Registrant’s telephone number, including area code: ~~(510) 848-4400~~(206)485-7241

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~~ Yes☒ NO 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~~ Yes☒ NO No ☐

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.

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~~ Yes ☐ NO No ☒

The number of shares of Registrant’s Common Stock outstanding as of ~~October 25, 2017~~August 4, 2023 was ~~77,303,665.~~71,804,977

In this Quarterly Report on Form 10-Q, “we,” “our,” “us,” “Aduro,” and “the Company” refer to Aduro Biotech, Inc. and its consolidated subsidiaries. Aduro, Aduro Biotech, the Aduro logo and other trade names, trademarks or service marks of Aduro are the property of Aduro Biotech, Inc. This report contains references to our trademarks and to trademarks belonging to other entities. Trade names, trademarks and service marks of other companies appearing in this report are the property of their respective holders. We do not intend our use or display of other companies’ trade names or trademarks to imply a relationship with, or endorsement or sponsorship of us by, any other companies.

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

Condensed Consolidated Statements of ~~Comprehensive Loss~~Stockholders’ Equity

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

4. Cash, Cash Equivalents and ~~interim periods beginning after December 15, 2019. Early adoption is permitted for all periods beginning after December 15, 2018.~~ ~~The Company has evaluated the impact of this guidance and has concluded that adoption of the standard will not have a material impact on its consolidated financial statements.~~

In August 2016, the FASB issued ASU No. 2016-15, Statement of Cash Flows (Topic 230): Classification of Certain Cash Receipts and Cash Payments. ASU 2016-15 identifies how certain cash receipts and cash payments are presented and classified in the Statement of Cash Flows. The standard is effective for fiscal years and interim periods beginning after December 15, 2017. The standard should be applied retrospectively and early adoption is permitted, including adoption in an interim period. ~~The Company has evaluated the impact of this guidance and has concluded that the adoption of the standard will not have a material impact on its Consolidated Statement of Cash Flows.~~

In November 2016, the FASB issued ASU No. 2016-18, Statement of Cash Flows (Topic 230): Restricted Cash. ASU 2016-18 requires that the statement of cash flows explains the change during the period in the total cash, cash equivalents, and restricted cash. The standard is effective for fiscal years beginning after December 15, 2017, and interim periods within those years. This standard should be applied retrospectively and early adoption is permitted, including adoption in an interim period. The Company plans to adopt this standard on January 1, 2018 utilizing the required retrospective transition method. The adoption of ASU 2016-18 on January 1, 2018 will change the presentation and classification of restricted cash in its Consolidated Statement of Cash Flows.Marketable Securities

In May 2017, the FASB issued ASU No. 2017-09, Compensation – Stock Compensation (Topic 718): Scope of Modification Accounting. ASU 2017-09 provides clarity and reduces the complexity of applying the guidance in Topic 718, Compensation – Stock Compensation, to a change to the terms or conditions of a share-based payment award. This standard is effective for annual periods beginning after December 15, 2017. The Company has evaluated the impact of this guidance and has concluded that adoption of the standard will not have a material impact on its consolidated financial statements.

~~Recently Adopted Accounting Pronouncements~~

In March 2016, the FASB issued ASU No. 2016-09, Compensation - Stock Compensation (Topic 718): Improvements to Employee Share-Based Payment Accounting. The standard is intended to simplify several areas of accounting for share-based compensation arrangements, including the income tax impact, classification of awards as either equity or liabilities, classification on the statement of cash flows and forfeitures. Formerly, these excess tax benefits were recognized in additional paid-in capital and tax deficiencies (to the extent there were previous tax benefits) were recognized as an offset to accumulated excess tax benefits. If no previous tax benefit existed, the deficiencies were recognized in the income statement as an increase to income tax expense. The changes require all excess tax benefits and tax deficiencies related to share-based payments be recognized as income tax expense or benefit in the income statement. Gross excess tax benefits in the cash flow statement have also changed from the prior presentation as a financing activity to being classified as an operating activity. The excess tax benefits are no longer included in the assumed proceeds of the diluted EPS calculation, which results in stock-based awards being more dilutive. Lastly, the Company elected to continue to estimate forfeitures based on historical data and recognizes forfeiture compensation expense over the vesting period of the award. This standard is effective prospectively for annual reporting periods, and interim periods therein, beginning after December 15, 2016. The Company adopted this ASU on January 1, 2017 which resulted in the recognition of excess tax benefits within the Condensed Consolidated Statements of Operations rather than paid-in capital of $3.8 million for the nine months ended September 30, 2017.

~~3. Fair Value Measurements~~

The carrying amounts of certain of the Company’s financial instruments, including cash equivalents, accounts receivable and accounts payable approximate their fair values due to their short maturities. Assets and liabilities recorded at fair value on a recurring basis in the balance sheets, as well as assets and liabilities measured at fair value on a non-recurring basis or disclosed at fair value, are categorized based upon the level of judgment associated with inputs used to measure their fair values. The accounting guidance for fair value provides a framework for measuring fair value, and requires certain disclosures about how fair value is determined. Fair value is defined as the price that would be received upon the sale of an asset or paid to transfer a liability (an exit price) in an orderly transaction between market participants at the measurement date. The accounting guidance also establishes a three-level valuation hierarchy that prioritizes the inputs to valuation techniques used to measure fair value based upon whether such inputs are observable or unobservable. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect market assumptions made by the reporting entity. The three-level hierarchy for the inputs to valuation techniques is briefly summarized as follows:

~~Level 1—Inputs are unadjusted, quoted prices in active markets for identical assets or liabilities at the measurement date;~~

~~Level 2~~—Inputs are observable, unadjusted quoted prices in active markets for similar assets or liabilities, unadjusted quoted prices for identical or similar assets or liabilities in markets that are not active, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the related assets or liabilities; and

~~Level 3—Unobservable inputs that are significant to the measurement of the fair value of the assets or liabilities that are supported by little or no market data.~~

The Company’s cash equivalents, which include money market funds, are classified as Level 1 because they are valued using quoted market prices. The Company’s marketable securities consist of available-for-sale securities and are generally classified as Level 2 because their value is based on valuations using significant inputs derived from or corroborated by observable market data.

In certain cases where there is limited activity or less transparency around the inputs to valuation, securities are classified as Level 3. Level 3 liabilities consist of the contingent consideration liability.

