Summary of Significant Accounting Policies (Tables)

3 Months Ended

Mar. 31, 2018

Contract assets and contract liabilities


	Balance at						Balance at
	January 1, 2018						End
	(ASC 606 adoption)		Additions		Deductions		of Period
Three months ended March 31, 2018
Contract asset	$	—	$	4,041	$	—	$	4,041
Contract liabilities:
Deferred revenue	$	89,967	$		$	(7,834)	$	82,133


		Three months ended
		March 31, 2018
Revenue recognized in the period from:
Amounts included in contract liabilities at the beginning of the period	$	11,540
Performance obligations satisfied in previous periods	$	-

Schedule of inventory

Inventory at March 31, 2018 and December 31, 2017 is summarized below (in thousands):


	March 31,		December 31,
	2018		2017
Raw materials	$	40	$	40
Work in process		328		998
Total	$	368	$	1,038

Schedule of assets that are required to be measured at fair value on a recurring basis

As of March 31, 2018, the Company held certain assets that are required to be measured at fair value on a recurring basis. The following table represents the fair value hierarchy for the Company’s financial assets measured at fair value on a recurring basis as of March 31, 2018 (in thousands):

Fair Value Measurements at March 31, 2018 Using

Quoted Prices in

Significant

Active Markets for

Significant Other

Unobservable

Identical Assets

Observable Inputs

Inputs

Total

(Level 1)

(Level 2)

(Level 3)

Cash equivalents

195,063

—

As of December 31, 2017, the Company held certain assets that are required to be measured at fair value on a recurring basis. The following table represents the fair value hierarchy for the Company’s financial assets measured at fair value on a recurring basis as of December 31, 2017 (in thousands):

Fair Value Measurements at December 31, 2017 Using

Quoted Prices in

Significant

Active Markets for

Significant Other

Unobservable

Identical Assets

Observable Inputs

Inputs

Total

(Level 1)

(Level 2)

(Level 3)

Cash equivalents

240,013

—

Schedule of common stock equivalents, as calculated in accordance with the treasury-stock method

The Company’s common stock equivalents, as calculated in accordance with the treasury‑stock method for the options and unvested restricted stock and the if-converted method for the Convertible Notes, are shown in the following table (in thousands):


	Three Months Ended
	March 31,
	2018	2017
Options outstanding to purchase common stock and unvested restricted stock at end of period	17,677	13,690
Common stock equivalents under treasury stock method for options and unvested restricted stock	3,436	110
Shares issuable upon conversion of Convertible Notes at end of period	501	23,878
Common stock equivalents under if-converted method for Convertible Notes	501	23,878

Schedule of risk-free rate of the stock options based on US Treasury rate



	Three Months Ended March 31,
	2018		2017
Dividend	None		None
Volatility	70.82	%	66.89	%
Risk-free interest rate	2.70	%	2.03	%
Expected life (years)	6.0		6.0

Summary of stock option activity

A summary of option activity under the 2006 and 2016 Plans as of March 31, 2018, and changes during the three month period then ended is presented below (in thousands, except weighted-average data):


		Weighted-
	Number	Average
	of Stock	Exercise
	Options	Price
Outstanding at December 31, 2017	11,971	$	9.91
Granted	4,465		10.55
Exercised	(421)		5.37
Forfeited/Canceled	(173)		12.83
Outstanding at March 31, 2018	15,842	$	10.18

Summary of restricted stock activity

A summary of restricted stock activity under the 2006 and 2016 Plans (inclusive of the performance awards noted above) as of March 31, 2018 and changes during the three month period ended March 31, 2018 is presented below (in thousands):



	Number of	Weighted-
	Restricted	Average Grant
	Stock Shares	Date Fair Value
Unvested at December 31, 2017	2,319	$	2.82
Awarded	—		—
Vested	(484)		2.52
Forfeited	—		—
Unvested at March 31, 2018	1,835	$	2.90

Schedule of percentage of total revenues recognized from each significant customer


	Three Months Ended
	March 31,
Collaborative Partner:	2018		2017
CytomX	4	%	48	%
Roche	37	%	27	%
Sanofi	—	%	21	%
Takeda	56	%	3	%

