each Licensed Product in a Calendar Year
Royalty Rate
[]
[]
[]
[]
[]
[]

With respect to each Licensed Product in each country or other jurisdiction in the Territory, from and after the expiration of the Royalty Term for such Licensed Product in such country or other jurisdiction, Net Sales of such Licensed Product in such country or other jurisdiction shall be excluded for purposes of calculating the Net Sales thresholds and ceilings set forth in this Section 6.6.1 (Royalty Rates).
6.6.2    Royalty Term. AbbVie shall have no obligation to pay any royalty with respect to Net Sales of any Licensed Product in any country or other jurisdiction in the Territory after the Royalty Term for such Licensed Product in such country or other jurisdiction in the Territory has expired.
6.6.3    Reductions. Notwithstanding the foregoing:
(a)    from and after the date on which a Licensed Product is sold in a particular country or other jurisdiction in the Territory and is both (i) not covered by a Valid Claim of a Licensor Patent described in clause (a) of Section 1.149 (“Royalty Term”) and (ii) not subject to Regulatory Exclusivity in such country or other jurisdiction, the royalty rate for such Licensed Product with respect to such country or other jurisdiction shall be reduced by [] from the applicable rate(s) set forth in Section 6.6.1 (Royalty Rates) (as adjusted by Section 6.6.3(c) (Reductions)); and
(b)    in the event that in any country or other jurisdiction in the Territory during the Royalty Term for a Licensed Product, but following the expiration, invalidation, revocation, cancellation, dedication to the public, disclaimer or abandonment date of the last Licensor Patent that includes a Valid Claim claiming the Licensed Compound contained in such Licensed Product in such country or other jurisdiction, if the unit volume of all Biosimilar Products in such country or other jurisdiction in a Calendar Quarter equals or exceeds [] of the sum of unit volume of such Licensed Product and all Biosimilar Products in such country or other jurisdiction, (i) Net Sales of such Licensed Product in such country or other jurisdiction shall [], and (ii) any payments owed by AbbVie with respect to such Licensed Product under Section 6.6.1 (Royalty Rates) shall be reduced by [] for [] for such Licensed Product in such country or other jurisdiction;
(c)    [], in the event that AbbVie enters into an agreement with a Third Party in order to obtain a license or right under a Patent or intellectual property right owned or controlled by such Third Party in a particular country or other jurisdiction pursuant to Section 7.6 (Third Party Licenses and Patents), AbbVie shall be entitled to deduct from any royalties payable hereunder with respect to such country or other jurisdiction [] of all royalties and other amounts paid to such Third Party in respect of such agreement (“Third Party Payments”); and
(d)    AbbVie shall have the right to [].
6.6.4    Mechanics of Adjustments to Royalties. [], any reductions set forth in Section 6.6.3 (Reductions) shall be applied in []; provided that, [], the adjustments made pursuant to Section 6.6.3(a) and Section 6.6.3(b) (Reductions) collectively shall not reduce by more than [] the royalties that would





otherwise be owed under Section 6.6.1 (Royalty Rates) as reduced by Section 6.6.3(c) (Reductions) and all aggregate reductions under Section 6.6.3 (Reductions) shall not reduce the royalties that would otherwise be owed under Section 6.6.1 (Royalty Rates) by more than []. For clarity, any reductions to be taken from royalties under Section 6.6.3(c) (Reductions), including [], or under Section 6.6.3(d) (Reductions) that are not able to be deducted in a Calendar Quarter due to the royalty floor in this Section 6.6.4 (Mechanics of Adjustments to Royalties) [] shall be carried over to subsequent Calendar Quarters and applied against the royalties due with respect to such subsequent Calendar Quarters until the reduction has been taken in full. Any adjustments pursuant to Section 6.6.3 (Reductions) shall apply only to the relevant Licensed Product in the relevant country or other jurisdiction in the Territory and shall be allocated [].
6.7    Royalty Payments and Reports. AbbVie shall calculate all amounts payable to Licensor pursuant to Section 6.6 (Royalties) at the end of each Calendar Quarter, which amounts shall be converted to Dollars, in accordance with Section 6.8 (Mode of Payments; Offsets). AbbVie shall pay to Licensor the royalty amounts due with respect to a given Calendar Quarter within [] after the end of such Calendar Quarter. Each payment of royalties due to Licensor shall be accompanied by a statement of the amount of Net Sales of each Licensed Product in each country or other jurisdiction the Territory during the applicable Calendar Quarter and a calculation of the amount of royalty payment due on such Net Sales for such Calendar Quarter.
6.8    Mode of Payment; Offsets. All payments to either Party under this Agreement shall be made by deposit of Dollars in the requisite amount to such bank account as the receiving Party may from time to time designate by notice to the paying Party.  For the purposes of calculating any sums due under, or otherwise reimbursable pursuant to, this Agreement (including the calculation of Net Sales expressed in currencies other than Dollars), a Party shall convert any amount expressed in a foreign currency into Dollar equivalents using its, its Affiliate’s or Sublicensee’s standard conversion methodology consistent with Accounting Standards.  AbbVie shall have the right to [], if any, under this Agreement; provided that AbbVie shall promptly provide Licensor notice of any such offsets.
6.9    Withholding Taxes.
6.9.1    Where any sum due to be paid to either Party hereunder is subject to any withholding or similar tax, the Parties shall use their commercially reasonable efforts to do all such acts and things and to sign all such documents as shall enable them to take advantage of any applicable double taxation agreement or treaty. In the event there is no applicable double taxation agreement or treaty, or if an applicable double taxation agreement or treaty reduces but does not eliminate such withholding or similar tax, the payor shall remit such withholding or similar tax to the appropriate government authority, deduct the amount paid from the amount due to payee and secure and send to payee the best available evidence of the payment of such withholding or similar tax. Any such amounts deducted by the payor in respect of such withholding or similar tax shall be treated as having been paid by the payor for purposes of this Agreement. In the event that a government authority retroactively determines that a payment made by a Party to the other Party pursuant to this Agreement should have been subject to withholding or similar (or to additional withholding or similar) taxes, and such Party (the “Withholding Party”) remits such withholding or similar taxes to the government authority, including any interest and penalties that may be imposed thereon (together with the tax paid, the “Withholding Amount”), the Withholding Party shall have the right (a) to offset the Withholding Amount against future payment obligations of the Withholding Party under this Agreement, (b) to invoice the other Party for the Withholding Amount (which shall be payable by the other Party within [] of its receipt of such invoice) or (c) to pursue reimbursement by any other available remedy.





6.9.2    If AbbVie (or AbbVie’s Affiliates or successors) is required to make a payment to Licensor subject to a deduction or withholding of tax, as described in Section 6.9.1 (Withholding Taxes), then [], then notwithstanding Section 6.9.1 (Withholding Taxes), the payment by AbbVie [] following the filing of the tax return or other report in which such deduction or withholding is made.
6.10    Indirect Taxes. All payments are exclusive of value added taxes, sales taxes, consumption taxes and other similar taxes (the “Indirect Taxes”). If any Indirect Taxes are chargeable in respect of any payments, the paying Party shall pay such Indirect Taxes at the applicable rate in respect of such payments following receipt, where applicable, of an Indirect Taxes invoice in the appropriate form issued by the receiving Party in respect of those payments. The Parties shall issue invoices for all amounts payable under this Agreement consistent with Indirect Tax requirements and irrespective of whether the sums may be netted for settlement purposes. If the Indirect Taxes originally paid or otherwise borne by the paying Party are in whole or in part subsequently determined not to have been chargeable, necessary steps shall be taken by the receiving Party to receive a refund of these undue Indirect Taxes from the applicable governmental authority or other fiscal authority and any amount of undue Indirect Taxes repaid by such authority to the receiving Party shall be transferred to the paying Party within [] of receipt.
6.11    Interest on Late Payments. If any payment due to either Party under this Agreement is not paid when due, then such paying Party shall pay interest thereon (before and after any judgment) at an annual rate (but with interest accruing on a daily basis) of [], such interest to run from the date on which payment of such sum became due until payment thereof in full together with such interest; provided, however, that if the [] is unavailable, then such interest shall be at an annual rate of [], as adjusted from time to time on the first New York Business Day of each month.
6.12    Audit. AbbVie shall, and shall cause its Affiliates to, keep complete books and records pertaining to Net Sales of Licensed Products in sufficient detail to calculate all amounts payable hereunder. Such books and records shall be retained by AbbVie and its Affiliates until the later of (a) [] after the end of the period to which such books and records pertain, and (b) the expiration of the applicable tax statute of limitations (or any extensions thereof), or for such longer period as may be required by Applicable Law. At the request of Licensor, AbbVie shall, and shall cause its Affiliates to, permit an independent public accounting firm of nationally recognized standing designated by Licensor and reasonably acceptable to AbbVie, at reasonable times during normal business hours and upon reasonable notice, to audit the books and records maintained pursuant to this Section 6.12 (Audit) to ensure the accuracy of all reports and payments made hereunder. Such examinations may not (i) be conducted for any Calendar Quarter more than [] after the end of such Calendar Quarter, (ii) be conducted more than once in any [] period or (iii) be repeated for any Calendar Quarter. The accounting firm shall disclose only whether the reports are correct or not, and the specific details concerning any discrepancies. No other information shall be shared. Except as provided below, the cost of any audit hereunder shall be borne by Licensor, unless an audit reveals a variance of more than the greater of [] from the reported amounts [], in which case AbbVie shall bear the cost of such audit. Unless disputed pursuant to Section 6.13 (Audit Dispute) below, if an audit concludes that (x) additional amounts were owed by AbbVie, AbbVie shall pay the additional amounts with interest from the date originally due as provided in Section 6.11 (Interest on Late Payments), or (y) excess payments were made by AbbVie, Licensor shall reimburse such excess payments, in either case ((x) or (y)), within [] after the date on which such audit is completed by Licensor.
6.13    Audit Dispute. In the event of a dispute with respect to any audit under Section 6.12 (Audit), Licensor and AbbVie shall work in good faith to resolve such dispute. If the Parties are unable to reach a mutually acceptable resolution of such dispute within [], such dispute shall be submitted for resolution to a





certified public accounting firm jointly selected by each Party’s certified public accountants or to such other Person as the Parties shall mutually agree (the “Audit Arbitrator”). The decision of the Audit Arbitrator shall be final and the costs of such arbitration as well as the initial audit shall be []. Not later than [] after such decision and in accordance with such decision, the audited Party shall pay any additional amounts with interest from the date originally due as provided in Section 6.11 (Interest on Late Payments), or the auditing Party shall reimburse any excess payments, as applicable.
6.14    Confidentiality. The receiving Party shall treat all information subject to review under this ARTICLE 6 (Payments and Records) in accordance with the confidentiality provisions of ARTICLE 9 (Confidentiality and Non-Disclosure) and the Parties shall cause the Audit Arbitrator to enter into a reasonably acceptable confidentiality agreement with the audited Party obligating such firm to retain all such information in confidence pursuant to such confidentiality agreement.
6.15    No Other Compensation. Each Party hereby agrees that the terms of this Agreement fully define all consideration, compensation and benefits, monetary or otherwise, to be paid, granted or delivered by a Party to the other Party in connection with the transactions contemplated herein. Neither Party previously has paid or entered into any other commitment to pay, whether orally or in writing, any of the other Party’s employees, directly or indirectly, any consideration, compensation or benefits, monetary or otherwise, in connection with the transaction contemplated herein.
6.16    No Limitation. Nothing contained in this ARTICLE 6 (Payments and Records) shall in any way limit either Party’s right to indemnification under this Agreement or to otherwise recover damages for breach of this Agreement.
ARTICLE 7
INTELLECTUAL PROPERTY RIGHTS
7.1    Ownership of Intellectual Property Rights.
7.1.1    Ownership of Technology. Subject to Section 5.3.2 (Regulatory Matters) and Section 7.1.2 (Ownership of Joint Patents and Joint Know-How), as between the Parties, each Party (as used in ARTICLE 7 (Intellectual Property Rights), “Party,” “Licensor,” or “AbbVie” includes, respectively, its designated Affiliate(s)) shall own and retain all rights, title and interests in and to any and all: (a) Information and inventions that are conceived, discovered, developed or otherwise made by or on behalf of such Party (or its Affiliates) under this Agreement, whether or not patented or patentable, and any and all Patents and other intellectual property rights with respect thereto, except for Joint Know-How or Joint Patents, and (b) other Information, inventions, Patents and other intellectual property rights that are owned or otherwise Controlled (other than pursuant to the grant of rights set forth in Sections 4.4.1 (License Grants to AbbVie)) by such Party or its Affiliates.
7.1.2    Ownership of Joint Patents and Joint Know-How. Subject to Section 5.3.2 (Regulatory Matters), as between the Parties, the Parties shall each own an equal, undivided interest in any and all (a) Information and inventions that are conceived, discovered, developed or otherwise made jointly by or on behalf of Licensor or its Affiliates, on the one hand, and AbbVie or its Affiliates, on the other hand, in connection with the work conducted under this Agreement, in each case whether or not patented or patentable (the “Joint Know-How”), and (b) Patents (the “Joint Patents”) and other intellectual property rights with





respect to the Information and inventions described in clause (a) (together with Joint Know-How and Joint Patents, the “Joint Intellectual Property Rights”). Each Party shall promptly disclose to the other Party in writing, and shall cause its Affiliates, licensees and sublicensees to so disclose, the development, making, conception or reduction to practice of any Joint Know-How or Joint Patents. Subject to the licenses and rights of reference granted under Sections 4.4.1 (License Grants to AbbVie) and Licensor’s exclusivity obligations under Section 2.4 (Exclusivity), each Party shall have the right to Exploit the Joint Intellectual Property Rights, including the right to grant licenses through multiple tiers, without a duty of seeking consent or accounting to the other Party.
7.1.3    United States Law. The determination of inventorship and whether Information and inventions are conceived, reduced to practice, discovered, developed or otherwise made under this Agreement by a Party for the purpose of allocating proprietary rights (including Patent, copyright or other intellectual property rights) therein, shall, for purposes of this Agreement, be made in accordance with the United States patent law and other Applicable Law in the United States irrespective of where such conception, reduction to practice, discovery, development or making occurs.
7.1.4    Assignment Obligations. Licensor shall use commercially reasonable efforts to cause all Persons who perform Development activities, Manufacturing activities or regulatory activities for Licensor under this Agreement to be under an obligation to assign (or, if Licensor is unable to cause such Person to agree to such assignment obligation despite Licensor’s using commercially reasonable efforts to negotiate such assignment obligation, provide a license under) their rights in any Information and inventions resulting therefrom to Licensor, except where Applicable Law requires otherwise and except in the case of governmental, not-for-profit and public institutions which have standard policies against such an assignment (in which case a suitable license, or right to obtain such a license, shall be obtained).
7.2    Prosecution of Patents.
7.2.1    Maintenance and Prosecution of Licensor Product Patents.
(a)    Prior to Option Effective Date. During the Term and prior to the Option Effective Date, in consultation with AbbVie, Licensor shall have the obligation to prepare, file, prosecute and maintain the Licensor Product Patents [] in a manner consistent with Licensor’s standard practices with respect to its other Patents in effect as of the Effective Date, at Licensor’s sole cost and expense, provided that (i) AbbVie may request for Licensor to prepare and file any Licensor Product Patent in [], following which Licensor shall prepare, file, prosecute and maintain such Licensor Product Patent in such country, [], subject to the terms and conditions of this Section 7.2.1 (Maintenance and Prosecution of Licensor Product Patents); and (ii) upon the Option Effective Date, the preparation, filing, prosecution, and maintenance of any Licensor Product Patent shall be governed by Section 7.2.1(b) (Following Option Effective Date). Licensor shall keep AbbVie fully informed of any steps with regard to the preparation, filing, prosecution and maintenance of Licensor Patents that [], including by []. Licensor shall [] the requests and suggestions of AbbVie with respect to such Licensor drafts and with respect to strategies for filing and prosecuting such Licensor Patents in the Territory. Notwithstanding the foregoing, Licensor shall promptly inform AbbVie of any adversarial patent office proceeding or sua sponte filing, including a request for, or filing or declaration of, any interference, opposition or reexamination relating to such Licensor Patent in the Territory. The Parties shall thereafter consult and cooperate to determine a course of action with respect to any such proceeding in the Territory and Licensor shall [] all comments, requests and suggestions provided by AbbVie. Licensor shall not initiate any such adversarial patent office proceeding relating to such Licensor Patent in the Territory without first consulting AbbVie. In the event that Licensor decides [] any Licensor Patent that [] in a country or other jurisdiction in the Territory, Licensor shall timely provide reasonable prior written notice to AbbVie of such intention, AbbVie





shall thereupon have the option, in its sole discretion, to [] of such Licensor Patent [] in such country or other jurisdiction. Following AbbVie’s assumption of control and direction of the preparation, filing, prosecution and maintenance of such Licensor Patent in a country or jurisdiction, Licensor shall reasonably cooperate with AbbVie in such country or other jurisdiction as provided under Section 7.2.4 (Cooperation), including prosecuting such Licensor Patent at AbbVie’s direction in such country or jurisdiction.
(b)    Following Option Effective Date. Upon the Option Effective Date of a Licensed Compound, AbbVie shall [] to prepare, file, prosecute and maintain the corresponding Licensor Product Patents worldwide, []. AbbVie shall [] the requests and suggestions of Licensor with respect to such AbbVie drafts and with respect to strategies for filing and prosecuting the Licensor Product Patents in the Territory, and shall not claim, without Licensor’s prior written consent, any Combination Product that includes the Licensed Compound and another compound that is Controlled by Licensor and is not a Licensed Compound. Notwithstanding the foregoing, AbbVie shall promptly inform Licensor of any adversarial patent office proceeding or sua sponte filing, including a request for, or filing or declaration of, any interference, opposition or reexamination relating to a Licensor Product Patent in the Territory. The Parties shall thereafter consult and cooperate to determine a course of action with respect to any such proceeding in the Territory and AbbVie shall [] all reasonable comments, requests and suggestions provided by Licensor. AbbVie shall not initiate any such adversarial patent office proceeding relating to a Licensor Product Patent in the Territory without first consulting Licensor. In the event that AbbVie decides not to prepare, file, prosecute or maintain a Licensor Product Patent in a country or other jurisdiction in the Territory, AbbVie shall provide no less than [] prior written notice to Licensor of such intention, Licensor shall thereupon have the option, in its sole discretion, to assume the control and direction of the preparation, filing, prosecution and maintenance of such Licensor Product Patent at its expense in such country or other jurisdiction. Following Licensor’s assumption of control and direction of the preparation, filing, prosecution and maintenance of a Licensor Product Patent in a country or jurisdiction, AbbVie shall reasonably cooperate with Licensor in such country or other jurisdiction as provided under Section 7.2.4 (Cooperation).
7.2.2    Maintenance and Prosecution of Licensor Platform Patents. During the Term, Licensor shall have the sole right to prepare, file, prosecute and maintain the Licensor Platform Patents. Notwithstanding the foregoing, in the event that a Licensor Platform Patent [], upon AbbVie’s reasonable request, the Parties shall discuss in good faith the appropriate prosecution strategy to allow AbbVie to seek patent protection of such subject matter. Without limiting the generality of the foregoing, following the Option Effective Date, upon AbbVie’s reasonable request, []. In exercising its review rights, if Licensor in good faith determines, and AbbVie agrees, that AbbVie’s request would have a materially adverse impact on Licensor’s prosecution and maintenance of the original Licensor Platform Patent, the Parties shall reasonably cooperate on a strategy that would not negatively impact Licensor’s ability to prosecute and maintain the original Licensor Platform Patent. If the Parties disagree on whether AbbVie’s request would have a materially adverse impact on Licensor’s prosecution and maintenance of the original Licensor Platform Patent, then Parties shall [] with respect to the disputed prosecution and maintenance strategy for the original Licensor Platform Patent shall be [], and the Parties shall []. For clarity, [] if such action would [], the original Licensor Platform Patent. If it is [], upon AbbVie’s reasonable request, Licensor shall use reasonable efforts to []. Licensor shall (a) retain the sole right to prosecute and maintain [], (b) keep AbbVie fully informed of all steps with regard to the preparation, filing, prosecution and maintenance of such [], and (c) consider in good faith the requests and suggestions of AbbVie with respect to such Licensor drafts and incorporate AbbVie’s comments [] unless the incorporation of such comments would have a materially adverse impact on other claims in such Patent. If after good faith consultation, the Parties disagree on whether AbbVie’s comments would have a materially adverse impact on other claims in such Patent, then Parties shall []. In the event that Licensor decides not to continue to prosecute or maintain the [] in a country or other jurisdiction in the Territory, Licensor shall timely provide reasonable prior written notice to AbbVie of such intention, and AbbVie shall thereupon have the option, in its





sole discretion, to assume the control and direction of the preparation, filing, prosecution and maintenance of such Patent to pursue such subject matter, at its expense in such country or other jurisdiction.
7.2.3    Maintenance and Prosecution of Joint Patents. During the Term, AbbVie shall have the first right, but not the obligation, to prepare, file, prosecute and maintain the Joint Patents worldwide, at AbbVie’s sole cost and expense. AbbVie shall keep Licensor fully informed of all steps with regard to the preparation, filing, prosecution and maintenance of Joint Patents, including by []. AbbVie shall [] the requests and suggestions of Licensor with respect to such AbbVie drafts and with respect to strategies for filing and prosecuting the Joint Patents in the Territory. In the event that AbbVie decides not to prepare, file, prosecute or maintain a Joint Patent in a country or other jurisdiction in the Territory, AbbVie shall timely provide reasonable prior written notice to Licensor of such intention, and Licensor shall thereupon have the option, in its sole discretion, to assume the control and direction of the preparation, filing, prosecution and maintenance of such Joint Patent at its expense in such country or other jurisdiction. Upon AbbVie’s written acceptance of such option, Licensor shall assume the responsibility and control for the preparation, filing, prosecution and maintenance of such Joint Patent. In such event, AbbVie shall reasonably cooperate with Licensor in such country or other jurisdiction as provided under Section 7.2.4 (Cooperation).
7.2.4    Cooperation. The Parties agree to cooperate fully in the preparation, filing, prosecution and maintenance of the Licensor Patents and Joint Patents in the Territory under this Agreement. Cooperation shall include:
(a)    executing all papers and instruments, or requiring its employees or contractors to execute such papers and instruments, so as to (i) effectuate the ownership of intellectual property set forth in Section 7.1.1 (Ownership of Technology) and 7.1.2 (Ownership of Joint Patents and Joint Know-How); (ii) enable the other Party to apply for and to prosecute Patent applications in the Territory; and (iii) obtain and maintain any patent term extensions, supplementary protection certificates and the like with respect to the Licensor Patents and Joint Patents in the Territory, in each case ((i), (ii), and (iii)), to the extent provided for in this Agreement;
(b)    consistent with this Agreement, assisting in any license, transfer or assignment registration processes with applicable governmental authorities that may be available in the Territory for the protection of a Party’s interests under this Agreement; and
(c)    promptly informing the other Party of any matters coming to a Party’s attention that may materially affect the preparation, filing, prosecution or maintenance of any Licensor Patents or Joint Patents in the Territory.
7.2.5    Patent Term Extension and Supplementary Protection Certificate. With respect to a Licensed Product, AbbVie shall be responsible for making decisions regarding patent term extensions, supplementary protection certificates, pediatric exclusivities and any other extensions that are now or become available in the future, wherever applicable, for any Licensor Product Patents, Amended Platform Patents and Joint Patents in any country or other jurisdiction in the Territory; provided that any Dispute with respect thereto shall be finally and definitively resolved by AbbVie. AbbVie shall have the sole responsibility of applying for, and Licensor shall have no right to apply for, any extension (including patent term extension, supplementary protection certificate and pediatric exclusivity) with respect to such Patents in the Territory in connection with the Licensed Product. AbbVie shall keep Licensor fully informed of its efforts to obtain such extension. Licensor shall provide prompt and reasonable assistance, as requested by AbbVie, including by taking such action as patent holder as is required under any Applicable Law to obtain such extension. [].
7.2.6    Patent Listings. As between the Parties, with respect to each Licensed Product, AbbVie shall have the sole right to determine and make all patent listings and filings with governmental





authorities in the Territory with respect to the Licensor Patents and Joint Patents. AbbVie shall keep Licensor reasonably informed of such listings, and Licensor shall fully cooperate with AbbVie in connection with such listings.
7.2.7    UPC Opt-Out and Opt-In. AbbVie shall have the first right to make decisions regarding the Opt-Out or Opt-In under the Article 83(4) of the Agreement on a Unified Patent Court between the participating Member States of the European Union (2013/C 175/01), with respect to Licensor Product Patents and Joint Patents, and pay all fees and make all submissions associated with such decisions. Licensor shall assist AbbVie in such submissions at AbbVie’s cost, including providing all necessary documents and making all necessary submissions as a patent owner. If AbbVie decides not to make a decision with respect to any Licensor Product Patents or Joint Patents, Licensor shall have the right to make such decision and pay all fees associated therewith.
7.3    Enforcement of Patents.
7.3.1    Enforcement of Licensor Patents. Each Party shall promptly notify the other Party in writing of any alleged or threatened infringement of the Licensor Patents by a Third Party in the Territory of which such Party becomes aware (including alleged or threatened infringement based on the development, commercialization or Exploitation of, or an application to register or market, a product containing a Licensed Compound or any Licensed Product in the Territory (the “Product Infringement”)).
(a)    Prior to the Option Effective Date, during the Term, Licensor shall have the first right, but not the obligation, to prosecute any Product Infringement in the Territory at its sole expense and Licensor shall retain control of the prosecution of such claim, suit or proceeding. In the event Licensor prosecutes any Product Infringement, AbbVie shall have the right to join as a party to such claim, suit or proceeding in the Territory and participate with its own counsel at its own expense; provided that Licensor shall retain control of the prosecution of such claim, suit or proceeding. During any such claim, suit or proceeding, Licensor shall: (i) []; (ii) []; and (iii) []. If Licensor does not [] under this Section 7.3.1(a) (Enforcement of Licensor Patents), then AbbVie [].
(b)    During the Term, following the Option Effective Date, AbbVie shall have the first right, but not the obligation, to prosecute any Product Infringement in the Territory (the “AbbVie Prosecuted Infringements”) at its sole expense and AbbVie shall retain control of the prosecution of such claim, suit or proceeding. In the event AbbVie prosecutes any AbbVie Prosecuted Infringement, Licensor shall have the right to join as a party to such claim, suit or proceeding in the Territory and participate with its own counsel at its own expense; provided that AbbVie shall retain control of the prosecution of such claim, suit or proceeding. During any such claim, suit or proceeding, AbbVie shall: (i) []; (ii) []; and (iii) []. If AbbVie does not [], then Licensor [].
7.3.2    Enforcement of Joint Patents. Each Party shall promptly notify the other Party in writing of any alleged or threatened infringement of the Joint Patents by a Third Party in the Territory of which such Party becomes aware (including alleged or threatened infringement based on the development, commercialization or Exploitation of, or an application to register or market, a product containing a Licensed Compound or any Licensed Product in the Territory). AbbVie shall have the first right, but not the obligation, to prosecute any such infringement in the Territory at its sole expense and AbbVie shall retain control of the prosecution of such claim, suit or proceeding. In the event AbbVie prosecutes any such infringement, Licensor shall have the right to join as a party to such claim, suit or proceeding in the Territory and participate with its own counsel at its own expense; provided that AbbVie shall retain control of the prosecution of such claim, suit or proceeding. During any such claim, suit or proceeding, AbbVie shall (a) []; (b) []; and (c) []. If AbbVie [], then Licensor [].