~~The following table sets forth the Company’s financial instruments that were measured at fair value on a recurring basis by level within the fair value hierarchy (in thousands):~~

September 30, 2017

Level 1

Level 2

Level 3

Total

Financial Assets:

Money market funds

$
58,946

$
—

$
—

$
58,946

U.S. government and agency securities

—

124,344

—

124,344

Corporate debt securities

—

77,535

—

77,535

Commercial paper

—

91,892

—

91,892

Total

$
58,946

$
293,771

$
—

$
352,717

Financial Liabilities:

Contingent consideration related to acquisition

$
—

$
—

$
6,250

$
6,250

Total

$
—

$
—

$
6,250

$
6,250

December 31, 2016

Level 1

Level 2

Level 3

Total

Financial Assets:

Money market funds

$
54,318

$
—

$
—

$
54,318

U.S. government and agency securities

—

166,800

—

166,800

Corporate debt securities

—

77,880

—

77,880

Commercial paper

—

49,643

—

49,643

Total

$
54,318

$
294,323

$
—

$
348,641

Financial Liabilities:

Contingent consideration related to acquisition

$
—

$
—

$
4,032

$
4,032

Total

$
—

$
—

$
4,032

$
4,032

The acquisition-date fair value of the contingent consideration liability represents the future consideration that is contingent upon the achievement of specified development milestones for a product candidate. The fair value of the contingent consideration is based on the Company’s probability-weighted discounted cash flow assessment that considers probability and timing of future payments. The fair value measurement is based on significant Level 3 inputs such as anticipated timelines and probability of achieving development milestones. Changes in the fair value of the liability for contingent consideration, except for the impact of foreign currency, will be recognized as research and development expense in the condensed consolidated statements of operations until settlement.

The Company did not have any financial assets and liabilities measured at fair value on a non-recurring basis as of September 30, 2017 and December 31, 2016. There were no transfers between the fair value measurement category levels during any of the periods presented.

~~The following table sets forth a summary of the changes in the fair value of the Company’s Level 3 financial liabilities (in thousands):~~

Contingent
Consideration

Balance at December 31, 2016

$
4,032

Net change in fair value upon remeasurement

1,622

Foreign currency impact on contingent consideration

596

Balance at September 30, 2017

$
6,250

~~The following tables summarize the estimated value of the Company’s cash,~~Cash, cash equivalents and marketable securities ~~and~~consisted of the ~~gross unrealized holding gains and losses~~following (in thousands):


	June 30, 2023
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	3,828	$	—	$	—		$	3,828
Money market funds		71,998		—		—			71,998
Commercial paper		14,461		—		(2	)		14,459
U.S. government and agency securities		36,852		12		—			36,864
Total cash and cash equivalents	$	127,139	$	12	$	(2	)	$	127,149
Marketable securities:
Commercial paper	$	35,524	$	—	$	(39	)	$	35,485
U.S. government and agency securities		120,345		3		(538	)		119,810
Corporate debt securities		16,785		—		(92	)		16,693
Total marketable securities	$	172,654	$	3	$	(669	)	$	171,988


	December 31, 2022
	Amortized Cost		Unrealized Gains		Unrealized Losses			Estimated Fair Value
Cash and cash equivalents:
Cash	$	15,724	$	—	$	—		$	15,724
Money market funds		45,443		—		—			45,443
Commercial paper		41,972		—		(15	)		41,957
U.S. government and agency securities		12,311		3		—			12,314
Total cash and cash equivalents	$	115,450	$	3	$	(15	)	$	115,438
Marketable securities:
Commercial paper	$	69,630	$	2	$	(58	)	$	69,574
U.S. government and agency securities		148,160		6		(1,461	)		146,705
Corporate debt securities		54,123		—		(526	)		53,597
Total marketable securities	$	271,913	$	8	$	(2,045	)	$	269,876

The amortized cost and estimated fair value of ~~the Company’s~~our available-for-sale marketable securities by contractual maturity are summarized below as of ~~September~~June 30, ~~2017~~2023 (in thousands):

For all securities with a fair value less than its amortized cost basis, we determined the decline in fair value below amortized cost basis to be noncredit related. We have not recognized any impairment losses through June 30, 2023.

The fair value of the CVR liability increased during the six months ended June 30, 2023 by $2.9 million primarily due to remeasuring the value of our preferred shares in Sairopa at estimated fair value mainly as a result of Sairopa executing a license agreement for its SIRPa inhibitor ADU-1805 with Exelixis, Inc. in November 2022. The contingent consideration liability did not change significantly during the six months ended June 30, 2023. In addition, we will hold the shares in Sairopa until there is a liquidation event, at which time, in accordance with the CVR Agreement, 50% of any net proceeds will accrue to the benefit of the CVR holders, net of deductions permitted under the CVR Agreement, including taxes and certain other expenses. Refer to Note 10 “Equity Method Investment” for more information.

September 30,

December 31,

2017

2016

Compensation and related benefits

$
4,714

$
4,228

Accrued research expense

2,961

722

Professional and consulting services

1,597

1,168

Accrued construction in progress

889

447

Other

1,088

2,032

Total accrued expenses and other liabilities

$
11,249

$
8,597

~~5. Goodwill and~~7. Intangible Assets

~~Goodwill~~

~~The gross carrying amount of goodwill was as follows (in thousands):~~

Balance at December 31, 2016

$
7,658

Foreign currency translation adjustment

944

Balance at September 30, 2017

$
8,602

Intangible assets

The gross carrying amounts and net book value of ~~our~~ intangible assets were as follows (in thousands):

September 30, 2017

Gross Carrying
Amount

Accumulated
Amortization

Net Book Value

Intangible assets with finite lives:

License agreement

$
11,683

$
1,120

$
10,563

Total intangible assets with finite lives

11,683

1,120

10,563

Acquired IPR&D assets

20,259

—

20,259

Total intangible assets

$
31,942

$
1,120

$
30,822


	June 30, 2023
	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Intangible assets with finite lives:
Acquired license agreement	$	26,685	$	4,322	$	22,363
In-place lease		1,433		375		1,058
Total intangible assets with finite lives		28,118		4,697		23,421
Acquired in-process research & development (‟IPR&Dˮ) assets		36,550		—		36,550
Total intangible and acquired IPR&D assets	$	64,668	$	4,697	$	59,971


	December 31, 2022
	Gross Carrying Amount		Accumulated Amortization		Net Book Value
Intangible assets with finite lives:
Acquired license agreement	$	26,685	$	3,538	$	23,147
In-place lease		1,433		293		1,140
Total intangible assets with finite lives		28,118		3,831		24,287
Acquired IPR&D assets		36,550		—		36,550
Total intangible and acquired IPR&D assets	$	64,668	$	3,831	$	60,837

December 31, 2016

Gross Carrying
Amount

Accumulated
Amortization

Net Book Value

Intangible assets with finite lives:

License agreement

$
10,400

$
607

$
9,793

Total intangible assets with finite lives

10,400

607

9,793

Acquired IPR&D assets

18,034

—

18,034

Total intangible assets

$
28,434

$
607

$
27,827

Intangible assets are carried at cost less accumulated ~~amortization. The license agreement~~amortization and impairment. Amortization is ~~being amortized~~ over aperiods of 9 to 17 years, with an original weighted average period of 2016.7 years, and the amortization expense is recorded in operating expenses. ~~The increase in the gross carrying amount of intangible~~We test our acquired IPR&D assets ~~as of September 30, 2017 compared to December 31, 2016 reflected a positive impact of foreign currency exchange which was primarily due to the strengthening of the Euro against the U.S. dollar.~~for impairment on an annual basis, or more frequently if an impairment indicator exists.