ASU 2014-09

Accounting Policy Schedules

Schedule of financial statement impact of adopting ASC 606


			Adjustments		Balance at
	December 31,		Due to		January 1,
	2017		ASU 2014-09		2018
ASSETS
Cash and cash equivalents	$	267,107	$	—	$	267,107
Accounts receivable		2,649		—		2,649
Unbilled revenue		2,580		—		2,580
Non-cash royalty receivable		—		8,900		8,900
Inventory		1,038		—		1,038
Prepaid and other current assets		2,967		—		2,967
Total current assets		276,341		8,900		285,241
Property and equipment, net of accumulated depreciation		14,538		—		14,538
Other assets		3,797		—		3,797
Total assets	$	294,676	$	8,900	$	303,576
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Accounts payable	$	8,562	$	—	$	8,562
Accrued compensation		11,473		—		11,473
Other accrued liabilities		15,767		—		15,767
Current portion of deferred lease incentive		784		—		784
Current portion of liability related to the sale of future royalties, net		17,779		—		17,779
Current portion of deferred revenue		1,405		41		1,446
Total current liabilities		55,770		41		55,811
Deferred lease incentive, net of current portion		5,129		—		5,129
Deferred revenue, net of current portion		93,752		(5,231)		88,521
Convertible 4.5% senior notes, net		2,050		—		2,050
Liability related to the sale of future royalties, net		151,634		—		151,634
Other long-term liabilities		4,236		—		4,236
Total liabilities		312,571		(5,190)		307,381
Shareholders’ deficit:
Preferred stock		—		—		—
Common stock		1,325		—		1,325
Additional paid-in capital		1,009,362		—		1,009,362
Accumulated deficit		(1,028,582)		14,090		(1,014,492)
Total shareholders’ deficit		(17,895)		14,090		(3,805)
Total liabilities and shareholders’ deficit	$	294,676	$	8,900	$	303,576


	As of March 31, 2018
			Pro forma as if the
			previous accounting
	As reported		was in effect
ASSETS
Cash and cash equivalents	$	218,383	$	218,383
Accounts receivable		34		34
Unbilled revenue		2,838		2,838
Contract asset		4,041		—
Non-cash royalty receivable		16,090		8,875
Inventory		368		368
Prepaid and other current assets		5,680		5,680
Total current assets		247,434		236,178
Property and equipment, net of accumulated depreciation		12,850		12,850
Other assets		4,681		4,681
Total assets	$	264,965	$	253,709
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Accounts payable	$	7,786	$	7,786
Accrued compensation		5,671		5,671
Other accrued liabilities		23,756		23,756
Current portion of deferred lease incentive		784		784
Current portion of liability related to the sale of future royalties, net		27,619		27,619
Current portion of deferred revenue		611		569
Total current liabilities		66,227		66,185
Deferred lease incentive, net of current portion		4,933		4,933
Deferred revenue, net of current portion		81,522		84,423
Convertible 4.5% senior notes, net		2,053		2,053
Liability related to the sale of future royalties, net		142,018		142,018
Other long-term liabilities		4,523		4,523
Total liabilities		301,276		304,135
Shareholders’ deficit:
Preferred stock		—		—
Common stock		1,330		1,330
Additional paid-in capital		1,015,464		1,015,464
Accumulated deficit		(1,053,105)		(1,067,220)
Total shareholders’ deficit		(36,311)		(50,426)
Total liabilities and shareholders’ deficit	$	264,965	$	253,709


	Three months ended March 31, 2018
			Pro forma as if the
			previous accounting
	As reported		was in effect
Revenues:
License and milestone fees	$	11,540	$	9,830
Non-cash royalty revenue related to the sale of future royalties		7,190		8,875
Research and development support		383		383
Clinical materials revenue		702		702
Total revenues		19,815		19,790
Operating Expenses:
Research and development		44,831		44,831
General and administrative		9,995		9,995
Restructuring charge		1,731		1,731
Total operating expenses		56,557		56,557
Loss from operations		(36,742)		(36,767)
Investment income, net		662		662
Non-cash interest expense on liability related to the sale of future royalties and convertible senior notes		(3,046)		(3,046)
Interest expense on convertible senior notes		(24)		(24)
Other income (expense), net		537		537
Net loss	$	(38,613)	$	(38,638)
Basic and diluted net loss per common share	$	(0.30)	$	(0.30)


	Three months ended March 31, 2018
			Pro forma as if the
			previous accounting
	As reported		was in effect
Cash flows from operating activities:
Net loss	$	(38,613)	$	(38,638)
Adjustments to reconcile net loss to net cash used for operating activities:
Non-cash royalty revenue related to sale of future royalties		(7,190)		(8,875)
Non-cash interest expense on liability related to sale of future royalties and convertible senior notes		3,046		3,046
Depreciation and amortization		2,527		2,527
Loss on sale/disposal of fixed assets and impairment charges		(30)		(30)
Stock and deferred share unit compensation		3,847		3,847
Deferred rent		15		15
Change in operating assets and liabilities:
Accounts receivable		2,615		2,615
Unbilled revenue		(258)		92
Inventory		670		328
Prepaid and other current assets		(2,713)		(2,713)
Other assets		(884)		(884)
Accounts payable		(757)		(757)
Accrued compensation		(5,802)		(5,802)
Other accrued liabilities		5,447		5,447
Deferred revenue		(11,875)		(10,165)
Net cash used for operating activities		(49,955)		(49,947)