7.3.3    Biosimilar Applications. If either Party receives a copy of an application submitted to the FDA under subsection (k) of Section 351 of the PHSA (a “Biosimilar Application”) naming a Licensed Product as a reference product or otherwise becomes aware that such a Biosimilar Application has been filed (such as in an instance described in Section 351(l)(9)(C) of the PHSA), either Party shall, within [], notify the other Party so that the other Party may seek permission to view the application and related confidential information from the filer of the Biosimilar Application under Section 351(l)(1)(B)(iii) of the PHSA. If either Party receives any equivalent Biosimilar Application or otherwise becomes aware that such an equivalent Biosimilar Application has been filed in any other jurisdiction in the Territory, either Party shall, within [], notify the other Party. Regardless of the Party that is the “reference product sponsor” for purposes of such Biosimilar Application, (a) AbbVie shall have the sole right to designate, pursuant to Section 351(l)(1)(B)(ii) of the PHSA, the outside counsel and in-house counsel who shall receive confidential access to the Biosimilar Application; (b) AbbVie shall have the sole right to list any Patents, including Licensor Patents and Joint Patents, insofar as they claim or cover the applicable Licensed Product as required pursuant to Section 351(l)(3)(A), Section 351(l)(5)(b)(i)(II), or Section 351(l)(7) of the PHSA, to respond to any communications with respect to such lists from the filer of the Biosimilar Application, and to negotiate with the filer of the Biosimilar Application as to whether to utilize a different mechanism for information exchange than that specified in Section 351(l) of the PHSA; and (c) AbbVie shall have the sole right to identify Patents or respond to communications under any equivalent or similar listing in any other jurisdiction in the Territory. If required pursuant to Applicable Law, Licensor shall prepare such lists and make such responses at AbbVie’s direction. Licensor shall, upon AbbVie’s request, (i) timely provide to AbbVie all Information, including a correct and complete list of Licensor Patents covering any Licensed Product, that is necessary or reasonably useful to enable AbbVie to make such lists and communications with respect to the Licensor Patents, and (ii) cooperate with AbbVie’s reasonable requests in connection therewith, including meeting any submission deadlines, in each case, to the extent required or permitted by Applicable Law. Notwithstanding anything to the contrary in this Agreement, AbbVie shall have the sole right, but not the obligation, to prosecute, manage and settle any litigation with respect to any Biosimilar Application, and any Patent proceedings associated with the litigation with respect to such Biosimilar Application, including any invalidity, unpatentability or unenforceability challenges, and any oppositions and post-grant proceedings directed to such Patents. Upon AbbVie’s request, Licensor shall cooperate with AbbVie’s reasonable requests in seeking an injunction against any commercial marketing by the filer of a Biosimilar Application as permitted pursuant to Section 351(l)(8)(B) of the PHSA.
7.3.4    Cooperation. The Parties agree to cooperate fully in any infringement action pursuant to this Section 7.3 (Enforcement of Patents). Where a Party brings such an action, the other Party shall, where necessary, furnish a power of attorney solely for such purpose or shall join in, or be named as a necessary party to, such action. Subject to the terms of this Agreement, the Party controlling any patent infringement litigation in accordance with this Section 7.3 (Enforcement of Patents) []; provided that neither Party shall have the right to []. The Party commencing the litigation shall keep the other Party reasonably informed of all material developments during the course of the proceedings.
7.3.5    Recovery. Any recovery realized as a result of such litigation described in Section 7.3.1 (Enforcement of Licensor Patents), 7.3.2 (Enforcement of Joint Patents), 7.3.3 (Biosimilar Applications), or 7.3.4 (Cooperation) (whether by way of settlement or otherwise) shall be first allocated to reimburse the Parties for their costs and expenses in making such recovery (which amounts shall be allocated pro rata if insufficient to cover the totality of such expenses). Any remainder after such reimbursement is made shall be []; provided that []; provided that [].
7.4    Infringement Claims by Third Parties. If the manufacture, sale or use of a Licensed Compound or Licensed Product in the Territory pursuant to this Agreement results in, or may result in, any claim, suit or proceeding by a Third Party alleging patent infringement by a Party (or its Affiliates), such Party





shall promptly notify the other Party thereof in writing. Such Party shall have the first right, but not the obligation, to defend and control the defense of any such claim, suit or proceeding at its own expense (but subject to deduction as provided below), using counsel of its own choice. The other Party may participate in any such claim, suit or proceeding with counsel of its choice at its own expense. Without limitation of the foregoing, if such Party finds it necessary or desirable to join the other Party as a party to any such action, the other Party shall execute all papers and perform such acts as shall be reasonably required at such Party’s expense. If such Party elects (in a written communication submitted to the other Party within a reasonable amount of time after notice of the alleged patent infringement) not to defend or control the defense of, or otherwise fails to initiate or maintain the defense of, any such claim, suit or proceeding, within such time periods so that the other Party is not prejudiced by any delays, the other Party may conduct and control the defense of any such claim, suit or proceeding at its own expense. Each Party shall keep the other Party reasonably informed of all material developments in connection with any such claim, suit or proceeding. AbbVie shall be []. Any recoveries by a Party of any sanctions awarded to such Party and against a party asserting a claim being defended under this Section 7.4 (Infringement Claims by Third Parties) shall be applied as follows: such recovery shall be applied first to (a) reimburse such Party for its reasonable out-of-pocket costs of defending such claim, suit or proceeding [], and (b) []. The balance of any such recoveries shall be retained or provided to AbbVie and included in calculation of Net Sales for the relevant Licensed Product.
7.5    Invalidity, Unpatentability or Unenforceability Defenses or Actions.
7.5.1    Licensor Patents.
(a)    During the Term, Licensor shall have the first right, but not the obligation, to defend and control the defense of the validity, patentability and enforceability of the Licensor Patents (excluding Licensor Product Patents upon the Option Effective Date) at its own expense in the Territory. AbbVie may participate in any such claim, suit or proceeding in the Territory with counsel of its choice at its own expense; provided that Licensor shall retain control of the defense in such claim, suit or proceeding. If Licensor elects not to defend or control the defense of the Licensor Patents in a claim, suit or proceeding brought in the Territory, or otherwise fails to initiate or maintain the defense of any such claim, suit or proceeding, then AbbVie may conduct and control the defense of any such claim, suit or proceeding at its own expense.
(b)    During the Term following and as of the Option Effective Date, AbbVie shall have the first right, but not the obligation, to defend and control the defense of the validity, patentability and enforceability of the Licensor Product Patents at its own expense in the Territory. Licensor may participate in any such claim, suit or proceeding in the Territory with counsel of its choice at its own expense; provided that AbbVie shall retain control of the defense in such claim, suit or proceeding. If AbbVie elects not to defend or control the defense of the Licensor Product Patents in a claim, suit or proceeding brought in the Territory, or otherwise fails to initiate or maintain the defense of any such claim, suit or proceeding, then Licensor may conduct and control the defense of any such claim, suit or proceeding at its own expense.
7.5.2    Joint Patents. AbbVie shall have the first right, but not the obligation, to defend and control the defense of the validity, patentability and enforceability of any Joint Patents at its own expense in the Territory. Licensor may participate in any such claim, suit or proceeding in the Territory related to the Joint Patents with counsel of its choice at its own expense; provided that AbbVie shall retain control of the defense in such claim, suit or proceeding. If AbbVie elects not to defend or control the defense of the Joint Patents in a claim, suit or proceeding brought in the Territory, or otherwise fails to initiate or maintain the defense of any such claim, suit or proceeding, then Licensor may conduct and control the defense of any such claim, suit or proceeding at its own expense.





7.5.3    Cooperation. Each Party shall assist and cooperate with the other Party as such other Party may reasonably request from time to time in connection with its activities set forth in this Section 7.5 (Invalidity, Unpatentability or Unenforceability Defenses or Actions), including by being joined as a party plaintiff in a claim, suit or proceeding, providing access to relevant documents and other evidence, and making its employees available during reasonable business hours. In connection with any such defense or claim or counterclaim, the controlling Party shall consider in good faith any comments from the other Party and shall keep the other Party reasonably informed of any material steps taken. In connection with the activities set forth in this Section 7.5 (Invalidity, Unpatentability or Unenforceability Defenses or Actions), each Party shall consult with the other as to the strategy for the defense of the Licensor Patents and Joint Patents. Subject to the terms of this Agreement, the Party controlling any such defense or claim or counterclaim shall have the right to settle such defense, claim or counterclaim; provided that neither Party shall have the right to settle any defense, claim or counterclaim in a manner that imposes any costs or liability on, or involves any admission by, the other Party, without the express written consent of such other Party.
7.5.4    Costs and Expenses. AbbVie shall [].
7.6    Third Party Licenses and Patents. If [], the Development, Manufacture, Commercialization or Exploitation of any Licensed Compound or Licensed Product by AbbVie or any of its Affiliates infringes or misappropriates any Patent, trade secret or other intellectual property right of a Third Party in any country or other jurisdiction in the Territory such that AbbVie or any of its Affiliates cannot Develop, Manufacture, Commercialize or Exploit such Licensed Compound or Licensed Product in such country or other jurisdiction without infringing such Patent, trade secret or other intellectual property right of such Third Party, then AbbVie shall have the sole right, but not the obligation, to negotiate and obtain a license from such Third Party as necessary for AbbVie and its Affiliates to Develop, Manufacture, Commercialize and Exploit such Licensed Compound or Licensed Product in such country or other jurisdiction. If, following the Option Effective Date, [], a Third Party’s Patent [], AbbVie or its Affiliates shall have the sole right, but not the obligation, to challenge the patentability, validity or enforceability of such Patent in any court of competent jurisdiction or before any supra-national, federal, national, regional, state, provincial or local governmental body of competent jurisdiction including the United States Patent and Trademark Office and the European Patent Office, provided it so notifies Licensor of such intent to challenge and the commencement of any such action. [], Licensor shall not challenge the patentability, validity or enforceability of such Patent in any court or governmental body without AbbVie’s prior written consent, provided it has been notified by AbbVie that AbbVie intends to so challenge such Patent. If Licensor has challenged the patentability, validity or enforceability of such Patent before the Option Effective Date, AbbVie shall have the right, but not the obligation, to manage and control such challenge, at AbbVie’s expense, after the Option Effective Date. Licensor shall assist and cooperate with AbbVie as AbbVie may reasonably request from time to time in connection with the activities set forth in this Section 7.6 (Third Party Licenses and Patents).
7.7    Product Trademarks.
7.7.1    Ownership and Prosecution of Product Trademarks. AbbVie shall own all rights, title and interests in and to the Product Trademarks in the Territory, and shall be responsible for the registration, prosecution and maintenance thereof. [].
7.7.2    Enforcement of Product Trademarks. AbbVie shall have the sole right and responsibility for taking such action as AbbVie deems necessary against a Third Party based on any alleged, threatened or actual infringement, dilution, misappropriation or other violation of, or unfair trade practices or any other like offense relating to, the Product Trademarks by a Third Party in the Territory. AbbVie [] pursuant to this Section 7.7.2 (Enforcement of Product Trademarks) and [].





7.7.3    Third Party Claims. AbbVie shall have the sole right and responsibility for defending against any alleged, threatened or actual claim by a Third Party that the use or registration of the Product Trademarks in the Territory infringes, dilutes, misappropriates or otherwise violates any Trademark or other right of such Third Party or constitutes unfair trade practices or any other like offense, or any other claims as may be brought by a Third Party against a Party in connection with the use of the Product Trademarks with respect to a Licensed Product in the Territory. AbbVie shall bear the costs and expenses relating to any defense commenced pursuant to this Section 7.7.3 (Third Party Claims) and any settlements and judgments with respect thereto, and shall retain any damages or other amounts collected in connection therewith.
7.8    International Nonproprietary Name. Prior to the Effective Date, Licensor []. Licensor shall [] and allow AbbVie to comment thereon. As between the Parties, AbbVie shall have the sole right and responsibility to select the International Nonproprietary Name or other name or identifier for any other Licensed Compound or Licensed Product. Subject to the foregoing, AbbVie shall have the sole right and responsibility to apply for submission to the World Health Organization for the International Nonproprietary Name, and submission to the United States Adopted Names Council for the United States Adopted Name.
7.9    Inventor's Remuneration. Each Party shall be solely responsible for any remuneration that may be due such Party's inventors under any applicable inventor remuneration laws.
7.10    AbbVie Patents. For clarity, AbbVie shall have the sole right, but no obligation, to prosecute, maintain, enforce and defend any Patent controlled or owned by AbbVie or its Affiliates.
7.11    Common Interest. All information exchanged between the Parties regarding the prosecution, maintenance, enforcement and defense of Patents under this ARTICLE 7 (Intellectual Property Rights) shall be deemed to be Confidential Information of the disclosing Party. In addition, the Parties acknowledge and agree that, with regard to such prosecution, maintenance, enforcement and defense, the interests of the Parties as collaborators, licensors and/or licensees are to, for their mutual benefit, obtain patent protection and plan patent defense against potential patentability/invalidity challenges or infringement activities by Third Parties, and, as such, are aligned and are legal in nature. The Parties agree and acknowledge that they have not waived, and nothing in this Agreement constitutes a waiver of, any legal privilege concerning Patents under this ARTICLE 7 (Intellectual Property Rights), including privilege under the common interest doctrine and similar or related doctrines. Notwithstanding anything to the contrary in this Agreement, to the extent a Party has a good faith belief that any information required to be disclosed by such Party to the other Party under this ARTICLE 7 (Intellectual Property Rights) is protected by attorney-client privilege or any other applicable legal privilege or immunity, such Party shall not be required to disclose such information and the Parties shall in good faith cooperate to agree upon a procedure (which may include entering into a specific common interest agreement, disclosing such information on a “for counsel eyes only” basis or similar procedure) under which such information may be disclosed without waiving or breaching such privilege or immunity.
ARTICLE 8
DATA PRIVACY AND SECURITY





8.1    Data Privacy and Security.
8.1.1    For all Personal Data collected, Processed, hosted or transmitted in performance by Licensor or its Affiliates of this Agreement, Licensor shall:
8.1.2    comply at all times with the Data Security and Privacy Laws;
8.1.3    to the extent permitted by Applicable Law, notify AbbVie, as soon as practicable and in any event prior to making the relevant disclosure, if Licensor is obliged to make a disclosure of Personal Data under Applicable Law;
8.1.4    make timely notification to, and obtain any necessary authorizations from, any applicable Regulatory Authority where required under applicable Data Security and Privacy Laws of Licensor’s collection and other Processing of Personal Data in order to comply with Licensor’s obligations under this Agreement;
8.1.5    at all times, act in a manner such that Licensor is not subject to any prohibition or restriction that (a) prevents or restricts Licensor from disclosing or transferring Personal Data to AbbVie, as required under this Agreement; or (b) prevents or restricts either Party from Processing Personal Data as envisaged under this Agreement. If Licensor becomes aware of any circumstances that Licensor believes, acting reasonably, may give rise to such a prohibition or restriction, Licensor shall promptly notify AbbVie of the same and take all reasonable steps, including following AbbVie’s reasonable instructions, to ensure that such prohibition or restriction does not impact Licensor’s performance of Licensor’s obligations under this Section 8.1 (Data Privacy and Security);
8.1.6    ensure that all fair Processing and required notices have been obtained and are maintained and are sufficient in scope, and that Licensor has an appropriate legal basis under Data Security and Privacy Laws, to enable Licensor to Process Personal Data as required in order to comply with Licensor’s obligations under this Agreement and to obtain the benefit of Licensor’s rights under this Agreement (including the transfer of all applicable Personal Data to AbbVie), in each case, in accordance with the Data Security and Privacy Laws;
8.1.7    implement and maintain reasonable administrative, technical and physical safeguards designed to (a) maintain the security and confidentiality of Personal Data; (b) protect against reasonably anticipated threats or hazards to the security or integrity of Personal Data; and (c) protect against unauthorized access to or use of Personal Data;
8.1.8    notify AbbVie promptly, and in any event within [] of receipt of (a) any correspondence from a data protection regulator in relation to the Processing of Personal Data related to this Agreement, or (b) a request or notice from a data subject exercising his rights under the Data Security and Privacy Laws, including to access, rectify or delete his Personal Data in relation to the Personal Data Processed under this Agreement; and
8.1.9    refrain from taking actions related to the Processing of Personal Data that would be reasonably likely to damage or impair AbbVie’s reputation.
8.2    Data Agreements. At the reasonable request of AbbVie, the Parties shall cooperate to enter into any necessary joint controller agreements or controller-processor agreements with respect to such Personal Data as necessary to comply with Applicable Law.





8.3    Security Breach Notification. Licensor shall notify AbbVie immediately upon learning of any actual or suspected misappropriation or unauthorized access to, or disclosure or use of Personal Data collected, Processed, hosted or transmitted in performance by Licensor of this Agreement, including the conduct of the Development Plan (a “Data Breach”). Licensor shall promptly investigate each Data Breach that it becomes aware of or has reason to suspect may have occurred and, in the case of an actual Data Breach, shall, at AbbVie’s request, provide reasonable levels of access and information to AbbVie in connection with any independent investigation that AbbVie may desire to conduct with respect to such Data Breach. Licensor shall cooperate with AbbVie in identifying any reasonable steps that should be implemented to limit, stop or otherwise remedy any actual or suspected Data Breach.
ARTICLE 9
CONFIDENTIALITY AND NON-DISCLOSURE
9.1    []. Licensor recognizes that []. Accordingly, during the Term, Licensor shall, and shall cause its Affiliates and its and their respective officers, directors, employees and agents to, []; except to the extent []. For further clarification, []. In the event this Agreement is terminated in its entirety or with respect to a country, other jurisdiction or Terminated Territory, [], but the [].
9.2    Confidentiality Obligations. At all times during the Term and for a period of [] following termination or expiration hereof in its entirety, each Party shall, and shall cause its officers, directors, employees and agents to, keep confidential and not publish or otherwise disclose to a Third Party and not use, directly or indirectly, for any purpose, any Confidential Information furnished or otherwise made known to it, directly or indirectly, by the other Party, except to the extent such disclosure or use is expressly permitted by the terms of this Agreement. Notwithstanding the foregoing, the Parties [] the use of information [], and as such, each Party agrees that []; provided that (a) [] of such use; (b) the foregoing [] (i) a right to [], or (ii) a license []; and (c) [] outside this Agreement. Notwithstanding the foregoing, to the extent the receiving Party can be demonstrate by documentation or other competent proof, the confidentiality and non-use obligations under this Section 9.2 (Confidentiality Obligations) with respect to any Confidential Information shall not include any information that:
9.2.1    has been published by a Third Party or otherwise is or hereafter becomes part of the public domain by public use, publication, general knowledge or the like through no wrongful act, fault or negligence on the part of the receiving Party;
9.2.2    has been in the receiving Party’s possession prior to disclosure by the disclosing Party without any obligation of confidentiality with respect to such information; provided that the foregoing exception shall not apply with respect to Regulatory Documentation;
9.2.3    is subsequently received by the receiving Party from a Third Party without restriction and without breach of any agreement between such Third Party and the disclosing Party;
9.2.4    that is generally made available to Third Parties by the disclosing Party without restriction on disclosure; or
9.2.5    has been independently developed by or for the receiving Party without reference to, or use or disclosure of, the disclosing Party’s Confidential Information; provided that the foregoing exception shall not apply with respect to Regulatory Documentation.