Amortization expense was ~~$145,000 and $138,000~~$0.4 million for both the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016, respectively~~2022 and ~~$413,000 and $415,000~~was $0.9 million for both the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016, respectively.~~ 2022. Based on finite-lived intangible assets recorded as of ~~September~~June 30, ~~2017,~~2023, the estimated future amortization expense for the next five years is as follows (in thousands):

Year Ending December 31,

Estimated
Amortization
Expense

2017 (remaining three months)

$
146

2018

584

2019

584

2020

584

2021

584

2022

584


Year Ending December 31,	Estimated Amortization Expense
2023 (remaining six months)	$	866
2024		1,733
2025		1,733
2026		1,733
2027		1,733
Thereafter		15,623

8.Accrued and Other Current Liabilities

Accrued and other current liabilities consisted of the following (in thousands):


	June 30,		December 31,
	2023		2022
Research and development costs	$	19,689	$	21,970
Compensation and benefits		8,581		11,085
Sublease rent and security deposit		—		157
Business taxes and licensing fees		45	—
Consulting and outside services		971		403
Other		56		21
Total accrued and other current liabilities	$	29,342	$	33,636

9. Investment in Equity Securities

~~6. Collaboration Agreements~~In November 2021, we entered into agreements related to the formation of SanReno, a corporation established to develop, manufacture and commercialize kidney disease therapies in mainland China, Hong Kong, Macau, Taiwan and Singapore (collectively, the “Territory”). In connection with the formation of SanReno and pursuant to a license agreement entered into between Chinook and SanReno in November 2021 (the “China License Agreement”), Chinook granted SanReno exclusive licenses under certain intellectual property to develop and commercialize atrasentan and zigakibart in the Territory for use in all human indications. In return, Chinook received 40.0 million Series A preferred shares in SanReno representing 50% ownership of the outstanding voting securities and a warrant to purchase a total of 5.0 million common shares of SanReno at an exercise price of $0.01 per share upon the attainment of regulatory exclusivity for atrasentan in the Territory. Such warrant will only be exercisable if and provided that SanReno obtains, before the 10-year anniversary of the closing of the formation of SanReno, the regulatory exclusivity for atrasentan in China for at least three years commencing from the New Drug Application approval by the National Medical Product Administration of China. The warrant will have a five-year exercise period after it becomes exercisable upon satisfaction of the exercise conditions and was valued at $1.2 million on the grant date based on the probability of exercise of the warrant and the market for such instruments. An investor syndicate led by Frazier Healthcare Partners and Pivotal bioVenture Partners China, along with existing Chinook investors Versant Ventures and Samsara BioCapital, invested $40.0 million in exchange for the remaining 50% of the outstanding voting securities of SanReno. Refer to Note 11 “Collaboration and License Agreements” for more information regarding the China License Agreement.

~~Novartis Agreement~~

In ~~March 2015,~~connection with the ~~Company~~formation of SanReno in November 2021, Chinook also entered into a ~~collaboration~~Shareholders Agreement (the “Shareholders Agreement”) providing for certain rights and obligations of SanReno and its shareholders. Pursuant to the Shareholders Agreement, Chinook has the right to designate an individual for election to the board of directors of SanReno and SanReno has agreed that certain specified events (including certain liquidation events) shall require the approval of shareholders of SanReno holding a supermajority of SanReno’s Series A preferred shares. The Shareholders Agreement terminates by mutual consent of the parties, and automatically terminates upon the dissolution of SanReno or immediately prior to the consummation of a qualified initial public offering.

We account for the investment in SanReno in accordance with the provisions of ASC Topic 321, Investments – Equity Securities, and elect to use the measurement alternative therein. As such, the investment is valued at $41.2 million as of June 30, 2023, which was the total of the aggregate cost value of the 40.0 million preferred shares in SanReno received by us on the date of the closing of the formation of SanReno and the grant date value of the warrant. The investment will be re-measured upon future observable price changes(s) in orderly transaction(s) or upon impairment, if any. We have not recognized any impairment losses through June 30, 2023.

Pursuant to the terms of the Series A preferred stock, we are entitled to non-cumulative dividends at 8% of our initial investment, payable when and if declared by the board of directors of SanReno. Dividends from our investment in equity securities, if declared, are reflected in the consolidated statements of operations and comprehensive loss. There were no dividends declared through June 30, 2023.

10. Equity Method Investment

In April 2021, we entered into a definitive agreement with Sairopa B.V., a private company created by Van Herk Royalty B.V. and D.S. Chahal (the “Sairopa Investors”) to acquire certain non-renal assets of Chinook in exchange for preferred stock in Sairopa. We will hold such shares until such time as there is a liquidation event, as defined in the shareholders agreement, in Sairopa. In accordance with the CVR Agreement, 50% of any net proceeds received from this transaction by way of a liquidation event of Sairopa by October 4, 2030, net of deductions permitted under the CVR Agreement, including taxes and certain other expenses, will accrue to the benefit of the CVR holders.

As of June 30, 2023, we own a 36% interest in Sairopa. We determined that we have the ability to exercise significant influence over Sairopa but do not have a controlling interest. Therefore, the investment in Sairopa was accounted for using the equity method. Judgment regarding the level of influence over each equity method investment includes considering key factors such as ownership interest, representation on the board of directors, and participation in policy-making decisions. The Sairopa Investors provided an initial capitalization of 12.5 million Euros. We recorded the equity method investment at $10.0 million, which is the fair value of the equity received by us in exchange for the non-renal assets.

Our equity method investment was recorded at cost at inception and is adjusted each period for our share of the investee’s income or loss, which is reported in our consolidated statements of operations and comprehensive loss on a one quarter lag. In November 2022, Sairopa executed a license agreement with ~~Novartis Pharmaceuticals Corporation, or Novartis, pursuant to which~~Exelixis, Inc (“Exelixis”). Under the ~~Company is collaborating worldwide with Novartis regarding the development and potential commercialization of product candidates containing an agonist~~terms of the ~~molecular target known as STING in the field of oncology, including immuno-oncology and cancer vaccines. Under this~~ agreement, or the Novartis Agreement, the Company granted Novartis a co-exclusive license to develop such products worldwide, an exclusive license to commercialize such products outside the United States and a non-exclusive license to support the Company in commercializing such products in the United States if it requests such support. The collaboration is guided by a joint steering committee with each party having final decision making authority regarding specified areas of development or commercialization.

