10-K 1 alpn-10k_20171231.htm 10-K alpn-10k_20171231.htm




Washington, D.C. 20549




(Mark One)


For the fiscal year ended December 31, 2017



Commission File Number 001-37449



(Exact name of Registrant as specified in its Charter)





(State or other jurisdiction of

incorporation or organization)

(I.R.S. Employer
Identification No.)



201 Elliott Avenue West, Suite 230

Seattle, WA


(Address of principal executive offices)

(Zip Code)

Registrant’s telephone number, including area code: (206) 788-4545


Securities registered pursuant to Section 12(b) of the Act: Common Stock, Par Value $0.001 Per Share; Common stock traded on the NASDAQ stock market

Securities registered pursuant to Section 12(g) of the Act: None

Indicate by check mark if the Registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act. YES  NO 

Indicate by check mark if the Registrant is not required to file reports pursuant to Section 13 or 15(d) of the Act. YES  NO 

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 and posted on its corporate Web site, if any, every Interactive Data File required to be submitted and posted 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 and post such files). YES  NO 

Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K (§229.405) is not contained herein, and will not be contained, to the best of Registrant’s knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. 

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, a non-accelerated filer, 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


  (Do not check if a smaller reporting company)


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 

The aggregate market value of the voting and non-voting common equity held by non-affiliates of the Registrant, based on the closing price of the shares of common stock on The NASDAQ Stock Market on June 30, 2017, was approximately $28.4 million. Shares of common stock held by each executive officer and director and by each other person who may be deemed to be an affiliate of the Registrant, have been excluded from this computation. The determination of affiliate status for this purpose is not necessarily a conclusive determination for other purposes.

The number of shares of Registrant’s Common Stock outstanding as of March 20, 2018 was 13,846,084.

Portions of the registrant’s definitive proxy statement to be filed with the Securities and Exchange Commission in connection with the registrant’s 2018 Annual Meeting of Stockholders, which will be filed subsequent to the date hereof, are incorporated by reference into Part III of this Form 10-K. Such proxy statement will be filed with the Securities and Exchange Commission not later than 120 days following the end of the registrant’s fiscal year ended December 31, 2017.




Table of Contents






Forward-Looking Statements





Item 1.



Item 1A.

Risk Factors


Item 1B.

Unresolved Staff Comments


Item 2.



Item 3.

Legal Proceedings


Item 4.

Mine Safety Disclosures








Item 5.

Market for Registrant’s Common Equity, Related Stockholder Matters and Issuer Purchases of Equity Securities


Item 6.

Selected Financial Data


Item 7.

Management’s Discussion and Analysis of Financial Condition and Results of Operations


Item 7A.

Quantitative and Qualitative Disclosures About Market Risk


Item 8.

Financial Statements and Supplementary Data


Item 9.

Changes in and Disagreements with Accountants on Accounting and Financial Disclosure


Item 9A.

Controls and Procedures


Item 9B.

Other Information








Item 10.

Directors, Executive Officers and Corporate Governance


Item 11.

Executive Compensation


Item 12.

Security Ownership of Certain Beneficial Owners and Management and Related Stockholder Matters


Item 13.

Certain Relationships and Related Transactions, and Director Independence


Item 14.

Principal Accounting Fees and Services








Item 15.

Exhibits, Financial Statement Schedules






Forward-Looking Statements

This Annual Report on Form 10-K 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 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 potential 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 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 expectations regarding market risk, including interest rate changes;


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.



Item 1. Business.


Our company is focused on discovering and developing innovative, protein-based immunotherapies targeting the immune synapse to treat cancer, autoimmune/inflammatory disorders, and other diseases. Our proprietary scientific platform uses a process known as directed evolution to create therapeutics potentially capable of modulating human immune system proteins.

In our pre-clinical studies, our scientific platform has proven capable of identifying novel molecules, including single domains capable of modulating multiple targets. These molecules have demonstrated efficacy in in vitro and in vivo mouse models. We believe therapeutics generated by our scientific platform have the potential to provide benefit in a broad range of immune system disorders. We have chosen to focus our initial efforts in select areas with unmet medical needs in oncology and inflammatory/autoimmune diseases.

The human immune system is a complex system evolved to protect humans from external infections and harmful changes of internal cells. The Immunoglobulin Superfamily (abbreviated “IgSF”) is the name given to the largest family of adhesion, costimulatory (activating), and inhibitory (blocking) proteins found on the surface of immunological, neurological, and other human cell types. Our scientific approach and platform are based upon IgSF protein units (referred to as “domains”). We believe the IgSF protein family is particularly valuable because many IgSF proteins naturally bind multiple binding partners, also referred to as “counterstructures”.

The scientific discoveries resulting from our work to date have resulted from applying our technology to IgSF proteins to create what we call “Variant Ig Domains” or “vIgDs”. Ours is a platform technology, and we believe our scientific platform represents a novel approach to targeting the immune system. Our scientists create vIgDs through directed evolution—an iterative scientific engineering process purposefully conducted to “evolve” an IgSF protein towards a desired therapeutic function. The potential to create therapies capable of working within a formed synapse, forcing a synapse to occur, or preventing a synapse from occurring are important, novel attributes of our scientific platform.

In cancer, the immune system is often suppressed by inhibitory signals (or quiescent due to lack of costimulatory signals) within the tumor microenvironment. We believe our vIgDs can stimulate the immune system by delivering an activating signal, blocking an inhibitory signal, or both. The potential of vIgDs to modulate multiple inhibitory and/or activating pathways simultaneously for the treatment of cancer is a powerful and novel attribute of our scientific platform.

In autoimmune and inflammatory conditions, the immune system has become overactive and mistakenly attacks healthy cells. Our vIgDs are potentially capable of delivering an inhibitory signal, blocking an activating signal, or both—potentially diminishing the severity of autoimmune and inflammatory conditions.

Our scientific platform creates a variety of molecules with broad potential applicability across diseases. vIgDs can be formatted in many different ways, including standard Fc fusion proteins, localized Fc fusion proteins, and monoclonal antibody fusion proteins as well as formulated as a Transmembrane Immunomodulatory Protein (“TIP”) or as a Secreted Immunomodulatory Protein (“SIP”) The ability to utilize different formats potentially broadens future applications of vIgDs in addition to potentially conferring useful therapeutic properties.

ALPN-101 is our lead program and is being developed for the treatment of autoimmune and inflammatory diseases. We are developing our ALPN-202 program for the treatment of cancer.

We expect to request regulatory approval to begin human clinical trials of ALPN-101 (ICOSL vIgD-Fc), our dual ICOS/CD28 antagonist, in the fourth quarter of 2018. We expect the target indications for ALPN-101 will be inflammatory and/or autoimmune disorders or both.

We expect to request regulatory approval to begin human clinical trials with a molecule from our ALPN-202 program in 2019. The ALPN-202 program is a CD80 vIgD-Fc, a dual PD-1/CTLA-4 antagonist with CD28 costimulation. The target indication for the ALPN-202 program will be the treatment of cancer.


In addition to advancing programs internally, we continue to seek partners who can bring therapeutic area experience, development expertise, commercialization capabilities, and funding allowing us to maximize the potential of vIgDs and our scientific platform.

In October 2015, we signed a research and license agreement with Kite Pharma, a Gilead company (“Kite”), granting Kite an exclusive license to two of our TIP programs for use in Kite’s ECT programs. We received $5.5 million in up-front cash and are eligible to receive up to $530.0 million in developmental, clinical, and regulatory milestone payments in addition to royalties on any products containing our TIPs. In the collaboration, we provide the TIPs and perform in vitro testing, while Kite is responsible for in vivo testing, manufacturing, clinical trials and commercialization of any resulting therapies. This collaboration was renewed in October 2017.

Immunology Background

Our therapies are being evaluated for their potential to target immune system disorders, including oncology (cancer), infectious disease, and inflammatory/autoimmune disease. Based on preclinical data generated to date, we believe vIgDs have the potential to provide therapeutic benefit in a broad range of immune system disorders. We have chosen to focus our initial efforts on select therapeutic areas with unmet medical needs in oncology and inflammatory/autoimmune disease.

The human immune system is a complex system evolved to protect the host from external infection and harmful alterations of natural cells. At the most basic level, this system has evolved to detect antigens. Antigens are essentially anything causing the immune system to try and mount an immune response. Antigens vary from pathogens like a virus, mutated cells like those involved in causing cancer, or even otherwise healthy cells. In special situations such as transplanted organs or cells from a bone marrow transplant, the body sees antigens from these otherwise normal cells as “non-self”.

The immune system determines if an antigen is harmful or not, and then acts accordingly—activating to destroy cells displaying the target antigen or inhibiting the immune system from doing anything if the target antigen is judged not harmful. The immune system has a memory for antigens so it can mount an activating or inhibitory response more quickly if a previously-seen antigen is encountered again.

The basic actors within the immune system are as follows:


Antigen presenting cells (“APCs”) responsible for gathering antigens and presenting them to the immune system.


T cells armed to destroy cells the immune system has decided are harmful—including pathogens, cancer cells, and transplanted cells.


B cells capable of recognizing foreign antigens and secreting antibodies to facilitate removal of the identified antigens.


Regulatory T cells and suppressive myeloid cells which inhibit the immune system from responding, preventing the immune system from attacking healthy cells.

Importantly, the APCs in the immune system gather antigens to determine whether they are harmful or not. If the antigens are judged harmful by the immune system, cytotoxic (effector) cells are activated to eliminate the harmful cells. If the antigens are judged not harmful by the immune system, regulatory cells inhibit the immune system to ensure no normal healthy cells are killed.

Activation and inhibition can be thought of like applying the gas or pressing the brake in an automobile. When viewed through the lens of activation (costimulation) and inhibition, our scientists work to develop therapies seeking to do one of four things:


Deliver an activating signal (press on the gas) to get a stronger immune response


Block an inhibitory signal (release the brake) to get a stronger immune response


Deliver an inhibitory signal (press on the brake) to slow down an existing immune response


Block an activating signal (release the gas) to slow down an existing immune response


The above can also be expressed in more precise scientific terminology this way:


Agonize a costimulatory receptor to press on the gas


Antagonize an inhibitory receptor to release the brake


Agonize an inhibitory receptor to press on the brake


Antagonize a costimulatory receptor to release the gas

For infectious disease or cancer, patients need a stronger immune response so we seek to develop therapies delivering an activating signal, blocking an inhibitory signal, or both. If a patient has an inflammatory/autoimmune disease or has received a transplant, we seek to develop therapies delivering an inhibitory signal, blocking an activating signal, or both.

IgSF Proteins Defined

The IgSF is the name given to the largest family of adhesion, costimulatory (activating), and inhibitory proteins found on the surface of immunological, neurological, and other human cell types. Structurally predicted to number over 400 proteins, these cell surface and soluble molecules are broadly involved with recognition of antigens, assisting in the formation of the immune synapse, and performing costimulatory, co‑inhibitory, and cytokine receptor signaling functions.

Figure 1 below shows several IgSF protein types ranging from a CD1 protein with a single “V” domain to the IgM protein which has a variety of “V” and “C” domains (referred to in scientific literature as “IgC” and “IgV” domains). This family of proteins underpins our technology because our scientific approach and platform are based upon engineering these IgC and IgV domains for therapeutic benefit.


Figure 1

IgSF proteins like those in Figure 1 have evolved to play a primary role in the immune system of higher order species. This is reflected in the central components of the adaptive immune system—such as antibodies, MHC molecules, T cell receptors (“TCRs”), and B cell receptors—all being composed of IgSF domains. Other critical IgSF components of T cell responses include the TCR co-receptors, CD4 and CD8.

Current therapeutic advances in oncology block “checkpoint inhibitor” IgSF domains such as PD-1 and CTLA-4. The next generation of therapeutics target checkpoint inhibitor IgSF domains such as TIGIT, LAG-3, TIM-3, and BTLA. Critical costimulatory ligands of the B7 family are all IgSF proteins, as are their activating receptors CD28, ICOS, CD226, and


TMIGD2. IgSF domains participate in the most critical aspects of adaptive immunity. Figure 2 below shows a subset of the over 400 identified IgSF proteins and where they are typically found on tumor cells and immune system cells.


Figure 2

Figure 2 illustrates how some IgSFs appear on multiple cell types. For example, CD28 (and its ligand binding partners or “counterstructures”, CD80 and CD86) and ICOS (and its counterstructure ICOSL) show up on CD4 helper T cells, myeloid/myeloid-derived suppressor cells, CD4 TREG regulatory cells, and CD8 T cells. A vIgD targeting ICOS and CD28, to continue the example, could therefore potentially have activity across a number of these cell types.