Specific aspects or details of Confidential Information shall not be deemed to be within the public domain or in the possession of the receiving Party merely because such Confidential Information is embraced by more general information in the public domain or in the possession of the receiving Party. Further, any combination of Confidential Information shall not be considered in the public domain or in the possession of the receiving Party merely because individual elements of such Confidential Information are in the public domain or in the possession of the receiving Party unless the combination are in the public domain or in the possession of the receiving Party.
9.3    Permitted Disclosures. [], a receiving Party may disclose the disclosing Party’s Confidential Information to the extent that such disclosure is:
9.3.1    in the reasonable opinion of the receiving Party’s legal counsel, required to be disclosed pursuant to law, regulation or a valid order of a court of competent jurisdiction or other supra-national, federal, national, regional, state, provincial and local governmental body of competent jurisdiction, (including by reason of filing with securities regulators, but subject to Section 9.5 (Public Announcements))); provided that the receiving Party shall first have given prompt written notice (and to the extent possible, at least [] notice) to the disclosing Party and given the disclosing Party a reasonable opportunity to take whatever action it deems necessary to protect its Confidential Information (for example, quash such order or to obtain a protective order or confidential treatment requiring that the Confidential Information and documents that are the subject of such order be held in confidence by such court or governmental body or, if disclosed, be used only for the purposes for which the order was issued). In the event that no protective order or other remedy is obtained, or the disclosing Party waives compliance with the terms of this Agreement, the receiving Party shall furnish only that portion of Confidential Information which the receiving Party is advised by counsel is legally required to be disclosed;
9.3.2    made by or on behalf of the receiving Party to the Regulatory Authorities as required in connection with any filing, application or request for any Regulatory Approval in accordance with the terms of this Agreement; provided, that reasonable measures shall be taken to assure confidential treatment of such Confidential Information to the extent practicable and consistent with Applicable Law;
9.3.3    made by or on behalf of the receiving Party to a patent authority as may be necessary or reasonably useful for purposes of preparing, obtaining, defending or enforcing a Patent in accordance with the terms of this Agreement; provided that reasonable measures shall be taken to assure confidential treatment of such Confidential Information, to the extent such protection is available;
9.3.4    made to its or its Affiliates’ financial and legal advisors who have a need to know such disclosing Party’s Confidential Information and are either under professional codes of conduct giving rise to expectations of confidentiality and non-use or under written agreements of confidentiality and non-use, in each case, at least as restrictive as those set forth in this Agreement; provided that the receiving Party shall remain responsible for any failure by such financial and legal advisors to treat such Confidential Information as required under this ARTICLE 9 (Confidentiality and Non-Disclosure);
9.3.5    made by the receiving Party or its Affiliates to potential or actual investors or acquirers that is necessary in connection with their evaluation of such potential or actual investment or acquisition; provided that such Persons shall be subject to obligations of confidentiality and non-use with respect to such Confidential Information substantially similar to the obligations of confidentiality and non-use of the receiving Party pursuant to this ARTICLE 9 (Confidentiality and Non-Disclosure);
9.3.6    made by AbbVie or its Affiliates or Sublicensees to its or their advisors, consultants, clinicians, vendors, service providers, contractors, existing or prospective collaboration partners, licensees, sublicensees or other Third Parties as may be necessary or useful in connection with the Exploitation





of the Licensed Compound, the Licensed Products or otherwise in connection with the performance of its obligations or exercise of its rights as contemplated by this Agreement; provided that such Persons shall be subject to obligations of confidentiality and non-use with respect to such Confidential Information substantially similar to the obligations of confidentiality and non-use of the receiving Party pursuant to this ARTICLE 9 (Confidentiality and Non-Disclosure) (with a duration of confidentiality and non-use obligations as appropriate that is no less than [] from the date of disclosure for advisors, consultants, clinicians, vendors, service providers and contractors); or
9.3.7    made by Licensor or its Affiliates, after receiving advance approval from AbbVie, to its or their advisors, consultants, clinicians, vendors, service providers, contractors and the like to the extent necessary in assisting with Licensor’s activities contemplated by this Agreement; provided that such Persons shall be subject to obligations of confidentiality and non-use with respect to such Confidential Information of AbbVie substantially similar to the obligations of confidentiality and non-use of Licensor pursuant to this ARTICLE 9 (Confidentiality and Non-Disclosure) (with a duration of confidentiality and non-use obligations as appropriate that is no less than [] from the date of disclosure).
9.4    Use of Name. Except as expressly provided herein, neither Party shall mention or otherwise use the name, logo or Trademark of the other Party or any of its Affiliates (or any abbreviation or adaptation thereof) in any publication, press release, marketing and promotional material, or other form of publicity, without the prior written approval of the other Party in each instance. The restrictions imposed by this Section 9.4 (Use of Names) shall not prohibit either Party from making any disclosure identifying the other Party that, in the opinion of the disclosing Party’s counsel, is required by Applicable Law; provided that such Party shall submit the proposed disclosure identifying the other Party in writing to the other Party as far in advance as reasonably practicable (and in no event less than [] prior to the anticipated date of disclosure) so as to provide a reasonable opportunity to comment thereon.
9.5    Public Announcements. The Parties have agreed upon the content of a joint press release which shall be issued substantially in the form attached hereto as Schedule 9.5 (Press Release), the release of which the Parties shall coordinate in order to accomplish such release promptly upon execution of this Agreement. Neither Party shall issue any other public announcement, press release or other public disclosure regarding this Agreement or its subject matter without the other Party’s prior written consent, except for any such disclosure that is, in the opinion of the disclosing Party’s counsel, required by Applicable Law or the rules of a stock exchange on which the securities of the disclosing Party are listed (or to which an application for listing has been submitted). In the event a Party is, in the opinion of its counsel, required by Applicable Law or the rules of a stock exchange on which its securities are listed (or to which an application for listing has been submitted) to make such a public disclosure, such Party shall submit the proposed disclosure in writing to the other Party as far in advance as reasonably practicable (and in no event less than [] prior to the anticipated date of disclosure) so as to provide a reasonable opportunity to comment thereon. Notwithstanding the foregoing, AbbVie, its Sublicensees and its and their respective Affiliates shall have the right to publicly disclose research, development and commercial information (including with respect to regulatory matters) regarding the Licensed Compound and Licensed Products; provided that (a) such disclosure is subject to the provisions of ARTICLE 9 (Confidentiality and Non-Disclosure) and Section 9.7 (Return of Confidential Information) with respect to Licensor’s Confidential Information and (b) AbbVie shall not use the name of Licensor (or insignia, or any contraction, abbreviation or adaptation thereof) without Licensor’s prior written permission.
9.6    Publications. Each Party recognizes that the publication of papers regarding results of, and other information regarding, activities under this Agreement, including oral presentations and abstracts, may be beneficial to both Parties; provided such publications are subject to reasonable controls to protect





Confidential Information. In particular, it is the intent of the Parties to maintain the confidentiality of any Confidential Information included in any invention disclosures or draft Patent application until such Patent application has been filed. Accordingly, each Party shall have the right to review and approve any paper proposed for publication by the other Party, including any oral presentation or abstract, that contains Clinical Data or pertains to results of Clinical Studies, or other studies with respect to the Licensed Compounds or Licensed Products, or that includes Confidential Information of the other Party; provided that following the Option Effective Date, (a) [] have the right to publish papers regarding results of, and other information regarding, activities under this Agreement, including oral presentations and abstracts, [], and (b) [] have the right to review and approve any paper proposed for publication by AbbVie under this Agreement, including any oral presentation or abstract, []. Before any such paper or abstract is submitted for publication or an oral presentation is made, the publishing or presenting Party shall deliver a then-current copy of the paper, abstract or materials for oral presentation to the other Party at least [] prior to submitting the paper, abstract or materials to a publisher or making the presentation. The other Party shall review any such paper and give its comments to the publishing Party within [] of the delivery of such paper to the other Party. With respect to oral presentation materials and abstracts, the other Party shall make reasonable efforts to expedite review of such materials and abstracts, and shall return such items as soon as practicable to the publishing or presenting Party with appropriate comments, if any, but in no event later than [] from the date of delivery to the other Party. Failure to respond within such [] shall be deemed approval to publish or present. If approval is not given or deemed given, either Party may refer the matter to the JGC for resolution together with the reasons for withholding approval. Notwithstanding the foregoing, the publishing or presenting Party shall comply with the other Party’s request to delete references to the other Party’s Confidential Information in any paper, abstract or materials and shall withhold publication of any such paper, abstract or materials or any presentation of same for an additional [] in order to permit the Parties to obtain Patent protection if either Party deems it necessary. Any publication shall include recognition of the contributions of the other Party according to standard practice for assigning scientific credit, either through authorship or acknowledgement, as may be appropriate.
9.7    Return of Confidential Information. Upon the effective date of the termination of this Agreement for any reason, a Party may request in writing, and the other Party shall either, with respect to Confidential Information (in the event of termination of this Agreement with respect to one (1) or more countries, other jurisdictions or Terminated Territories but not in its entirety, solely to the extent relating specifically and exclusively to such countries, other territories or Terminated Territories): (a) as soon as reasonably practicable, destroy all copies of such Confidential Information in the possession of the other Party and confirm such destruction in writing to the requesting Party; or (b) as soon as reasonably practicable, deliver to the requesting Party, at the other Party’s expense, all copies of such Confidential Information in the possession of the other Party; provided that the other Party shall be permitted to retain one (1) copy of such Confidential Information for the sole purpose of performing any continuing obligations hereunder, as required by Applicable Law, or for archival purposes. Notwithstanding the foregoing, the other Party also shall be permitted to retain such additional copies of or any computer records or files containing such Confidential Information that have been created solely by the other Party’s automatic archiving and back-up procedures, to the extent created and retained in a manner consistent with the other Party’s standard archiving and back-up procedures, but not for any other use or purpose.
9.8    Survival. All Confidential Information shall continue to be subject to the terms of this Agreement for the period set forth in Section 9.2 (Confidentiality Obligations).
ARTICLE 10
REPRESENTATIONS AND WARRANTIES





10.1    Mutual Representations and Warranties. Licensor and AbbVie each represents and warrants to the other, as of the Effective Date, and covenants, as follows:
10.1.1    Organization. It is a duly organized, validly existing and in good standing under the laws of the jurisdiction of its organization, and has all requisite power and authority, corporate or otherwise, to execute, deliver and perform this Agreement.
10.1.2    Authorization. The execution and delivery of this Agreement and the performance by it of the transactions contemplated hereby have been duly authorized by all necessary corporate action, and do not violate (a) such Party’s charter documents, bylaws or other organizational documents, (b) in any material respect, any agreement, instrument or contractual obligation to which such Party is bound, (c) any requirement of any Applicable Law, or (d) any order, writ, judgment, injunction, decree, determination or award of any court or governmental agency presently in effect applicable to such Party.
10.1.3    Binding Agreement. This Agreement is a legal, valid and binding obligation of such Party enforceable against it in accordance with its terms and conditions, subject to the effects of bankruptcy, insolvency or other laws of general application affecting the enforcement of creditor rights, judicial principles affecting the availability of specific performance and general principles of equity (whether enforceability is considered a proceeding at law or equity).
10.1.4    No Inconsistent Obligation. It is not under any obligation, contractual or otherwise, to any Person that conflicts with or is inconsistent in any material respect with the terms of this Agreement, or that would impede the diligent and complete fulfillment of its obligations hereunder.
10.2    Additional Representations, Warranties and Covenants of Licensor. Licensor further represents, warrants and covenants, as applicable, to AbbVie, as of (a) the Effective Date and (b) the Option Effective Date, except as set forth in the corresponding section of Schedule 10.2 (Licensor Disclosure Schedule) or of the updated disclosure schedule delivered by Licensor to AbbVie under Section 4.2 (Option Exercise):
10.2.1    All Licensor Product Patents existing as of the Effective Date are listed on Schedule 10.2.1 (Existing Licensor Product Patents), which schedule shall be updated and delivered by Licensor to AbbVie in accordance with Section 4.2 (Option Exercise) to include all Licensor Product Patents existing as of the delivery by Licensor to AbbVie of the Option Exercise Data Package. All Existing Patents are subsisting and are not invalid or unenforceable, in whole or in part, are being diligently prosecuted in the respective patent offices in the Territory in accordance with Applicable Law, and have been filed and maintained properly and correctly, including execution and recordal of all inventor assignment agreements where necessary, and all applicable fees have been paid on or before the due date for payment.
10.2.2    There are no claims, judgments or settlements against, or amounts with respect thereto, owed by Licensor or any of its Affiliates relating to (a) (i) [], (b) the Existing Patents or (c) the Licensor Know-How. No claim or litigation has been brought or threatened by any Person alleging, and Licensor has no knowledge of any claim, whether or not asserted, that (x) the Licensor Patents or the Licensor Know-How are invalid or unenforceable or (y) the Regulatory Documentation, the Licensor Patents or the Licensor Know-How or the disclosing, copying, using, making, assigning or licensing of the Regulatory Documentation, the Licensor Patents or the Licensor Know-How violates, infringes, misappropriates or otherwise conflicts or interferes with any intellectual property or proprietary right of any Person. To Licensor’s knowledge, the Development, Commercialization or Exploitation of the Licensed Compound and Licensed Products as contemplated herein does not violate, infringe, misappropriate or otherwise conflict or interfere with any intellectual property or proprietary right of any Person. To Licensor’s knowledge, no Person is infringing or





threatening to infringe or misappropriating or threatening to misappropriate the Existing Patents, the Licensor Know-How or [].
10.2.3    Licensor is the sole and exclusive owner of the entire right, title and interest in the Existing Patents and the Licensor Know-How free of any encumbrance, lien or claim of ownership by any Third Party. Licensor is entitled to grant the licenses specified herein. The grant of any license by Licensor specified herein does not require Licensor to notify any Third Party, or exercise any right, perform any obligation or otherwise satisfy any requirement under any agreement between Licensor and a Third Party.
10.2.4    Licensor has the right to use all Information and Patents necessary to Develop and Manufacture the Licensed Compound and the Licensed Products as contemplated under the Initial Development Plan and the aGVHD Clinical Study, and such Development and Manufacture are not subject to any other license or agreement to which Licensor or any of its Affiliates is a party.
10.2.5    During the Term, neither Licensor nor any of its Affiliates shall encumber or diminish the rights granted to AbbVie hereunder with respect to the Licensor Patents, Licensor Know-How and Regulatory Documentation.
10.2.6    To Licensor’s knowledge, true, complete and correct copies of: (a) the file wrapper, inventor assignment documents and other documents and materials relating to the prosecution, defense, maintenance, validity and enforceability of the Existing Patents; (b) (i) as of the Effective Date, all Existing Regulatory Documentation and (ii) as of the Option Effective Date, all Existing Regulatory Documentation and any Regulatory Documentation Controlled by Licensor or any of its Affiliates as of the Option Effective Date; and (c) all material adverse information with respect to the safety and efficacy of the Licensed Compound known to Licensor, in each case ((a) through (c)), have been provided or made available to AbbVie.
10.2.7    Licensor and its Affiliates have generated, prepared, maintained and retained all Regulatory Documentation that is required to be maintained or retained pursuant to and in accordance with good laboratory and clinical practice and Applicable Law, and all such information is true, complete and correct and what it purports to be.
10.2.8    The Existing Patents represent all Patents that are owned or Controlled by Licensor or its Affiliates and cover or claim ALPN-101 or the Exploitation thereof.
10.2.9    Each Person who has or has had any rights in or to any Existing Patents or any Licensor Know-How, has assigned and has executed an agreement assigning its entire right, title and interest in and to such Existing Patents and Licensor Know-How to Licensor. To Licensor’s knowledge, no current officer, employee, agent or consultant of Licensor or any of its Affiliates is in violation of any term of any assignment or other agreement regarding the protection of Patents or other intellectual property or proprietary information of Licensor or such Affiliate or of any employment contract or any other contractual obligation relating to the relationship of any such Person with Licensor.
10.2.10    To Licensor’s knowledge, all works of authorship and all other materials subject to copyright protection included in Licensor Know-How are original and were either created by employees of Licensor or its Affiliates within the scope of their employment or are otherwise works made for hire, or all right, title and interest in and to such materials have been legally and fully assigned and transferred to Licensor or such Affiliate, and all rights in all inventions and discoveries, made, developed or conceived by any employee or independent contractor of Licensor or any of its Affiliates during the course of their employment (or other retention) by Licensor or such Affiliate and relating to or included in the Licensor Know-How or that are the subject of one (1) or more Existing Patents have been or shall be assigned in writing to Licensor or such Affiliate.





10.2.11    The Licensor Know-How has been kept confidential by Licensor and its Affiliates or has been disclosed to Third Parties by Licensor and its Affiliates only under terms of confidentiality. To the knowledge of Licensor and its Affiliates, no breach of such confidentiality has been committed by any Third Party.
10.2.12    Licensor has made (and shall make) available to AbbVie all Regulatory Documentation, Licensor Know-How and other Information in its possession or Control regarding or related to the Licensed Compound or the Licensed Products and all such Regulatory Documentation, Licensor Know-How and other Information are (and, if made available after the Effective Date, shall be) true, complete and correct. Neither Licensor nor any of its Affiliates is aware of any facts or circumstances that could adversely affect the acceptance, or the subsequent approval, by any Regulatory Authority of any filing, application or request for Regulatory Approval of any Licensed Product.
10.2.13    Neither Licensor nor any of its Affiliates, nor any of its or their respective officers, employees or agents, has made an untrue statement of material fact or fraudulent statement to the FDA or any other Regulatory Authority with respect to the Development of the Licensed Compound or the Licensed Products, failed to disclose a material fact required to be disclosed to the FDA or any other Regulatory Authority with respect to the Development of the Licensed Compound or the Licensed Products, or committed an act, made a statement or failed to make a statement with respect to the Development of the Licensed Compound or the Licensed Products that could reasonably be expected to provide a basis for the FDA to invoke its policy respecting “Fraud, Untrue Statements of Material Facts, Bribery, and Illegal Gratuities”, set forth in 56 Fed. Reg. 46191 (September 10, 1991) and any amendments thereto or any analogous laws or policies in the Territory.
10.2.14    Licensor and its Affiliates have conducted, and their respective contractors and consultants have conducted, all Development of the Licensed Compound and the Licensed Products that they have conducted prior to the Effective Date in accordance with Applicable Law. Licensor has conducted, and has caused its contractors and consultants to conduct, any and all pre-clinical and Clinical Studies related to the Licensed Compound and Licensed Products in accordance with Applicable Law. Licensor and its Affiliates have employed (and, with respect to such tests and studies that Licensor shall perform, shall employ) Persons with appropriate education, knowledge and experience to conduct and to oversee the conduct of the pre-clinical and Clinical Studies with respect to the Licensed Compound and Licensed Products.
10.2.15    There are no amounts that shall be required to be paid to a Third Party in consideration for any rights as a result of the Development or Commercialization of Licensed Compound or the Licensed Products that arise out of any agreement to which Licensor or any of its Affiliates is a party.
10.2.16    Licensor represents and warrants that it has not ever been, is not currently, nor is it the subject of a proceeding that could lead to it becoming a Debarred Entity, Excluded Entity or Convicted Entity and it shall not use in any capacity, in connection with the obligations to be performed under this Agreement, any person who is a Debarred Individual, Excluded Individual or a Convicted Individual.  Licensor further covenants that if, during the Term, it becomes a Debarred Entity, Excluded Entity or Convicted Entity or if any employee or agent performing any of its obligations hereunder becomes a Debarred Individual, Excluded Individual or a Convicted Individual, Licensor shall immediately notify AbbVie and AbbVie shall have the right to terminate this Agreement.  This provision shall survive termination or expiration of this Agreement. For purposes of this provision, the following definitions shall apply:
(a)    A “Debarred Individual” is an individual who has been debarred by the FDA pursuant to 21 U.S.C. §335a (a) or (b) from providing services in any capacity to a person that has an approved or pending drug or biological product application.





(b)    A “Debarred Entity” is a corporation, partnership or association that has been debarred by the FDA pursuant to 21 U.S.C. §335a (a) or (b) from submitting or assisting in the submission of any abbreviated drug application, or a subsidiary or affiliate of a Debarred Entity.
(c)    An “Excluded Individual” or “Excluded Entity” is (i) an individual or entity, as applicable, who has been excluded, debarred, suspended or is otherwise ineligible to participate in federal health care programs such as Medicare or Medicaid by the Office of the Inspector General (OIG/HHS) of the U.S. Department of Health and Human Services, or (ii) is an individual or entity, as applicable, who has been excluded, debarred, suspended or is otherwise ineligible to participate in federal procurement and non-procurement programs, including those produced by the U.S. General Services Administration (GSA).
(d)    A “Convicted Individual” or “Convicted Entity” is an individual or entity, as applicable, who has been convicted of a criminal offense that falls within the ambit of 21 U.S.C. §335a (a) or 42 U.S.C. §1320a - 7(a), but has not yet been excluded, debarred, suspended or otherwise declared ineligible.  
10.2.17    Licensor and its Affiliates (a) have complied and shall comply with all Applicable Law governing bribery, money laundering and other corrupt practices and behavior (including, as applicable, the U.S. Foreign Corrupt Practices Act and UK Bribery Act) and (b) shall not, directly or indirectly, offer, give, pay, promise to pay or authorize the payment of any bribes, kickbacks, influence payments or other unlawful or improper inducements to any Person in whatever form (including gifts, travel, entertainment, contributions or anything else of value).
10.2.18    Licensor and its Affiliates have and undertake that they shall continue to update and maintain during the Term an internal compliance program under which Licensor (or its Affiliates’) employees are required to comply with all Applicable Law, including applicable local and international anti-bribery and anti-corruption laws and regulations.
10.2.19    If AbbVie so requests, Licensor covenants and agrees that Third Party employees and agents providing services on behalf of Licensor pursuant to this Agreement shall attend training provided by AbbVie on applicable anti-bribery and anti-corruption laws and the requirements of this Agreement.
10.2.20    Licensor shall have obtained from each of its Affiliates, sublicensees, employees and agents, and from the employees and agents of its Affiliates, sublicensees and agents, who are participating in the Exploitation of the Licensed Compound or Licensed Products or who otherwise have access to any Confidential Information of AbbVie, rights to any and all Information that relate to the Licensed Compound or Licensed Products, in each case prior to the performance of or participation in such activities, such that AbbVie shall, by virtue of this Agreement, receive from Licensor, without payments beyond those required by ARTICLE 6 (Payments and Records), the licenses and other rights granted to AbbVie hereunder.
10.2.21    The inventions claimed or covered by the Existing Patents (a) were not conceived, discovered, developed or otherwise made in connection with any research activities funded, in whole or in part, by the federal government of the United States or any agency thereof, and (b) are not a “subject invention” as that term is described in 35 U.S.C. Section 201(f).
10.2.22    To Licensor’s knowledge, the Processing of Personal Data by Licensor (including, without limitation, any transfer of Personal Data across national borders) in connection with the Licensed Compound and Licensed Products is and has been in compliance with Data Security and Privacy Laws in all countries and jurisdictions in the Territory, all privacy related consents and notices that apply to the Licensed Compound and Licensed Products and the requirements of any contract or codes of conduct to which Licensor is a party (“Privacy and Security Obligations”). To Licensor’s knowledge, Licensor has provided





all necessary privacy notices related to research participants and has an appropriate legal basis under Data Security and Privacy Laws to Process all Personal Data in connection with the Licensed Compound and Licensed Products. Licensor has commercially reasonable physical, technical, organizational and administrative security measures and policies in place to protect all Personal Data collected by it or on its behalf from and against unauthorized Processing. Licensor is and has complied in all material respects with all Privacy and Security Obligations relating to data breach reporting and notification obligations.
10.2.23    In the last [], Licensor has not received written notice of any alleged material violation from a Regulatory Authority or other Third Party of any Privacy and Security Obligations and has no knowledge of facts that would give rise to such a violation. Licensor is not under investigation by any Regulatory Authority for a violation of Data Security and Privacy Laws.
10.2.24    The execution, delivery and performance of this Agreement and the other agreements and instruments contemplated hereby, and the consummation of the transactions contemplated hereunder, comply with the Privacy and Security Obligations. Licensor has the full right and authority to provide to AbbVie the Personal Data Processed by Licensor in connection with the Licensed Compound and Licensed Products for the purposes contemplated in this Agreement.
10.2.25    In the event the consummation of the Agreement and the transactions contemplated herein require Licensor to transfer Personal Data across national borders, Licensor shall ensure the lawful export of Personal Data, the terms of which may be outlined in a separate agreement between AbbVie and Licensor.
10.3    DISCLAIMER OF WARRANTIES. EXCEPT FOR THE EXPRESS WARRANTIES SET FORTH HEREIN, NEITHER PARTY MAKES ANY REPRESENTATIONS OR GRANTS ANY WARRANTIES, EXPRESS OR IMPLIED, EITHER IN FACT OR BY OPERATION OF LAW, BY STATUTE OR OTHERWISE, AND EACH PARTY SPECIFICALLY DISCLAIMS ANY OTHER WARRANTIES, WHETHER WRITTEN OR ORAL, OR EXPRESS OR IMPLIED, INCLUDING ANY WARRANTY OF QUALITY, MERCHANTABILITY OR FITNESS FOR A PARTICULAR USE OR PURPOSE.
ARTICLE 11
INDEMNITY
11.1    Indemnification of Licensor. AbbVie shall indemnify Licensor, its Affiliates and its and their respective directors, officers, employees and agents (the “Licensor Indemnitees”) and defend and save each of them harmless from and against any and all losses, damages, liabilities, penalties, costs and expenses (including reasonable attorneys’ fees and expenses) (collectively, “Losses”) in connection with any and all suits, investigations, claims or demands of Third Parties (collectively, “Third Party Claims”) incurred by or rendered against the Licensor Indemnitees arising from or occurring as a result of:
(a)    the breach by AbbVie or its Affiliates of this Agreement;
(b)    the negligence, reckless conduct or willful misconduct on the part of AbbVie or its Affiliates or their respective directors, officers, employees and agents in performing its or their obligations under this Agreement;