~~Under the Novartis Agreement, the Company received~~Exelixis made an upfront payment of ~~$200.0~~$40.0 million to obtain an exclusive, worldwide license to develop and commercialize ADU-1805 and other anti-SIRPα antibodies, and for certain expenses to be incurred by Sairopa in ~~April 2015. During~~conducting phase 1 clinical studies of ADU-1805. Additionally, during the ~~second~~first quarter of ~~2016, the Company~~2023, Sairopa earned a ~~$35.0~~$35.0 million milestone under the terms of the agreement. Sairopa is eligible to receive additional near-term development milestone payments totaling up to $62.5 million. Following the completion of certain clinical studies, Exelixis may exercise an option to continue the license agreement for $225.0 million based upon ~~initiation~~its evaluation of a ~~Phase 1 trial for~~pre-specified clinical data package to be delivered by Sairopa. Following the ~~first STING product candidate, ADU-S100, and recognized~~exercise of the ~~payment as revenue in the period. The Company is also~~option, Sairopa would be eligible to receive up to ~~an additional $215.0~~$465.0 million in additional development, ~~milestones~~commercial, and ~~up to an additional $250.0 million in regulatory approval milestones.~~

~~The Company is responsible for 38% of the joint development costs worldwide and Novartis is responsible for the remaining 62% of the joint development costs worldwide.~~

~~The Company will also receive 50% of gross profits~~net sales milestone payments, as well as tiered royalties on sales of any products commercialized pursuant to this collaboration in the United States and 45% of gross profits for specified European countries and Japan. For each of these profit share countries, each party will be responsible for its respective commercial sharing percentage of all joint commercialization costs incurred in that country.

~~For all other countries where the Company is not sharing profits, Novartis will be responsible for all commercialization costs and will pay the Company a royalty in the mid-teens on all~~future net sales of products.

Our equity method investment is also adjusted each period for gains or losses from changes in our ownership interest in Sairopa, if any. We assess our equity method investment for impairment whenever events or changes in circumstances indicate that the carrying value of the investment may not be recoverable. We have not recognized any impairment losses through June 30, 2023.

11. Collaboration and License Agreements

SanReno Therapeutics

In November 2021, we entered into the China License Agreement, pursuant to which we granted SanReno exclusive licenses under certain intellectual property to develop, manufacture and commercialize for atrasentan and zigakibart in the Territory. Refer to Note 9 “Investment in Equity Securities” for further details on the agreements executed with SanReno. We evaluated the China License Agreement under ASC Topic 606 and determined that the China License Agreement represents a contract with a customer. We identified the following performance obligations: (i) the licenses to develop, manufacture and commercialize atrasentan and zigakibart; (ii) our obligation to transfer know-how for the licensed product ~~sold by Novartis, its affiliates~~candidates (“Technology Transfers”); (iii) manufacturing and ~~sublicensees,~~supply services; and (iv) opt-in global studies. Refer to Note 11 “Collaboration and License Agreements” in our Annual Report on Form 10-K for the year ended December 31, 2022.

Pursuant to the China License Agreement, SanReno will reimburse the manufacturing and supply services at cost plus a mark-up and will reimburse the opt-in global studies at cost, which represent pass-through fees from third-party vendors, including clinical research organization. Revenue attributable to the manufacturing and supply services and opt-in global studies will be recognized as incurred. For the three months ended June 30, 2023 and 2022, we recognized revenue of $0.7 million and $0.4 million, respectively, under the China License Agreement for costs reimbursed related to opt-in global studies and manufacturing and supply services. For the six months ended June 30, 2023 and 2022, we recognized revenue of $2.5 million and $3.1 million, respectively, under the China License Agreement for costs reimbursed related to opt-in global studies and manufacturing and supply services.

We are also eligible to receive a progress-dependent milestone payment of up to approximately $25.0 million with ~~such percentage subject~~respect to ~~reduction post patent and data exclusivity expiration and subject~~zigakibart. Under the China License Agreement, SanReno is also obligated to ~~reduction, capped~~pay Chinook royalty payments at a ~~specified~~ percentage ~~for royalties~~in the low teens based on net sales of atrasentan in the Territory on the portion of annual net sales in excess of a pre-determined amount, which royalty will be payable ~~to third party licensors. Novartis’ royalty obligation will run~~until the expiration of all licensed patents covering the sale of atrasentan in the Territory. The China License Agreement expires on a ~~country-by-country~~licensed product-by-licensed product basis ~~until~~on the ~~later~~latest of: (i) the expiration of the royalty term for atrasentan, (ii) the expiration of the last valid claim ~~covering~~of a licensed patent for zigakibart in the ~~product, expiration~~Territory. The parties may terminate the China License Agreement pursuant to terms specified in the agreement. Chinook and SanReno also have reciprocal rights of ~~data exclusivity~~first negotiation in their respective territories for ~~the product~~certain future kidney disease products developed or ~~12 years after first commercial sale~~in-licensed by either company. Chinook retains full rights to atrasentan and zigakibart outside of the ~~product~~Territory.

The potential progress-dependent cash milestone payment that we are eligible to receive is fully constrained based on the probability of achievement. Accordingly, any future milestone payment received under the agreement will be recorded upon or over a period following receipt. Further, we will apply the exception under ASC Topic 606 for variable consideration related to sales-or-usage based royalties received in ~~such country.~~exchange for licensed intellectual property associated with atrasentan, therefore the royalties are not included in the transaction price until the licensee sells product. No progress-dependent milestone payments and royalties were earned during the three and six months ended June 30, 2023 and 2022.

~~With respect~~AbbVie Ireland Unlimited Company

In December 2019, we entered into a license agreement (the “License Agreement”) with AbbVie Ireland Unlimited Company (“AbbVie”), which granted us an exclusive license to develop and commercialize atrasentan, an endothelin receptor antagonist. Under the ~~United States, specified European countries and/or Japan, the Company may elect for such region to either reduce by 50% or to eliminate in full the Company’s~~agreement, we assumed all global development and commercialization ~~cost sharing obligation. If~~responsibilities for atrasentan. In consideration of the ~~Company elects~~license and rights granted under the License Agreement, we made an upfront cash payment and issued 2.0 million shares of common stock for total consideration of $6.7 million to ~~reduce its cost sharing percentage by 50%~~AbbVie. We concluded that this transaction should be accounted for as an asset purchase, and as such, recorded the associated expense within research and development expense in ~~any such region, then its profit share in such region will also be reduced by 50%. If~~ the ~~Company elects to eliminate its development cost sharing obligation, then such region will be removed from~~statements of operations and comprehensive loss, as the ~~profit share,~~product has not reached technological feasibility and ~~instead Novartis will owe the Company royalties on any net sales of product for such region, as described above.~~

The Company recognizes revenue from collaboration, license or research arrangements when persuasive evidence of an arrangement exists, delivery has occurred or services have been rendered, the price is fixed or determinable and collection is reasonably assured. The Company has determined that the license does not have ~~stand-alone value separable from~~alternative future use. Under the co-development services to be performed under the agreement, with the Company participating in the research and development services. As a result, the Company recognizes revenue from the $200.0 million upfront fee received on a straight-line basis over its estimated performance period of 13.5 years, commencing in July 2015, the date of the Joint Steering Committee’s approval of the research and development plan. Changes in the estimated period of performance will be accounted for prospectively as a change in estimate. The Company will recognize

substantive milestone payments in their entirety in the period in which the milestone is achieved. Non-substantive milestone payments will be recognized on a straight-line basis over the remaining performance period. Costs associated with co-development activities performed under the agreement are included in research and development expenses in the accompanying condensed consolidated statements of operations. Reimbursement of research and development costs by Novartis is included in collaboration and license revenue. The Company will recognize revenue from the sale of any products commercialized pursuant to this collaboration in the United States, will retain 50% of the gross profits from such sales, and will pay the remaining 50% of the gross profits to Novartis. The Company will receive from Novartis 45% of gross profits for specified European countries and Japan. Profit sharing payments made to or received from Novartis are aggregated by product by territory and are reported as expenses or revenues, as applicable.

