Summary of Significant Accounting Policies (Tables)

6 Months Ended

Jun. 30, 2018

Contract assets and contract liabilities


	Balance at						Balance at
	January 1, 2018						End
	(ASC 606 adoption)		Additions		Deductions		of Period
Six months ended June 30, 2018
Contract asset	$	—	$	4,041	$	(4,041)	$	—
Contract liabilities:
Deferred revenue	$	89,967	$	—	$	(8,196)	$	81,771


		Three Months Ended		Six Months Ended
		June 30, 2018		June 30, 2018
Revenue recognized in the period from:
Amounts included in contract liabilities at the beginning of the period	$	1,321	$	13,196
Performance obligations satisfied in previous periods	$	-	$	-

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

As of June 30, 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 June 30, 2018 (in thousands):

Fair Value Measurements at June 30, 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

323,388

—

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 inventory

Inventory at June 30, 2018 and December 31, 2017 is summarized below (in thousands):


	June 30,		December 31,
	2018		2017
Raw materials	$	—	$	40
Work in process		1,890		998
Total	$	1,890	$	1,038

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		Six Months Ended
	June 30,		June 30,
	2018	2017	2018	2017
Options outstanding to purchase common stock and unvested restricted stock at end of period	17,776	15,588	17,776	15,588
Common stock equivalents under treasury stock method for options and unvested restricted stock	3,451	1,224	3,484	463
Shares issuable upon conversion of convertible notes at end of period	501	23,878	501	23,878
Common stock equivalents under if-converted method for convertible notes	501	23,878	501	23,878

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



	Three Months Ended June 30,				Six Months Ended June 30,
	2018		2017		2018		2017
Dividend	None		None		None		None
Volatility	71.60	%	68.17	%	70.90	%	67.10	%
Risk-free interest rate	2.84	%	1.90	%	2.71	%	2.01	%
Expected life (years)	6.0		6.0		6.0		6.0

Summary of stock option activity

A summary of option activity under the Company’s equity plans as of June 30, 2018, and changes during the six 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	$	9.92
Granted	4,925		10.54
Exercised	(568)		4.97
Forfeited/Canceled	(368)		12.65
Outstanding at June 30, 2018	15,960	$	10.22

Summary of restricted stock activity

A summary of restricted stock activity under the Company’s equity plans (inclusive of the performance awards noted above) as of June 30, 2018 and changes during the six month period ended June 30, 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	(503)		2.64
Forfeited	—		—
Unvested at June 30, 2018	1,816	$	2.87

Schedule of percentage of total revenues recognized from each significant customer


	Three Months Ended				Six Months Ended
	June 30,				June 30,
Collaborative Partner:	2018		2017		2018		2017
CytomX	6	%	3	%	4	%	22	%
Novartis	11	%	—	%	4	%	—	%
Roche	78	%	17	%	50	%	21	%
Sanofi	—	%	77	%	—	%	53	%
Takeda	1	%	2	%	39	%	2	%

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		ASC 606		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 June 30, 2018
			Pro forma as if the
			previous accounting
	As reported		was in effect
ASSETS
Cash and cash equivalents	$	345,058	$	345,058
Accounts receivable		19		19
Unbilled revenue		522		522
Contract asset		—		—
Non-cash royalty receivable		7,236		—
Inventory		1,890		1,890
Prepaid and other current assets		9,893		9,893
Total current assets		364,618		357,382
Property and equipment, net of accumulated depreciation		12,029		12,029
Other assets		4,437		4,437
Total assets	$	381,084	$	373,848
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Accounts payable	$	12,881	$	12,881
Accrued compensation		8,524		8,524
Other accrued liabilities		17,865		17,865
Current portion of deferred lease incentive		793		793
Current portion of liability related to the sale of future royalties, net		22,265		22,265
Current portion of deferred revenue		1,020		755
Total current liabilities		63,348		63,083
Deferred lease incentive, net of current portion		4,806		4,806
Deferred revenue, net of current portion		80,751		83,908
Convertible 4.5% senior notes, net		2,057		2,057
Liability related to the sale of future royalties, net		136,701		136,701
Other long-term liabilities		4,231		4,231
Total liabilities		291,894		294,786
Shareholders’ deficit:
Preferred stock		—		—
Common stock		1,490		1,490
Additional paid-in capital		1,182,429		1,182,429
Accumulated deficit		(1,094,729)		(1,104,857)
Total shareholders’ deficit		89,190		79,062
Total liabilities and shareholders’ deficit	$	381,084	$	373,848


	Three months ended June 30, 2018				Six months ended June 30, 2018
			Pro forma as if the				Pro forma as if the
			previous accounting				previous accounting
	As reported		was in effect		As reported		was in effect
Revenues:
License and milestone fees	$	1,321	$	5,330	$	12,861	$	15,159
Non-cash royalty revenue related to the sale of future royalties		7,242		7,222		14,432		16,096
Research and development support		388		388		771		771
Clinical materials revenue		336		336		1,038		1,038
Total revenues		9,287		13,276		29,102		33,064
Operating Expenses:
Research and development		38,701		38,701		83,532		83,532
General and administrative		8,652		8,652		18,647		18,647
Restructuring charge		686		686		2,417		2,417
Total operating expenses		48,039		48,039		104,596		104,596
Loss from operations		(38,752)		(34,763)		(75,494)		(71,532)
Investment income, net		814		814		1,476		1,476
Non-cash interest expense on liability related to the sale of future royalties and convertible senior notes		(2,611)		(2,611)		(5,657)		(5,657)
Interest expense on convertible senior notes		(23)		(23)		(47)		(47)
Other income (expense), net		(1,052)		(1,052)		(515)		(515)
Net loss	$	(41,624)	$	(37,635)	$	(80,237)	$	(76,275)
Basic and diluted net loss per common share	$	(0.31)	$	(0.28)	$	(0.61)	$	(0.58)