(c)    the Development, Manufacture or other Exploitation of the Licensed Compound or Licensed Products by AbbVie or its Affiliates or Sublicensees anywhere in the world following the Option Effective Date; and
except, in the case of clauses (a) through (c) above, for those Losses for which Licensor, in whole or in part, has an obligation to indemnify AbbVie pursuant to Section 11.2 (Indemnification of AbbVie) hereof, as to which Losses each Party shall indemnify the other to the extent of their respective liability for such Losses.
11.2    Indemnification of AbbVie. Licensor shall indemnify AbbVie, its Affiliates and its and their respective directors, officers, employees and agents (the “AbbVie Indemnitees”) and defend and save each of them harmless from and against any and all Losses in connection with any and all Third Party Claims incurred by or rendered against the AbbVie Indemnitees arising from or occurring as a result of:
(a)    the breach by Licensor or its Affiliates of this Agreement;
(b)    the negligence, reckless conduct or willful misconduct on the part of Licensor or its Affiliates or its or their respective directors, officers, employees and agents in performing its obligations under this Agreement;
(c)    the conduct of the aGVHD Clinical Study at any time or the Development, Manufacture or other Exploitation of the Licensed Compound or Licensed Products by Licensor, Affiliates or its licensee anywhere in the world prior to the Option Effective Date;
(d)    []; and
except, in the case of clauses (a) through (d) above, for those Losses for which AbbVie, in whole or in part, has an obligation to indemnify Licensor pursuant to Section 11.1 (Indemnification of Licensor) hereof, as to which Losses each Party shall indemnify the other to the extent of their respective liability for the Losses.
11.3    Notice of Claim. All indemnification claims in respect of a Party, its Affiliates or their respective directors, officers, employees and agents shall be made solely by such Party to this Agreement (the “Indemnified Party”). The Indemnified Party shall give the indemnifying Party prompt written notice (an “Indemnification Claim Notice”) of any Losses or discovery of fact upon which such Indemnified Party intends to base a request for indemnification under this ARTICLE 11 (Indemnity), provided that any delay in providing such notice shall not constitute a waiver or release of, or otherwise limit, the Indemnified Party’s rights to indemnification, except to the extent that such delay materially prejudices the indemnifying Party’s ability to defend against the relevant claims. Each Indemnification Claim Notice must contain a description of the claim and the nature and amount of the Loss (to the extent that the nature and amount of such Loss is known at such time). The Indemnified Party shall furnish promptly to the indemnifying Party copies of all papers and official documents received in respect of any Losses and Third Party Claims.
11.4    Control of Defense.
11.4.1    In General. Subject to the provisions of Sections 7.4 (Infringement Claims by Third Parties), 7.5 (Invalidity or Unenforceability Defenses or Actions) and 7.7 (Product Trademarks), at its option, the indemnifying Party may assume the defense of any Third Party Claim by giving written notice to the Indemnified Party within [] after the indemnifying Party’s receipt of an Indemnification Claim Notice. The assumption of the defense of a Third Party Claim by the indemnifying Party shall not be construed as an





acknowledgment that the indemnifying Party is liable to indemnify the Indemnified Party in respect of such Third Party Claim, nor shall it constitute a waiver by the indemnifying Party of any defenses it may assert against the Indemnified Party’s claim for indemnification. Upon assuming the defense of a Third Party Claim, the indemnifying Party may appoint as lead counsel in the defense of such Third Party Claim any legal counsel selected by the indemnifying Party which shall be reasonably acceptable to the Indemnified Party. In the event the indemnifying Party assumes the defense of a Third Party Claim, the Indemnified Party shall immediately deliver to the indemnifying Party all original notices and documents (including court papers) received by the Indemnified Party in connection with such Third Party Claim. Should the indemnifying Party assume the defense of a Third Party Claim, except as provided in Section 11.4.2 (Right to Participate in Defense), the indemnifying Party shall not be liable to the Indemnified Party for any legal expenses subsequently incurred by such Indemnified Party in connection with the analysis, defense or settlement of such Third Party Claim unless specifically requested in writing by the indemnifying Party. In the event that it is ultimately determined that the indemnifying Party is not obligated to indemnify, defend or hold harmless the Indemnified Party from and against a Third Party Claim, the Indemnified Party shall reimburse the indemnifying Party for any Losses incurred by the indemnifying Party in its defense of such Third Party Claim.
11.4.2    Right to Participate in Defense. Without limiting Section 11.4.1 (In General), any Indemnified Party shall be entitled to participate in, but not control, the defense of such Third Party Claim and to employ counsel of its choice for such purpose; provided that such employment shall be at the Indemnified Party’s own expense unless (a) the employment thereof, and the assumption by the indemnifying Party of such expense, has been specifically authorized by the indemnifying Party in writing, (b) the indemnifying Party has failed to assume the defense and employ counsel in accordance with Section 11.4.1 (In General) (in which case the Indemnified Party shall control the defense), or (c) the interests of the Indemnified Party and the indemnifying Party with respect to such Third Party Claim are sufficiently adverse to prohibit the representation by the same counsel of both Parties under Applicable Law, ethical rules or equitable principles.
11.4.3    Settlement. With respect to any Losses relating solely to the payment of money damages in connection with a Third Party Claim and that shall not result in the Indemnified Party’s becoming subject to injunctive or other relief or otherwise adversely affecting the business of the Indemnified Party in any manner, and as to which the indemnifying Party shall have acknowledged in writing the obligation to indemnify the Indemnified Party hereunder, the indemnifying Party shall have the sole right to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss, on such terms as the indemnifying Party, in its sole discretion, shall deem appropriate. With respect to all other Losses in connection with Third Party Claims, where the indemnifying Party has assumed the defense of a Third Party Claim in accordance with Section 11.4.1 (In General), the indemnifying Party shall have authority to consent to the entry of any judgment, enter into any settlement or otherwise dispose of such Loss; provided that it obtains the prior written consent of the Indemnified Party (which consent shall not be unreasonably withheld, conditioned or delayed). If the indemnifying Party does not assume and conduct the defense of a Third Party Claim as provided above, the Indemnified Party may defend against such Third Party Claim. Regardless of whether the indemnifying Party chooses to defend or prosecute any Third Party Claim, no Indemnified Party shall admit any liability with respect to, or settle, compromise or dispose of, any Third Party Claim without the prior written consent of the indemnifying Party, which consent shall not to be unreasonably withheld, conditioned or delayed. The indemnifying Party shall not be liable for any settlement, compromise or other disposition of a Loss by an Indemnified Party that is reached without the written consent of the indemnifying Party, which consent shall not be unreasonably withheld, conditioned or delayed.
11.4.4    Cooperation. The Indemnified Party shall, and shall cause each indemnitee to, cooperate in the defense or prosecution thereof and shall furnish such records, information and testimony, provide such witnesses and attend such conferences, discovery proceedings, hearings, trials and appeals as may be reasonably requested in connection therewith. Such cooperation shall include access during normal business





hours afforded to the indemnifying Party to, and reasonable retention by the Indemnified Party of, records and information that are reasonably relevant to such Third Party Claim, and making Indemnified Parties and other employees and agents available on a mutually convenient basis to provide additional information and explanation of any materials provided hereunder, and the indemnifying Party shall reimburse the Indemnified Party for all its reasonable out-of-pocket expenses in connection therewith.
11.4.5    Expenses. Except as provided above, the reasonable and verifiable costs and expenses, including fees and disbursements of counsel, incurred by the Indemnified Party in connection with any Third Party Claim shall be reimbursed on a Calendar Quarter basis in arrears by the indemnifying Party, without prejudice to the indemnifying Party’s right to contest the Indemnified Party’s right to indemnification and subject to refund in the event the indemnifying Party is ultimately held not to be obligated to indemnify the Indemnified Party.
11.5    Special, Indirect, and Other Losses. EXCEPT (A) FOR WILLFUL MISCONDUCT, (B) FOR A PARTY’S BREACH OF ITS OBLIGATIONS UNDER ARTICLE 9 (CONFIDENTIALITY AND NON-DISCLOSURE) [], (C) AS PROVIDED UNDER SECTION 13.11 (EQUITABLE RELIEF) AND (D) TO THE EXTENT ANY SUCH DAMAGES ARE REQUIRED TO BE PAID TO A THIRD PARTY AS PART OF A CLAIM FOR WHICH A PARTY PROVIDES INDEMNIFICATION UNDER THIS ARTICLE 11 (INDEMNITY), NEITHER PARTY NOR ANY OF ITS AFFILIATES SHALL BE LIABLE FOR INDIRECT, INCIDENTAL, SPECIAL, EXEMPLARY, PUNITIVE OR CONSEQUENTIAL DAMAGES, INCLUDING LOSS OF PROFITS OR BUSINESS INTERRUPTION, HOWEVER CAUSED AND ON ANY THEORY OF LIABILITY, WHETHER IN CONTRACT, TORT, NEGLIGENCE, BREACH OF STATUTORY DUTY OR OTHERWISE IN CONNECTION WITH OR ARISING IN ANY WAY OUT OF THE TERMS OF THIS AGREEMENT OR THE TRANSACTIONS CONTEMPLATED HEREBY OR THE USE OF THE LICENSED COMPOUND OR LICENSED PRODUCT, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGE.
11.6    Insurance. Each Party shall obtain and carry in full force and effect the minimum insurance requirements set forth herein from an insurance company properly licensed to provide the required insurance. Such insurance (a) shall be primary insurance with respect to each Party’s own participation under this Agreement, (b) shall be issued by a recognized insurer [], or an insurer pre-approved in writing by the other Party, and (c) shall list the other Party as an additional insured under the General Liability Insurance. Each Party shall bear its own costs for obtaining and maintaining insurance with respect to each Party’s own participation under this Agreement.
11.6.1    Types and Minimum Limits. The types of insurance and minimum limits shall be:
(a)    [].
(b)    [].
(c)    [].
Each Party shall at all times maintain in force any insurance policy that is required by any federal, state, national or other such Applicable Law that may govern or have jurisdiction over any provision of this Agreement and at all times remain fully compliant with any such Applicable Law.





11.6.2    Certificates of Insurance. Upon request by a Party, the other Party shall provide Certificates of Insurance evidencing compliance with the above requirements in this Section 11.6 (Insurance). The insurance policies shall be under an occurrence form, but if only a claims-made form is available to a Party, then such Party shall continue to maintain such insurance after the expiration or termination of this Agreement for the longer of (a) a period of [] following termination or expiration of this Agreement in its entirety, or (b) with respect to a particular Party, last sale of a Licensed Product (or but for expiration or termination, would be considered a Licensed Product) sold under this Agreement by a Party.
11.6.3    Self-Insurance. Notwithstanding the foregoing, AbbVie may self-insure, in whole or in part, the insurance requirements described above.
ARTICLE 12
TERM AND TERMINATION
12.1    Term. This Agreement shall commence on the Effective Date and, unless earlier terminated in accordance herewith, shall continue in force and effect until: (a) in the event that the Option is not exercised by AbbVie during the Option Exercise Period, the first day following the end of the Option Exercise Period or (b) in the event that the Option is exercised by AbbVie during the Option Exercise Period, the date of expiration of the last Royalty Term for the last Licensed Product in the last country in the Territory (such period, the “Term”).
12.2    Termination for Material Breach.
12.2.1    Material Breach. If a Party (the “Non-Breaching Party”) believes that the other Party (the “Breaching Party”) has materially breached one (1) or more of its material obligations under this Agreement, then the Non-Breaching Party may deliver notice of such material breach to the Breaching Party (a “Default Notice”). If the Breaching Party does not dispute that it has committed a material breach of one (1) or more of its material obligations under this Agreement, then if the Breaching Party fails to cure such material breach, or fails to take steps as would be considered reasonable to effectively cure such material breach, within ninety (90) days after receipt of the Default Notice, or if such compliance cannot be fully achieved within such ninety (90)-day period and the Breaching Party has failed to commence compliance or has failed to use diligent efforts to achieve full compliance as soon thereafter as is reasonably possible, the Non-Breaching Party may terminate this Agreement upon written notice to the Breaching Party. If the Breaching Party disputes that it has materially breached this Agreement, such dispute shall be resolved pursuant to Section 13.7 (Dispute Resolution), and if the Breaching Party is determined to be in material breach (a “Breach Determination”), then if the Breaching Party fails to complete the actions specified by the Breach Determination to cure such material breach within ninety (90) days after such ruling, or if such compliance cannot be fully achieved within such ninety (90) day period and the Breaching Party has failed to commence compliance or has failed to use diligent efforts to achieve full compliance as soon thereafter as is reasonably possible, then the Non-Breaching Party may terminate this Agreement upon written notice to the Breaching Party.
12.2.2    Material Breach Related to Diligence in a Major Market. Notwithstanding Section 12.2 (Material Breach), if a material breach and failure to cure contemplated by Section 12.2 (Material Breach) is with respect to AbbVie’s diligence obligations under Section 5.7 (AbbVie Diligence) with respect to any Major Market but not all Major Markets, Licensor shall not have the right to terminate this Agreement in its entirety, but shall have the right to terminate this Agreement solely with respect to such Major Market(s). If such material breach is as to all Major Markets, then such material breach shall be deemed a material breach as to this Agreement taken as a whole.





12.3    Termination Right by AbbVie For Convenience. AbbVie may terminate this Agreement in its entirety, or on a country-by-country or other jurisdiction-by-other jurisdiction basis, for any or no reason, upon ninety (90) days’ prior written notice to Licensor.
12.4    Termination for Insolvency. In the event that either Party (a) files for protection under bankruptcy or insolvency laws, (b) makes an assignment for the benefit of creditors, (c) appoints or suffers appointment of a receiver or trustee over substantially all of its property that is not discharged within [] after such filing, (d) proposes a written agreement of composition or extension of its debts, (e) proposes or is a party to any dissolution or liquidation, (f) files a petition under any bankruptcy or insolvency act or has any such petition filed against it that is not discharged within [] of the filing thereof, or (g) admits in writing its inability generally to meet its obligations as they fall due in the general course, then the other Party may terminate this Agreement in its entirety effective immediately upon written notice to such Party.
12.5    Rights in Bankruptcy.
12.5.1    Applicability of 11 U.S.C. § 365(n). All rights and licenses (collectively, the “Intellectual Property”) granted under or pursuant to this Agreement, including all rights and licenses to use improvements or enhancements developed during the Term, are intended to be, and shall otherwise be deemed to be, for purposes of Section 365(n) of the United States Bankruptcy Code (the “Bankruptcy Code”) or any analogous provisions in any other country or jurisdiction, licenses of rights to “intellectual property” as defined under Section 101(35A) of the Bankruptcy Code.  The Parties agree that the licensee of such Intellectual Property under this Agreement shall retain and may fully exercise all of its rights and elections under the Bankruptcy Code, including Section 365(n) of the Bankruptcy Code, or any analogous provisions in any other country or jurisdiction.  All of the rights granted to either Party under this Agreement shall be deemed to exist immediately before the occurrence of any bankruptcy case in which the other Party is the debtor.
12.5.2    Rights of non-Debtor Party in Bankruptcy. If a bankruptcy proceeding is commenced by or against either Party under the Bankruptcy Code or any analogous provisions in any other country or jurisdiction, the non-debtor Party shall be entitled to a complete duplicate of (or complete access to, as appropriate) any Intellectual Property and all embodiments of such Intellectual Property, which, if not already in the non-debtor Party’s possession, shall be delivered to the non-debtor Party within [] of such request; provided that the debtor Party is excused from its obligation to deliver the Intellectual Property to the extent the debtor Party continues to perform all of its obligations under this Agreement and the Agreement has not been rejected pursuant to the Bankruptcy Code or any analogous provision in any other country or jurisdiction.
12.6    Termination for Failure or Delay to Obtain HSR Clearance. This Agreement shall terminate (a) upon notice given by AbbVie to Licensor in the event that either Party receives a second request for additional information under the HSR Act (a “Second Request”) and AbbVie delivers such notice of termination within ten (10) Business Days after becoming aware of the Second Request or such notice, as the case may be, or (b) upon notice given by AbbVie to Licensor in the event that the Option Effective Date has not occurred within one hundred eighty (180) days after the date on which the HSR Filing is made and such Party delivers notice of termination within ten (10) Business Days after the end of such one hundred eighty (180)‑day period.
12.7    AbbVie Rights in Lieu of Termination. If, at any time during the Term, AbbVie has the right to terminate this Agreement pursuant to Section 12.2.1 (Material Breach) (subject to Licensor’s rights to dispute any such breach claim therein and, if Licensor does exercise such dispute rights, effective only upon





a Breach Determination) or Section 12.4 (Termination for Insolvency), then AbbVie may, by written notice to Licensor, in lieu of such termination right, instead elect to continue this Agreement as modified by this Section 12.6 (AbbVie Rights in Lieu of Termination), in which case:
12.7.1    If such termination right arises prior the completion of the activities under the then-current Development Plan, AbbVie shall have the right, in its sole and absolute discretion, by written notice delivered to Licensor, to conduct any activities allocated to Licensor under such Development Plan and all such activities under such plan shall be deemed to be allocated to AbbVie for the purposes of this Agreement. Licensor shall reimburse AbbVie for all out-of-pocket costs incurred by AbbVie in the conduct of such activities, up to the amounts budgeted therefor in the Initial Development Plan, and, in the event that as of the time of such termination right arising, the Option has not been exercised under this Agreement, Licensor’s obligations under Section 5.1 (Technology Transfer) shall apply, mutatis mutandis, as if AbbVie had exercised the Option as of the date of such notice;
12.7.2    In the event that AbbVie delivers notice to Licensor of its exercise of the right to conduct activities allocated to Licensor under the Development Plan prior to the Option Effective Date, Licensor hereby grants, and shall cause its Affiliates to grant, to AbbVie an exclusive license (including with regard to Licensor and its Affiliates), with the right to grant sublicenses through multiple tiers, under the Licensor Patents, the Licensor Know-How and the interest of Licensor and its Affiliates in the Joint Know-How and Joint Patents to conduct activities allocated to AbbVie under the Development Plan;
12.7.3    AbbVie shall have the right, at AbbVie’s sole election, to disband the JGC and terminate the activities of the JGC and thereafter undertake all activities assigned by this Agreement to the JGC solely and exclusively by itself;
12.7.4    if AbbVie has such right to terminate prior to the Option Effective Date, the Option shall remain in effect, but the Option Exercise Fee shall be reduced by an amount equal to fifty percent (50%) of the Option Exercise Fee;
12.7.5    if (a) AbbVie has such right to terminate prior to the Option Effective Date, the amount of any milestone payment payable by AbbVie to Licensor under Section 6.2 (Development Milestone by Licensor), Section 6.3 (Development Milestone by AbbVie) or Section 6.5 (Sales-Based Milestones) for any milestone event achieved after AbbVie has such right to terminate shall be reduced by fifty percent (50%) of the applicable amount set forth in Section 6.2 (Development Milestone by Licensor), Section 6.3 (Development Milestone by AbbVie) or Section 6.5 (Sales-Based Milestones), as applicable, or (b) if AbbVie has such right to terminate after the Option Effective Date, the amount of any milestone payment payable by AbbVie to Licensor under Section 6.2 (Development Milestone by Licensor), Section 6.3 (Development Milestone by AbbVie) or Section 6.5 (Sales-Based Milestones) for any milestone event achieved after AbbVie has such right to terminate shall be reduced by twenty-five percent (25%) of the applicable amount set forth in Section 6.2 (Development Milestone by Licensor), Section 6.3 (Development Milestone by AbbVie) or Section 6.5 (Sales-Based Milestones), as applicable;
12.7.6    AbbVie’s diligence obligations under Section 5.7 (AbbVie Diligence) shall terminate; and
12.7.7    all other provisions of this Agreement shall remain in full force and effect without change.





12.8    Termination in Entirety.
12.8.1    In the event of a termination of this Agreement in its entirety by AbbVie pursuant to Section 12.3 (Termination Right by AbbVie For Convenience) or Section 12.6 (Termination for Failure or Delay to Obtain HSR Clearance), or Licensor pursuant to Section 12.2 (Material Breach) or 12.4 (Termination for Insolvency):
(a)    all rights and licenses, including the Option, if unexercised, granted by Licensor hereunder shall immediately terminate;
(b)    all rights and licenses granted by AbbVie hereunder shall immediately terminate; and
(c)    at Licensor’s request, the Parties shall negotiate in good faith to agree upon the terms pursuant to which (i) AbbVie would []; (ii) AbbVie would assign to Licensor any of AbbVie’s rights in and to []; and (iii) AbbVie would provide and assign to Licensor or its designee any [].
12.8.2    In the event of a termination of this Agreement in its entirety by AbbVie pursuant to Section 12.2 (Material Breach) or 12.4 (Termination for Insolvency), all rights and licenses granted by either Party hereunder shall immediately terminate.
12.9    Termination of Terminated Territory. In the event of a termination of this Agreement with respect to a country or other jurisdiction by AbbVie pursuant to Section 12.3 (Termination Right by AbbVie For Convenience) or with respect to a Terminated Territory by Licensor pursuant to Section 12.2.2 (Material Breach Related to Diligence in a Major Market) (but not in the case of any termination of this Agreement in its entirety):
12.9.1    all rights and licenses granted by Licensor hereunder (a) shall automatically be deemed to be amended to exclude, if applicable and subject to Section 12.9.1(b) (Termination of Terminated Territory), the right to Develop, market, promote, detail, distribute, import, sell, offer for sale, file any Drug Approval Application for or seek any Regulatory Approval for the terminated Licensed Products in such country or other jurisdiction or Terminated Territory, as applicable, and (b) shall otherwise survive and continue in effect in such country or other jurisdiction or Terminated Territory, as applicable, solely for the purpose of furthering any Exploitation of the Licensed Products in the Territory excluding the Terminated Territory; and
12.9.2    at Licensor’s request, the Parties shall negotiate in good faith to agree upon the terms pursuant to which AbbVie [], as applicable, solely to [], as applicable.
12.10    Remedies. Except as otherwise expressly provided herein, termination of this Agreement (either in its entirety or with respect to one (1) or more country(ies) or other jurisdiction(s)) in accordance with the provisions hereof shall not limit remedies that may otherwise be available in law or equity.
12.11    Accrued Rights; Surviving Obligations.
12.11.1    Termination or expiration of this Agreement (either in its entirety or with respect to one (1) or more country(ies) or other jurisdiction(s)) for any reason shall be without prejudice to any rights that shall have accrued to the benefit of a Party prior to such termination or expiration. Such termination or expiration shall not relieve a Party from obligations that are expressly indicated to survive the termination