For the three months ended September 30, 2017 and 2016, the Company recognized $3.7 million and $3.7 million, respectively, and for the nine months ended September 30, 2017 and 2016, the Company recognized $11.2 million and $11.1 million, respectively, in revenue from its collaboration with Novartis primarily related to amortization of the upfront fee. The remaining balance of the upfront fees of $166.7 million is included in deferred revenue at September 30, 2017.

~~Janssen ADU-214 Agreement~~

~~In October 2014, the Company entered into a Research and~~ License Agreement, ~~or the Janssen ADU-214 Agreement, with Janssen Biotech Inc., or Janssen, a wholly owned subsidiary of Johnson & Johnson Development Corporation,~~we are obligated to develop a drug for the treatment of lung cancer. Under the terms of the Janssen ADU-214 Agreement, the Company granted Janssen an exclusive, worldwide license to research, develop, manufacture, use, sellmake contingent development, regulatory and otherwise exploit products containing ADU-214 for any and all uses. Janssen has agreed not to administer or cause to be administered ADU-214 in humans in clinical trials for the treatment of pancreatic cancer or mesothelioma. The Company was responsible for certain research and development activities from the effective date of the agreement until investigational new drug application, or IND, approval which occurred in the fourth quarter of 2015.

~~Since the inception of the Janssen ADU-214 Agreement through September 30, 2017, the Company received an upfront license fee of $30.0 million and substantive and non-substantive~~commercial milestone payments of ~~$21.0 million upon completion of various development activities. Under the terms of the Janssen ADU-214 Agreement, the Company is eligible to receive future contingent payments~~ up to a ~~total~~maximum of ~~$766.0~~$135.0 million ~~composed of development milestones through completion of all Phase 3 clinical trials,~~in the aggregate, as well as ~~regulatory and commercial milestones. The contingent payments are triggered upon the activities expected to be undertaken by Janssen. The Company is eligible to receive~~pay royalties on ~~any~~the worldwide net sales of licensed products ~~by Janssen, its affiliates and sublicensees at a rate~~ ranging from ~~high-single digits~~upper-single-digit to ~~low teens based on the aggregate annual net sales of licensed products worldwide and based on the country of sale.~~high-teen percentages.

~~The upfront license fee of $30.0 million was recognized on a straight-line basis from the effective date of the agreement through October 2015. In addition, the Company recognized~~We did not recognize any milestone payments ~~of $21.0 million in 2015 as all performance obligations were achieved.~~

~~Janssen ADU-741 and GVAX Prostate Agreements~~

In May 2014, the Company entered into a Research and License Agreement, or the Janssen ADU-741 Agreement, and a GVAX Prostate License Agreement, or Janssen GVAX Prostate Agreement, with Janssen to collaborate on the development of a drug for the ~~treatment~~three and six months ended June 30, 2023 and 2022. As of ~~prostate cancer. Under~~June 30, 2023 and December 31, 2022, we did not have any payable or receivable balances associated with the terms of the Janssen ADU-741 Agreement, the Company granted Janssen an exclusive, worldwide license to research, develop, manufacture, use, sell and otherwise exploit products containing ADU-741 for any and all uses. The Company was responsible for certain research and development activities from the effective date of the agreement until IND approval which occurred in the fourth quarter of 2015.License Agreement.

Since the inception of the Janssen ADU-741 Agreement through September 30, 2017, the Company received an upfront payment of $12.0 million and substantive and non-substantive milestone payments of $10.0 million upon completion of certain development activities. Under the terms of the Janssen ADU-741 Agreement, the Company is eligible to receive future contingent payments up to a total of $343.0 million composed of development milestones through completion of all Phase 3 clinical trials, as well as regulatory and commercial milestones. The contingent payments are triggered upon the activities expected to be undertaken by Janssen. The Company is eligible to receive royalties on net sales of licensed products by Janssen, its affiliates and sublicensees at a rate ranging from mid-single digits to low teens based on aggregate annual net sales and based on the country of sale.Merck

Under the Janssen GVAX Prostate Agreement, the Company granted Janssen an exclusive worldwide license to research, develop, manufacture, use, sell and otherwise exploit products containing GVAX Prostate for any and all uses. The Company received an upfront payment of $500,000 in May 2014 and is eligible to receive an additional $2.0 million on the achievement of a specified commercial milestone. In addition, the Company is eligible to receive royalties in the high single digits based on net sales of the product.

The upfront fees received totaling $12.5 million were recognized on a straight-line basis from the effective date of the agreements through October 2015. In addition, the Company recognized milestone payments of $10.0 million in 2015 as all performance obligations were achieved.

~~Merck License Agreement~~

In connection with the ~~acquisition of~~ Aduro ~~Biotech Europe in October 2015, the Company~~Merger, we became party to an agreement with ~~Merck Sharp & Dohme Corp., or~~ Merck. The agreement sets forth the parties’ respective obligations for development, commercialization, regulatory and manufacturing and supply activities for antibody product candidates. ~~The Company identified~~All performance obligations of Aduro were completed prior to the ~~following performance deliverables under the agreement: 1) the license, 2) the obligation to provide research activities and 3) the obligation to participate on a Joint Research Committee.~~

~~The Company is~~Aduro Merger. We are eligible to receive future contingent payments, including up to ~~$310.0~~$287.0 million in potential development milestone payments, and up to ~~$135.0~~$135.0 million in commercial and net sales milestones for a product candidate. In addition, ~~the Company is~~we are eligible to receive royalties at percentages in the mid-single digits to low teens based on net sales of the product. Future milestone payments and royalties will be recognized as revenue when earned as we have no performance obligations under this agreement. Any such milestones and royalties earned prior to October 4, 2030 will be payable by us to the CVR holders, net of deductions permitted under the CVR Agreement, including taxes and certain other expenses.

~~The~~Eli Lilly and Company ~~considered~~

In connection with the ~~provisions~~Aduro Merger, we assumed an ongoing research collaboration and exclusive license agreement with Eli Lilly and Company (“Lilly”) for the research and development of novel immunotherapies for autoimmune and other inflammatory diseases. Our only remaining performance obligation under the ~~multiple-element arrangement guidance~~agreement was to perform research services through 2021, for which we were reimbursed up to a specified amount. We are eligible to receive future contingent milestone payments of up to approximately $463.0 million per licensed product and tiered royalties on net sales at percentages in ~~determining how to recognize~~ the ~~total consideration of the agreement. The Company~~single digits. We determined that ~~none~~the potential milestone payments are not considered probable of ~~the deliverables have standalone value; all of these obligations will be delivered throughout the estimated period of performance~~being achieved and, ~~therefore are accounted for as a single unit of accounting.~~

~~The Company determined that all of the future contingent payments meet the definition of a milestone. Accordingly, revenue for the achievement of these~~accordingly, such milestones will be recognized inas revenue when earned.