Previous utilizations of IgSF domains as therapeutic products have been limited by the generally low affinities of native, unmodified IgSFs (also referred to as “wild-type” IgSFs) have for their various counterstructures. We believe our expertise in protein engineering and immunological function enables novel therapeutic mechanisms of action not previously appreciated by the biopharmaceutical industry.

Specifically, our scientists apply directed evolution via our scientific platform to strategically engineer single IgSF domains to potentially bind to multiple IgSF counterstructures. The ability to potentially bind multiple counterstructures with varying affinity has resulted in increased functional activity in our pre-clinical work and potentially represents the discovery of novel biology by using our scientific platform.

While the IgSF family also includes antibodies, and monoclonal antibodies are commonly used as therapeutics by the biotechnology industry, we are interested instead in the native, non-antibody, IgSF proteins secreted or expressed on the surface of human cells. We believe these members of the IgSF family are particularly valuable in terms of therapeutic potential compared to antibodies because IgSF proteins have often evolved to bind multiple counterstructures.

Even though our non-antibody vIgDs possess novel functional activity not associated with antibody reagents, we believe vIgDs will share many of the beneficial biochemical properties making antibodies attractive therapeutic molecules, such as stability, manufacturability, and flexible formatting—while retaining novel vIgD benefits and potentially enabling new opportunities to target human disease.


Immune Synapse Defined

The immune synapse is a temporary, dynamic interaction at the core of the immune system’s response to antigens. When the synapse is created between two cells (like an APC and a T cell, or a tumor cell and a T cell), adhesion molecules hold cell membranes in tight formation to enable sufficient antigen presentation and/or receptor signaling. When this exchange works well, the body is adequately defended against a wide range of pathologies—including cancer and infectious diseases. When the exchange malfunctions, harmful cells are not destroyed or normal/healthy cells are mistakenly attacked.

The immune synapse is very small and often exists for just minutes. While intact, cells forming the synapse exchange a wide variety of information. Environmental cues, ligand/receptor expression ratios, and specific receptor orientations come together in a dynamic fashion to determine whether a T cell is going to respond to a given antigen or recognize it as harmless. Importantly, IgSF proteins are the principal players in the immune synapse—another reason we chose to focus our scientific platform on IgSF proteins.

Some of our research is targeted to these critical moments of T cell activation where vIgD-based therapeutics generated by our proprietary scientific platform can be used to modulate the spatial arrangement and signaling of multiple targets in the immune synapse. Other research projects seek to develop the ability to force synapses to occur, or prevent them from occurring, based upon the desired therapeutic outcome. This flexibility to work within a formed immune synapse, force an immune synapse to occur, or prevent an immune synapse from occurring is an important, novel attribute of our vIgDs.

Inflammatory/Autoimmune Disease

Inflammatory or autoimmune diseases like Type I diabetes, systemic lupus erythematosus (“lupus”), inflammatory myositis (for example, polymyositis and dermatomyositis), Sjögren’s syndrome, and inflammatory bowel disease are a result of the immune system targeting the body’s healthy tissues by mistake. There are more than 80 known types of inflammatory/autoimmune diseases, many of which are severely debilitating and/or life threatening. A related condition is when a transplant patient’s body attacks the newly transplanted organ (graft rejection) or, in the case of stem cell transplants, the newly transplanted cells attack the patient’s body (graft versus host disease). These are all immune system disorders caused by the immune system having too much activation or too little inhibition. For simplicity, we refer to autoimmune and inflammatory diseases as simply “inflammatory diseases” for the remainder of this section, or both.

Our therapeutic goal with inflammatory disease is to press on the brake by delivering an inhibitory signal or release the gas by blocking an activating signal. We believe one novel aspect of our proprietary scientific platform is the potential ability to create a single vIgD-based therapeutic capable of doing both. We do not currently have a therapeutic targeting inflammatory diseases in human clinical trials or on the market. However, based upon evidence from preclinical studies to date, we believe our scientific platform has the potential to produce vIgD‑based therapeutics targeting inflammatory diseases.

Substantial progress has been made over the last decade in developing disease-modifying therapies to slow or stop disease progression in multiple inflammatory indications. Inhibitors of the pro-inflammatory cytokine TNFα, as well as approved drugs like abatacept and belatacept, have led to disease reductions and improvements in quality of life for patients with a variety of inflammatory disorders including rheumatoid arthritis, psoriasis, ulcerative colitis, Crohn’s disease, and others.

Challenges in Inflammatory Disease

We believe there remains a large unmet need for improved efficacy in the treatment of inflammatory diseases. For example, in rheumatoid arthritis, where arguably the greatest advances in treating inflammatory disease have been made, patients frequently cycle through different biologic therapies and a recent meta-analysis found only just over half of patients on anti-TNFα therapies achieved at least a twenty percent improvement in disease activity. 1

The need for novel therapies is particularly acute for patients with chronic diseases such as lupus, for which only one new drug has been approved by the FDA in the last 50 years. Belimumab, a monoclonal antibody inhibiting B-cell activating factor, was approved in 2011 by the FDA despite concerns the therapy resulted only in modest improvement for lupus patients. Belimumab demonstrated a reduction in corticosteroid usage and an acceptable safety profile, but was not approved for use in severe active lupus nephritis or severe active central nervous system lupus.



Lloyd, et al, Rheumatology (Oxford), v 45 n 112, December 2010, pp 2313-21


Graft versus host disease (“GvHD”), with a mortality rate of 75% or more, is an inflammatory disease which has been particularly challenging for development of new therapies and where there exists a substantial unmet need. Over the last two decades, a multitude of therapies including stem cell transplant, IL-2 antagonists, antithymocyte globulin, anti-CD52, anti-TNF therapies, and others have been studied. While ibrutinib was recently approved for chronic GvHD, there are no approved therapies for the treatment of acute GvHD and a significant number of chronic GvHD patients did not have durable responses to ibrutinib.

How We Are Different

We currently plan to develop therapeutics for inflammatory diseases by focusing on key activating and inhibitory IgSFs driving aberrant immune reactions. For these diseases, we plan on using our proprietary scientific platform to create vIgD-based therapies intended to affect the immune synapse (usually by preventing its formation) and/or interacting directly with those IgSF proteins causing immune system reactions to healthy tissues. We do not currently have a therapeutic targeting inflammatory diseases in human clinical trials or on the market. However, based upon evidence from preclinical studies to date, we believe our scientific platform has the potential to produce therapeutics targeting inflammatory diseases.

Although some signaling between cells occurs between singular ligand and receptor pairs, there are an increasing number of examples where signaling between cells involves multi-protein complexes consisting of three or more proteins recognized in cytokine, adhesion, inhibitory, and other signaling pathways. IgSF domains are exquisitely evolved for such complex interactions. Our next-generation therapies target multi-protein complexes and could potentially facilitate transformative patient care by forcing complexes consisting of the desired protein combinations.

Our scientific platform is flexible enough to be able to take combined approaches like blocking costimulatory proteins ICOS and CD28. When formatted properly, the resulting domain could potentially work in the immune synapse—or potentially prevent an immune synapse from forming—thereby potentially simultaneously decreasing the activating signal and sparing the inhibitory signal, ideally reducing or eliminating symptoms of inflammatory disease.


Cancer is broadly defined as normal human cells growing in an uncontrolled fashion and capable of spreading this aberrant activity elsewhere in the body. Cancer can also be seen as a failure of the immune system to recognize transformed, harmful cells. Tumors develop because cancer cells learn to evade the immune system or dampen immune system activity to such a low level the tumor grows despite an otherwise healthy immune system.

Traditional cancer treatments have focused on directly killing tumor cells through the use of toxic chemicals like chemotherapy or other approaches like irradiating cells. The 2010 FDA approval of sipuleucel-T marked a meaningful change in how tumors are treated. Sipuleucel-T represented the FDA’s first approval of an active cancer immunotherapy. It was designed to help a patient’s immune system attack prostate cancer cells. Brought to FDA approval by one of the founders of our company, the approval of sipuleucel-T energized the field to focus more closely on how to make use of the immune system to treat cancer.

The subsequent development of therapies targeting “checkpoint inhibitors” or pathways responsible for inhibiting an immune response has resulted in several recent FDA-approved therapeutics. Targeting checkpoint inhibitors, thereby releasing the brake on the immune system, has provided meaningful efficacy for a subset of cancer patients.

The first drug approved in this therapeutic class was ipilimumab, an antibody interfering with inhibitory signals from an IgSF protein called CTLA-4. In 2014, two antibodies blocking the inhibitory IgSF protein PD-1— pembrolizumab and nivolumab—were approved in multiple indications. Antagonists of the IgSF protein PD-L1 followed (atezolizumab, avelumab, and durvalumab).

In addition to modulators of these IgSF proteins, several other immunotherapies for cancer are either approved or in development including adoptive T cell therapies (CAR-T, TCR and autologous T cells called “TILs”), cancer vaccines, and oncolytic viruses.

As noted in more detail below, we believe there is a significant unmet medical need for cancer patients for whom existing immunotherapies fail to help or who relapse after initial success on these existing immunotherapies.


Challenges in Oncology

While checkpoint inhibitors have meaningfully changed cancer treatment, their benefit is only observed in a minority of patients and response rates vary substantially by tumor type, disease stage, and other factors. For example, observed response rates for PD-1 inhibitors in melanoma and non-small cell lung cancer are among the highest and range from 20%–40%—possibly due to the higher mutational burden frequently found in these tumors. In contrast, response rates of checkpoint inhibitors in ovarian cancers are lower, with clinical data to date demonstrating a 10%–15% response rate. Therapies designed to stimulate the immune system to attack tumors often have their effect diminished by a tumor’s evolved ability to generate redundant inhibitory signals, or dampen costimulatory signals, effectively shutting down productive immune responses before the tumor can be cleared.

One of our goals is to “raise the tail of the survival curve” for cancer patients while potentially minimizing further adverse events. In Figure 3, the arrows represent this concept of “lifting the tail”— achieving a higher percentage of patients with durable relief from their cancer diagnosis.


Adapted from: Cell, v161, n2. April 2015.


Figure 3

While the field of cancer immunotherapy advanced significantly since the approval of sipuleucel-T, no single immunotherapy is capable of creating a durable anti-tumor response in more than a third of cancer patients—and some types of cancer continue to be resistant to any immunological approach. The field has initially tried to address this unmet medical need by combining different checkpoint inhibitors—essentially trying to release the brake twice as hard. Despite several attempts, however, this approach has not resulted in success across a broad variety of cancers.

How We Are Different

Our proprietary scientific platform is potentially capable of engineering wild-type IgSF proteins for therapeutic benefit and with potentially novel attributes and activity. For example, our platform creates novel IgSF mutants we call vIgDs designed to be capable of antagonizing (blocking) an inhibitory receptor while agonizing (delivering) an activating signal,


boosting the immune system’s response to cancer cells. We are evaluating whether these vIgD-based therapeutics will work in patients where there might be too much inhibition or too little activation in the tumor micro-environment (abbreviated “TME”), or both.

We believe antagonizing inhibitory signals to release the brakes on the immune system is important, but insufficient for most patients. One way we are different than approved immune-oncology therapeutics is our focus on agonizing activating receptors, pressing on the gas to stimulate the immune system. A potentially unique attribute of our scientific platform is its ability to create single vIgDs capable of both antagonizing inhibitory receptors (release the brake) and agonizing activating receptors (press the gas).

We are also developing molecules intended to force synapses to form, delivering activating signals, blocking inhibitory signals, or both. We intend to evaluate whether these types of therapies could potentially work in situations where there might be insufficient T cells in the TME.

Our early research suggests working with vIgDs engineered through our scientific platform potentially create a more powerful immune system response compared to unmodified, wild-type IgSF proteins. We do not currently have a therapeutic targeting cancer in human clinical trials or on the market. However, based upon evidence from our preclinical studies to date, we believe our scientific platform has the potential to produce vIgD-based therapeutics targeting cancer.

Our Scientific Platform

Our proprietary scientific platform is potentially capable of engineering native IgSF proteins for use as therapeutics. For example, vIgDs can be engineered with improved binding to single or multiple protein partners or counterstructures. A core potential advantage of our scientific platform is creating vIgDs with the ability to potentially strengthen binding to one counterstructure while losing or diminishing binding to another—potentially increasing selectivity for novel therapeutic outcomes. These protein engineering efforts may also potentially uncover binding to previously under-appreciated counterstructures with the potential to positively impact therapeutic efficacy.