or expiration of this Agreement. Without limiting the foregoing, Sections 2.1.7 (Records), 4.7 (Sublicense Survival), 4.9 (No Implied License), 6.14 (Confidentiality), 6.15 (No Other Compensation), 6.16 (No Limitation), 7.1.2 (Ownership of Joint Patents and Joint Know-How), 7.2.3 (Maintenance and Prosecution of Joint Patents), 7.2.4 (Cooperation) (solely to the extent such provision relates to Joint Patents), 7.2.7 (UPC Opt-Out and Opt-In) (solely to the extent such provision relates to Joint Patents), 7.3.2 (Enforcement of Joint Patents), 7.3.5 (Recovery) (solely to the extent such provision relates to Joint Patents), 7.5.2 (Joint Patents), 7.5.3 (Cooperation) (solely to the extent such provision relates to Joint Patents), 7.11 (Common Interest), 10.3 (Disclaimer of Warranties), 12.5 (Rights in Bankruptcy), 12.8 (Termination in Entirety), 12.9 (Termination of Terminated Territory), 12.10 (Remedies), 12.11 (Accrued Rights; Surviving Obligations) and ARTICLE 1 (Definitions), ARTICLE 8 (Data Privacy and Security), ARTICLE 9 (Confidentiality and Non-Disclosure), ARTICLE 11 (Indemnity) and ARTICLE 13 (Miscellaneous) shall survive the termination or expiration of this Agreement for any reason. If this Agreement is terminated with respect to a country, other jurisdiction or a Terminated Territory but not in its entirety, then following such termination, the foregoing provisions of this Agreement shall remain in effect with respect to such country, other jurisdiction or Terminated Territory, as applicable, (to the extent they would survive and apply in the event the Agreement expires or is terminated in its entirety) and all provisions not surviving in accordance with the foregoing shall terminate upon termination of this Agreement with respect to such country, other jurisdiction or Terminated Territory and be of no further force and effect (and, for purposes of clarity, all provisions of this Agreement shall remain in effect with respect to all countries in the Territory other than such country, other jurisdiction or Terminated Territory).
12.11.2    Notwithstanding the termination of AbbVie’s licenses and other rights under this Agreement or with respect to a particular Major Market or country or other jurisdiction, as the case may be, to the extent a Licensed Product has obtained Regulatory Approval as of such time, AbbVie shall have the right for [] after the effective date of such termination with respect to each Major Market or country or other jurisdiction with respect to which such termination applies to sell or otherwise dispose of all Licensed Compound or Licensed Product then in its inventory and any in-progress inventory, in each case that is intended for sale or disposition in such Major Market or country or other jurisdiction, as though this Agreement had not terminated with respect to such Major Market or country or other jurisdiction, and such sale or disposition shall not constitute infringement of Licensor’s or its Affiliates’ Patent or other intellectual property or other proprietary rights. For purposes of clarity, AbbVie shall continue to make payments thereon as provided in ARTICLE 6 (Payments and Records) (as if this Agreement had not terminated with respect to such Major Market or country or other jurisdiction).
ARTICLE 13
MISCELLANEOUS
13.1    Subcontracting. Licensor shall have the right to subcontract any of its activities under this Agreement to an Affiliate of Licensor or a Third Party (a “Third Party Provider”) with AbbVie’s prior written consent; provided that Licensor shall have such right to subcontract to any of the approved Third Party Providers set forth on Schedule 13.1 (Approved Third Party Providers) without AbbVie’s prior written consent. AbbVie shall have the right to subcontract any of its activities under this Agreement to an Affiliate of AbbVie or a Third Party Provider; provided that AbbVie furnishes Licensor with advanced written notice thereof and an opportunity to consult regarding such subcontract, which notice shall specify the work to be subcontracted. Each Party shall obtain a written undertaking from any Affiliate or Third Party Provider to which such Party is subcontracting any of such Party’s activities under this Agreement pursuant to this Section 13.1 (Subcontracting) that such Affiliate or Third Party Provider, as applicable, shall be subject to the applicable terms and conditions of this Agreement, including the confidentiality provisions of ARTICLE 9 (Confidentiality and Non-Disclosure). Any act or omission by such Affiliate or Third Party Provider that would be a breach of this Agreement if





conducted or made by the subcontracting Party shall be deemed a breach of this Agreement by the subcontracting Party. As between the Parties, the subcontracting Party shall be responsible for the effective and timely management of and payment of such Affiliate or Third Party Provider. The engagement of such Affiliate or Third Party Provider in compliance with this Section 13.1 (Subcontracting) shall not relieve the subcontracting Party of its obligations under this Agreement. The subcontracting Party shall be solely responsible for any taxes, including income, withholding, payroll, VAT, sales tax or the like that arise from the use of such Affiliate or Third Party Provider, in each case, subject to Section 6.9 (Withholding Taxes) and Section 6.10 (Indirect Taxes).
13.2    Force Majeure. Neither Party shall be held liable or responsible to the other Party or be deemed to have defaulted under or breached this Agreement for failure or delay in fulfilling or performing any term of this Agreement when such failure or delay is caused by or results from events beyond the reasonable control of the non-performing Party, including fires, floods, earthquakes, hurricanes, embargoes, shortages, epidemics, quarantines, war, acts of war (whether war be declared or not), terrorist acts, insurrections, riots, civil commotion, strikes, lockouts or other labor disturbances (whether involving the workforce of the non-performing Party or of any other Person), acts of God or acts, omissions or delays in acting by any governmental authority (except to the extent such delay results from the breach by the non-performing Party or any of its Affiliates of any term or condition of this Agreement). The non-performing Party shall notify the other Party of such force majeure within [] after such occurrence by giving written notice to the other Party stating the nature of the event, its anticipated duration and any action being taken to avoid or minimize its effect. The suspension of performance by the non-performing Party shall be of no greater scope and no longer duration than is necessary and the non-performing Party shall use commercially reasonable efforts to remedy its inability to perform. If a Party’s performance of its obligations is delayed by an event or condition under this Section 13.2 (Force Majeure) for more than [], then the Parties shall discuss in good faith the modification of the Parties’ obligations under this Agreement in order to mitigate such delay caused by such event or condition.
13.3    Export Control. This Agreement is made subject to any restrictions concerning the export of products or technical information from the United States or other countries that may be imposed on the Parties from time to time. Each Party agrees that it shall not export, directly or indirectly, any technical information acquired from the other Party under this Agreement or any products using such technical information to a location or in a manner that at the time of export requires an export license or other governmental approval, without first obtaining the written consent to do so from the appropriate agency or other governmental entity in accordance with Applicable Law.
13.4    Assignment. Without the prior written consent of the other Party, such consent not to be unreasonably withheld, conditioned or delayed, neither Party shall sell, transfer, assign, delegate, pledge or otherwise dispose of, whether voluntarily, involuntarily, by operation of law or otherwise, this Agreement or any of its rights or duties hereunder; provided that (a) at any time during the Term, AbbVie may make such an assignment without Licensor’s consent to its Affiliate or to a successor, whether in a merger, sale of stock, sale of assets, or any other transaction, of the business to which this Agreement relates and (b) at any time during the Term, Licensor may make such an assignment without AbbVie’s consent to its Affiliate or to a successor, whether in a merger, sale of stock, sale of assets, or any other transaction, of the business to which this Agreement relates. With respect to an assignment to an Affiliate, the assigning Party shall remain responsible for the performance by such Affiliate of the assigning Party’s rights and obligations hereunder. Notwithstanding the foregoing or any other provision in this Agreement, in the event of a Change in Control of a Party or if a Party assigns this Agreement to its successor (whether by way of merger, acquisition, or sale of all or substantially all of its assets to which this Agreement relates), the intellectual property or tangible property rights of the





Person that is the acquirer in such Change in Control or such successor that (i) exists immediately prior to such Change in Control or assignment or (ii) is developed or acquired thereafter, in each case ((i)-(ii)), [], shall not be subject to and shall be automatically excluded from the terms and conditions of this Agreement, including the rights licensed to the other Party under this Agreement. Any attempted assignment or delegation in violation of this Section 13.4 (Assignment) shall be void and of no effect. All validly assigned and delegated rights and obligations of the Parties hereunder shall be binding upon and inure to the benefit of and be enforceable by and against the successors and permitted assigns of Licensor or AbbVie, as the case may be. The permitted assignee or transferee shall assume all obligations of its assignor or transferor under this Agreement. Without limiting the foregoing, the grant of rights set forth in this Agreement shall be binding upon any successor or permitted assignee of Licensor, and the obligations of AbbVie, including the payment obligations, shall run in favor of any such successor or permitted assignee of Licensor’s benefits under this Agreement.
13.5    Severability. If any provision of this Agreement is held to be illegal, invalid or unenforceable under any present or future law, and if the rights or obligations of either Party under this Agreement shall not be materially and adversely affected thereby, (a) such provision shall be fully severable, (b) this Agreement shall be construed and enforced as if such illegal, invalid or unenforceable provision had never comprised a part hereof, (c) the remaining provisions of this Agreement shall remain in full force and effect and shall not be affected by the illegal, invalid or unenforceable provision or by its severance herefrom, and (d) in lieu of such illegal, invalid or unenforceable provision, there shall be added automatically as a part of this Agreement a legal, valid and enforceable provision as similar in terms to such illegal, invalid or unenforceable provision as may be possible and reasonably acceptable to the Parties. To the fullest extent permitted by Applicable Law, each Party hereby waives any provision of law that would render any provision hereof illegal, invalid or unenforceable in any respect.
13.6    Governing Law, Jurisdiction and Service.
13.6.1    Governing Law. This Agreement or the performance, enforcement, breach or termination hereof shall be interpreted, governed by and construed in accordance with the laws of the State of Delaware, United States, excluding any conflicts or choice of law rule or principle that might otherwise refer construction or interpretation of this Agreement to the substantive law of another jurisdiction; provided that all questions concerning (a) inventorship of Patents under this Agreement shall be determined in accordance with Section 7.1.3 (United States Law) and (b) the construction or effect of Patents shall be determined in accordance with the laws of the country or other jurisdiction in which the particular Patent has been filed or granted, as the case may be. The Parties agree to exclude the application to this Agreement of the United Nations Convention on Contracts for the International Sale of Goods.
13.6.2    Service. Each Party further agrees that service of any process, summons, notice or document by registered mail to its address set forth in Section 13.8.2 (Address for Notice) shall be effective service of process for any action, suit or proceeding brought against it under this Agreement in any court.
13.7    Dispute Resolution. Except for disputes resolved by the procedures set forth in Section 3.1.5 (Dispute Resolution), 6.13 (Audit Dispute) or 13.11 (Equitable Relief), any dispute arising out of, relating to, or in connection with this Agreement, including any question regarding its existence, validity or termination, or any document or instrument delivered in connection herewith (a “Dispute”), it shall be resolved pursuant to this Section 13.7 (Dispute Resolution).
13.7.1    General. Any Dispute shall first be referred to the Senior Officers of the Parties, who shall confer in good faith on the resolution of such Dispute. Any final decision mutually agreed





to by the Senior Officers shall be conclusive and binding on the Parties. If the Senior Officers are not able to agree on the resolution of any such Dispute within [] (or such other period of time as mutually agreed by the Senior Officers) after such Dispute was first referred to them, then, except as otherwise set forth in Section 13.7.2 (Intellectual Property Right Disputes), the Dispute shall be finally resolved through arbitration in accordance with the procedures set forth on Schedule 13.7.1 (ADR Procedures).
13.7.2    Intellectual Property Right Disputes. In the event that a Dispute arises with respect the validity, patentability, scope, enforceability, inventorship or ownership of any Patent, Trademark or other intellectual property right, and such Dispute cannot be resolved in accordance with Section 13.7.1 (General), unless otherwise agreed by the Parties in writing, such Dispute shall not be submitted to an ADR proceeding in accordance with Schedule 13.7.1 (ADR Procedures) and instead, either Party may initiate litigation or proceeding in a court or governmental agency of competent jurisdiction, notwithstanding Section 13.6 (Governing Law; Jurisdiction and Service), in any country or other jurisdiction in which such right applies. In case of a Dispute between the Parties with respect to inventorship, the Parties may, upon mutual agreement, jointly select a patent attorney registered before the United States Patent and Trademark Office and submit such Dispute to the mutually-selected patent attorney for resolution under the United States patent law, and the decision of such patent attorney with respect to inventorship shall be final and bind both Parties, and the Parties shall share equally the expenses of such patent attorney.
13.7.3    Adverse Ruling. Any determination pursuant to this Section 13.7 (Dispute Resolution) that a Party is in material breach of its material obligations hereunder shall specify a (nonexclusive) set of actions to be taken to cure such material breach, if feasible.
13.7.4    Interim Relief and Tolling. Notwithstanding anything herein to the contrary, nothing in this Section 13.7 (Dispute Resolution) shall preclude either Party from seeking interim or provisional relief, including a temporary restraining order, preliminary injunction or other interim equitable relief concerning a Dispute if necessary to protect the interests of such Party. This Section 13.7.4 (Interim Relief and Tolling) shall be specifically enforceable.
13.8    Notices.
13.8.1    Notice Requirements. Any notice, request, demand, waiver, consent, approval or other communication permitted or required under this Agreement shall be in writing, shall refer specifically to this Agreement and shall be deemed given only if (a) delivered by hand, (b) sent by facsimile transmission (with transmission confirmed), or (c) by internationally recognized overnight delivery service that maintains records of delivery, addressed to the Parties at their respective addresses specified in Section 13.8.2 (Address for Notice) or to such other address as the Party to whom notice is to be given may have provided to the other Party in accordance with this Section 13.8.1 (Notice Requirements). Such notice shall be deemed to have been given as of the date delivered by hand or transmitted by facsimile (with transmission confirmed) or on the second Business Day (at the place of delivery) after deposit with an internationally recognized overnight delivery service. Any notice delivered by facsimile shall be confirmed by a hard copy delivered as soon as practicable thereafter. This Section 13.8.1 (Notice Requirements) is not intended to govern the day-to-day business communications necessary between the Parties in performing their obligations under the terms of this Agreement.
13.8.2    Address for Notice.
If to AbbVie, to:

AbbVie Ireland Unlimited Company





c/o PricewaterhouseCoopers Financial Services Limited
4th Floor, Washington House
16 Church Street
Hamilton HM11, Bermuda
Attention: []

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

AbbVie Inc.
1 North Waukegan Road
North Chicago, Illinois 60064
Attention: []
Facsimile: []

If to Licensor, to:

Alpine Immune Sciences Inc.
188 E Blaine St Suite 200
Seattle, WA 98102
United States
Attention: []
Email: []

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

Cooley LLP
3175 Hanover Street
Palo Alto, CA 94034
Attn: Barbara Kosacz
13.9    Entire Agreement; Amendments. This Agreement, together with the Schedules attached hereto, sets forth and constitutes the entire agreement and understanding between the Parties with respect to the subject matter hereof and all prior agreements, understandings, promises and representations, whether written or oral, with respect thereto are superseded hereby (including the CDA). Each Party confirms that it is not relying on any representations or warranties of the other Party except as specifically set forth in this Agreement. No amendment, modification, release or discharge shall be binding upon the Parties unless in writing and duly executed by authorized representatives of both Parties.
13.10    English Language. This Agreement shall be written and executed in, and all other communications under or in connection with this Agreement shall be in, the English language. Any translation into any other language shall not be an official version thereof, and in the event of any conflict in interpretation between the English version and such translation, the English version shall control.
13.11    Equitable Relief. Each Party acknowledges and agrees that the restrictions set forth in Section 2.4 (Exclusivity) and ARTICLE 7 (Intellectual Property Rights) and ARTICLE 9 (Confidentiality and Non-Disclosure) are reasonable and necessary to protect the legitimate interests of the other Party and that such other Party would not have entered into this Agreement in the absence of such restrictions, and that any breach or threatened breach of any provision of such Section or Articles may result in irreparable injury to such





other Party for which there shall be no adequate remedy at law. In the event of a breach or threatened breach of any provision of such Section or Articles, the non-breaching Party shall be authorized and entitled to seek from any court of competent jurisdiction injunctive relief, whether preliminary or permanent, specific performance and an equitable accounting of all earnings, profits and other benefits arising from such breach, which rights shall be cumulative and in addition to any other rights or remedies to which such non-breaching Party may be entitled in law or equity. Both Parties agree to waive any requirement that the other Party (a) post a bond or other security as a condition for obtaining any such relief, and (b) show irreparable harm, balancing of harms, consideration of the public interest or inadequacy of monetary damages as a remedy. Nothing in this Section 13.11 (Equitable Relief) is intended, or should be construed, to limit either Party’s right to equitable relief or any other remedy for a breach of any other provision of this Agreement.
13.12    Waiver and Non-Exclusion of Remedies. Any term or condition of this Agreement may be waived at any time by the Party that is entitled to the benefit thereof, but no such waiver shall be effective unless set forth in a written instrument duly executed by or on behalf of the Party waiving such term or condition. The waiver by either Party hereto of any right hereunder or of the failure to perform or of a breach by the other Party shall not be deemed a waiver of any other right hereunder or of any other breach or failure by such other Party whether of a similar nature or otherwise. The rights and remedies provided herein are cumulative and do not exclude any other right or remedy provided by Applicable Law or otherwise available except as expressly set forth herein.
13.13    No Benefit to Third Parties. Except as provided in ARTICLE 11 (Indemnity), covenants and agreements set forth in this Agreement are for the sole benefit of the Parties hereto and their successors and permitted assigns, and they shall not be construed as conferring any rights on any other Persons.
13.14    Further Assurance. Each Party shall duly execute and deliver, or cause to be duly executed and delivered, such further instruments and do and cause to be done such further acts and things, including the filing of such assignments, agreements, documents and instruments, as may be necessary or as the other Party may reasonably request in connection with this Agreement or to carry out more effectively the provisions and purposes hereof, or to better assure and confirm unto such other Party its rights and remedies under this Agreement.
13.15    Relationship of the Parties. It is expressly agreed that Licensor, on the one hand, and AbbVie, on the other hand, shall be independent contractors and that the relationship between the Parties shall not constitute a partnership, joint venture or agency, including for all tax purposes. Neither Licensor, on the one hand, nor AbbVie, on the other hand, shall have the authority to make any statements, representations or commitments of any kind, or to take any action, which shall be binding on the other, without the prior written consent of the other Party to do so. All persons employed by a Party shall be employees of such Party and not of the other Party and all costs and obligations incurred by reason of any such employment shall be for the account and expense of such Party.
13.16    Counterparts; Facsimile Execution. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one (1) and the same instrument. This Agreement may be executed by facsimile or electronically transmitted signatures and such signatures shall be deemed to bind each Party hereto as if they were original signatures.





13.17    References. Unless otherwise specified, (a) references in this Agreement to any Article, Section or Schedule shall mean references to such Article, Section or Schedule of this Agreement, (b) references in any Section to any clause are references to such clause of such Section, and (c) references to any agreement, instrument or other document in this Agreement refer to such agreement, instrument or other document as originally executed or, if subsequently amended, replaced or supplemented from time to time, as so amended, replaced or supplemented and in effect at the relevant time of reference thereto.
13.18    Schedules. In the event of any inconsistencies between this Agreement and any schedules or other attachments hereto, the terms of this Agreement shall control.
13.19    Construction. Except where the context otherwise requires, wherever used, the singular shall include the plural, the plural the singular, the use of any gender shall be applicable to all genders and the word “or” is used in the inclusive sense (and/or). Whenever this Agreement refers to a number of days, unless otherwise specified, such number refers to calendar days. The captions of this Agreement are for convenience of reference only and in no way define, describe, extend or limit the scope or intent of this Agreement or the intent of any provision contained in this Agreement. The term “including,” “include” or “includes” as used herein shall mean “including, but not limited to,” and shall not limit the generality of any description preceding such term. The language of this Agreement shall be deemed to be the language mutually chosen by the Parties and no rule of strict construction shall be applied against either Party hereto. Each Party represents that it has been represented by legal counsel in connection with this Agreement and acknowledges that it has participated in the drafting hereof. In interpreting and applying the terms and provisions of this Agreement, the Parties agree that no presumption shall apply against the Party which drafted such terms and provisions.
[SIGNATURE PAGE FOLLOWS.]







THIS AGREEMENT IS EXECUTED by the authorized representatives of the Parties as of the Effective Date.

ALPINE IMMUNE SCIENCES INC.
ABBVIE IRELAND UNLIMITED COMPANY

By: /s/ Paul Rickey

Name: Paul Rickey

Title: CFO
        
By: /s/ Scott Reents

Name: Scott Reents

Title: Director
 
 

































[Signature Page to Option and License Agreement]





Schedule 1.14

ALPN-101

[]





Schedule 1.97-A

[]






Schedule 1.97-B

[]






Schedule 1.97-C

[]





Schedule 1.120

Option Exercise Data Package

[]





Schedule 1.121

Option Exercise Data Package Trigger Event

[]





Schedule 1.157

[] Success Completion Criteria

[]





Schedule 2.1.1

Initial Development Plan

[]






Schedule 4.2

Option Exercise Disclosure Schedule

To be attached following the Option Exercise Data Package Trigger Event.







Schedule []

[]







Schedule []

[]






Schedule 9.5

Press Release

Alpine Immune Sciences and AbbVie Announce Option and License Agreement for the Development and Commercialization of ALPN-101
- Alpine grants AbbVie option to license worldwide rights to ALPN-101, a phase 2-ready, first-in-class dual CD28/ICOS costimulation antagonist, building on AbbVie’s commitment to developing novel therapies in Immunology
- Alpine to receive $60 million in an upfront cash payment; eligible to receive up to $805 million for exercise of the option and success-based development, regulatory and commercial milestones
- Alpine to conduct a phase 2 study in systemic lupus erythematosus during the option period
- Alpine will host a conference call today at 8:30 a.m. ET -
SEATTLE, WA and NORTH CHICAGO, Ill., June 18, 2020 -- Alpine Immune Sciences, Inc. (NASDAQ: ALPN), a leading clinical-stage immunotherapy company focused on developing innovative treatments for cancer and autoimmune/inflammatory diseases, and AbbVie Inc. (NYSE: ABBV), a research-based global biopharmaceutical company, today announced an exclusive worldwide option and license agreement for ALPN-101, a first-in-class dual CD28/ICOS costimulation antagonist.
CD28 and ICOS are key costimulatory molecules that likely play critical roles in multiple autoimmune and inflammatory diseases. ALPN-101 is a potent inhibitor of both CD28 and ICOS pathways with demonstrated efficacy in multiple preclinical disease models, superior to blockade of either pathway alone. Favorable safety and tolerability, pharmacokinetics and pharmacodynamics have been observed in a first-in-human study in adult healthy volunteers.
“We are very pleased to partner ALPN-101 with AbbVie, a world leader in the development and commercialization of innovative immunology therapies,” said Mitchell H. Gold, M.D., Executive Chairman and Chief Executive Officer of Alpine. “AbbVie is an ideal partner for ALPN-101, with the therapeutic area expertise, R&D commitment, and global resources needed to maximize ALPN-101’s potential for patients suffering from autoimmune diseases. Today’s agreement validates our unique Directed Evolution platform that has yielded multiple product candidates including ALPN-101. We look forward to working with our colleagues at AbbVie to potentially transform clinical outcomes in systemic lupus erythematosus, a disease with currently few appealing treatment options.”
“AbbVie’s expertise in Immunology has led to remarkable breakthroughs in the treatment of autoimmune diseases,” said Tom Hudson, M.D., Senior Vice President and Chief Scientific Officer, AbbVie. “ALPN-101’s dual mechanism of action has compelling potential as a next-generation treatment in systemic lupus erythematosus and other autoimmune diseases. We are excited to partner with the team at Alpine on the development of this novel therapeutic.”
Under the terms of the agreement, Alpine will receive an upfront payment of $60 million, and will also be eligible to receive up to an aggregate of $805 million for exercise of the option and success-based development, regulatory and commercial milestones. In addition, Alpine is eligible to receive tiered royalties on net sales of ALPN-101. In exchange, AbbVie will receive an option to an exclusive license for ALPN-101. During the option period, Alpine will conduct a Phase 2 study in systemic lupus erythematosus.