We did not recognize revenue for the ~~period when the milestone is achieved~~three and ~~collectability is reasonably assured~~. ~~The Company recognized $2.0 million in revenue from the achievement of a milestone during the nine~~six months ended ~~September~~June 30, ~~2017.~~2023 and 2022 under the Lilly agreement.

12. Commitments and Contingencies

~~Genmab Agreement~~Leases

We have a total of three operating leases as of June 30, 2023 with remaining lease terms of approximately 3 to 7 years.

In ~~February 2015, Aduro Biotech Europe~~June 2021, we entered into a ~~co-development~~sublease agreement for office space in Seattle, Washington (“Seattle Sublease”), which we use as our corporate headquarters. The Seattle Sublease commenced on July 1, 2021 with an original lease term of 58 months. In April 2023, the sublandlord declared bankruptcy which terminated the Seattle Sublease. As a result, our Seattle Sublease term changed to a month-to-month basis with the landlord. Therefore, we derecognized the operating lease liabilities and ~~commercialization agreement with Genmab~~assets related to ~~evaluate five DuoBody product candidates targeting immune checkpoints. Genmab~~this lease, which resulted in a gain of $0.3 million recorded in other income in the consolidated statements of operations and ~~Aduro Biotech Europe will contribute panels~~comprehensive loss. We also wrote-off $0.6 million of ~~antibodies~~leasehold improvements related to this office space.

As of June 30, 2023, we are subleasing approximately 112,000 square feet in one of our facilities. Sublease income was $3.5 million and $2.0 million for the ~~creation~~three months ended June 30, 2023 and 2022, respectively, and was $5.3 million and $4.0 million for the six months ended June 30, 2023 and 2022, respectively, which was netted against rent expense and is recorded as a component of ~~bispecific antibody products using Genmab’s DuoBody platform. If~~general and administrative expenses in the ~~companies jointly select a product candidate for clinical development, development costs~~consolidated statement of operations and comprehensive loss. Total sublease income to be earned, in aggregate, will be ~~shared equally, with each party retaining a 50% share of~~approximately $53.0 million over the product rights. If one of the companies decides not to move a therapeutic candidate forward, the other company is entitled to continue developing the product at predefined licensing terms. The agreement also includes terms which allow the parties to opt out of joint development at key points in each product’s clinical development.

~~7. Commitments and Contingencies~~

~~Leases~~

The Company moved into its new corporate office and laboratory facility located in Berkeley, California in August, 2016. The Company’s offices are leased pursuant to an Office/Laboratory Lease that was entered into in September 2015, or the Heinz Lease. The Company began incurring rent expense when the landlord delivered possession of the facility to the Company in March 2016. Initially, the Heinz Lease was for approximately 56,000 square feet with an option for the Company to lease the remainder of the space within the facility. During the second quarter of 2016, the Company amended the lease to include approximately 7,000 additional square feet and on June 30, 2016 the Company exercised its option for approximately 41,000 additional square feet, representing the remaining space within the facility. The Heinz Lease had an initial term of twelve years, which was extended to approximately thirteen and a half years as a result of the option exercised on June 30, 2016. The Company has the right to further extend the Heinz Lease term for up to two renewal terms of five years each, provided that the rental rate would be subject to market adjustment at the beginning of each renewal term.

The Company continues to lease its former office and research and development facility in Berkeley, California, under a non-cancelable operating lease, or the Bancroft Lease. In February 2015, the Company amended the Bancroft Lease agreement to increase the total square footage to approximately 25,000 square feet and extended the term of the ~~Bancroft Lease to expire on December 31, 2018. The Bancroft Lease also contains an option to extend the lease for an additional two years.~~ ~~The Company has transitioned the entirety of its Berkeley operations to its Heinz facility in 2016. As of September 30, 2017, the entire facility under the Bancroft Lease has been subleased.~~sublease agreement.

~~During 2016, the Company established~~We maintain a letter of credit ~~with Bank of America Merrill Lynch~~ as security for ~~the Heinz Lease~~a facility lease that expires in ~~the amount of $0.5 million.~~2029. The letter of credit is collateralized by a certificate of deposit ~~for $0.5~~in the amount of $1.8 million, which ~~has been included in~~is classified as long-term restricted cash in ~~the~~our condensed consolidated balance sheet as of ~~September~~June 30, ~~2017 and December 31, 2016.~~2023. Additionally, we maintain a letter of credit as a security deposit for a facility lease that expires in 2026. The letter of credit is collateralized by a certificate of deposit in the amount of $0.3 million, which is classified as long-term restricted cash in our condensed consolidated balance sheet as of June 30, 2023.

The maturity of our operating lease liabilities as of June 30, 2023 is as follows (in thousands):

~~The Company also has office and laboratory space in Oss, the Netherlands, for employees of Aduro Biotech Europe. The term of the Oss lease is through December 2017, with a one-year renewal option.~~


Undiscounted Lease Payments	Amounts
2023 (remaining six months)	$	3,260
2024		6,590
2025		6,711
2026		6,706
2027		6,484
Thereafter		12,421
Total undiscounted lease payments		42,172
Present value adjustment		(8,187	)
Total net lease liability	$	33,985
Net lease liability - current	$	4,268
Net lease liability - non-current		29,717
Total net lease liability	$	33,985

Rent expense recognized for operating leases was ~~$1.2~~$2.3 million for both the three months ended June 30, 2023 and 2022, respectively, and was $4.7 million for both the six months ended June 30, 2023 and 2022. Variable lease payments, including non-lease components such as common area maintenance fees, recognized as rent expense for operating leases were $0.6 million and ~~$1.4~~$0.8 million for the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016,~~2022, respectively, and ~~$4.1 million and $2.6~~were $1.6 million for both the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and 2016, respectively. Under the terms of the lease agreements, the Company is also responsible for certain insurance, property tax and maintenance expenses. Future minimum payments under the Company’s office leases at September 30, 2017 are as follows (in thousands):2022.