Directed Evolution

We recognize how evolution resulted in a finely-tuned and delicately-balanced human immune system in general, and the important role of complex IgSF protein interactions in particular. Our aim is to leverage our scientists’ expertise in protein engineering and understanding of the immune system. Our scientific platform seeks to engineer or evolve natural, wild-type IgSFs in a manner conferring a therapeutic benefit when administered to patients.

Our scientists utilize yeast display protein library strategies to identify variants of wild-type IgSFs with desired binding characteristics. The power of yeast library approaches derives from the fact libraries can contain up to 109 protein variants with either random or rationally targeted amino acid mutations at any desired frequency per variant. At this level of protein diversity, it is usually possible to find at least a small fraction of variants with desired binding profiles. Thus, this technology can potentially provide us with protein variants of interest we can later optimize to potentially achieve the desired biology. We call this process “directed evolution” and its purpose is to alter the domains on wild-type IgSF proteins to achieve a desired therapeutic goal. This process is our proprietary scientific platform and we call the altered domains produced by our scientific platforms “vIgDs”.

We believe the key advantages to our approach are:


potential broad applicability since many critical immuno-regulatory proteins are composed of IgSF members;


potentially rapid and precise selection of desired binding properties; and


potential early elimination of unstable proteins because the yeast display platform biases recovery of affinity-modified proteins towards a well-folded, non-aggregated, and stable subset of proteins;

Figure 4 shows the work flow process of directed evolution in our scientific platform. We start with a wild-type IgSF protein and then enter a cycle of library generation and yeast display. Flow cytometry or other methods are used to sort for yeast clones displaying variants with desired binding characteristics. Biologic and biophysical assays of purified proteins assess biological function and manufacturing characteristics. The end product is an optimized vIgD. Additional cycles can be carried out by building next generation libraries from the output of prior libraries to result in further optimization.



Figure 4

A key skill in our directed evolution approach is our ability to construct productive libraries. When the structure of the wild-type IgSF protein is available, potential predictions can be made regarding the optimal amino acid alterations necessary to obtain the desired binding profile. We use these predictions to create a “rationally designed” library featuring mutations introduced in specific regions of the target IgSF protein. When such information is not available, mutations can be randomly introduced into the target protein at any desired average number of mutations per variant creating a “random” library. When our scientists apply these library designs, either approach can yield useful candidate proteins.

Our scientific platform is generally able to improve upon native IgSF activity regardless of whether natural binding affinity is weak or strong. When starting affinity is very weak, techniques employed by our scientists have accomplished several thousand-fold increases in binding affinity with sometimes as few as two library generation cycles. Even when starting affinity is very high, our scientific platform can still improve binding affinities. The same general strategies can be used when the desired therapeutic profile requires reduced affinity compared to the wild-type IgSF.

Our scientists rely on results from various in vitro analyses using human immune cells to guide outputs from our scientific platform. Upon the completion of one generation of the directed evolution process described above, the identified proteins are reformatted from display on yeast to soluble Fc fusion proteins produced in mammalian cells, and then tested in vitro with human immune cells. Candidates for further discovery research are identified by their desired immune system activity compared to the activity of the wild-type IgSF protein or other reference molecules. Those engineered vIgDs most strongly outperforming wild-type IgSFs and/or reference molecules may then be potentially used as the basis for second- or even third-generation directed evolution cycles.

Discovering New Biology

We believe the advantages of our scientific platform allow us to identify new biology. Our lead program is an example of this where a single ICOSL domain, normally only binding ICOS with any physiological relevance, is engineered into a vIgD able to bind both ICOS and CD28. We have replicated this type of novel biology in other programs directed to disclosed and undisclosed targets.


In preclinical animal models, we often find our engineered vIgDs can outperform the relevant wild-type IgSF protein and/or other reference molecules when the vIgD differs from the wild-type IgSF by as few as one to three mutations. Based on in silico analyses and analogous FDA-approved therapies, we do not believe vIgDs are unusually susceptible to immunogenic effects causing adverse events or loss of drug activity.

Highly Productive

Our scientific platform is highly productive. A single library run through the directed evolution process can potentially create vIgDs useful in both oncology and inflammatory/autoimmune conditions. While this potential advantage is not universal for every IgSF target, our experience is most of our successful discovery campaigns result in vIgDs applicable to a broad variety of therapeutic protein designs and indications. We believe this is a novel attribute given most other platforms require each molecule to be painstakingly purpose-built for each intended therapeutic area.

Potential vIgD Formats

We believe our vIgDs are highly flexible. In many cases, a single affinity-maturation campaign can result in potential multiple domains suitable for use in the formats such as those appearing in Figure 5.



Figure 5

Which format is chosen depends upon the therapeutic application of the vIgD, the desired product profile, and/or the needs of our current and future partners. Figure 5 is not a complete listing as some formats in our discovery program remain undisclosed.


The vIgD-Fc fusion protein is the simplest format. Our lead autoimmune/inflammation program, ALPN-101, and lead oncology program, ALPN‑202, are both examples of vIgD-Fc formats.

The IgV(s), IgC(s), or both of an engineered vIgD protein are fused to an Fc backbone. Combining vIgDs with antibody Fc domains to make Fc fusion proteins potentially allows better expression, facilitates purification, and improves pharmacokinetic (dosing) properties. Fc fusion proteins are a standard format in the industry, with examples such as etanercept, abatacept, and belatacept. In most of our early programs, the Fc backbone is effectorless. In certain situations, the Fc backbone can be designed to have effector function, potentially capable of depleting problematic cell populations. A vIgD-Fc could potentially be administered intravenously, subcutaneously, topically, or other methods

Multifunction vIgD-based Molecule

Multiple vIgDs can be combined or “stacked” together with or without an Fc backbone to create a multifunctional, vIgD-based molecule. With the potential to make use of novel biology discovered using our scientific platform, an Fc fusion with just two domains can potentially affect three, four, or more IgSF targets.


Unlike most other approaches trying to target multiple checkpoints or costimulatory molecules, or both, our vIgD-based therapeutics are not traditional antibody constructs or large and unwieldy scaffolds. In general, all of our vIgD-based therapeutics utilize domains appearing very much like the native IgSF proteins.




Figure 6

Our V-mAb technology potentially allows targeting a vIgD into the tumor microenvironment with a monoclonal antibody. A “V-mAb” is a vIgD joined with a monoclonal antibody recognizing a validated target (as depicted in Figure 6). Our V-mAbs use the targeting antibody to localize the vIgD to the TME or target tissue to potentially deliver specific, locally-active immuno-modulation.

Tumors thrive in environments of immune suppression. Immune cells have often been recruited to the TME, but are not responding correctly. In many cases, the T cells are recognizing antigen in the form of MHC peptide, but this signal is not supported by required costimulatory activity. In these cases, T cells could benefit from tumor or APC expression of costimulatory ligands such as CD80, CD86, or ICOSL. This strategy will potentially invigorate tumor immune responses in a tumor-specific context, which could potentially be safer than activating T cells with systemic costimulatory agonists.

From a manufacturing standpoint, V-mAbs may potentially have advantages compared to antibody-drug conjugates or ADCs. ADCs typically join a targeting monoclonal antibody with a cytotoxic drug. Our V-mAbs are potentially different from the complex four-step manufacturing process (mAb, linker, drug, and conjugation) necessary for ADCs and do not contain toxic chemicals potentially harmful to bystander cells.


TIP Program



Figure 7

Engineered Cellular Therapies (“ECTs”) in the form of CAR-T cells, engineered TCR human T cells, and engineered TILs have captured the attention of the scientific community and patients. The first CAR-T products were approved by the FDA in 2017, ushering in a new era of cancer immunotherapy.

Our TIP program (depicted in Figure 7) was created to potentially improve ECTs. The cytotoxicity, cytokine production, and survival of ECTs can potentially benefit from costimulatory signaling. We created vIgD-based extracellular domains engineered to potentially bind multiple powerful activating receptors on the surface of the T cell, which we call “TIPs”. By expressing costimulatory TIPs on CAR-Ts or TCR-engineered T cells, a TIP-enabled product could potentially increase the activity of infused CAR-T/ TCR cells and endogenous T cells present in the tumor environment—potentially causing enhanced and/or more persistent responses to tumors via enhanced costimulatory (activating) signaling.

In October of 2015, Kite and Alpine entered into a research and license agreement pursuant to which we granted Kite an exclusive license to two of our TIP programs, which Kite plans to further engineer into CAR and TCR product candidates. This agreement was extended in October 2017.

SIP Program

Our scientific platform is not restricted to transmembrane proteins expressed on the surface of engineered cell therapies in the TIP format. Infused CAR-T or modified TCR T cells—or even oncolytic viruses—can also be potentially modified to express vIgD-based SIPs.

Potential applications include secretion of SIPs into the extracellular space to antagonize inhibitory receptor activity, which often restricts T cell responses in the tumor environment. Cellular therapies can be engineered to express therapeutic molecules in the tumor environment, such as secreted cytokines or modulators of both inhibitory and activating receptors. The potential result could be ECTs or oncolytic viruses capable of carrying their own localized signals to modify the immune synapse with no need for combination use with expensive checkpoint monoclonal antibodies.

We believe SIPs are a promising approach to antagonize inhibitory receptors because of a SIP’s small size as well as the demonstrated ability of T cells to express SIPs compared to monoclonal antibodies or antibody fragments.


Collaboration with Kite Pharma, a Gilead Company

In October 2015, we entered into an exclusive, worldwide license and research agreement with Kite to research, develop, and commercialize autologous ECTs incorporating two programs from our TIP technology. The research term of this agreement was extended in October 2017.


Under the terms of the license and research agreement with Kite, we will conduct initial research to deliver two program TIPs with certain pre-defined characteristics. Kite will then conduct further research on the program TIPs with the goal of demonstrating proof-of-concept. If successful, Kite would further engineer the program TIPs into certain CAR-T and TCR product candidates to potentially enhance anti-tumor response.

Pursuant to the terms of the license and research agreement, we are responsible for conducting a research plan to deliver TIPs to two specified IgSF targets. Kite is responsible for integrating the TIPs into their ECT constructs. Kite is also responsible for performing in vitro and in vivo studies of resulting TIP/ECT therapeutics, manufacturing, and clinical trials.

Financial Terms

Under the terms of the agreement, Kite paid us a $5.0 million upfront payment plus $0.5 million in additional payments to support our research. These amounts became non-refundable upon completion of a milestone in March 2016. We are eligible to receive an additional $0.5 million research support payment payable by Kite in two tranches.  In addition, we remain eligible to receive up to $530.0 million in total milestone payments based upon the successful completion of pre-specified research, clinical and regulatory milestones relating to both program TIPs. At Kite’s option, a portion of the milestone payments may be paid in shares of Kite’s common stock. We will also be eligible to receive a low, single-digit percentage royalty for sales on a licensed-product-by-licensed-product and country-by-country basis, until the later of (1) the date on which the licensed product is no longer covered by certain intellectual property rights, and (2) the expiration of a defined term beginning on the first commercial sale of the licensed product. We also granted to Kite an exclusive right of first negotiation to negotiate an exclusive, worldwide, sublicensable, royalty-bearing license, to practice and exploit any pharmaceutical or biologic product containing certain allogeneic T cells developed for use as a therapy for cancer, which we refer to as the Allogeneic Products. In addition, Kite has a one-time right of first refusal prior to our accepting any offer to license such Allogeneic Products on terms substantially similar to terms offered by Kite.


Kite may terminate the agreement with prior written notice after expiration of the research term. Either party may also terminate the agreement upon certain insolvency events of the other party, or with written notice upon material breach by the other party, if such breach has not been cured within a defined period of receiving such notice. We may terminate the agreement with prior written notice if Kite or Kite’s affiliates or sublicensees challenge the validity, enforceability or scope of any Alpine licensed patents.


Kite has worldwide exclusive use of TIPs engineered to target two IgSF proteins chosen by Kite. The license exclusivity is limited to these targets used as ECTs. We retain the right to develop or outlicense these two target families outside of ECTs as well as the right to develop or license any other IgSF targets for use in ECTs.

Intellectual Property Related to Kite Transaction

Each party will each solely own any inventions, and patents claiming those inventions, generated and invented solely by such party, respectively, subject to the exclusive licenses granted by us to Kite. Each party will jointly own any inventions, and patents claiming those inventions, generated or invented by both parties pursuant to the activities conducted under the license and research agreement, subject to the exclusive licenses granted by us to Kite.