Upon exercise of the option, AbbVie will conduct all future clinical development, manufacturing and commercialization activities for ALPN-101.
Alpine will host a conference call today at 8:30 a.m. ET to discuss the option and license agreement and outline the company’s strategic focus moving forward.
Conference Call and Webcast Details
Alpine will host a conference call today at 8:30 a.m. ET to discuss today’s announcement. To access the live call by phone, dial (800) 816-3005 (domestic) or (857) 770-0069 (international) using participant passcode 3770288. To access a live webcast of the call, please visit the Investor Relations section of the Alpine Immune Sciences website at www.alpineimmunesciences.com. The recorded webcast will be available for replay for approximately 30 days following the call.
About Alpine Immune Sciences, Inc.
Alpine Immune Sciences, Inc. is committed to leading a new wave of immune therapeutics, creating potentially powerful multifunctional immunotherapies to improve patients’ lives via unique protein engineering technologies. Alpine is backed by world-class research and development capabilities, a highly productive scientific platform, and a proven management team. For more information, visit www.alpineimmunesciences.com. Follow @AlpineImmuneSci on Twitter and LinkedIn.
About AbbVie
AbbVie’s mission is to discover and deliver innovative medicines that solve serious health issues today and address the medical challenges of tomorrow. We strive to have a remarkable impact on people’s lives across several key therapeutic areas: immunology, oncology, neuroscience, eye care, virology, women’s health and gastroenterology, in addition to products and services across its Allergan Aesthetics portfolio. For more information about AbbVie, please visit us at www.abbvie.com. Follow @abbvie on Twitter, Facebook, Instagram, YouTube and LinkedIn.
Forward-Looking Statements
Alpine Immune Sciences, Inc.:
This release contains forward-looking statements within the meaning of Section 27A of the Securities Act of 1933, Section 21E of the Securities Exchange Act of 1934 and the Private Securities Litigation Reform Act of 1995. These forward-looking statements are not based on historical fact and include statements regarding our platform technology and potential therapies; the timing of and results from clinical trials and pre-clinical development activities, including those related to our collaboration with AbbVie; clinical and regulatory objectives and the timing thereof; the potential efficacy, safety profile, future development plans, addressable market, regulatory success, and commercial potential of our product candidates, including those related to our collaboration with AbbVie; our ability to achieve milestones in our collaboration with AbbVie; the progress and potential of our other ongoing development programs; the efficacy of our clinical trial designs; expectations regarding our other ongoing collaborations; and our ability to successfully develop and achieve milestones in our development programs. Forward-looking statements generally include statements that are predictive in nature and depend upon or refer to future events or conditions and include words such as “may,” “will,” “should,” “would,” “expect,” “plan,” “intend,” and other similar expressions, among others. These forward-looking statements are based on current assumptions that involve risks, uncertainties, and other factors that may cause actual results, events, or developments to be materially different from those expressed or implied by such forward-looking statements. These risks and uncertainties,





many of which are beyond our control, include, but are not limited to: clinical trials may not demonstrate safety and efficacy of any of our or our collaborators’ product candidates; our ongoing discovery and pre-clinical efforts may not yield additional product candidates; our discovery-stage and pre-clinical programs may not advance into the clinic or result in approved products; any of our or our collaborators’ product candidates may fail in development, may not receive required regulatory approvals, or may be delayed to a point where they are not commercially viable; we may not achieve additional milestones in our proprietary or partnered programs; the impact of expanded product development and clinical activities on operating expenses; the impact of competition; adverse conditions in the general domestic and global economic markets, including as a result of the ongoing COVID-19 pandemic; as well as the other risks identified in our filings with the Securities and Exchange Commission. These forward-looking statements speak only as of the date hereof and we undertake no obligation to update forward-looking statements, and readers are cautioned not to place undue reliance on such forward-looking statements.

AbbVie:
Some statements in this news release are, or may be considered, forward-looking statements for purposes of the Private Securities Litigation Reform Act of 1995. The words “believe,”“expect,” “anticipate,” “project” and similar expressions, among others, generally identify forward-looking statements. AbbVie cautions that these forward-looking statements are subject to risks and uncertainties that may cause actual results to differ materially from those indicated in the forward-looking statements. Such risks and uncertainties include, but are not limited to, failure to realize the expected benefits from AbbVie’s acquisition of Allergan plc (“Allergan”), failure to promptly and effectively integrate Allergan’s businesses, competition from other products, challenges to intellectual property, difficulties inherent in the research and development process, adverse litigation or government action, changes to laws and regulations applicable to our industry and the impact of public health outbreaks, epidemics or pandemics, such as COVID-19. Additional information about the economic, competitive, governmental, technological and other factors that may affect AbbVie's operations is set forth in Item 1A, “Risk Factors,” of AbbVie's 2019 Annual Report on Form 10-K, which has been filed with the Securities and Exchange Commission, as updated by its subsequent Quarterly Reports on Form 10-Q. AbbVie undertakes no obligation to release publicly any revisions to forward-looking statements as a result of subsequent events or developments, except as required by law.

Contacts
Alpine Immune Sciences, Inc.:
Media
Jennifer Paganelli, W20
212-301-7225
jpaganelli@w2ogroup.com

Investors:
Laurence Watts, Gilmartin Group, LLC.:
619-916-7620





laurence@gilmartinir.com

AbbVie
Media:
Adelle Infante
847-938-8745
adelle.infante@abbvie.com

Investors:
Liz Shea
847-935-2211
liz.shea@abbvie.com

Source: Alpine Immune Sciences Inc.; AbbVie Inc.





Schedule 10.2

Licensor Disclosure Schedule

[]





Schedule 10.2.1

Existing Licensor Product Patents
[†]











Schedule 13.1

Approved Third Party Providers

[†]






Schedule 13.7.1

ADR Procedures

[†]


Exhibit


Exhibit 31.1
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Mitchell H. Gold, M.D., certify that:

1.
I have reviewed this Quarterly Report on Form 10-Q of Alpine Immune Sciences, 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(s) 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(s) 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: August 11, 2020
 
/s/ Mitchell H. Gold, M.D.
Mitchell H. Gold, M.D.
Executive Chairman and Chief Executive Officer
(Principal Executive Officer)



Exhibit


Exhibit 31.2
CERTIFICATION PURSUANT TO
RULES 13a-14(a) AND 15d-14(a) UNDER THE SECURITIES EXCHANGE ACT OF 1934,
AS ADOPTED PURSUANT TO SECTION 302 OF THE SARBANES-OXLEY ACT OF 2002
I, Paul Rickey, certify that:
1.
I have reviewed this Quarterly Report on Form 10-Q of Alpine Immune Sciences, 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(s) 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(s) 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: August 11, 2020
 
/s/ Paul Rickey
Paul Rickey
Senior Vice President and Chief Financial Officer
(Principal Accounting Officer and Principal Financial Officer)



Exhibit


Exhibit 32.1
ALPINE IMMUNE SCIENCES, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Alpine Immune Sciences, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Mitchell H. Gold, M.D., Executive Chairman and Chief Executive Officer (Principal Executive Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(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.
/s/ Mitchell H. Gold, M.D.
Mitchell H. Gold, M.D.
Executive Chairman and Chief Executive Officer
(Principal Executive Officer)
August 11, 2020
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the Report to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Alpine Immune Sciences, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.



Exhibit


Exhibit 32.2
ALPINE IMMUNE SCIENCES, INC.
CERTIFICATION PURSUANT TO
18 U.S.C. SECTION 1350,
AS ADOPTED PURSUANT TO
SECTION 906 OF THE SARBANES-OXLEY ACT OF 2002
In connection with the Quarterly Report of Alpine Immune Sciences, Inc. (the “Company”) on Form 10-Q for the quarter ended June 30, 2020, as filed with the Securities and Exchange Commission on the date hereof (the “Report”), I, Paul Rickey, Senior Vice President and Chief Financial Officer (Principal Accounting Officer and Principal Financial Officer) of the Company, certify, pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, that to my knowledge:
(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.
/s/ Paul Rickey
Paul Rickey
Senior Vice President and Chief Financial Officer
(Principal Accounting Officer and Principal Financial Officer)
August 11, 2020
A signed original of this written statement required by Section 906 of the Sarbanes-Oxley Act of 2002 has been provided to the Company and will be retained by the Company and furnished to the Securities and Exchange Commission or its staff upon request.
This certification accompanies the Report to which it relates, is not deemed filed with the Securities and Exchange Commission and is not to be incorporated by reference into any filing of Alpine Immune Sciences, Inc. under the Securities Act of 1933, as amended, or the Securities Exchange Act of 1934, as amended (whether made before or after the date of the Report), irrespective of any general incorporation language contained in such filing.



v3.20.2
Cover - shares
6 Months Ended
Jun. 30, 2020
Aug. 03, 2020
Cover [Abstract]    
Document Type 10-Q  
Document Quarterly Report true  
Document Period End Date Jun. 30, 2020  
Document Transition Report false  
Entity File Number 001-37449  
Entity Registrant Name ALPINE IMMUNE SCIENCES, INC.  
Entity Incorporation, State or Country Code DE  
Entity Tax Identification Number 20-8969493  
Entity Address, Address Line One 188 East Blaine Street, Suite 200  
Entity Address, City or Town Seattle  
Entity Address, State or Province WA  
Entity Address, Postal Zip Code 98102  
City Area Code 206  
Local Phone Number 788-4545  
Title of 12(b) Security Common Stock, par value $0.001 per share  
Trading Symbol ALPN  
Security Exchange Name NASDAQ  
Entity Current Reporting Status Yes  
Entity Interactive Data Current Yes  
Entity Filer Category Non-accelerated Filer  
Entity Small Business true  
Entity Emerging Growth Company true  
Entity Ex Transition Period true  
Entity Shell Company false  
Entity Common Stock, Shares Outstanding (in shares)   23,784,850
Entity Central Index Key 0001626199  
Current Fiscal Year End Date --12-31  
Document Fiscal Year Focus 2020  
Document Fiscal Period Focus Q2  
Amendment Flag false  
v3.20.2
Condensed Consolidated Balance Sheets - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Current assets:    
Cash and cash equivalents $ 88,220 $ 16,123
Short-term investments 1,998 24,397
Restricted cash, current 0 132
Prepaid expenses and other current assets 1,018 1,650
Total current assets 91,236 42,302
Restricted cash, noncurrent 254 254
Property and equipment, net 1,531 1,552
Operating lease, right-of-use asset 9,674 9,985
Total assets 102,695 54,093
Current liabilities:    
Accounts payable 548 1,543
Accrued liabilities 3,824 5,285
Deferred revenue, current 23,688 1,435
Current portion of long-term debt 119 418
Total current liabilities 28,179 8,681
Deferred revenue, noncurrent 36,468 0
Operating lease liability, noncurrent 11,947 11,429
Long-term debt 9,873 4,509
Total liabilities 86,467 24,619
Commitments and contingencies
Stockholders’ equity:    
Common stock, $0.001 par value per share; 200,000,000 shares authorized at June 30, 2020 and December 31, 2019; 18,641,698 shares issued and 18,591,231 shares outstanding at June 30, 2020; 18,638,359 shares issued and 18,587,892 shares outstanding at December 31, 2019 19 19
Treasury stock, at cost; 50,467 shares at June 30, 2020 and December 31, 2019 0 0
Additional paid-in capital 119,651 117,371
Accumulated other comprehensive gain (loss) (55) 10
Accumulated deficit (103,387) (87,926)
Total stockholders’ equity 16,228 29,474
Total liabilities and stockholders’ equity $ 102,695 $ 54,093
v3.20.2
Condensed Consolidated Balance Sheets (Parenthetical) - $ / shares
Jun. 30, 2020
Dec. 31, 2019
Statement of Financial Position [Abstract]    
Common stock, par value (in dollars per share) $ 0.001 $ 0.001
Common stock, shares authorized (in shares) 200,000,000 200,000,000
Common stock, shares issued (in shares) 18,641,698 18,638,359
Common stock, shares outstanding (in shares) 18,591,231 18,587,892
Treasury stock, shares (in shares) 50,467 50,467
v3.20.2
Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Income Statement [Abstract]        
Collaboration revenue $ 688 $ 567 $ 1,779 $ 567
Operating expenses:        
Research and development 7,096 10,166 11,974 20,516
General and administrative 3,344 2,553 5,122 4,898
Total operating expenses 10,440 12,719 17,096 25,414
Loss from operations (9,752) (12,152) (15,317) (24,847)
Other income (expense):        
Interest expense (226) (61) (346) (131)
Interest income 44 357 196 741
Loss before taxes (9,934) (11,856) (15,467) (24,237)
Income tax benefit 6 0 6 0
Net loss (9,928) (11,856) (15,461) (24,237)
Comprehensive income (loss):        
Unrealized (loss) gain on investments (1) 17 (16) 32
Unrealized gain (loss) on foreign currency translation 64 4 (49) (10)
Comprehensive loss $ (9,865) $ (11,835) $ (15,526) $ (24,215)
Weighted-average shares used to compute basic and diluted net loss per share (in shares) 18,588,993 18,576,199 18,588,442 18,126,556
Basic and diluted net loss per share (in dollars per share) $ (0.53) $ (0.64) $ (0.83) $ (1.34)
v3.20.2
Condensed Consolidated Statements of Stockholders' Equity (Unaudited) - USD ($)
$ in Thousands
Total
Common Stock
Treasury
Additional Paid-in Capital
Accumulated Other Comprehensive Loss
Accumulated Deficit
Beginning balance (in shares) at Dec. 31, 2018   13,854,205 50,467      
Beginning balance at Dec. 31, 2018 $ 44,591 $ 14 $ 0 $ 90,664 $ (13) $ (46,074)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Stock issued during period (in shares)   4,706,700        
Issuance of Units in Private Placement, net of offering costs 23,618 $ 5   23,613    
Exercise of stock options (in shares)   124        
Exercise of stock options 0          
Stock-based compensation 754     754    
Unrealized gain (loss) on investments 15       15  
Unrealized (loss) gain on foreign currency translation (14)       (14)  
Net loss (12,381)         (12,381)
Ending balance (in shares) at Mar. 31, 2019   18,561,029 50,467      
Ending balance at Mar. 31, 2019 56,583 $ 19 $ 0 115,031 (12) (58,455)
Beginning balance (in shares) at Dec. 31, 2018   13,854,205 50,467      
Beginning balance at Dec. 31, 2018 44,591 $ 14 $ 0 90,664 (13) (46,074)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Unrealized gain (loss) on investments 32          
Unrealized (loss) gain on foreign currency translation (10)          
Net loss (24,237)          
Ending balance (in shares) at Jun. 30, 2019   18,584,730 50,467      
Ending balance at Jun. 30, 2019 45,421 $ 19 $ 0 115,704 9 (70,311)
Beginning balance (in shares) at Mar. 31, 2019   18,561,029 50,467      
Beginning balance at Mar. 31, 2019 56,583 $ 19 $ 0 115,031 (12) (58,455)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Issuance of Units in Private Placement, net of offering costs (20)     (20)    
Exercise of stock options (in shares)   23,701        
Exercise of stock options 11     11    
Stock-based compensation 682     682    
Unrealized gain (loss) on investments 17       17  
Unrealized (loss) gain on foreign currency translation 4       4  
Net loss (11,856)         (11,856)
Ending balance (in shares) at Jun. 30, 2019   18,584,730 50,467      
Ending balance at Jun. 30, 2019 45,421 $ 19 $ 0 115,704 9 (70,311)
Beginning balance (in shares) at Dec. 31, 2019   18,587,892 50,467      
Beginning balance at Dec. 31, 2019 29,474 $ 19 $ 0 117,371 10 (87,926)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Issuance of warrants 60     60    
Stock-based compensation 986     986    
Unrealized gain (loss) on investments (15)       (15)  
Unrealized (loss) gain on foreign currency translation (113)       (113)  
Net loss (5,533)         (5,533)
Ending balance (in shares) at Mar. 31, 2020   18,587,892 50,467      
Ending balance at Mar. 31, 2020 24,859 $ 19 $ 0 118,417 (118) (93,459)
Beginning balance (in shares) at Dec. 31, 2019   18,587,892 50,467      
Beginning balance at Dec. 31, 2019 29,474 $ 19 $ 0 117,371 10 (87,926)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Unrealized gain (loss) on investments (16)          
Unrealized (loss) gain on foreign currency translation (49)          
Net loss (15,461)          
Ending balance (in shares) at Jun. 30, 2020   18,591,231 50,467      
Ending balance at Jun. 30, 2020 16,228 $ 19 $ 0 119,651 (55) (103,387)
Beginning balance (in shares) at Mar. 31, 2020   18,587,892 50,467      
Beginning balance at Mar. 31, 2020 24,859 $ 19 $ 0 118,417 (118) (93,459)
Increase (Decrease) in Stockholders' Equity [Roll Forward]            
Exercise of stock options (in shares)   3,339        
Exercise of stock options 2     2    
Stock-based compensation 1,232     1,232    
Unrealized gain (loss) on investments (1)       (1)  
Unrealized (loss) gain on foreign currency translation 64       64  
Net loss (9,928)         (9,928)
Ending balance (in shares) at Jun. 30, 2020   18,591,231 50,467      
Ending balance at Jun. 30, 2020 $ 16,228 $ 19 $ 0 $ 119,651 $ (55) $ (103,387)
v3.20.2
Condensed Consolidated Statements of Cash Flows - USD ($)
$ in Thousands
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Operating activities    
Net loss $ (15,461) $ (24,237)
Adjustments to reconcile net loss to net cash used in operating activities:    
Depreciation expense 279 229
Amortization of premium/discount on investments (58) (185)
Non-cash interest expense 125 67
Stock-based compensation expense 2,218 1,436
Changes in operating assets and liabilities:    
Prepaid expenses and other current assets 632 (415)
Right-of-use asset 318 454
Accounts payable and accrued liabilities (2,467) 1,829
Deferred revenue 58,721 2,108
Lease liabilities 518 (386)
Net cash provided by (used in) operating activities 44,825 (19,100)
Investing activities    
Purchases of property and equipment (254) (200)
Purchase of short-term investments (4,871) (39,804)
Maturities of short-term investments 27,312 40,125
Proceeds from the sale of short-term investments 0 1,391
Net cash provided by investing activities 22,187 1,512
Financing activities    
Proceeds from borrowings, net of issuance costs 5,000 0
Proceeds from sale of common stock, net of offering costs 0 23,598
Repayment of debt 0 (1,000)
Proceeds from exercise of stock options 2 11
Net cash provided by financing activities 5,002 22,609
Effect of exchange rate on cash, cash equivalents and restricted cash (49) (10)
Net increase in cash and cash equivalents and restricted cash 71,965 5,011
Cash and cash equivalents and restricted cash, beginning of period 16,509 10,843
Cash and cash equivalents and restricted cash, end of period 88,474 15,854
Supplemental Information    
Discount in connection with issuance of debt 335 0
Cash paid for interest 198 67
Recognition of right-of-use asset $ 0 $ 11,757
v3.20.2
Description of Business
6 Months Ended
Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
Description of Business Description of Business
Alpine Immune Sciences, Inc. (the “Company”, “Alpine”, “we”, “us”, or “our”), together with its consolidated subsidiaries, is a clinical-stage immunotherapy company committed to leading a new wave of immune therapeutics, creating potentially powerful multifunctional immunotherapies to improve patients’ lives via unique protein engineering technologies. Our approach includes a proprietary scientific platform that uses a process known as directed evolution to convert native immune system proteins into multi-targeted therapeutics potentially capable of modulating the human immune system. We were incorporated under the laws of the State of Delaware and are headquartered in Seattle, Washington.
A novel strain of coronavirus, SARS-CoV-2 (“COVID-19”), was first reported in December 2019, and subsequently declared a global pandemic by the World Health Organization in March 2020. As a result of the COVID-19 outbreak, many companies have experienced disruptions in their operations and in markets served.  We have implemented some and may take additional temporary precautionary measures intended to help ensure the well-being of our employees and minimize business disruption. We considered the impact of COVID-19 on the assumptions and estimates used and determined that there were no material adverse impacts to our results of operations and financial position at June 30, 2020. The full extent of the future impacts of the COVID-19 outbreak on our operations is uncertain. A prolonged outbreak may adversely impact our business, including our clinical trials.
v3.20.2
Summary of Significant Accounting Policies
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Summary of Significant Accounting Policies Summary of Significant Accounting Policies
Basis of Presentation and Use of Estimates
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and generally accepted accounting principles in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Significant estimates inherent in the preparation of the accompanying unaudited condensed consolidated financial statements include those used for revenue recognition, accruals for clinical trial activities and other accruals, and the estimated fair value of equity-based awards. We base our estimates and assumptions on historical experience when available and on various factors we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates.
The accompanying unaudited condensed consolidated financial statements as of June 30, 2020 and for the three and six months ended June 30, 2020 and 2019 and the related interim information contained within the notes to the condensed consolidated financial statements are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited financial statements and in the opinion of management, reflect all normal recurring adjustments necessary for a fair statement of our financial position for the interim periods presented. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes for the years December 31, 2019 and 2018 included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 30, 2020 (“Annual Report”). The results of our operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the full year.
Principles of Consolidation
Our unaudited condensed consolidated financial statements include the financial position and results of operations of Alpine Immune Sciences, Inc. and our wholly owned operating company and subsidiary, AIS Operating Co., Inc., and our wholly-owned subsidiary, Alpine Immune Sciences Australia PTY LTD. All inter-company balances and transactions have been eliminated in consolidation. 
Cash and Cash Equivalents and Restricted Cash
We consider all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Cash and cash equivalents consist of deposits with commercial banks in checking and interest-bearing accounts, and highly liquid money market funds.
Restricted cash represents cash drawn on lines of credit used to establish collateral to support the security deposit on our operating leases to rent office and laboratory space in Seattle, Washington.
Periodically, we maintain deposits in financial institutions in excess of government insured limits. We believe we are not exposed to significant credit risk as our deposits, which are held at financial institutions, are high credit quality securities such as money market funds, U.S. Treasury securities, and commercial paper. To date, we have not realized any losses on these deposits.
Short-Term Investments
Our short-term investments include funds invested in highly liquid money market funds, U.S. Treasury securities, commercial paper, and corporate debt securities with a final maturity of each security of less than one year. These investments are classified as available-for-sale debt securities, which are recorded at fair value based on quoted prices in active markets.
If the estimated fair value of a debt security is below its amortized cost basis, we evaluate whether it is more likely than not that we will sell the security before its anticipated recovery in market value. If an impairment exists, the security is written down to its estimated fair value and we consider whether credit losses exist for the related securities. A credit loss exists if the present value of expected cash flows is less than the amortized cost basis of the security. Credit-related losses are recognized as an allowance for credit losses on the balance sheet with a corresponding adjustment to earnings. Unrealized gains and losses that are unrelated to credit deterioration are reported in other comprehensive income (loss). Purchase premiums and discounts are recognized as interest income using the interest method over the terms of the securities. Realized gains and losses and declines in fair value deemed to be other than temporary are reflected in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) using the specific-identification method.
Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Our steps for recognizing revenue consist of; (1) identifying the contract, (2) identifying the performance obligations as either distinct or bundled goods and services, (3) determining the transaction price associated with each performance obligation for which we expect to be entitled in exchange for transferring such goods and services, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue upon satisfaction of performance obligations.
Our collaboration agreements principally contain multiple performance obligations, which may include (1) grants of, or options to obtain, intellectual property licenses; (2) research and development services; and/or (3) manufacturing or supply services. Payments typically received under these arrangements include one or more of the following: non-refundable upfront license fees, option exercise fees, payment for research and/or development efforts, amounts due upon the achievement of specified objectives, and/or royalties on future product sales. Our revenue is primarily derived from our collaboration agreements with Adaptimmune Therapeutics plc (“Adaptimmune”) and AbbVie Ireland Unlimited Company (“AbbVie”). See further discussion of our collaboration agreements in Note 8.
We allocate revenue to each performance obligation based on its relative stand-alone selling price. We generally determine stand-alone selling prices at the inception of the contract based on our best estimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone basis. Payments received prior to satisfying the relevant revenue recognition criteria are recorded as deferred revenue in the accompanying Condensed Consolidated Balance Sheets and recognized as revenue when the related revenue recognition criteria are met. We recognize revenue under our collaboration agreements based on employee hours contributed to each performance obligation, or by using a cost-based input method to measure progress toward completion of the performance obligation and to calculate the corresponding revenue to recognize each period.
Our collaboration agreements provide for non-refundable milestone payments. We recognize revenue that is contingent upon the achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. A milestone is considered substantive when the consideration payable to us for such milestone (1) is consistent with our performance necessary to achieve the milestone or the increase in value to the collaboration resulting from our performance; (2) relates solely to our past performance; and (3) is reasonable relative to all of the other deliverables and payments within the arrangement. In making this assessment, we consider all facts and circumstances relevant to the arrangement, including factors such as the scientific, regulatory, commercial, and other risks that must be overcome to achieve the milestone, the level of effort and investment required to achieve the milestone and whether any portion of the milestone consideration is related to future performance or deliverables.
We review the contributed employee hours and progress towards completion for each performance obligation under our collaboration agreements, and adjust the revenue recognized to reflect changes in assumptions relating to the estimated
satisfaction of the performance obligation. We could accelerate revenue recognition in the event of early termination of programs or if our expectations change. Alternatively, we could decelerate revenue recognition if programs are extended or delayed. While such changes to our estimates have no impact on our reported cash flows, the timing of revenue recorded in future periods could be materially impacted.
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. The objective of the standard is to improve areas of GAAP by removing certain exceptions permitted by ASC Topic 740, Income Taxes, and clarifying existing guidance to facilitate consistent application. The standard will become effective for us beginning on January 1, 2021. We are currently evaluating the new standard to determine the potential impact on our financial condition, results of operations, cash flows, and financial statement disclosures.
Recently Adopted Accounting Pronouncements
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements: Clarifying the Interaction between Topic 808 and Topic 606. This ASU clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration received from a collaborative arrangement participant if the participant is not a customer. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments: Credit Losses, as clarified in ASU 2019-04 and ASU 2019-05. The objective of the standard is to provide information about expected credit losses on financial instruments at each reporting date and to change how other-than-temporary impairments on investment securities are recorded. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures. We will continue to monitor the impact of the COVID-19 outbreak on expected credit losses.
v3.20.2
Net Loss Per Share
6 Months Ended
Jun. 30, 2020
Earnings Per Share [Abstract]  
Net Loss Per Share Net Loss Per Share
Basic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period. The common stock issuable upon the conversion or exercise of the following dilutive securities has been excluded from the diluted net loss per share calculation because their effect would have been anti-dilutive. Diluted net loss per share, therefore, does not differ from basic net loss per share for the periods presented.
 