Year Ending December 31,

Amounts

2017 (remaining three months)

$
997

2018

4,893

2019

4,669

2020

4,809

2021

4,953

Thereafter

43,673

Total

$
63,994

The following summarizes additional information related to our operating leases:


	June 30, 2023	December 31, 2022
Weighted-average remaining lease terms (in years)
Operating leases	6.3	6.5
Weighted-average discount rate
Operating leases	7.2%	7.4%

Indemnification Agreements

~~Indemnification~~

In the ordinary course of business, ~~the Company enters~~we enter into agreements that may include indemnification provisions. Pursuant to such agreements, ~~the Company~~we may indemnify, hold harmless and defend an indemnified party for losses suffered or incurred by the indemnified party. Some of the provisions will limit losses to those arising from third party actions. In some cases, the indemnification will continue after the termination of the agreement. The maximum potential amount of future payments ~~the Company~~we could be required to make under these provisions is not determinable. ~~The Company has~~We have never incurred material costs to defend lawsuits or settle claims related to these indemnification provisions. ~~The Company has~~We have also entered into indemnification agreements with ~~its~~our directors and officers that ~~may~~ require ~~the Company~~us, among other things, to indemnify ~~its directors and officers~~them against certain liabilities that may arise by reason of their status or service as directors or officers to the fullest extent permitted by Delaware corporate law. ~~The Company~~We currently ~~has~~maintain directors’ and officers’ liability insurance.

Legal Proceedings

~~The Company is not party to any material legal proceedings at this time.~~ From time to time, ~~the Company~~we may become involved in ~~various legal proceedings that arise in~~litigation relating to claims arising from the ordinary course of business. Management believes that there are no actions pending against us currently, the ultimate disposition of which would have a material adverse effect on our ~~business.~~results of operations, financial condition or cash flows.

Other Commitments

~~The Company has~~We have various manufacturing, clinical, research and other contracts with vendors in the conduct of the normal course of ~~its~~our business. All contracts are terminable, with varying provisions regarding termination. If a contract with a specific vendor were to be terminated, ~~generally the Company~~we would only be obligated for the products or services that ~~the Company~~we had received at the time the termination became effective as well as non-cancelable and non-refundable obligations, including ~~those~~payment obligations for costs or expenses incurred by the vendor for products or services before the termination became ~~effective, and in some cases a termination fee.~~effective. In the case of terminating a clinical trial agreement at a particular site, ~~the Company may~~we would also be obligated to provide continued support for appropriate ~~treatment for clinical trial subjects~~medical procedures at that site until ~~or after~~ completion or termination.

13. Common Stock

~~8. Stockholders’ Equity~~

At-the-Market Sales Agreement

In ~~May 2016, the Company~~April 2021, we entered into an “at-the-market” sales agreement ~~or the 2016~~(the “2021 Sales ~~Agreement,~~Agreement”), with ~~Cowen~~Cantor Fitzgerald & Co. and ~~Company,~~SVB Securities LLC, ~~or Cowen,~~previously known as SVB Leerink LLC, through which ~~the Company~~we may offer and sell shares of ~~its~~our common stock having an aggregate offering of up to ~~$100.0~~$75.0 million ~~from time to time~~ through ~~Cowen, acting as~~our sales agents, Cantor Fitzgerald & Co. and SVB Securities LLC. In November 2022, we amended the ~~Company’s sales agent.~~ ~~The issuance and sale of these shares by the Company pursuant to the 2016~~2021 Sales Agreement ~~are deemed an “at-the-market” offering under~~to provide for offerings of up to $150.0 million. We will pay the ~~Securities Act of 1933, as amended. Under the 2016 Sales Agreement, the Company agreed to pay Cowen~~sales agents a commission of up to ~~3% of the gross proceeds of any sales made pursuant to the Sales Agreement. During the nine months ended September 30, 2017, the Company received net~~

proceeds of $60.5 million after deducting commissions and expenses payable by the Company, from the sale of 5,823,789 shares of common stock pursuant to the 2016 Sales Agreement. Since the inception of the 2016 Sales Agreement through September 30, 2017, the Company sold a total of 8,350,018 shares and received net total proceeds of $97.3 million. As of September 30, 2017, there were no amounts remaining for future sales under the Sales Agreement.

In August 2017, the Company entered into a subsequent “at-the-market” sales agreement, or 2017 Sales Agreement, with Cowen, through which the Company may offer and sell shares of its common stock having an aggregate offering of up to $100.0 million through Cowen, as the Company’s sales agent. Similar to 2016 Sales Agreement, the Company will pay Cowen a commission of up to 3%3% of the gross proceeds of sales made through the ~~arrangement. During~~2021 Sales Agreement. In the ~~three and nine months ended September 30, 2017, the Company received~~first quarter of 2023, we sold 0.9 million shares for $19.6 million in net proceeds ~~of $16.7 million, after deducting commissions and expenses payable by~~under the ~~Company, from the sale of 1,499,572 shares of common stock pursuant the 2017~~2021 Sales Agreement. As of ~~September~~June 30, ~~2017, the Company had an aggregate of $83.3~~2023, we have $115.6 million ~~available to be offered~~remaining under the ~~2017~~2021 Sales Agreement, which is subject to the continued effectiveness of ~~its~~our automatic shelf registration statement on Form S-3 ASR (Registration No. ~~333-211063)~~333-265168), or upon an effective replacement shelf registration statement.

14. Stock-Based Compensation

9. Equity Incentive Plans

~~2015~~In 2019, Private Chinook adopted the 2019 Equity Incentive Plan

(the “2019 Plan”). In ~~March 2015,~~connection with the ~~Company’s board of directors adopted~~Aduro Merger, we assumed Aduro’s two equity incentive plans, the Amended and ~~in April 2015 the Company’s stockholders approved the~~Restated 2015 Equity Incentive Plan ~~or the 2015 Plan, which became effective upon the Initial Public Offering (“IPO”~~(the “2015 Plan”) and ~~provides for~~ the ~~granting of incentive stock options, nonstatutory stock options, and other forms of stock awards to its employees, directors and consultants. The Company’s~~ 2009 Stock Incentive Plan or(the “2009 Plan,” and collectively the “Aduro Plans” and together with the 2019 Plan, the “Plans”). No additional grants may be made from the 2009 ~~Plan, terminated on the date the 2015 Plan was adopted. Options~~Plan; however, shares subject to awards granted ~~or shares issued~~ under the 2009 Plan ~~that were outstanding on the date the 2015 Plan became effective will~~ remain subject to the terms of the 2009 Plan.

~~The 2015 Plan is administered by the~~In 2022, our board of directors ~~or a committee appointed by~~approved the ~~board~~2022 Employment Inducement Incentive Award Plan (the “2022 Inducement Plan”). We reserved 1.5 million shares of ~~directors, which determines the types of~~our common stock for issuance pursuant to awards to be granted ~~including~~under the ~~number~~2022 Inducement Plan. The terms of ~~shares subject~~the 2022 Inducement Plan are substantially similar to the ~~awards, the exercise price and the vesting schedule. The exercise price of incentive stock options and nonqualified stock options will be no less than 100%~~terms of the ~~fair value per share~~Plans with the exception that awards may only be made to an employee who has not previously been an employee or member of our board of directors if the ~~Company’s common stock on the date~~award is in connection with commencement of ~~grant. If an individual owns capital stock representing more than 10%~~employment. As of the voting shares, the price of each share will be at least 110% of the fair value on the date of grant. Options expire after 10 years (five years for stockholders owning greater than 10% of the voting stock). The number of shares of common stock initially reserved for issuance under the 2015 Plan was 6,134,292 shares with an automatic annual increase to the shares issuable under the 2015 Plan to the lower of (i) 4% of the total number of shares of common stock outstanding onJune 30, 2023 and December 31, of the preceding calendar year, or (ii) a lower number determined by the board of directors. On January 1, 2017 the shares issuable under the 2015 Plan increased by 2,716,729. The Company had 6,350,6252022, there were 2.2 million and 2.1 million shares available for future grant, respectively, under the Plans and the 2022 Inducement Plan.