Our Strategy

Our goal is to create modern therapies targeting the immune synapse, using our directed- evolution based scientific platform to treat patients with serious conditions such as cancer and inflammatory/autoimmune diseases. To achieve our goals, we intend to:

Aggressively move our lead inflammation/autoimmune program ALPN-101 to clinical trials for the treatment of autoimmune/inflammatory diseases.

ALPN-101 is an ICOS/CD28 dual antagonist vIgD fused to an effectorless Fc backbone. ALPN‑101 is based on the discovery, using our scientific platform, of a single vIgD with increased binding affinity for both ICOS and CD28. Molecules in the ALPN-101 program have demonstrated activity in vitro and in vivo in multiple models of disease. IND-enabling nonclinical and manufacturing efforts have started and we intend to apply for authorization in the fourth quarter of 2018 to begin clinical trials. We currently plan to study ALPN-101 initially in healthy volunteers. We may subsequently study ALPN-101 in patients with diseases such as GvHD, systemic lupus erythematosus, Sjögren’s syndrome, inflammatory myositis (e.g., polymyositis, dermatomyositis), and/or arthritis.

Aggressively move our lead oncology program ALPN-202 to clinical trials.

Molecules in the ALPN-202 program are designed to antagonize PD-L1 and CTLA-4, while also providing tumor-localized CD28 agonism. Molecules in the ALPN-202 program are thus potentially capable of blocking inhibitory signals from PD-L1 and CTLA-4 while providing CD28 costimulation. This is accomplished with a single vIgD fused to an effectorless Fc backbone. The ALPN-202 program is based on the discovery, using directed evolution and our scientific platform, of a single domain capable of interacting with PD-L1, CD28, and CTLA-4. Molecules in the ALPN-202 program have demonstrated in vivo activity in a mouse model of PD-L1 positive tumors. We intend to file an IND in 2019 to begin clinical trials.

Maximize the value of our pipeline and platform via partnering activities.

We believe our scientific platform is highly productive, with affinity maturation campaigns often resulting in hundreds of potential hits producing dozens of vIgDs with potentially desirable biologic activity. Our discovery efforts to date have resulted in vIgDs with potential uses in cancer, autoimmune/inflammatory, and infectious disease. We believe this provides significant opportunity for partnering discussions. Our first such collaboration, with Kite Pharma, involved two targets for use in ECTs and provided us $5.5 million in cash plus $530.0 million in potential developmental, clinical, and regulatory milestone payments. While difficult to predict the timing of such partnerships or whether we will be successful in our efforts to enter into further collaborations, we are continually in discussions with multiple potential partners ranging from small biotechnology firms to large pharmaceutical companies.

Product Pipeline


Figure 8


Lead inflammation/autoimmune program: ALPN-101, a Dual ICOS/CD28 vIgD-Fc Antagonist

Our lead autoimmune/inflammation program is comprised of a novel single domain vIgD binding both ICOS and CD28 at higher affinity than wild-type molecules. This vIgD is fused to an effectorless Fc backbone and is intended for the potential treatment of certain inflammatory and autoimmune conditions.

Inducible T cell Costimulator (“ICOS”) is part of the CD28 costimulatory family of molecules, including PD-1, CD28, and CTLA-4. ICOS is related to CD28, but, in contrast, is poorly expressed in naïve T cells, and rapidly induced upon activation.2 It appears to be a dominant costimulatory pathway in at least some effector or pathogenic T cells, particularly in the absence of CD28.3 Elevated levels of ICOS‑expressing T cells have been described in an increasing number of inflammatory diseases, correlating with disease activity.4,5 Inhibition of ICOS is effective in several preclinical inflammatory disease models. The ICOS pathway may therefore represent a major costimulatory pathway, nonredundant with CD28 and highly relevant to inflammatory diseases.

Cluster of Differentiation 28 (“CD28”) is the dominant costimulatory pathway in naïve, antigen-inexperienced T cells, and required for their activation.6 However, optimal activation of activated and/or effector T cells often occurs independently of CD28.7 CD28 expression becomes progressively reduced during activation in at least some T cell populations, and CD28-negative T cells have been observed in a growing number of autoimmune diseases, often correlated with disease activity.8 Therapeutic agents directed against the CD28 pathway alone, such as abatacept, have proven only partially effective or ineffective in some inflammatory diseases,9 and/or only induce only partial disease improvement in their approved indications.10 Therefore, an additional, non-CD28, costimulatory pathway(s) likely participates in activated, effector T cells, and may be particularly relevant to inflammatory disease pathogenesis. The known ligands for CD28 are CD80 and CD86. CD28 functions akin to a rheostat—the more CD28 signaling occurs, the faster and stronger the subsequent immune response.

Few studies have examined the effect of therapeutic blockade of ICOS in humans, but early clinical trial findings with the anti-ICOSL mAb AMG-55711 suggest inhibition of the ICOS pathway alone may also be insufficient to achieve complete efficacy in many inflammatory conditions.

ALPN-101 is designed to inhibit both the CD28 and ICOS pathways to potentially dampen an overactive immune response. Since it addresses potential deficiencies of single pathway blockade, we hypothesize it to be capable of delivering deeper clinical responses by blockading two key T cell costimulatory pathways with a single therapeutic. Using our scientific platform, we have potentially created a powerful dual ICOS/CD28antagonist with significantly increased binding affinity for both ICOS and CD28 and capable of modulating both targets with a single domain.



  Wikenheiser & Stumhofer, Frontiers in Immunology, v7 n304. August 2016


  e.g. Wang et al. Journal of Immunology, v172 n10. May 2004, pp 5917-5923


e.g. Choi, et al. Arthritis and Rheumatology, v67 n4. March 2015 pp 988-999


e.g. Fonseca, et al. Arthritis and Rheumatology. (In press 10.1002/art.40424)


  McKnight, et al. Journal of Immunology, v152 n11. June 1994, pp 5220-5225


Schweitzer & Sharpe, Journal of Immunology, v161 n6. September 1998, pp 2762-2771


  Maly & Schirmer, Journal of Immunology Research, n348746. March 2015


  e.g. Furie, et al, Arthritis & Rheumatology, v66 n2. January 2014, pp 379-389


  e.g. Maxwell & Singh, Cochrane Database of Systematic Reviews, v2009 n4. October 2009


  Cheng, et al. Annals of the Rheumatic Diseases, v76 n2. 2017 p. 151


Figure 9 is a graphical representation of ALPN-101 and the theorized mechanism of action in humans.


Figure 9

The left side of Figure 9 represents how the interaction typically works to activate T cells when they connect with antigen-presenting cells (“APCs”). CD80/CD86 binds to CD28, and ICOSL binds to ICOS. The resulting costimulatory signal boosts T cell activity (press on the gas). In the case of autoimmune disease and inflammation, this is unwanted activity.

The center of Figure 9 depicts two single ICOSL vIgDs engineered with our scientific platform, each capable of binding CD28 and ICOS. These ICOSL vIgDs are fused to an effectorless Fc.

The right side of Figure 9 shows the goal of ALPN-101—specifically, to block the ability of CD80/CD86 and ICOSL to bind their respective receptors. Put more simply, ALPN-101 seeks to block activating signals (release the gas pedal). When these powerful CD28 and ICOS costimulatory signals are blocked, we believe unwanted immune system activity may be reduced to potentially help patients with inflammatory conditions. The versatility of this therapeutic will potentially allow us to affect a number of different autoimmune/inflammatory diseases and different sets of refractory patient populations.

Notably, ALPN-101 is not a bispecific antibody construct. A traditional bispecific would be constructed of one domain binding ICOS and one domain binding CD28. Instead, ALPN-101 makes use of a novel single domain engineered by our scientists using our proprietary scientific platform.

We have performed a number of pre-clinical experiments demonstrating molecules in the ALPN‑101 program are active in both in vitro (lab bench) and in vivo (animal) models.

Novel Biology

The dual ICOS/CD28 antagonist vIgD at the core of the ALPN-101 program represents potentially novel biology. The mixed-lymphocyte reaction (“MLR”) assay used in this test is an in vitro assay using real human immune system cells. The MLR assay helps gauge the relative immune activity of our early discovery candidates. The data in Figure 10 below show


ALPN-101 is a much better inhibitor of T cell activity, as measured by interferon gamma (IFN-γ) than either belatacept or abatacept, two drugs approved for autoimmune/inflammatory indications.


Figure 10

Superior Activity in Human Xenograft GvHD Model

Molecules in the ALPN-101 program were studied in an in vivo mouse model of Graft versus Host Disease (“GvHD”), a damaging and even potentially fatal inflammatory disease most often brought about during stem cell and/or bone marrow transplant treatments for cancer or other serious diseases. The results represented in Figure 11 show an ALPN-101 program molecule had superior survival (right panel) and a better Disease Activity Index (left panel). Belatacept, an FDA-approved drug for prevention of renal allograft rejection (a type of inflammation-related rejection process analogous to GvHD) is used as a comparison.


Figure 11


Arthritis Model

Figure 12 shows data from an in vivo collagen-induced arthritis model. This model is designed to test a drug’s ability to reduce the kinds of inflammatory signals associated with rheumatoid arthritis and other types of inflammatory arthritis conditions. In this experiment, an early molecule in the ALPN-101 program was superior in suppressing arthritic inflammation to abatacept, a drug approved by the FDA to treat rheumatoid and psoriatic arthritis.


Figure 12

Summary of ALPN-101 Program Preclinical Data

Our scientists have demonstrated in preclinical studies molecules in the ALPN-101 program:


potently inhibit T cell activity;


improve the disease activity index and extend survival in an in vivo animal GvHD model with comparable activity to belatacept, an FDA-approved drug for immunosuppression in renal transplantation with data in GvHD; and


reduce disease severity and delays onset time relative to control in a pilot in vivo arthritis model with activity superior to abatacept, an FDA-approved drug for rheumatoid and psoriatic arthritis.

ALPN-101 Clinical Plans

Our goal is to file for regulatory authorization for our first ALPN-101 clinical trial in the fourth quarter of 2018. While subject to change, we expect that the initial clinical study will involve cohorts of healthy volunteers who will receive single or multiple ascending doses of ALPN-101 to ascertain its safety, pharmacokinetics, and pharmacodynamics (the biological effects of ALPN-101, as measured in the blood and/or other tissues)

ALPN-202 Program in Oncology

The ALPN-202 program is our lead program for immuno-oncology. Our scientists used wild‑type CD80 as the basis for a directed evolution campaign using our proprietary scientific platform. They were able to create a number of interesting vIgDs, including a series capable of blocking PD-1 inhibition and delivering costimulation via CD28. Some vIgDs from this campaign also have significant binding to CTLA-4, another inhibitory checkpoint IgSF.


Programmed cell death protein ligand 1 (“PD-L1”) and its counterstructure, PD-1, are responsible for suppressing immune system responses. Cytotoxic T-lymphocyte Associated protein 4 (“CTLA-4”) also suppresses immune system responses. Both are IgSFs commonly referred to as checkpoint proteins since they act as inhibitory checks against immune system activation, pressing the brakes on an immune reaction. As noted above, CD28 provides a costimulatory signal necessary for T cell activation and survival. It is believed to be the most potent T cell costimulatory receptor of the immune system.

It has long been recognized CD28 is required for T cell activation and CD28 is the most important of the costimulatory molecules.12 The tumor microenvironment often features exhausted T cells suppressed via PD-1/PD-L1 engagement as seen on the left of Figure 13 below. The development of anti PD-1/L1 mAbs have helped relieve one aspect of the exhausted phenotype, but less than 30% of patients typically respond – likely attributable to the minority of patients who do have sufficient CD28 costimulation as depicted in the center panel of Figure 13. More recent research has, in fact, shown CD28 costimulation is required for anti PD-1/L1 efficacy, absent which tumors do not respond due to inadequate costimulation as seen in the third panel of Figure 13.13 Therefore, there may be a need for a therapeutic providing both checkpoint antagonism and CD28 costimulation.

Figure 13

The goal of the ALPN-202 program is to create a therapeutic capable of blocking checkpoint inhibitor activity to take the brakes off the immune system while providing for CD28 costimulation to step on the gas and increase immune system response. Among the potential therapeutic molecules in the ALPN-202 program are those we believe have three modes of activity:


antagonize PD-L1 to inhibit immune responses;


agonize CD28 to increase immune response, but only in the presence of PD‑L1—a potential mechanism of action we call PD-L1 “dependent” activity; and


antagonize CTLA-4 to decrease CTLA-4’s ability to inhibit immune response.