June 30,
 
2020
 
2019
 
(unaudited)
Warrants to purchase common stock
1,894,455

 
1,859,733

Stock options and restricted stock units outstanding
4,040,935

 
3,266,572

Total
5,935,390

 
5,126,305


v3.20.2
Cash Equivalents and Short-Term Investments
6 Months Ended
Jun. 30, 2020
Cash, Cash Equivalents, and Short-term Investments [Abstract]  
Cash Equivalents and Short-term Investments Cash Equivalents and Short-Term Investments
The amortized cost and fair value of our cash equivalents and short-term investments are as follows (in thousands):
 
June 30, 2020
Assets:
(unaudited)
 
Amortized Cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Fair market value
Money market funds
$
27,053

 
$

 
$

 
$
27,053

Corporate debt securities and commercial paper
1,998

 

 

 
1,998

Total
$
29,051

 
$

 
$

 
$
29,051

 
December 31, 2019
Assets:
Amortized Cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Fair market value
Money market funds
$
9,995

 
$

 
$

 
$
9,995

U.S. treasury bills
5,019

 
2

 

 
5,021

Corporate debt securities and commercial paper
21,862

 
14

 

 
21,876

Total
$
36,876

 
$
16

 
$

 
$
36,892


All short-term investments held as of June 30, 2020 and December 31, 2019 were classified as available-for-sale securities and had contractual maturities of less than one year. There were no realized gains and losses on these securities for the periods presented.
v3.20.2
Fair Value Measurements
6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Fair Value Measurements Fair Value Measurements
Cash and cash equivalents, restricted cash, receivables, accounts payable and accrued liabilities, which are recorded at invoiced amount or cost, approximate fair value based on the short-term nature of these financial instruments. Fair value is defined as the exchange price received for an asset or paid to transfer a liability, or an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value, is 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 inactive markets, 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 supported by little or no market activity and significant to the fair value of the assets or liabilities.
As of June 30, 2020, and December 31, 2019, cash of $61.2 million and $3.6 million, respectively, is excluded from the fair value table below. The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis (in thousands):
 
June 30, 2020
 
(unaudited)
Assets:
Level 1
 
Level 2
 
Level 3
 
Total
Money market funds
$
27,053

 
$

 
$

 
$
27,053

Corporate debt securities and commercial paper

 
1,998

 

 
1,998

Total
$
27,053

 
$
1,998

 
$

 
$
29,051

 
December 31, 2019
Assets:
Level 1
 
Level 2
 
Level 3
 
Total
Money market funds
$
9,995

 
$

 
$

 
$
9,995

U.S. treasury bills
5,021

 

 

 
5,021

Corporate debt securities and commercial paper

 
21,876

 

 
21,876

Total
$
15,016

 
$
21,876

 
$

 
$
36,892


Our Level 2 assets consist of commercial paper and corporate debt securities. We review trading activity and pricing for our available-for-sale securities as of the measurement date. When sufficient quoted pricing for identical securities is not available, we use market pricing and other observable market inputs for similar securities obtained from various third-party data providers. These inputs either represent quoted prices for similar assets in active markets or have been derived from observable market data.
v3.20.2
Additional Balance Sheet Information
6 Months Ended
Jun. 30, 2020
Disclosure Text Block Supplement [Abstract]  
Additional Balance Sheet Information Additional Balance Sheet Information
Prepaid expenses and other current assets consist of the following (in thousands):
 
June 30, 2020
 
December 31, 2019
 
(unaudited)
 
 
Prepaid research and development
$
580

 
$
574

Tenant improvement allowance receivable
42

 
586

Prepaid insurance
90

 
301

Prepaid other
285

 
89

Other receivables
21

 
100

Prepaid expenses and other current assets
$
1,018

 
$
1,650



Accrued liabilities consist of the following (in thousands):
 
June 30, 2020
 
December 31, 2019
 
(unaudited)
 
 
Research and development services
$
1,970

 
$
2,543

Employee compensation
1,073

 
1,761

Legal and professional fees
687

 
515

Accrued other
94

 
466

Accrued Liabilities
$
3,824

 
$
5,285


v3.20.2
Long-term Debt
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Long-term Debt Long-term Debt
In December 2016, we entered into a Loan and Security Agreement (the “Original Agreement”), with Silicon Valley Bank (“SVB”), under which we borrowed $5.0 million. The Original Agreement accrued interest at a floating per annum rate equal to the lender’s prime rate minus 1.75%. The Original Agreement had an interest-only period through July 2018.
In August 2019 (the “Effective Date”), we entered into an Amended and Restated Loan and Security Agreement (the “Loan Agreement”) with SVB, pursuant to which SVB agreed to extend term loans to us with an aggregate principal amount of up to $15.0 million (the “Term Loans”). Borrowings under the Loan Agreement consist of up to three separate tranches. The initial tranche of $5.0 million was funded in August 2019, $3.0 million of which was used to repay amounts owing under our Original Agreement. In March 2020, the second tranche of $5.0 million was funded to us. We did not draw down the final tranche of $5.0 million, which expired on July 31, 2020. We intend to use the debt proceeds for working capital and other general corporate purposes, including the advancement of our development programs.
The Term Loans accrue interest at a floating per annum rate of 0.25% above the prime rate, subject to a floor of 5.75%, which interest is payable monthly commencing in September 2019. Upon the occurrence and during the continuance of an event of default, a default interest rate will apply that is 4.0% above the otherwise applicable interest rate. The Term Loans are interest only until September 30, 2020, however, under the Loan Agreement our interest only period automatically extends to June 30, 2021 if we receive aggregate new capital of at least $40.0 million no later than June 30, 2020. We met this milestone in June 2020 in conjunction with the AbbVie agreement, discussed in detail in Note 8. As a result of the interest only extension, the Term Loans will be payable in 25 equal monthly installments of principal plus interest, with the final installment due and payable on July 1, 2023.
We may prepay all of the Term Loans subject to a prepayment fee equal to $75,000, which represents the deferred portion of the final payment due under the Original Agreement, plus the outstanding principal balance under the Term Loans at the time of such prepayment multiplied by a prepayment fee of 2.0% in the first year, 1.0% in the second year, and 0% in the third year and thereafter. Additionally, a final payment in the amount of 5.5% of the funded Term Loans is payable to SVB on the date on which the Term Loans are prepaid, paid or become due and payable in full. The final payment fees are recorded in long-term debt with an offsetting reduction to debt discount on our accompanying Condensed Consolidated Balance Sheets.
The Loan Agreement contains customary representations and warranties, events of default and affirmative and negative covenants, including, among others, covenants that limit or restrict our ability to, among other things, incur additional indebtedness, grant liens, merge or consolidate, make acquisitions, pay dividends or other distributions or repurchase equity,
make investments, dispose of assets, engage in any new lines of business, and enter into certain transactions with affiliates, in each case subject to certain exceptions. We assessed the likelihood of the lender accelerating payment of the loan due to a material adverse change in our business, operations, financial, or other condition as remote. We were in compliance with our covenants as of June 30, 2020. As such, as of June 30, 2020, the classification of the loan is split between current and noncurrent based on the timing of payment obligations. As security for its obligations under the Loan Agreement, we granted SVB a first priority security interest on substantially all of our assets, except intellectual property, and subject to certain other exceptions.
In connection with the Loan Agreement, we issued a warrant to SVB to purchase up to 52,083 shares of our common stock at a price of $4.32 per share, 17,361 shares of which became exercisable in August 2019 after we drew down the initial tranche. In March 2020, after we drew down the second tranche of our Term Loan, an additional 17,361 shares became exercisable. The remaining warrants did not vest and expired on July 31, 2020, upon the expiration of the third tranche of our Term Loan. The fair value of the warrants on the date of issuance for the initial tranche and second tranche was $60,000 and $60,000, respectively, determined using the Black-Scholes option-pricing model, and was recorded as a component of equity and as a debt discount on our accompanying Condensed Consolidated Balance Sheets. In connection with Original Agreement, SVB also holds 7,069 fully vested common stock warrants at an exercise price of $12.38 per share.
The Term Loan was accounted for as a debt modification in a non-troubled debt restructuring, rather than a debt extinguishment, based on a comparison of the present value of the cash flows under the terms of the debt immediately before and after the Effective Date of the Term Loan, which resulted in a change of less than 10%. As a result, the remaining unamortized debt discount recorded in connection with the Original Agreement will be amortized to interest expense over the repayment term of Loan Agreement. In connection with the initial and second tranches of the Loan Agreement, we recorded a total debt discount of $812,000, which is being amortized to interest expense using the effective interest method over the repayment term of the loan. Non-cash interest expense associated with the amortization of the discount was $81,000 and $31,000 for the three months ended June 30, 2020 and 2019, respectively, and $125,000 and $67,000 for the six months ended June 30, 2020 and 2019, respectively. The unamortized discount was $632,000 as of June 30, 2020.  
Scheduled principal payments on our outstanding debt as of June 30, 2020 under our Loan Agreement, excluding final fee amounts, are as follows (in thousands):
Year ending December 31,
 
Total
2020 (remainder of year)
 
$

2021
 
2,400

2022
 
4,800

2023
 
2,800

Total future principal payments
 
$
10,000


v3.20.2
License and Collaboration Agreements
6 Months Ended
Jun. 30, 2020
Organization, Consolidation and Presentation of Financial Statements [Abstract]  
License and Collaboration Agreements License and Collaboration Agreements
AbbVie
In June 2020, we entered into an option and license agreement with AbbVie (the “AbbVie Agreement”) for the development of ALPN-101. The AbbVie Agreement grants AbbVie the exclusive option to purchase an exclusive worldwide license to ALPN-101 (the “License Option”). The License Option is exercisable by AbbVie at any time and will expire 90 days from the achievement of certain development milestones. If AbbVie exercises the License Option, AbbVie will take over the future development and commercialization. Prior to the exercise of the License Option, we will perform research and development services, including conducting a Phase 2 study in systemic lupus erythematosus, based on an agreed-upon development plan (the “Development Plan”). We will be fully responsible for all costs incurred to conduct the activities under the Development Plan, provided that, AbbVie may be responsible for increased costs under the Development Plan in connection with certain material amendments proposed by AbbVie. We will also be solely responsible, at our sole cost and expense, for manufacturing and regulatory filings for ALPN-101 necessary to complete activities under the Development Plan.
In June 2020, in connection with the execution of the AbbVie Agreement, AbbVie paid us a nonrefundable upfront payment of $60.0 million. Prior to the exercise of the License Option, AbbVie has agreed to make cash payments upon our achievement of certain predefined pre-option development milestones (the “Alpine Development Milestones”) up to an aggregate amount of $75.0 million. If AbbVie exercises the License Option, they will pay a one-time cash payment of $75.0 million. Following the exercise of the License Option, AbbVie has also agreed to make aggregate cash payments of up to $205.0 million upon AbbVie’s achievement of certain development and commercial milestones and additional aggregate cash payments of up to $450.0 million upon AbbVie’s achievement of certain sales-based cash milestones, collectively referred to as
(the “AbbVie Milestones”). Subsequent to commercialization, we are also eligible to receive high single-digit to low double-digit percentage royalties on worldwide net sales of licensed products.
For revenue recognition purposes, we determined that our contractual promises in the AbbVie Agreement are not distinct and are interdependent with our performance obligation to provide research and development services under the Development Plan. Thus, all contractual promises related to the upfront payment and Alpine’s Development Milestones were combined into a single performance obligation. We determined the Alpine Development Milestone payments are probable of significant revenue reversal as the achievement is highly dependent on factors outside our control. Therefore, these milestone payments are fully constrained and were not included in the transaction price. We will re-evaluate the transaction price each reporting period and update as uncertain events are resolved or other changes in circumstances occur.
The License Option and the AbbVie Milestones were not determined to be performance obligations at the inception of the contract as they did not represent material rights. If exercised, the License Option and AbbVie Milestones will be accounted for as a separate contract and will be recognized as revenue if and when triggered. Any consideration related to sales-based royalties and profit-sharing payments will be recognized when the related sales occur.
We use a cost-based input method to measure progress toward completion of the performance obligation and to calculate the corresponding revenue to recognize each period. In applying the cost-based input, we use actual costs incurred relative to budgeted costs for the combined performance obligation. These costs consist primarily of internal personnel efforts and third-party contract costs relative to the level of patient enrollment in the study. Revenue will be recognized based on the level of costs incurred relative to the total budgeted costs for the performance obligation. A cost-based input method of revenue recognition requires management to make estimates of costs to complete our performance obligation. In making such estimates, significant judgment is required to evaluate assumptions related to cost estimates. The cumulative effect of revisions to estimated costs to complete our performance obligation will be recorded in the period in which changes are identified and amounts can be reasonably estimated. A significant change in these assumptions and estimates could have a material impact on the timing and amount of revenue recognized in future periods.
We recognized revenue from the AbbVie Agreement of $86,000 for the three and six months ended June 30, 2020. As of June 30, 2020 the remaining balance of the transaction price is $59.9 million and is recorded as current and noncurrent deferred revenue on our accompanying Condensed Consolidated Balance Sheets. We expect to recognize the remaining deferred revenue over the remainder of our Development Plan, which began in June 2020 and ends upon the later of the exercise or expiration of the option.
Adaptimmune
In May 2019, we entered into a collaboration and licensing agreement with Adaptimmune (the “Adaptimmune Collaboration”) to develop next-generation SPEAR T-cell products. Under the Adaptimmune Collaboration, we are to perform certain research services and grant Adaptimmune an exclusive license to programs from our secreted immunomodulatory protein (“SIP”) and transmembrane immunomodulatory protein (“TIP”) technologies. In June 2019, under the terms of the Adaptimmune Collaboration, we received an upfront license payment of $2.0 million, and through June 30, 2020 we have received an additional $1.3 million in research support payments to fund ongoing programs. These payments are recorded as deferred revenue upon receipt and are recognized to revenue based on employee hours contributed to each performance obligation. Under the Adaptimmune Collaboration we have recognized revenue of $602,000 and $142,000 for the three months ended June 30, 2020, and 2019, respectively and $1.7 million and $142,000 for the for the six months ended June 30, 2020 and 2019, respectively. In addition, we are eligible for additional research support payments, one-time payments and downstream development and commercialization milestones of up to $288.0 million, if all pre-specified milestones for each program are achieved. We are also eligible to receive low-single digit percentage royalties on worldwide net sales of the applicable products. As of June 30, 2020, we have $242,000 remaining in current deferred revenue on our Condensed Consolidated Balance Sheets.
v3.20.2
Stockholders’ Equity
6 Months Ended
Jun. 30, 2020
Stockholders' Equity Note [Abstract]  
Stockholders’ Equity Stockholders’ Equity
Securities Offerings
In July 2020, we entered into a securities purchase agreement (the “Securities Purchase Agreement”) for a private placement with a select group of institutional investors, pursuant to which we sold 5,139,610 units (the “Common Units”) and 790,710 units (the “Prefunded Warrant Units”), for an aggregate purchase price of $60.0 million. Each Common Unit consists of one share of our common stock plus a warrant to purchase 0.3 shares of common stock (the “Common Stock Warrants”), and each Prefunded Warrant Unit consists of one prefunded warrant to purchase one share of common stock (the “Prefunded Warrants”) plus 0.3 Common Stock Warrants. The Prefunded Warrant Units and the Common Units are collectively referred to
as the “Units” and each Unit has a purchase price of $10.1175. The Common Stock Warrants have an exercise price of $12.74 and a term of 3.5 years. The Prefunded Warrants became fully exercisable upon the closing date and have an exercise price of $0.001 per share.
The issuance of the securities sold under the Securities Purchase Agreement have not been registered under the Securities Act of 1933, as amended, or state securities laws and may not be offered or sold in the United States absent registration with the SEC or an applicable exemption from such registration requirements. We have agreed to file a registration statement with the SEC covering the resale of the shares of common stock issuable in connection with the Securities Purchase Agreement and upon exercise of the warrants.
In June 2018, we entered into an equity distribution agreement, (“Equity Distribution Agreement”), with Piper Jaffray & Co., (“Piper Jaffray”), pursuant to which we may sell shares of our common stock through an “at the market” equity offering program for up to $50.0 million in gross cash proceeds. Under the Equity Distribution Agreement, we will set the parameters for the sale of shares, including the number of shares to be issued, the time period during which sales are requested to be made, limitation on the number of shares that may be sold in any one trading day and any minimum price below which sales may not be made. We will be unable to sell shares under the Equity Distribution Agreement until a prospectus supplement relating to any sales under the Equity Distribution Agreement is filed with the SEC. As of June 30, 2020, no sales under our Equity Distribution Agreement have occurred.
Equity Incentive Plans
On January 1, 2020, in connection with our 2018 Equity Incentive Plan (the “2018 Plan”) annual increase provision, a total of 929,394 additional shares were automatically added to the shares authorized under the 2018 Plan. In June 2020, in conjunction with our annual meeting of stockholders, our stockholders approved an additional increase of 743,515 shares authorized under our 2018 Plan.
In January 2020, annual stock option grants totaling 1,026,950 shares with a weighted average exercise price of $3.25 per share were issued to eligible employees and board members.
Also in January 2020, we issued 156,328 shares of RSUs at a grant date fair value of $3.23 per share to certain employees in lieu of cash incentive compensation. Half of the shares underlying each RSU vested on June 30, 2020, with the remaining half scheduled to vest on December 31, 2020, subject to each grantee’s continued employment or service to the Company on the applicable vesting dates. In addition, upon a change in control as defined in the 2018 Plan, any unvested shares underlying the RSU will immediately vest.
Stock-Based Compensation Expense 
We use the Black-Scholes option pricing model to estimate the fair value of stock options granted at the grant date. The fair value of RSUs is equal to the closing stock price on the date of grant. We recognize the fair value of stock-based compensation as compensation expense over the requisite service period, which is the vesting period. Stock-based compensation is classified in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) as follows (in thousands): 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2020
 
2019
 
2020
 
2019
 
(unaudited)
Employee:
 
 
 
 
 
 
 
Research and development
$
716

 
$
422

 
$
1,225

 
$
762

General and administrative
507

 
248

 
972

 
631

Non-Employee:
 
 
 
 
 
 
 
