Summary of Significant Accounting Policies (Tables)

9 Months Ended

Sep. 30, 2018

Contract assets and contract liabilities


	Balance at								Balance at
	January 1, 2018								End
	(ASC 606 adoption)		Additions		Deductions		Impact of Netting		of Period
Nine months ended September 30, 2018
Contract asset	$	—	$	500	$	(5,000)	$	5,000	$	500

Contract liabilities	$	89,967	$	706	$	(13,368)	$	5,000	$	82,305


		Three Months Ended		Nine Months Ended
		September 30, 2018		September 30, 2018
Revenue recognized in the period from:
Amounts included in contract liabilities at the beginning of the period	$	172	$	13,368
Performance obligations satisfied in previous periods	$	500	$	500

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

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

Fair Value Measurements at September 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

283,864

—

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 September 30, 2018 and December 31, 2017 is summarized below (in thousands):


	September 30,		December 31,
	2018		2017
Raw materials	$	—	$	40
Work in process		1,938		998
Total	$	1,938	$	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		Nine Months Ended
	September 30,		September 30,
	2018	2017	2018	2017
Options outstanding to purchase common stock, shares issuable under the employee stock purchase plan, and unvested restricted stock at end of period	18,153	15,360	18,153	15,360
Common stock equivalents under treasury stock method for options, shares issuable under the employee stock purchase plan, and unvested restricted stock	3,153	2,570	3,378	1,210
Shares issuable upon conversion of convertible notes at end of period	501	740	501	740
Common stock equivalents under if-converted method for convertible notes	501	18,685	501	22,128

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



	Three Months Ended September 30,				Nine Months Ended September 30,
	2018		2017		2018		2017
Dividend	None		None		None		None
Volatility	71.91	%	69.31	%	70.99	%	67.26	%
Risk-free interest rate	2.89	%	1.93	%	2.72	%	2.00	%
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 September 30, 2018, and changes during the nine 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	5,431		10.43
Exercised	(595)		4.94
Forfeited/Canceled	(590)		11.40
Outstanding at September 30, 2018	16,217	$	11.47

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 September 30, 2018 and changes during the nine month period ended September 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 September 30, 2018	1,816	$	2.87

Schedule of percentage of total revenues recognized from each significant customer


	Three Months Ended				Nine Months Ended
	September 30,				September 30,
Collaborative Partner:	2018		2017		2018		2017
CytomX	14	%	1	%	7	%	20	%
Roche	77	%	77	%	57	%	27	%
Sanofi	—	%	—	%	—	%	47	%
Takeda	2	%	13	%	29	%	4	%

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 September 30, 2018
			Pro forma as if the
			previous accounting
	As reported		was in effect
ASSETS
Cash and cash equivalents	$	303,205	$	303,205
Accounts receivable		2,115		2,115
Unbilled revenue		521		521
Contract asset		500		—
Non-cash royalty receivable		8,115		—
Inventory		1,938		1,938
Prepaid and other current assets		6,320		6,320
Total current assets		322,714		314,099
Property and equipment, net of accumulated depreciation		13,209		13,209
Other assets		3,941		3,941
Total assets	$	339,864	$	331,249
LIABILITIES AND SHAREHOLDERS’ DEFICIT
Accounts payable	$	10,352	$	10,352
Accrued compensation		10,316		10,316
Other accrued liabilities		24,117		24,117
Current portion of deferred lease incentive		832		832
Current portion of liability related to the sale of future royalties, net		23,040		23,040
Current portion of deferred revenue		1,713		1,455
Total current liabilities		70,370		70,112
Deferred lease incentive, net of current portion		4,854		4,854
Deferred revenue, net of current portion		80,592		83,834
Convertible 4.5% senior notes, net		2,060		2,060
Liability related to the sale of future royalties, net		130,907		130,907
Other long-term liabilities		4,193		4,193
Total liabilities		292,976		295,960
Shareholders’ deficit:
Preferred stock		—		—
Common stock		1,490		1,490
Additional paid-in capital		1,186,934		1,186,934
Accumulated deficit		(1,141,536)		(1,153,135)
Total shareholders’ deficit		46,888		35,289
Total liabilities and shareholders’ deficit	$	339,864	$	331,249


	Three Months Ended				Nine months ended
	September 30, 2018				September 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	$	672	$	80	$	13,533	$	15,239
Non-cash royalty revenue related to the sale of future royalties		8,441		7,562		22,873		23,658
Research and development support		388		388		1,159		1,159
Clinical materials revenue		1,427		1,427		2,465		2,465
Total revenues		10,928		9,457		40,030		42,521
Operating Expenses:
Research and development		47,243		47,243		130,775		130,775
General and administrative		8,347		8,347		26,994		26,994
Restructuring charge		870		870		3,287		3,287
Total operating expenses		56,460		56,460		161,056		161,056
Loss from operations		(45,532)		(47,003)		(121,026)		(118,535)
Investment income, net		1,369		1,369		2,845		2,845
Non-cash interest expense on liability related to the sale of future royalties and convertible senior notes		(2,546)		(2,546)		(8,203)		(8,203)
Interest expense on convertible senior notes		(23)		(23)		(70)		(70)
Other (expense) income, net		(75)		(75)		(590)		(590)
Net loss	$	(46,807)	$	(48,278)	$	(127,044)	$	(124,553)
Basic and diluted net loss per common share	$	(0.32)	$	(0.33)	$	(0.92)	$	(0.91)