We believe we have one or more therapeutic candidates in the ALPN-202 program capable of this triple-action mechanism. This has been accomplished with a single vIgD fused to an effectorless Fc backbone. The fact we have engineered a single vIgD to accomplish this, instead of relying on multiple IgSF domains fused together, represents a potentially important scientific advance and emphasizes the potential power of our scientific platform to create novel therapeutics. We are studying molecules in the ALPN-202 program using in vivo models to better understand their activity against tumors.

We will present additional data on the ALPN-202 program at scientific conferences over the coming year.



Krummel & Allison, Journal of Experimental Medicine, v182 n2. August 1995, pp 459-65


Kamphorst et al, Science, v355 n6332. March 2017, pp 1423-1427


ALPN-202 Program Clinical Plans

Our goal is to file for regulatory approval for our first ALPN-202 clinical trials in 2019. We have not yet determined which cancer indication or indications we will investigate first.

Active Discovery Programs

We have a number of active discovery programs under way. In addition to active target research programs listed in Figure 14 below, we are working on a number of undisclosed IgSF targets using our proprietary scientific platform.


Figure 14

In addition to ongoing target discovery work, we are pursuing preclinical development work on a number of undisclosed therapeutic programs plus the following three discovery-stage programs.

Inhibitory Receptor Agonist (IRA) Program

A subset of IgSFs includes immune inhibitory or “checkpoint” receptors, such as PD-1, CTLA-4, TIGIT, LAG-3, and BTLA. These checkpoint receptors reduce inflammation in several proposed ways, such as competing with activating ligands and/or initiating negative signaling within cells—essentially putting the brakes on the immune system. They are thought to play critical roles in inflammation since genetic flaws affecting their activity have been associated with many autoimmune and inflammatory conditions. Additionally, therapeutic interventions reducing or eliminating their activity result in autoimmunity and/or inflammation in preclinical models.

Agonizing one or more of these checkpoint receptors, therefore, may be particularly effective in the treatment of multiple autoimmune/inflammatory disorders. True inhibitory receptor agonists, however, appear to have been generally difficult to generate reliably in drug-like formats.

Traditional approaches to make inhibitory receptor agonists have included monoclonal antibodies mAb14 or ligand-Fc fusion biologics15, but to date, no such agonists have been approved for clinical use.



Dixon, et. al. Journal of Immunology v200 n6, March 2018. In Press


Carter, et al. European Journal of Immunology v32 n3 February 2002, pp 634-643


Our proprietary scientific platform may provide a particularly unique and advantageous means to achieve inhibitory receptor agonism, since it is based upon potently functional IgSF domains highly similar to naturally evolved checkpoint ligands. This potentially allows greater physiologic accessibility to the immune synapse and the ability to modulate specific interactions therein. We are investigating the ability of appropriately engineered vIgD inhibitory receptor agonists to target specifically pathogenic inflammatory cells, creating potent yet directed immunosuppressants.

Trastuzumab/ICOSL V-mAb Program

As noted above, one potential advantage of vIgDs is they can be formatted in a number of different ways. To demonstrate the ability of vIgDs to be integrated into monoclonal antibodies—what we call V-mAbs—we advanced a development program to fuse a costimulatory ICOSL vIgD targeting ICOS and CD28 with trastuzumab, a monoclonal antibody targeting HER2-neu, which is FDA-approved for treating HER2-positive breast and gastric cancers.

Figure 15 below shows a number of alternate ways to attach vIgDs to trastuzumab. While not all of the formats were equally easy to manufacture, all variations shown were producible in sufficient quantities for in vitro testing.


Figure 15

In preclinical in vitro investigations, certain of the trastuzumab/ICOSL V-mAbs were able to retain binding to trastuzumab as well as their original binding to ICOS and CD28. Additionally, molecules in the trastuzumab/ICOSL V-mAb program were able to stimulate human T cells in a manner thought to be important for anti-tumor immunity, in the presence of HER2-positive tumor cells.

The goal of the V-mAb program is to use vIgDs to provide tumor-localized costimulation and/or tumor-localized checkpoint antagonism by using the targeting capability of monoclonal antibodies.


Tumor-Localized vIgD Program

As noted above, multiple vIgDs can be fused together on an Fc backbone. There are some IgSF members more likely to be present on the surface of tumors than anywhere else. We undertook a development program on one such IgSF, using it to localize an ICOS/CD28 dual costimulatory signal to tumor cells. Figure 16 is a schematic for how localization could work.



Figure 16

This approach was tested using a pilot in vivo mouse model. The CT26 murine colon tumor model was transfected with the target IgSF and implanted in mice. The vIgD-Fc created to target this IgSF was then given to the mice. Figure 17 below is a comparison of anti-tumor activity for the set of mice with the largest tumors prior to dosing. When used in combination with an anti PD-1 monoclonal antibody, complete tumor control was shown. These data are from a preliminary proof-of-concept molecule which, unlike molecules in the ALPN-202 program, work better in combination with anti PD-1 monoclonal antibodies.



Figure 17


We have established in-house recombinant protein generation capabilities for producing sufficient protein material to enable our scientific platform process, validate new scientific discoveries, and enable our discovery in vivo programs as currently contemplated. Having protein production capabilities in-house allows more rapid progression from yeast libraries to in vivo study results.

To date, generating our most promising leads—including our lead program ALPN-101 – has been accomplished through standard protein production and purification methods. As noted above, we believe one advantage of our scientific platform is selection outputs are generally manufacturable. Because the directed evolution process itself requires some level of protein production, second and third generation maturation campaigns usually select for proteins readily expressed with favorable biochemical properties. We produce our vIgDs and vIgD-Fc constructs in mammalian cell lines using both HEK293 and CHO cell expression systems in our in-house protein production processes.

We have not yet manufactured any of our proteins at commercial scale. Abatacept is a wild-type IgSF protein commercially approved for multiple indications with no publicly-reported manufacturing difficulties. Belatacept is an IgSF protein with two mutations, likewise approved in multiple countries. We believe these two examples are potentially similar (in manufacturing terms) to our vIgD-based products.

We have chosen a U.S.-based contract drug substance manufacturer for our initial clinical trial supplies of ALPN-101. We believe this contract manufacturer’s particular expertise is in protein analytics and production, and it has the capability to meet rapid timelines encompassing the development of production cell-lines to manufacturing of clinical trial quantities of the biopharmaceutical product.


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, preclinical testing, conducting clinical trials, obtaining regulatory approvals, and 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 and ALPN-202 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 counterstructures). To our knowledge, there are currently no competitors with a single molecule targeting ICOS and CD28 simultaneously.


an anti-ICOSL/B7RP-1 monoclonal antibody being developed by Amgen, Inc. (may be referred to as AMG557 or MEDI5872);


an anti-ICOS monoclonal antibody being developed by MedImmune, Inc. (MEDI570);


an anti-CD28 monoclonal antibody fragment being developed by OSE ImmunoTherapeutics SA and Johnson & Johnson Inc. (FR104);


a CTLA-4 selective for CD86 fusion protein being developed by Astellas Pharma Inc. (ASP 2408/09);


a CD28 superagonist monoclonal antibody being developed by TheraMab LLC (TAB08); and


an anti-BAFF, anti-ICOSL bispecific antibody being developed by Amgen, Inc (AMG/570/MEDI0700).

ALPN-202 program competitors

There are hundreds of 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 how it targets multiple IgSFs with a single molecule and how it combines inhibitory receptor antagonism with activating costimulation.

Other attempt to target multiple targets for immune-oncology are listed below. To our knowledge, there are currently no competitors with a single molecule targeting PD-L1, CD28, and CTLA-4.


a wild-type CD80 Fc being developed by Five Prime Therapeutics, Inc. (FPT155);


another wild-type CD80 molecule studied by University of Maryland Baltimore County;


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 antibodies being developed by Tesoro, Inc., including targeting PD-1 and TIM3 or PD-1 and LAG-3;


small molecule antagonists being developed by 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-1 and LAG-3 being developed by F-star Biotechnology, Ltd.; and


various combinations of separate anti PD-1/L1 and anti-CTLA-4 monoclonal antibodies.

Novel Platform Competitors

Platforms potentially competitive with our proprietary scientific platform include:


Nanobody® (Ablynx NV), being purchased by Sanofi Pharma, Inc. : Platform technology of single-domain, heavy-chain antibody fragments derived from camelidae (e.g., camels and llamas);


DART® (Macrogenics Inc): Dual-Affinity Re-Targeting and Trident technology platforms bind multiple targets with a single molecule; Anticalin® (Pieris Pharmaceuticals Inc): Engineered proteins derived from natural lipocalins found in blood plasma; Targeted Immunomodulation™ (Compass Therapeutics LLC): Antibody discovery targeting the tumor-immune synapse;


Harpoon Therapeutics Inc: Trispecific antigen-binding proteins;


various bispecific antibody platforms (e.g., Amgen Inc (BiTE®—approved), Roche AG (RG7828), Zymeworks Inc (Azymetric™), Xencor Inc (XmAb Bispecific), Compass Therapeutics (StitchMabsTM));


Five Prime Therapeutics®: Proprietary protein library and rapid protein production and testing platform;


Regeneron®: VEGF Trap and VelociSuite® antibody technology platforms; and


Shattuck Labs®: Agonist Redirected Antibody platform claimed to bind tumor-necrosis factor (“TNF”) and checkpoint targets.

Intellectual Property

Our scientific platform and substantially all our intellectual property has been developed internally. As of December 31, 2017, our patent portfolio consists of over 13 pending patent applications. Our initial patent application is directed to our scientific platform itself. Our second patent application is directed to the TIP program. We filed subsequent patent applications directed to our SIP program as well as to various target domains under development. To date, some of these applications have published but none have yet matured into granted patents. Each of these patent applications is solely owned by us. As we continue the development of our scientific platform and target vIgDs, we intend to continue pursuing intellectual property protection for these technologies.

We have in-licensed some intellectual property and trade secret materials on a non-exclusive basis. To date, such non-exclusive in-licenses are solely related to commercially-available cell lines involved in the manufacture of our vIgD programs. To date, no other intellectual property related to our scientific platform has been in-licensed.  We have out-licensed two programs under our TIP technology to Kite Pharma Inc. (a Gilead Company) on an exclusive basis. No other out-licenses have been made.

Although we do not believe our technology infringes any intellectual property rights owned by third parties, we are aware of one or more patents and patent applications that may relate to our technology. Third parties may assert claims against us alleging infringement of their intellectual property rights regardless of whether their allegations have merit. Allegations of infringement could harm our reputation, may result in the expenditure of significant resources to defend and resolve such allegations, and could require us to pay monetary damages if we are found to have infringed any third party intellectual property rights.

Government Regulation

The FDA and comparable regulatory authorities in state and local jurisdictions and in other countries impose substantial and burdensome requirements on the clinical development, manufacture, marketing, and distribution of therapeutic candidates. These agencies and other federal, state, and local entities regulate research and development activities and the testing, manufacture, quality control, safety, effectiveness, labeling, storage, record keeping, approval, advertising and promotion, and export and import of therapeutic candidates and products.


In the U.S., the FDA regulates drugs, medical devices, and biologic products under the Federal Food, Drug, and Cosmetic Act, or FFDCA, its implementing regulations and other laws, including, in the case of biologics, the Public Health Service Act. Our potential therapeutic candidates and products will be subject to regulation by the FDA as biologics. Biologics require the submission of a Biologics License Application (“BLA”) and approval by the FDA before being marketed in the U.S. None of our therapeutic candidates have been approved by the FDA for marketing in the U.S., and we currently have no BLAs pending. If we fail to comply with applicable FDA or other requirements at any time during the product development process, clinical testing, the approval process, or after approval, we may become subject to administrative or judicial sanctions. These sanctions could include the FDA’s refusal to approve pending applications, license suspension or revocation, withdrawal of an approval, warning letters, product recalls, product seizures, total or partial suspension of production or distribution, injunctions, fines, civil penalties, or criminal prosecution. Any FDA enforcement action could have a material adverse effect on us. The process required by the FDA before biologic therapeutic candidates may be marketed in the U.S. generally involves the following:


completion of extensive preclinical laboratory tests, preclinical animal studies, and formulation studies all performed in accordance with the FDA’s current good laboratory practice (“cGLP”), regulations;


submission to the FDA of an IND application which must become effective before human clinical trials in the U.S. may begin;


performance of adequate and well-controlled human clinical trials to establish the safety and efficacy of the drug candidate for each proposed indication;


submission to the FDA of a BLA;


satisfactory completion of an FDA inspection of the manufacturing facility or facilities at which the product is produced to assess compliance with cGMP regulations; and


FDA review and approval of the BLA prior to any commercial marketing, sale, or shipment of the therapeutic product.