Research and development
7

 
11

 
18

 
40

General and administrative
2

 
1

 
3

 
3

Total stock-based compensation expense
$
1,232

 
$
682

 
$
2,218

 
$
1,436


v3.20.2
Income Taxes
6 Months Ended
Jun. 30, 2020
Income Tax Disclosure [Abstract]  
Income Taxes Income Taxes
We are subject to income taxes in the United States and Australia and our effective tax rate is calculated quarterly based upon current assumptions relating to the full year’s estimated operating results and various tax-related items. Each
quarter an estimate of the annual effective tax rate is updated should we revise our forecast of earnings based upon our operating results. If there is a change in the estimated effective annual tax rate, a cumulative adjustment is made. Our effective tax rate for the six months ended June 30, 2020 and 2019 was (0.04)% and 0.00%, respectively. The difference between the effective tax rate of (0.04)% for the six months ended June 30, 2020, the effective tax rate of 0.00% for the six months ended June 30, 2019, and the U.S. federal statutory rate of 21% was primarily due to recognizing a full valuation allowance on deferred tax assets.  
As of June 30, 2020, we determined that, based on an evaluation of the four sources of income and all available evidence, both positive and negative, including our latest forecasts and cumulative losses in recent years, it was more likely than not that none of our deferred tax assets would be realized and therefore we continued to record a full valuation allowance. No current tax liability or expense has been recorded in the financial statements, with the exception of a minimal amount of state income tax refunded during the three-month period ended June 30, 2020.
v3.20.2
Summary of Significant Accounting Policies (Policies)
6 Months Ended
Jun. 30, 2020
Accounting Policies [Abstract]  
Basis of Presentation
Basis of Presentation and Use of Estimates
The accompanying unaudited condensed consolidated financial statements have been prepared in accordance with the rules and regulations of the Securities and Exchange Commission (“SEC”) and generally accepted accounting principles in the United States of America (“GAAP”). The preparation of financial statements in conformity with GAAP requires management to make judgments, estimates and assumptions that affect the amounts reported in the unaudited condensed consolidated financial statements and accompanying notes. Significant estimates inherent in the preparation of the accompanying unaudited condensed consolidated financial statements include those used for revenue recognition, accruals for clinical trial activities and other accruals, and the estimated fair value of equity-based awards. We base our estimates and assumptions on historical experience when available and on various factors we believe to be reasonable under the circumstances. Actual results could differ materially from those estimates.
The accompanying unaudited condensed consolidated financial statements as of June 30, 2020 and for the three and six months ended June 30, 2020 and 2019 and the related interim information contained within the notes to the condensed consolidated financial statements are unaudited. The unaudited interim financial statements have been prepared on the same basis as the audited financial statements and in the opinion of management, reflect all normal recurring adjustments necessary for a fair statement of our financial position for the interim periods presented. The accompanying unaudited condensed consolidated financial statements should be read in conjunction with our audited consolidated financial statements and accompanying notes for the years December 31, 2019 and 2018 included in our Annual Report on Form 10-K for the year ended December 31, 2019, filed with the SEC on March 30, 2020 (“Annual Report”). The results of our operations for the three and six months ended June 30, 2020 are not necessarily indicative of the results to be expected for the full year.
Principles of Consolidation
Principles of Consolidation
Our unaudited condensed consolidated financial statements include the financial position and results of operations of Alpine Immune Sciences, Inc. and our wholly owned operating company and subsidiary, AIS Operating Co., Inc., and our wholly-owned subsidiary, Alpine Immune Sciences Australia PTY LTD. All inter-company balances and transactions have been eliminated in consolidation. 
Cash and Cash Equivalents and Restricted Cash
Cash and Cash Equivalents and Restricted Cash
We consider all highly liquid investments with an original maturity of 90 days or less at the time of purchase to be cash equivalents. Cash and cash equivalents consist of deposits with commercial banks in checking and interest-bearing accounts, and highly liquid money market funds.
Restricted cash represents cash drawn on lines of credit used to establish collateral to support the security deposit on our operating leases to rent office and laboratory space in Seattle, Washington.
Periodically, we maintain deposits in financial institutions in excess of government insured limits. We believe we are not exposed to significant credit risk as our deposits, which are held at financial institutions, are high credit quality securities such as money market funds, U.S. Treasury securities, and commercial paper. To date, we have not realized any losses on these deposits.
Short-Term Investments
Short-Term Investments
Our short-term investments include funds invested in highly liquid money market funds, U.S. Treasury securities, commercial paper, and corporate debt securities with a final maturity of each security of less than one year. These investments are classified as available-for-sale debt securities, which are recorded at fair value based on quoted prices in active markets.
If the estimated fair value of a debt security is below its amortized cost basis, we evaluate whether it is more likely than not that we will sell the security before its anticipated recovery in market value. If an impairment exists, the security is written down to its estimated fair value and we consider whether credit losses exist for the related securities. A credit loss exists if the present value of expected cash flows is less than the amortized cost basis of the security. Credit-related losses are recognized as an allowance for credit losses on the balance sheet with a corresponding adjustment to earnings. Unrealized gains and losses that are unrelated to credit deterioration are reported in other comprehensive income (loss). Purchase premiums and discounts are recognized as interest income using the interest method over the terms of the securities. Realized gains and losses and declines in fair value deemed to be other than temporary are reflected in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) using the specific-identification method.
Revenue Recognition
Revenue Recognition
Revenue is recognized when control of the promised goods or services is transferred to our customers, in an amount that reflects the consideration we expect to be entitled to in exchange for those goods or services. Our steps for recognizing revenue consist of; (1) identifying the contract, (2) identifying the performance obligations as either distinct or bundled goods and services, (3) determining the transaction price associated with each performance obligation for which we expect to be entitled in exchange for transferring such goods and services, (4) allocating the transaction price to the performance obligations in the contract and (5) recognizing revenue upon satisfaction of performance obligations.
Our collaboration agreements principally contain multiple performance obligations, which may include (1) grants of, or options to obtain, intellectual property licenses; (2) research and development services; and/or (3) manufacturing or supply services. Payments typically received under these arrangements include one or more of the following: non-refundable upfront license fees, option exercise fees, payment for research and/or development efforts, amounts due upon the achievement of specified objectives, and/or royalties on future product sales. Our revenue is primarily derived from our collaboration agreements with Adaptimmune Therapeutics plc (“Adaptimmune”) and AbbVie Ireland Unlimited Company (“AbbVie”). See further discussion of our collaboration agreements in Note 8.
We allocate revenue to each performance obligation based on its relative stand-alone selling price. We generally determine stand-alone selling prices at the inception of the contract based on our best estimate of what the selling price would be if the deliverable was regularly sold by us on a stand-alone basis. Payments received prior to satisfying the relevant revenue recognition criteria are recorded as deferred revenue in the accompanying Condensed Consolidated Balance Sheets and recognized as revenue when the related revenue recognition criteria are met. We recognize revenue under our collaboration agreements based on employee hours contributed to each performance obligation, or by using a cost-based input method to measure progress toward completion of the performance obligation and to calculate the corresponding revenue to recognize each period.
Our collaboration agreements provide for non-refundable milestone payments. We recognize revenue that is contingent upon the achievement of a substantive milestone in its entirety in the period in which the milestone is achieved. A milestone is considered substantive when the consideration payable to us for such milestone (1) is consistent with our performance necessary to achieve the milestone or the increase in value to the collaboration resulting from our performance; (2) relates solely to our past performance; and (3) is reasonable relative to all of the other deliverables and payments within the arrangement. In making this assessment, we consider all facts and circumstances relevant to the arrangement, including factors such as the scientific, regulatory, commercial, and other risks that must be overcome to achieve the milestone, the level of effort and investment required to achieve the milestone and whether any portion of the milestone consideration is related to future performance or deliverables.
We review the contributed employee hours and progress towards completion for each performance obligation under our collaboration agreements, and adjust the revenue recognized to reflect changes in assumptions relating to the estimated
satisfaction of the performance obligation. We could accelerate revenue recognition in the event of early termination of programs or if our expectations change. Alternatively, we could decelerate revenue recognition if programs are extended or delayed. While such changes to our estimates have no impact on our reported cash flows, the timing of revenue recorded in future periods could be materially impacted.
Recently Issued and Adopted Accounting Pronouncements
Recently Issued Accounting Pronouncements
In December 2019, the FASB issued ASU No. 2019-12, Simplifying the Accounting for Income Taxes. The objective of the standard is to improve areas of GAAP by removing certain exceptions permitted by ASC Topic 740, Income Taxes, and clarifying existing guidance to facilitate consistent application. The standard will become effective for us beginning on January 1, 2021. We are currently evaluating the new standard to determine the potential impact on our financial condition, results of operations, cash flows, and financial statement disclosures.
Recently Adopted Accounting Pronouncements
In November 2018, the FASB issued ASU No. 2018-18, Collaborative Arrangements: Clarifying the Interaction between Topic 808 and Topic 606. This ASU clarifies that certain transactions between collaborative arrangement participants should be accounted for as revenue when the collaborative arrangement participant is a customer in the context of a unit of account and precludes recognizing as revenue consideration received from a collaborative arrangement participant if the participant is not a customer. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures.
In August 2018, the FASB issued ASU No. 2018-13, Fair Value Measurement. ASU 2018-13 modifies the disclosure requirements for fair value measurements by removing, modifying, or adding certain disclosures. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures.
In June 2016, the FASB issued ASU 2016-13, Financial Instruments: Credit Losses, as clarified in ASU 2019-04 and ASU 2019-05. The objective of the standard is to provide information about expected credit losses on financial instruments at each reporting date and to change how other-than-temporary impairments on investment securities are recorded. We adopted this ASU effective January 1, 2020 and it did not have a material impact on our financial statements and related disclosures. We will continue to monitor the impact of the COVID-19 outbreak on expected credit losses.
Net Loss Per Share Net Loss Per ShareBasic net loss per share is computed by dividing net loss by the weighted-average number of common shares outstanding during the period.
Fair Value Measurements Fair Value Measurements
Cash and cash equivalents, restricted cash, receivables, accounts payable and accrued liabilities, which are recorded at invoiced amount or cost, approximate fair value based on the short-term nature of these financial instruments. Fair value is defined as the exchange price received for an asset or paid to transfer a liability, or an exit price, in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. Valuation techniques used to measure fair value must maximize the use of observable inputs and minimize the use of unobservable inputs. The three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value, is 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 inactive markets, 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 supported by little or no market activity and significant to the fair value of the assets or liabilities.
Share-Based Compensation Expense
Stock-Based Compensation Expense 
We use the Black-Scholes option pricing model to estimate the fair value of stock options granted at the grant date. The fair value of RSUs is equal to the closing stock price on the date of grant. We recognize the fair value of stock-based compensation as compensation expense over the requisite service period, which is the vesting period.
v3.20.2
Net Loss Per Share (Tables)
6 Months Ended
Jun. 30, 2020
Earnings Per Share [Abstract]  
Schedule of Antidilutive Securities Excluded from Diluted Net Loss Per Share Attributable to Common Stockholders The common stock issuable upon the conversion or exercise of the following dilutive securities has been excluded from the diluted net loss per share calculation because their effect would have been anti-dilutive. Diluted net loss per share, therefore, does not differ from basic net loss per share for the periods presented.
 
June 30,
 
2020
 
2019
 
(unaudited)
Warrants to purchase common stock
1,894,455

 
1,859,733

Stock options and restricted stock units outstanding
4,040,935

 
3,266,572

Total
5,935,390

 
5,126,305


v3.20.2
Cash Equivalents and Short-Term Investments (Tables)
6 Months Ended
Jun. 30, 2020
Cash, Cash Equivalents, and Short-term Investments [Abstract]  
Summary of Amortized Cost and Fair Value of Cash Equivalents and Short Term Investments
The amortized cost and fair value of our cash equivalents and short-term investments are as follows (in thousands):
 
June 30, 2020
Assets:
(unaudited)
 
Amortized Cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Fair market value
Money market funds
$
27,053

 
$

 
$

 
$
27,053

Corporate debt securities and commercial paper
1,998

 

 

 
1,998

Total
$
29,051

 
$

 
$

 
$
29,051

 
December 31, 2019
Assets:
Amortized Cost
 
Gross unrealized gains
 
Gross unrealized losses
 
Fair market value
Money market funds
$
9,995

 
$

 
$

 
$
9,995

U.S. treasury bills
5,019

 
2

 

 
5,021

Corporate debt securities and commercial paper
21,862

 
14

 

 
21,876

Total
$
36,876

 
$
16

 
$

 
$
36,892


v3.20.2
Fair Value Measurements (Tables)
6 Months Ended
Jun. 30, 2020
Fair Value Disclosures [Abstract]  
Summary of Financial Assets Measured at Fair Value on Recurring Basis The following tables summarize our financial assets and liabilities measured at fair value on a recurring basis (in thousands):
 
June 30, 2020
 
(unaudited)
Assets:
Level 1
 
Level 2
 
Level 3
 
Total
Money market funds
$
27,053

 
$

 
$

 
$
27,053

Corporate debt securities and commercial paper

 
1,998

 

 
1,998

Total
$
27,053

 
$
1,998

 
$

 
$
29,051

 
December 31, 2019
Assets:
Level 1
 
Level 2
 
Level 3
 
Total
Money market funds
$
9,995

 
$

 
$

 
$
9,995

U.S. treasury bills
5,021

 

 

 
5,021

Corporate debt securities and commercial paper

 
21,876

 

 
21,876

Total
$
15,016

 
$
21,876

 
$

 
$
36,892


v3.20.2
Additional Balance Sheet Information (Tables)
6 Months Ended
Jun. 30, 2020
Disclosure Text Block Supplement [Abstract]  
Schedule of Prepaid Expenses and Other Current Assets
Prepaid expenses and other current assets consist of the following (in thousands):
 
June 30, 2020
 
December 31, 2019
 
(unaudited)
 
 
Prepaid research and development
$
580

 
$
574

Tenant improvement allowance receivable
42

 
586

Prepaid insurance
90

 
301

Prepaid other
285

 
89

Other receivables
21

 
100

Prepaid expenses and other current assets
$
1,018

 
$
1,650


Summary of Accrued Liabilities
Accrued liabilities consist of the following (in thousands):
 
June 30, 2020
 
December 31, 2019
 
(unaudited)
 
 
Research and development services
$
1,970

 
$
2,543

Employee compensation
1,073

 
1,761

Legal and professional fees
687

 
515

Accrued other
94

 
466

Accrued Liabilities
$
3,824

 
$
5,285


v3.20.2
Long-term Debt (Tables)
6 Months Ended
Jun. 30, 2020
Debt Disclosure [Abstract]  
Schedule of Maturities of Long-term Debt
Scheduled principal payments on our outstanding debt as of June 30, 2020 under our Loan Agreement, excluding final fee amounts, are as follows (in thousands):
Year ending December 31,
 
Total
2020 (remainder of year)
 
$

2021
 
2,400

2022
 
4,800

2023
 
2,800

Total future principal payments
 
$
10,000


v3.20.2
Stockholders’ Equity (Tables)
6 Months Ended
Jun. 30, 2020
Stockholders' Equity Note [Abstract]  
Schedule of Stock-based Compensation Expense Stock-based compensation is classified in the Condensed Consolidated Statements of Operations and Comprehensive Income (Loss) as follows (in thousands): 
 
Three Months Ended
June 30,
 
Six Months Ended
June 30,
 
2020
 
2019
 
2020
 
2019
 
(unaudited)
Employee:
 
 
 
 
 
 
 
Research and development
$
716

 
$
422

 
$
1,225

 
$
762

General and administrative
507

 
248

 
972

 
631

Non-Employee:
 
 
 
 
 
 
 
Research and development
7

 
11

 
18

 
40

General and administrative
2

 
1

 
3

 
3

Total stock-based compensation expense
$
1,232

 
$
682

 
$
2,218

 
$
1,436


v3.20.2
Summary of Significant Accounting Policies (Details)
6 Months Ended
Jun. 30, 2020
Maximum  
Significant Accounting Policies  
Available for sale securities, contractual maturity period (less than) 1 year
v3.20.2
Net Loss Per Share - Schedule of Anti-dilutive Securities (Details) - shares
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Antidilutive Securities Excluded from Computation of Earnings per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share (in shares) 5,935,390 5,126,305
Warrants to purchase common stock    
Antidilutive Securities Excluded from Computation of Earnings per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share (in shares) 1,894,455 1,859,733
Stock options and restricted stock units outstanding    
Antidilutive Securities Excluded from Computation of Earnings per Share [Line Items]    
Antidilutive securities excluded from computation of earnings per share (in shares) 4,040,935 3,266,572
v3.20.2
Cash Equivalents and Short-Term Investments - Summary of Amortized Cost and Fair Value (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost $ 29,051 $ 36,876
Gross unrealized gains 0 16
Gross unrealized losses 0 0
Fair market value 29,051 36,892
Money market funds    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost 27,053 9,995
Gross unrealized gains 0 0
Gross unrealized losses 0 0
Fair market value 27,053 9,995
U.S. treasury bills    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost   5,019
Gross unrealized gains   2
Gross unrealized losses   0
Fair market value   5,021
Corporate debt securities and commercial paper    
Debt Securities, Available-for-sale [Line Items]    
Amortized Cost 1,998 21,862
Gross unrealized gains 0 14
Gross unrealized losses 0 0
Fair market value $ 1,998 $ 21,876
v3.20.2
Cash Equivalents and Short-Term Investments - Additional Information (Details) - USD ($)
6 Months Ended 12 Months Ended
Jun. 30, 2020
Dec. 31, 2019
Cash, Cash Equivalents, and Short-term Investments [Abstract]    
Realized gains (losses) on securities $ 0 $ 0
v3.20.2
Fair Value Measurements - Additional Information (Details) - USD ($)
$ in Millions
Jun. 30, 2020
Dec. 31, 2019
Fair Value Disclosures [Abstract]    
Cash $ 61.2 $ 3.6
v3.20.2
Fair Value Measurements - Summary of Financial Assets and Liabilities (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value assets disclosure $ 29,051 $ 36,892
Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value assets disclosure 27,053 15,016
Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value assets disclosure 1,998 21,876
Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value assets disclosure 0 0
Money market funds    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value assets disclosure 27,053 9,995
Money market funds | Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value assets disclosure 27,053 9,995
Money market funds | Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value assets disclosure 0 0
Money market funds | Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value assets disclosure 0 0
U.S. treasury bills    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value assets disclosure   5,021
U.S. treasury bills | Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value assets disclosure   5,021
U.S. treasury bills | Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value assets disclosure   0
U.S. treasury bills | Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value assets disclosure   0
Corporate debt securities and commercial paper    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value assets disclosure 1,998 21,876
Corporate debt securities and commercial paper | Level 1    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value assets disclosure 0 0
Corporate debt securities and commercial paper | Level 2    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value assets disclosure 1,998 21,876
Corporate debt securities and commercial paper | Level 3    
Fair Value, Assets and Liabilities Measured on Recurring and Nonrecurring Basis [Line Items]    
Fair value assets disclosure $ 0 $ 0
v3.20.2
Additional Balance Sheet Information - Schedule of Prepaid Expenses and Other Current Assets (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Disclosure Text Block Supplement [Abstract]    
Prepaid research and development $ 580 $ 574
Tenant improvement allowance receivable 42 586
Prepaid insurance 90 301
Prepaid other 285 89
Other receivables 21 100
Prepaid expenses and other current assets $ 1,018 $ 1,650
v3.20.2
Additional Balance Sheet Information - Schedule of Accrued Liabilities (Details) - USD ($)
$ in Thousands
Jun. 30, 2020
Dec. 31, 2019
Disclosure Text Block Supplement [Abstract]    
Research and development services $ 1,970 $ 2,543
Employee compensation 1,073 1,761
Legal and professional fees 687 515
Accrued other 94 466
Accrued Liabilities $ 3,824 $ 5,285
v3.20.2
Long-term Debt - Narrative (Details)
1 Months Ended 3 Months Ended 6 Months Ended
Mar. 31, 2020
USD ($)
shares
Aug. 31, 2019
USD ($)
installment
tranche
$ / shares
shares
Dec. 31, 2016
USD ($)
$ / shares
Jun. 30, 2020
USD ($)
Jun. 30, 2019
USD ($)
Jun. 30, 2020
USD ($)
Jun. 30, 2019
USD ($)
Jul. 24, 2017
shares
Debt Instrument [Line Items]                
Proceeds from borrowings, net of issuance costs           $ 5,000,000 $ 0  
Amortization of debt discount       $ 81,000 $ 31,000 125,000 $ 67,000  
Unamortized debt discount       632,000   632,000    
Silicon Valley Bank | Original Agreement                
Debt Instrument [Line Items]                
Proceeds from borrowings, net of issuance costs     $ 5,000,000.0          
Repayments of debt   $ 3,000,000.0            
Prepayment fee (equal to)   75,000            
Silicon Valley Bank | Original Agreement | Common Stock Warrant                
Debt Instrument [Line Items]                
Warrants issued for shares of common stock (in shares) | shares               7,069
Warrants issued, exercise price (in dollars per share) | $ / shares     $ 12.38          
Silicon Valley Bank | Original Agreement | Prime Rate                
Debt Instrument [Line Items]                
Debt instrument variable interest rate     1.75%          
Term Loans                
Debt Instrument [Line Items]                
Debt instrument, total discount recorded       $ 812,000   $ 812,000    
Term Loans | Term Loans, Tranche One | Common Stock Warrant                
Debt Instrument [Line Items]                
Fair value of warrant   $ 60,000            
Term Loans | Term Loans, Tranche Two | Common Stock Warrant                
Debt Instrument [Line Items]                
Fair value of warrant $ 60,000              
Term Loans | Silicon Valley Bank                
Debt Instrument [Line Items]                
Debt instrument variable interest rate   0.25%            
Maximum borrowing capacity, amount   $ 15,000,000.0            
Number of tranches (up to) | tranche   3            
Percentage of default interest rate   4.00%            
New capital milestone for continuation of interest only payment period   $ 40,000,000.0            
Number of equal monthly installments payable | installment   25            
Final payment percentage   5.50%            
Term Loans | Silicon Valley Bank | Common Stock Warrant                
Debt Instrument [Line Items]                
Warrants issued for shares of common stock (in shares) | shares   52,083            
Warrants issued, exercise price (in dollars per share) | $ / shares   $ 4.32            
Number of shares exercisable (in shares) | shares 17,361 17,361            
Term Loans | Silicon Valley Bank | Base Rate                
Debt Instrument [Line Items]                
Debt instrument, interest rate floor   5.75%            
Term Loans | Silicon Valley Bank | Term Loans, Tranche One                
Debt Instrument [Line Items]                
Proceeds from borrowings, net of issuance costs   $ 5,000,000.0            
Term Loans | Silicon Valley Bank | Term Loans, Tranche Two                
Debt Instrument [Line Items]                
Proceeds from borrowings, net of issuance costs $ 5,000,000.0              
Term Loans | Silicon Valley Bank | Term Loans, Tranche Three                
Debt Instrument [Line Items]                
Unused borrowing capacity, expired amount   $ 5,000,000.0            
Debt Instrument, Redemption, Period One | Term Loans | Silicon Valley Bank                
Debt Instrument [Line Items]                
Redemption price, percentage   2.00%            
Debt Instrument, Redemption, Period Two | Term Loans | Silicon Valley Bank                
Debt Instrument [Line Items]                
Redemption price, percentage   1.00%            
Debt Instrument, Redemption, Period Three | Term Loans | Silicon Valley Bank                
Debt Instrument [Line Items]                
Redemption price, percentage   0.00%            
Maximum                
Debt Instrument [Line Items]                
Percentage change in loan in a non-troubled debt restructuring (less than)   0.10            
v3.20.2
Long-term Debt - Schedule of Maturities of Long-term Debt (Details)
$ in Thousands
Jun. 30, 2020
USD ($)
Debt Disclosure [Abstract]  
2020 (remainder of year) $ 0
2021 2,400
2022 4,800
2023 2,800
Total future principal payments $ 10,000
v3.20.2
License and Collaboration Agreements (Details) - USD ($)
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Dec. 31, 2019
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]          
Deferred revenue, current $ 23,688,000   $ 23,688,000   $ 1,435,000
Product | AbbVie          
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]          
Remaining balance in deferred revenue 59,900,000   59,900,000    
Potential cash payment upon excercising license option 75,000,000.0   75,000,000.0    
Potential cash payment upon achievement of certain development and commercial milestones 205,000,000.0   205,000,000.0    
Potential cash payment upon achievement of certain sales-based cash milestones 450,000,000.0   450,000,000.0    
Revenue 86,000   86,000    
Product | AbbVie | Maximum          
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]          
Potential future milestones receivable (up to) 75,000,000.0   75,000,000.0    
Product | AbbVie | Upfront License Payment          
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]          
Remaining balance in deferred revenue 60,000,000.0   60,000,000.0    
Product | Adaptimmune          
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]          
Revenue 602,000 $ 142,000 1,700,000 $ 142,000  
Deferred revenue, current 242,000   242,000    
Product | Adaptimmune | Maximum          
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]          
Potential future milestones receivable (up to) 288,000,000.0   288,000,000.0    
Product | Adaptimmune | Upfront License Payment          
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]          
Remaining balance in deferred revenue   $ 2,000,000.0   $ 2,000,000.0  
Product | Adaptimmune | Research Support Payment          
Collaborative Arrangement and Arrangement Other than Collaborative [Line Items]          
Remaining balance in deferred revenue $ 1,300,000   $ 1,300,000    
v3.20.2
Stockholders’ Equity - Narrative (Details)
$ / shares in Units, $ in Thousands
1 Months Ended 6 Months Ended
Jan. 01, 2020
shares
Jul. 31, 2020
USD ($)
shares
warrant
$ / shares
Jun. 30, 2020
shares
Jan. 31, 2020
$ / shares
shares
Jun. 30, 2018
USD ($)
Jun. 30, 2020
USD ($)
Jun. 30, 2019
USD ($)
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]              
Proceeds from issuance of common stock and prefunded warrants, gross | $           $ 0 $ 23,598
Options, grants in period (in shares)       1,026,950      
Grants in period, weighted average exercise price (in dollars per share) | $ / shares       $ 3.25      
Piper Jaffray & Co.              
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]              
Maximum amount of common stock eligible to be sold (up to) | $         $ 50,000    
2018 Plan              
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]              
Number of additional shares authorized (in shares) 929,394   743,515        
Restricted Stock Units (RSUs)              
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]              
RSUs issued during period (in shares)       156,328      
Grant date fair value (in dollars per share) | $ / shares       $ 3.23      
Subsequent Event              
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]              
Proceeds from issuance of common stock and prefunded warrants, gross | $   $ 60,000          
Purchase agreement, aggregate purchase price per unit (in dollars per share) | $ / shares   $ 10.1175          
Subsequent Event | Common Units              
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]              
Shares issued in transaction   5,139,610          
Subsequent Event | Prefunded Warrant Units              
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]              
Warrants exercisable for shares of common stock (in shares)   790,710          
Number of warrants per unit sold in purchase agreement | warrant   1          
Warrants issued, exercise price (in dollars per share) | $ / shares   $ 0.001          
Subsequent Event | Common Stock Warrant              
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]              
Warrants issued, exercise price (in dollars per share) | $ / shares   $ 12.74          
Warrants outstanding, term   3 years 6 months          
Subsequent Event | Common Stock | Common Units              
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]              
Number of shares of common stock per unit sold in purchase agreement (in shares)   1          
Subsequent Event | Common Stock | Prefunded Warrant Units              
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]              
Number of securities called by each warrant (in shares)   1          
Subsequent Event | Common Stock Warrant | Common Units              
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]              
Purchase agreement, ratio of common stock to warrants   0.3          
Subsequent Event | Common Stock Warrant | Prefunded Warrant Units              
Share-based Payment Arrangement, Expensed and Capitalized, Amount [Line Items]              
Purchase agreement, ratio of common stock to prefunded warrants   0.3          
v3.20.2
Stockholders’ Equity - Stock-Based Compensation (Details) - USD ($)
$ in Thousands
3 Months Ended 6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Jun. 30, 2020
Jun. 30, 2019
Class of Stock [Line Items]        
Total stock-based compensation expense $ 1,232 $ 682 $ 2,218 $ 1,436
Employee | Research and development        
Class of Stock [Line Items]        
Total stock-based compensation expense 716 422 1,225 762
Employee | General and administrative        
Class of Stock [Line Items]        
Total stock-based compensation expense 507 248 972 631
Non-Employee | Research and development        
Class of Stock [Line Items]        
Total stock-based compensation expense 7 11 18 40
Non-Employee | General and administrative        
Class of Stock [Line Items]        
Total stock-based compensation expense $ 2 $ 1 $ 3 $ 3
v3.20.2
Income Taxes (Details)
6 Months Ended
Jun. 30, 2020
Jun. 30, 2019
Income Tax Disclosure [Abstract]    
Effective tax rate (0.04%) 0.00%