The testing and approval process requires substantial time, effort, and financial resources, and we cannot be certain any approvals for our therapeutic candidates will be granted on a timely basis, if at all.

Once a therapeutic candidate is identified for development, it enters the preclinical testing stage. Preclinical studies include laboratory evaluations of protein chemistry, formulation, and stability, as well as studies to evaluate toxicity in animals. The results of the preclinical studies, together with manufacturing information and analytical data, are submitted to the FDA as part of an IND application. Currently, the IND automatically becomes effective 30 days after receipt by the FDA, unless the FDA, within the 30-day period, raises concerns or questions about the conduct of the clinical trial, including concerns that human research subjects will be exposed to unreasonable health risks. In such a case, the IND sponsor and the FDA must resolve any outstanding concerns before the clinical trial can begin. Submission of an IND may result in the FDA not allowing the clinical trials to commence or not allowing the clinical trials to commence on the terms originally specified in the IND. A separate submission to an existing IND must also be made for each successive clinical trial conducted during drug development, and the FDA must grant permission, either explicitly or implicitly by not objecting, before each clinical trial can begin. We have not yet commenced clinical trials for any of our current therapeutic candidates.

Clinical trials involve the administration of the therapeutic candidate to human subjects under the supervision of qualified investigators. Clinical trials are conducted under protocols detailing, among other things, the objectives of the clinical trial, the parameters to be used in monitoring safety, and the effectiveness criteria to be used. Each protocol must be submitted to the FDA as part of the IND. For each medical center proposing to conduct a clinical trial , an institutional review board (“IRB”) must also review and approve a plan for any clinical trial before it can begin at that center and the IRB must monitor the clinical trial until it is completed. The FDA, an IRB, or the sponsor may suspend or discontinue a clinical trial at any time on various grounds, including a finding the subjects are being exposed to an unacceptable health risk. Clinical testing also must satisfy extensive Good Clinical Practice requirements, including the requirements for informed consent.

All clinical research performed in the U.S. in support of a BLA must be authorized in advance by the FDA under the IND regulations and procedures described above. However, a sponsor who wishes to conduct a clinical trial outside the U.S. may, but need not, obtain FDA authorization to conduct the clinical trial under an IND. If a foreign clinical trial is not conducted under an IND, the sponsor may submit data from the clinical trial to the FDA in support of a BLA so long as the clinical trial is conducted in compliance with an international guideline for the ethical conduct of clinical research known as the Declaration of Helsinki and/or the laws and regulations of the country or countries in which the clinical trial is performed, whichever provides the greater protection to the participants in the clinical trial.


Clinical Trials

For purposes of BLA submission and approval, clinical trials are typically conducted in three sequential phases, which may overlap or be combined.


Phase I clinical trials are initially conducted in a limited population of subjects to test the therapeutic candidate for safety, dose tolerance, absorption, metabolism, distribution, and excretion in healthy humans or, on occasion, in patients with severe problems or life-threatening diseases to gain an early indication of its effectiveness.


Phase II clinical trials are generally conducted in a limited patient population to evaluate preliminarily the efficacy of the therapeutic candidate for specific targeted indications in patients with the disease or condition under study; evaluate dosage tolerance and appropriate dosage; and identify possible adverse effects and safety risks.


Phase III clinical trials are commonly definitive efficacy studies of the experimental medication. Phase III trials are typically conducted when Phase II clinical trials demonstrate a dose range of the therapeutic candidate is effective and has an acceptable safety profile. Phase III clinical trials are generally undertaken with large numbers of patients, such as groups of several hundred to several thousand, to provide substantial evidence of clinical efficacy and to further test for safety in an expanded patient population at multiple, geographically-dispersed clinical trial sites.

In some cases, the FDA may condition approval of a BLA on the sponsor’s agreement to conduct additional post-approval clinical trials to further assess the biologic’s safety and effectiveness after BLA approval. Such post-approval clinical trials are typically referred to as Phase IV clinical trials.

Concurrent with clinical trials, companies usually complete additional animal trials and must also develop additional information about the chemistry and physical characteristics of the biologic and finalize a process for manufacturing the biologic in commercial quantities in accordance with cGMP requirements. The manufacturing process must be capable of consistently producing quality batches of the therapeutic candidate and, among other things, the manufacturer must develop methods for testing the identity, strength, quality, and purity of the final biologic product. Additionally, appropriate packaging must be selected and tested and stability studies must be conducted to demonstrate the therapeutic candidate does not undergo unacceptable deterioration over its shelf life.

Biologics License Applications

The results of preclinical studies and of the clinical trials, together with other detailed information, including extensive manufacturing information and information on the chemistry, pharmacology, clinical pharmacology, and the clinical effects of the biologic, are submitted to the FDA in the form of a BLA requesting approval to market the biologic for one or more specified indications. The FDA reviews a BLA to determine, among other things, whether a biologic is safe, pure, and potent and whether the facility in which the biological product is manufactured, processed, packed, or held meets standards designed to assure the biological product continues to be safe, pure, and potent.

Once a BLA has been accepted for filing, by law the FDA will review the application and respond to the applicant but the review process may be significantly delayed by FDA’s requests for additional information or clarification. Under the Prescription Drug User Fee Act, the FDA evaluates a standard original BLA submission within the first 60 days of its receipt to determine if it is sufficiently complete to conduct a full review, and the FDA has a goal of responding to the submission within ten months of the 60-day filing date, but this timeframe is often extended. The FDA may refer the application to an advisory committee for review, evaluation, and/or recommendation as to whether the application should be approved. The FDA is not bound by the recommendation of an advisory committee, but it generally follows such recommendations. The FDA may deny approval of a BLA if the applicable statutory and regulatory criteria are not satisfied, or for any reason, or it may require additional clinical data. Even if such data are submitted, the FDA may ultimately decide the BLA does not satisfy the criteria for approval. Data from clinical trials are not always conclusive and the FDA may interpret data differently than we interpret data. Once the FDA approves a BLA, or supplement thereto, the FDA may withdraw the approval if ongoing regulatory requirements are not met or if safety problems are identified after the biologic reaches the market. Where a withdrawal may not be appropriate, the FDA still may seize existing inventory of such biologic or require a recall of any biologic already on the market. In addition, the FDA may require testing, including Phase IV clinical trials and surveillance programs to monitor the effect of approved biologics which have been commercialized. The FDA has the authority to prevent or limit further marketing of a biologic based on the results of these post-marketing programs.


A sponsor may also seek approval of its therapeutic candidates under programs designed to accelerate FDA review and approval of BLAs. For instance, a sponsor may seek FDA designation of a therapeutic candidate as a “fast track product.” Fast track products are those products intended for the treatment of a serious or life- threatening disease or condition and which demonstrate the potential to address unmet medical needs for such diseases or conditions. If fast track designation is obtained, the FDA may initiate review of sections of a BLA before the application is complete. This “rolling review” is available if the applicant provides, and the FDA approves, a schedule for the remaining information. In some cases, a fast track product may be approved on the basis of either a surrogate endpoint that is reasonably likely to predict clinical benefit, or on a clinical endpoint that can be measured earlier than irreversible morbidity or mortality, that is reasonably likely to predict an effect on irreversible morbidity or mortality or other clinical benefit, taking into account the severity, rarity, or prevalence of the condition and the availability or lack of alternative treatments, under the FDA’s accelerated approval program. Approvals of this kind typically include requirements for appropriate post-approval confirmatory clinical trials to validate the surrogate endpoint or otherwise confirm the effect of the clinical endpoint.

In addition, the Food and Drug Administration Safety and Innovation Act, (“FDASIA”) which was enacted and signed into law in 2012, established a new category of drugs referred to as “breakthrough therapies” that may be subject to accelerated approval. A sponsor may seek FDA designation of a drug candidate as a “breakthrough therapy” if the drug is intended, alone or in combination with one or more other drugs, to treat a serious or life- threatening disease or condition and preliminary clinical evidence indicates the drug may demonstrate substantial improvement over existing therapies on one or more clinically significant endpoints, such as substantial treatment effects observed early in clinical development.

Therapeutic candidates may also be eligible for “priority review,” or review within a six-month timeframe from the 60-day filing date, if a sponsor provides sufficient clinical data demonstrating its therapeutic candidate provides a significant improvement compared to marketed products. Even if a therapeutic candidate qualifies for one or more of these programs, the FDA may later decide the therapeutic candidate no longer meets the conditions for qualification or that the period for FDA review or approval will be lengthened. When appropriate, we intend to seek fast track designation and/or accelerated approval for our biologics. We cannot predict whether any of our therapeutic candidates will obtain a fast track and/or accelerated approval designation and, if so, whether such designation will be maintained or rescinded by FDA, or the ultimate impact, if any, of the fast track or the accelerated approval process on the timing or likelihood of FDA approval of any of our proposed biologics.

Biologics may be marketed only for the FDA approved indications and in accordance with the provisions of the approved labeling. Further, if there are any modifications to the biologic, including changes in indications, labeling, or manufacturing processes, equipment, or facilities, the applicant may be required to submit and obtain FDA approval of a new BLA or BLA supplement, which may require us to develop additional data or conduct additional preclinical studies and clinical trials.

Before approving an application, the FDA will inspect the facility or the facilities at which the biologic product is manufactured, and will not approve the product unless cGMP compliance is satisfactory. The FDA may also inspect the sites at which the clinical trials were conducted to assess their compliance, and will not approve the biologic unless compliance with Good Clinical Practice requirements is satisfactory.

The testing and approval processes require substantial time, effort, and financial resources, and each may take several years to complete. The FDA may not grant approval on a timely basis, or at all. Even if we believe a clinical trial has demonstrated safety and efficacy of one of our therapeutic candidates for the treatment of a disease, the results may not be satisfactory to the FDA. Preclinical and clinical data may be interpreted by the FDA in different ways, which could delay, limit, or prevent regulatory approval. We may encounter difficulties or unanticipated costs in our efforts to secure necessary governmental approvals which could delay or preclude us from marketing our therapeutic candidates. The FDA may limit the indications for use or place other conditions on any approvals restricting the commercial application of the products. After approval, certain changes to the approved biologic, such as adding new indications, change in personnel, manufacturing changes, or additional labeling claims, are subject to further FDA review and approval. Depending on the nature of the change proposed, a BLA supplement—which may require additional studies to evaluate the effect of such change on the identity, strength, quality, purity, or potency of the product as they may relate to the safety or effectiveness of the product—must be filed and approved before the change may be implemented. As with new BLAs, the review process for BLA supplements may be delayed by the FDA through requests for additional information or clarification.

We believe any of our therapeutic products approved as a biological product under a BLA might qualify for a 12-year period of exclusivity currently permitted by the Biologics Price Competition and Innovation Act (“BPCIA”). Specifically, the BPCIA established an abbreviated pathway for the approval of biosimilar and interchangeable biological products. The new


abbreviated regulatory pathway establishes legal authority for the FDA to review and approve biosimilar biologics, including the possible designation of a biosimilar as “interchangeable” based on its similarity to an existing brand product. Under the BPCIA, an application for a biosimilar product cannot be submitted by an applicant until four years after the date the reference product was first licensed and cannot be approved by the FDA until 12 years after the original branded product was first licensed under a BLA. There is a risk the U.S. Congress could amend the BPCIA to significantly shorten this exclusivity period or the FDA will not consider our therapeutic candidates to be reference products for competing products, potentially creating the opportunity for competition sooner than anticipated. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way 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. The BPCIA is complex and is only beginning to be interpreted and implemented by the FDA and the courts. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when any such processes may be fully adopted by the FDA, any such processes operating to limit the scope or length of exclusivity afforded by the BPCIA could have a material adverse effect on the future commercial prospects for our biological products. In addition, foreign regulatory authorities may also provide for exclusivity periods for approved biological products or for abbreviated pathways for follow on biological products. For example, biological products in Europe may be eligible for a 10-year period of exclusivity.

Under the Orphan Drug Act, the FDA may grant orphan drug designation to therapeutic candidates intended to treat a rare disease or condition, which is generally a disease or condition affecting fewer than 200,000 individuals in the U.S. or more than 200,000 individuals in the U.S. and for which there is no reasonable expectation the cost of developing and making available in the U.S. a therapeutic candidate for this type of disease or condition will be recovered from sales in the U.S. for that therapeutic candidate. Orphan drug designation must be requested before submitting a marketing application for the therapeutic for that particular rare disease or condition. After the FDA grants orphan drug designation, the identity of the therapeutic agent and its potential orphan use are disclosed publicly by the FDA. Orphan drug designation does not convey any advantage in, or shorten the duration of, the regulatory review and approval process. The FDA may revoke orphan drug designation, and if it does, it will publicize the drug is no longer designated as an orphan drug. If a therapeutic candidate with orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the therapeutic candidate is entitled to orphan product exclusivity, which means the FDA may not approve any other applications to market the same therapeutic candidate 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 candidates for seven years if a competitor obtains approval of the same therapeutic candidate as defined by the FDA or if our therapeutic candidate is determined to be contained within the competitor’s therapeutic candidate for the same indication or disease.

Under the Best Pharmaceuticals for Children Act, certain therapeutic candidates may obtain an additional six months of exclusivity if the sponsor submits information requested in writing by the FDA, referred to as a “Written Request,” relating to the use of the active moiety of the therapeutic candidate in children. The FDA may not issue a Written Request for studies on unapproved or approved indications where it determines information relating to the use of a therapeutic candidate in a pediatric population, or part of the pediatric population, may not produce health benefits in that population. In addition, the Pediatric Research Equity Act (“PREA”) requires a sponsor to conduct pediatric studies for most therapeutic candidates and biologics, for a new active ingredient, new indication, new dosage form, new dosing regimen, or new route of administration. Under PREA, original NDAs, BLAs and supplements thereto must contain a pediatric assessment unless the sponsor has received a deferral or waiver. The required assessment must assess the safety and effectiveness of the therapeutic candidate for the claimed indications in all relevant pediatric subpopulations and support dosing and administration for each pediatric subpopulation for which the therapeutic candidate is safe and effective. The sponsor or the FDA may request a deferral of pediatric studies for some or all of the pediatric subpopulations. A deferral may be granted for several reasons, including a finding the drug or biologic is ready for approval for use in adults before pediatric studies are complete or additional safety or effectiveness data needs to be collected before the pediatric studies begin. The FDA must send a noncompliance letter to any sponsor failing to submit the required assessment, keep a deferral current, or fails to submit a request for approval of a pediatric formulation.

Other Regulatory Requirements

Any biologics manufactured or distributed by us or our collaborators pursuant to FDA approvals would be subject to continuing regulation by the FDA, including recordkeeping requirements and reporting of adverse experiences associated with the product. Manufacturers and their subcontractors are required to register their establishments with the FDA and certain state agencies, and are subject to periodic unannounced inspections by the FDA and certain state agencies for compliance with ongoing regulatory requirements, including cGMPs, which impose certain procedural and documentation requirements upon us and third-party manufacturers. Failure to comply with the statutory and regulatory requirements can


subject a manufacturer to possible legal or regulatory action, such as warning letters, suspension of manufacturing, seizure of product, injunctive action or possible civil penalties. Our company cannot be certain it or its present or future third-party manufacturers or suppliers will be able to comply with the cGMP regulations and other ongoing FDA regulatory requirements. If our company or its present or future third-party manufacturers or suppliers are not able to comply with these requirements, the FDA may halt our clinical trials, require us to recall a drug from distribution, or withdraw approval of the BLA for the therapeutic product.

The FDA closely regulates the post-approval marketing and promotion of biologics, including standards and regulations for direct-to-consumer advertising, off-label promotion, industry-sponsored scientific and educational activities, and promotional activities involving the Internet. A company can make only those claims relating to safety and efficacy approved by the FDA. Failure to comply with these requirements can result in adverse publicity, warning letters, corrective advertising, and potential civil and criminal penalties. Physicians may prescribe legally available biologics for uses not described in the product’s labeling and different from those tested by us and approved by the FDA. Such off-label uses are common across medical specialties. Physicians may believe such off-label uses are the best treatment for many patients in varied circumstances. The FDA does not regulate the behavior of physicians in their choice of treatments. The FDA does, however, impose stringent restrictions on manufacturers’ communications regarding off-label use.

Healthcare Reform

In March 2010, Congress passed the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act (collectively, the “ACA”), a sweeping law intended to broaden access to health insurance, reduce or constrain the growth of health spending, enhance remedies against fraud and abuse, add new transparency requirements for the healthcare and health insurance industries, impose new taxes and fees on the health industry, and impose additional policy reforms. The ACA contains a number of provisions, including those governing enrollment in federal healthcare programs, reimbursement changes, and fraud and abuse, impacting existing government healthcare programs and resulting in the development of new programs, including Medicare payment for performance initiatives, and improvements to the physician quality reporting system and feedback program. The Affordable Care Act also does, among other things, the following:


Increases pharmaceutical manufacturer rebate liability under the Medicaid Drug Rebate Program due to an increase in the minimum basic Medicaid rebate on most branded prescription drugs, and the application of Medicaid rebate liability to drugs used in risk-based Medicaid managed care plans.


Expands the 340B Drug Pricing Program to require discounts for “covered outpatient drugs” sold to certain children’s hospitals, critical access hospitals, freestanding cancer hospitals, rural referral centers, and sole community hospital.


Requires pharmaceutical companies to offer discounts on brand-name drugs to patients who fall within the Medicare Part D coverage gap, commonly referred to as the “Donut Hole.”


Requires pharmaceutical companies to pay an annual non-tax-deductible fee to the federal government based on each company’s market share of prior year total sales of branded drugs to certain federal healthcare programs, such as Medicare, Medicaid, Department of Veterans Affairs, and Department of Defense.


Establishes the Independent Payment Advisory Board, which, since 2014, has had authority to recommend certain changes to the Medicare program to reduce expenditures by the program when spending exceeds a certain growth rate and such changes could result in reduced payments for prescription drugs. Under certain circumstances, these recommendations will become law unless Congress enacts legislation achieving the same or greater Medicare cost savings. However, as of early 2018, the President has yet to nominate anyone to serve on the board and there is legislation being proposed to repeal it.


Establishes the Patient-Centered Outcomes Research Institute to identify priorities in, and conduct comparative clinical effectiveness research, along with funding for such research. The research conducted by the Patient-Centered Outcomes Research Institute may affect the market for certain pharmaceutical products.


Establishes The Center for Medicare and Medicaid Innovation within the Centers for Medicare and Medicaid Services (“CMS”) to test innovative payment and service delivery models to lower Medicare and Medicaid spending, potentially including prescription drug spending. Funding has been allocated to support the mission of the Center for Medicare and Medicaid Innovation from 2011 to 2019.


From time to time, legislation is drafted, introduced, and passed in Congress that could significantly change the statutory provisions governing the sale, marketing, coverage, and reimbursement of products regulated by the CMS or other government agencies. In addition to new legislation, CMS regulations and policies are often revised or interpreted by the agency in ways significantly affecting our business and our products.

In particular, we expect the Administration and Congress will continue to seek to modify, repeal, or otherwise invalidate all, or certain provisions of, the U.S. healthcare reform legislation. Since taking office, President Trump has continued to support the repeal of all or portions of the ACA. President Trump has also issued an executive order in which he stated it is his Administration’s policy to seek the repeal of the ACA and directed executive departments and federal agencies to waive, defer, grant exemptions from, or delay the implementation of the provisions of the ACA to the maximum extent permitted by law. There is still uncertainty with respect to the impact President Trump’s Administration and Congress may have, if any, 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 the impact of potential legislation on our company.

Furthermore, political, economic, and regulatory influences are subjecting the health care industry in the U.S. to fundamental change. Initiatives to reduce the federal budget and debt and to reform health care coverage are increasing cost-containment efforts. We anticipate federal agencies, Congress, state legislatures, and the private sector will continue to review and assess alternative health care benefits, controls on health care spending, and other fundamental changes to the healthcare delivery system. Any proposed or actual changes could limit coverage for or the amounts federal and state governments will pay for health care products and services, which could also result in reduced demand for our products or additional pricing pressures, and limit or eliminate our spending on development projects and affect our ultimate profitability.

Third-Party Payor Coverage and Reimbursement

Significant uncertainty exists as to the coverage and reimbursement status of any products for which we may obtain regulatory approval. In the U.S., sales of any products for which we may receive regulatory approval for commercial sale will depend in part on the availability of coverage and reimbursement from third- party payors. Third-party payors include government authorities such as Medicare, Medicaid, TRICARE, and the Veterans Administration, managed care providers, private health insurers and other organizations.

The Medicaid Drug Rebate Program, which is part of the federal Medicaid program, a program for financially needy patients, among others, requires pharmaceutical manufacturers to enter into and have in effect a national rebate agreement with the Secretary of the Department of Health and Human Services as a condition for states to receive federal matching funds for the manufacturer’s outpatient drugs furnished to Medicaid patients.

In order for a pharmaceutical product to receive federal reimbursement under Medicare Part B, part of the federal Medicare program covering outpatient items and services for the aged and disabled, and Medicaid programs or to be sold directly to U.S. government agencies, the manufacturer must extend discounts to entities eligible to participate in the 340B drug pricing program, a federal program requiring manufacturers to provide discounts to certain safety-net providers. The required 340B discount on a given product is calculated based upon certain Medicaid Drug Rebate Program metrics reported by the manufacturer.

The process for determining whether a payor will provide coverage for a product is typically separate from the process for setting the reimbursement rate a payor will pay for the product. Third-party payors may limit coverage to specific products on an approved list or formulary which might not include all of the FDA-approved products for a particular indication. Also, third-party payors may refuse to include a particular branded product on their formularies or otherwise restrict patient access to a branded drug when a less costly generic equivalent or other alternative is available. However, under Medicare Part D—Medicare’s outpatient prescription drug benefit—there are protections in place to ensure coverage and reimbursement for oncology products and all Part D prescription drug plans are required to cover substantially all anti-cancer agents. Furthermore, a payor’s decision to provide coverage for a product does not imply an adequate reimbursement rate will be available. Adequate third-party reimbursement may not be available to enable us to maintain price levels sufficient to realize an appropriate return on our investment in product development.

Third-party payors are increasingly challenging the price and examining the medical necessity and cost- effectiveness of medical products and services, in addition to their safety and efficacy. In order to obtain coverage and reimbursement for any product approved for sale, we may need to pursue compendia listings or conduct expensive pharmacoeconomic studies in


order to demonstrate the medical necessity and cost- effectiveness of any products, in addition to the costs required to obtain regulatory approvals. Our drug candidates may not be considered medically necessary or cost-effective. If third-party payors do not consider a product to be cost-effective compared to other available therapies, they may not cover an approved product as a benefit under their plans or, if they do, the level of payment may not be sufficient to allow a company to sell its products at a profit.

Other Healthcare Laws and Regulations

If we obtain regulatory approval of our products, we may be subject to various federal and state laws targeting fraud and abuse in the healthcare industry. These laws may impact, among other things, our proposed sales and marketing strategies. In addition, we may be subject to patient privacy regulation by both the federal government and the states in which we conduct our business. The laws affecting our ability to operate include, but are not limited to:


the federal Anti-Kickback Statute, which prohibits, among other things, persons from knowingly and willfully soliciting, receiving, offering, or paying remuneration (a term interpreted broadly to include anything of value, including, for example, gifts, discounts, and credits), directly or indirectly, in cash or in kind, to induce or reward, or in return for, either the referral of an individual for, or the purchase, order, or recommendation of, an item or service reimbursable under a federal health care program, such as the Medicare and Medicaid programs;


federal civil and criminal false claims laws and civil monetary penalty laws, which prohibit, among other things, individuals or entities from knowingly presenting, or causing to be presented, claims for payment to Medicare, Medicaid, or other third-party payors that are false or fraudulent, or making a false statement or record material to payment of a false claim or avoiding, decreasing, or concealing an obligation to pay money owed to the federal government;


provisions of HIPAA,  prohibiting knowingly and willfully executing a scheme to defraud any health care benefit program and making false statements relating to health care matters;


provisions of HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act and its implementing regulations, which imposes certain requirements relating to the privacy, security, and transmission of individually identifiable health information;


the federal transparency laws, including the federal Physician Payment Sunshine Act, which was part of the Affordable Care Act, requiring manufacturers of certain drugs and biologics to track and disclose payments and other transfers of value they make to U.S. physicians and teaching hospitals, as well as physician ownership and investment interests in the manufacturer, which information is subsequently made publicly available in a searchable format on a CMS website; and


state law equivalents of each of the above federal laws, such as anti-kickback and false claims laws which may apply to items or services reimbursed by any third-party payor, including commercial insurers, state transparency reporting and compliance laws, 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 may not have the same effect, thus complicating compliance efforts.

The ACA broadened the reach of the fraud and abuse laws by, among other things, amending the intent requirement of the federal Anti-Kickback Statute and the applicable criminal healthcare fraud statutes contained within 42 U.S.C. § 1320a-7b. Pursuant to the statutory amendment, a person or entity no longer needs to have actual knowledge of this statute or specific intent to violate it in order to have committed a violation. In addition, the ACA provides the government may assert a claim including items or services resulting from a violation of the federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act or the civil monetary penalties statute. Many states have adopted laws similar to the federal Anti-Kickback Statute, some of which apply to the referral of patients for healthcare items or services reimbursed by any source, not only the Medicare and Medicaid programs.


As of December 31, 2017, we had 38 employees, of which 29 are engaged in research and development activities. None of our employees are represented by labor unions or covered by collective bargaining agreements. We consider our relationship with our employees to be good.



We lease a facility containing our research and development, laboratory, and office space, which consists of approximately 11,158 square feet located at 201 Elliott Avenue West, Seattle, Washington.

In January 2018, we entered into a lease amendment for approximately 6,184 square feet of additional office and laboratory space adjacent to our existing leased premises in Seattle, Washington.

The lease expires on December 31, 2019 and has two options to extend the lease term with each option enabling us to extend the lease term by twelve months.

Corporate Information

On July 24, 2017, Alpine Immune Sciences, Inc. completed its business combination with Nivalis Therapeutics, Inc., a publicly held company. In connection with the merger, Nivalis Therapeutics, Inc. changed its name to Alpine Immune Sciences, Inc. For additional information regarding this business combination, see Part II, Item 7, “Management’s Discussion and Analysis of Financial Condition and Results of Operations — Overview — Business Combination with Nivalis” contained elsewhere in this Annual Report on Form 10-K. Nivalis Therapeutics, Inc. was incorporated in Delaware in March 2007.  Alpine Immune Sciences, Inc. (prior to its business combination with Nivalis Therapeutics, Inc.) was incorporated in Delaware on December 30, 2014.

Our principal executive office is located at 201 Elliott Avenue West, Suite 230, Seattle WA, 98119. Our telephone number is (206) 788-4545. Our website is www.alpineimmunesciences.com. Information contained in, or that can be accessed through, our website is not a part of, and is not incorporated into, this report.

This Annual Report on Form 10-K includes our trademarks and registered trademarks, including “vIgD” Each other trademark, trade name or service mark appearing in this Annual Report on Form 10-K belongs to its holder.

Item 1A. Risk Factors.

You should carefully consider the following risk factors, in addition to the other information contained in this Annual Report on Form 10-K, including the section of this report captioned “Management’s Discussion and Analysis of Financial Condition and Results of Operations” and our 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-K 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 December 31, 2017, we had $81.2 million in cash, cash equivalents 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 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 and payments received under our license and research agreement with Kite, a Gilead company. 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 July 2016, we entered into a sales agreement with Cowen and Company, LLC, or Cowen, to sell up to $30.0 million worth of shares of our common stock, from time to time, through an “at the market” equity offering program under which Cowen will act as sales agent. 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, and 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 development-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 using our proprietary scientific platform technology, which produces variant Ig domains or vIgDs. We have had significant operating losses since inception. For 2017, our net loss was $7.8 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 license and research agreement with Kite. 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.

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 using our proprietary vIgD technology 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 our vIgDs. 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 vIgDs is both preliminary and limited.

Relatively few therapeutic candidates based on immunoglobulin superfamily, or IgSF, domains have been tested in animals or humans, and a number of clinical trials conducted by other companies using IgSF domains 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 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 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 vIgDs. We may spend substantial funds attempting to introduce these properties and may never succeed in doing so. In addition, vIgDs may demonstrate different chemical and pharmacological properties in human subjects or patients than they do in laboratory studies. Even if our programs, such as the ALPN-101 program, 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 I 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 are currently performing in vitro and in vivo proof of concept studies for several of our vIgDs preclinically, the risk profile in humans has yet to be assessed. 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 and no regulatory authority has granted approval to any person or entity, including our company, to market and commercialize therapeutics using vIgDs, 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 vIgDs, 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;


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 IgSFs 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 not 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 Institutional Review Board, or IRB, approval to conduct clinical trials at particular sites, regulatory approvals and successfully commercializing our therapeutic candidates, either alone or with third parties, such as our collaborator Kite. 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. The start or end of a clinical study is often delayed or halted due to changing regulatory requirements, manufacturing challenges, required clinical trial administrative actions, slower than anticipated patient enrollment, changing standards of care, availability or prevalence of use of a comparative therapeutic or required prior therapy, clinical outcomes, 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, including 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 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, 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 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 product 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;


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 conducted no clinical trials to date. We will have to conduct 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.

To date, our revenue has been primarily derived from our license and research agreement with Kite, and we are dependent on Kite for the successful development of therapeutic candidates in the collaboration.

In October 2015, we entered into an exclusive, worldwide license and research agreement with Kite to research, develop, and commercialize engineered autologous T cell therapies incorporating two programs from our technology. Pursuant to the license and research agreement, we will be potentially eligible to receive up to $530.0 million in total milestone payments upon the successful completion of research, clinical, and regulatory milestones. We will also potentially be eligible to receive a low single-digit percentage royalty for sales on a licensed product-by-licensed product and country-by-country basis.

Continued success of our collaboration with Kite, and our realization of the milestone and royalty payments under the agreement, depends upon the efforts of Kite. Kite has sole discretion in determining and directing the efforts and resources, including the ability to discontinue all efforts and resources, it applies to the development and, if approval is obtained, commercialization and marketing of the therapeutic candidates covered by the collaboration. Kite may not be effective in obtaining approvals for the therapeutic candidates developed under the collaboration arrangement or marketing or arranging for necessary supply, manufacturing, or distribution relationships for any approved products. Kite may change its strategic focus or pursue alternative technologies in a manner resulting in reduced, delayed, or no revenue to us. Kite has a variety of marketed products and its own corporate objectives and strategies may not be consistent with our best interests. If Kite fails to develop, obtain regulatory approval for, or ultimately commercialize any therapeutic candidate under the collaboration or if Kite 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 Kite 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.

If we are unable to secure intellectual property rights to programs covered under the license and research agreement, Kite may terminate the agreement and 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 Kite related to intellectual property rights or other aspects of the agreement or the relationship could delay development programs, create uncertainty as to ownership of intellectual property rights, may distract management from other business activities and generate substantial expense.

In October 2017, Kite was acquired by Gilead Pharma, Inc., or Gilead. While the research term of the collaboration was extended after the closing of the acquisition, there is no guarantee Gilead will place the same emphasis on the collaboration or wish to continue the collaboration. If either of these occurs, our business, financial condition, results of operations, and prospects could be materially and adversely affected.


If third parties on which we depend to conduct our 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 preclinical studies of our therapeutic candidates and may do the same for any 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.

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. 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. Any such event could have a material adverse effect on our business, financial condition, results of operations, and prospects.

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.

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 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. 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 regulatory standards, such as cGMPs. 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 does 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


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, and out- or in-licensing of therapeutic candidates or technologies. In particular, in addition to our current arrangements with Kite, 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 candidate 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.

The development and commercialization of therapeutic candidates is highly competitive. We believe a significant number of products are currently under development, and may become commercially available in the future, for the treatment of conditions for which we may try to develop therapeutic candidates. There are also competitors to our proprietary therapeutic candidates currently in development, some of which may become commercially available before our therapeutic candidates.

We compete with a variety of multinational pharmaceutical companies and specialized biotechnology companies, as well as with technologies being developed at universities and other research institutions. Our competitors have developed, are developing, or may develop therapeutic candidates and processes competitive with our therapeutic candidates. Competitive therapeutic treatments include those already approved and accepted by the medical community and any new treatments entering or about to enter the market. We are aware of multiple companies developing therapies with the same target as at least one target of our lead program (ICOSL and/or CD28) as well as companies building novel platforms to generate multi-specific antibody or non-antibody-based targeting proteins. While it is still premature for us to determine which indications may be targeted by our lead program, potential competitors to our lead program include:


an anti-ICOSL/B7RP-1 monoclonal antibody being developed by Amgen, Inc. (may be referred to as AMG557 or MEDI5872);


an anti-ICOS monoclonal antibody being developed by MedImmune, Inc. (MEDI570);


an anti-CD28 monoclonal antibody fragment being developed by OSE ImmunoTherapeutics SA and Johnson & Johnson Inc. (FR104);


a CTLA-4 Ig fusion selective for CD86 fusion protein being developed by Astellas Pharma Inc. (ASP 2408/09);


a CD28 superagonist monoclonal antibody being developed by TheraMab LLC (TAB08); and


an anti-BAFF, anti-ICOSL bispecific antibody being developed by Amgen, Inc (AMG/570/MEDI0700)

Platforms potentially competitive with our scientific platform include:


Nanobody® (Ablynx NV): Platform technology of single-domain, heavy-chain antibody fragments derived from camelidae (e.g., camels and llamas);


DART® (Macrogenics Inc): Dual-Affinity Re-Targeting and Trident technology platforms bind multiple targets with a single molecule;


Anticalin® (Pieris Pharmaceuticals Inc): Engineered proteins derived from natural lipocalins found in blood plasma;


Targeted Immunomodulation™ (Compass Therapeutics LLC): Antibody discovery targeting the tumor-immune synapse;


Harpoon Therapeutics Inc: Trispecific antigen-binding proteins;


Various bispecific antibody platforms (e.g., Amgen Inc (BiTE®—approved), Roche AG (RG7828), Zymeworks Inc (Azymetric™), Xencor Inc (XmAb Bispecific), Compass Therapeutics (StitchMabs™);


Five Prime Therapeutics®: Proprietary protein library and rapid protein production and testing platform;


Regeneron®: VEGF Trap and VelociSuite® antibody technology platforms; and


Shattuck Labs® Agonist Redirected Antibody platform claimed to bind tumor-necrosis factor (“TNF”) and checkpoint targets.

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.

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, Jay R. Venkatesan, M.D., our President and a member of our board of directors, Stanford Peng, M.D., Ph.D., our Executive Vice President of Research and Development and Chief Medical Officer, 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.

If 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 any clinical trials, we will need to expand our development, regulatory, and manufacturing capabilities or contract with other organizations to provide these capabilities for us. In the future, we expect to have to manage additional 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.

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, 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. Any product promotion and advertising will also be subject to regulatory requirements and continuing regulatory review.

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 not have 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, 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 vIgD 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 ability 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 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.

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 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 December 31, 2017, we had $81.2 million in cash, cash equivalents, and 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.

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.

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 NOLs, 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 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’ net operating loss carryforwards and certain other tax attributes. It is also possible that Alpine’s net operating loss 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. Consequently, even if we achieve profitability, we may not be able to utilize a material portion of Alpine’s, or any of Nivalis’, net operating loss 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;


compete 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


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, 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 counterstructures 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, or approval for marketing, or interfere with our ability to market our product to patients and physicians or achieve reimbursement from payors.

Because we have no products currently in human clinical trials, 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 in peer-reviewed scientific publications or apply to present data related to our research and development 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 in peer-reviewed scientific publications or present data related to our research and development 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 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.

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. As of December 31, 2017, our patent portfolio consists of over 13 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. 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 you 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, and the USPTO, 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 for a given period 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 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 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;


a third party may challenge our patents and, if challenged, a court may not hold that our patents are valid, enforceable, and non-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 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 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 rely, and will continue to rely, upon intellectual property rights licensed from third parties to protect our technology, including platform technology and therapeutic candidates and products. We are a party to a number of licenses granting us rights to third-party intellectual property necessary or useful for our business. We may also license additional third-party intellectual property in the future. 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, the 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, substantially all of our existing licenses are non-exclusive and we may not be able to obtain exclusive rights in licenses obtained in the future, which would potentially allow third parties to develop competing products or technology. Without protection for, or exclusive right to, the intellectual property we license, other companies might be able to offer substantially identical products for sale, which could adversely affect our competitive business position and harm our business prospects. In addition, we may sublicense our rights under our 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. A U.S. utility application and international application under the Patent Cooperation Treaty, or PCT, are usually filed within twelve months after the priority filing. Based on the PCT filing, national and regional patent applications may be filed in various international jurisdictions, such as the European Union, Japan, Australia, and Canada. 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 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 s 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.

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 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. 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 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