In connection with the Aduro Merger, we assumed Aduro’s 2015 employee stock purchase plan (“2015 ESPP”). As of June 30, 2023 and December 31, 2022, there were 1.7 million and 1.1 million shares available for future issuance under the 2015 ~~Plan as~~ESPP, respectively. As of ~~September~~June 30, ~~2017.~~2023, there was $0.3 million of total unrecognized compensation expense related to ESPP that is expected to be recognized over a weighted-average period of 0.4 years.

~~2009 Plan~~17

~~The Company’s 2009~~

Stock ~~Incentive Plan, or the 2009 Plan, terminated on the date the 2015 Plan was adopted. Options granted or shares issued~~option activity under the ~~2009~~Plans and the 2022 Inducement Plan that were outstanding on the date the 2015 Plan became effective will remain subject to the terms of the 2009 Plan. Prior to the 2009 Plan termination, the number of options available for grant was increased by 360,000 shares. At September 30, 2017, 5,510,478 options under the 2009 Plan remained outstanding.is set forth below:


	Number of Shares Underlying Options (in thousands)			Weighted- Average Exercise Price		Weighted Average Remaining Contractual Term (in years)		Aggregate Intrinsic Value (in thousands)
Balance—December 31, 2022		6,127		$	12.49		8.2	$	85,766
Granted		2,048			24.55
Exercised		(264	)		9.39
Canceled or forfeited		(70	)		19.40
Balance—June 30, 2023		7,841		$	15.68		8.2	$	179,517
Options exercisable—June 30, 2023		3,146		$	11.22	7.3		$	86,835
Options vested and expected to vest—June 30, 2023		7,841		$	15.68	8.2		$	179,517

~~Stock Options~~

~~The following table summarizes stock option activity for the nine months ended September 30, 2017:~~

Options Outstanding

Shares
Available
for Grant

Number of
Options

Weighted-
Average
Exercise
Price

Aggregate
Intrinsic
Value

(In thousands)

Balance—December 31, 2016

5,011,459

10,690,156

$
6.65

$
74,984

Authorized

2,716,729

—

RSUs granted, net

(679,225
)

—

Granted

(955,863
)

955,863

10.78

Exercised

—

(1,553,442
)

1.19

Canceled

257,525

⁽¹⁾

(503,295
)

9.56

Balance—September 30, 2017

6,350,625

9,589,282

$
7.80

$
52,935

Options exercisable—September 30, 2017

5,823,358

$
5.78

$
41,785

Options vested and expected to vest—September 30, 2017

9,419,275

$
7.72

$
52,669

⁽¹⁾	This excludes 245,770 canceled options for the nine months ended September 30, 2017 initially granted from the legacy stock option plans. As these plans have been terminated, any options canceled are not added back to the existing option plan pool.

The aggregate intrinsic ~~value represents~~values of options outstanding, exercisable, and vested and expected to vest were calculated as the difference between the exercise price of the options and the ~~closing~~market price for shares of our common stock as of June 30, 2023. Options for 0.3 million and 0.4 million shares of our common stock were exercised during the ~~Company’s common stock.~~ ~~The aggregate~~six months ended June 30, 2023 and 2022, respectively, with an intrinsic value of ~~options exercised for the three and nine months ended September 30, 2017 was $9.1~~$4.0 million and ~~$15.4~~$2.7 million, respectively.

As of ~~September~~June 30, ~~2017, the~~2023, there was $56.1 million of total unrecognized compensation expense related to ~~unvested~~stock options ~~net of estimated forfeitures, was $27.2 million, which the Company expects to recognize over an estimated weighted-average period of 2.2 years.~~

~~Restricted Stock Units (RSUs)~~

In September 2016, the Company’s board of directors authorized the issuance of Restricted Stock Units, or RSUs, under the 2015 Plan and adopted a form of Restricted Stock Unit Grant Notice and Restricted Stock Unit Award Agreement, or the RSU Agreement, whichthat is ~~intended to serve as a standard form agreement for restricted stock unit grants issued to employees, executive officers, directors and consultants.~~

~~The following table summarizes restricted stock unit activity for the nine months ended September 30, 2017:~~

RSUs Outstanding

Number of
Restricted Stock
Units

Weighted-
Average
Grant Date
Fair Value Per
Share

Balance—December 31, 2016

657,200

$
14.29

Granted

742,650

11.11

Vested

(149,850
)

14.29

Canceled/forfeited

(63,425
)

14.08

Balance—September 30, 2017

1,186,575

$
12.31

The fair value of RSUs is determined on the date of grant based on the market price of the Company’s common stock on that date. As of September 30, 2017, there was $13.7 million of unrecognized stock-based compensation expense, net of estimated forfeitures, related to RSUsexpected to be recognized over a weighted-average period of ~~3.5~~2.7 years.

Restricted stock unit (“RSU”) activity under the Plans and the 2022 Inducement Plan is set forth below:


	RSUs Outstanding
	Number of RSUs (in thousands)			Weighted- Average Grant Date Fair Value Per Share
Balance—December 31, 2022		1,364		$	15.33
Granted		701			24.46
Vested		(360	)		14.35
Canceled or forfeited		(34	)		19.39
Balance—June 30, 2023		1,671		$	19.30

~~Stock-based~~The total fair value of RSUs that vested in the six months ended June 30, 2023 and 2022 was $9.1 million and $2.2 million, respectively. As of June 30, 2023, there was $25.9 million of total unrecognized compensation expense related to RSUs that is expected to be recognized over a weighted-average period of 1.8 years.

Performance share unit (“PSU”) activity under the Plans is set forth below:


	PSUs Outstanding
	Number of PSUs (in thousands)			Weighted- Average Grant Date Fair Value Per Share
Balance—December 31, 2022		812		$	22.00
Canceled or forfeited		(28	)		21.75
Balance—June 30, 2023		784		$	22.00

In 2022, we granted PSUs to our employees under the Plans. The vesting of these awards is subject to the achievement of specified regulatory performance targets. As of June 30, 2023, there was $17.3 million of total unrecognized compensation expense related to these PSUs with performance targets that are considered not probable of achievement.

Valuation Assumptions

The weighted-average assumptions used to estimate the fair value of stock options under the Plans and the 2022 Inducement Plan using the Black-Scholes option-pricing model and the resulting weighted-average grant date fair value were as follows:


	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Assumptions:
Expected term (in years)	6.3	6.2	6.3	6.2
Volatility	74.7%	77.0%	75.3%	77.6%
Risk-free interest rate	3.5%	2.9%	3.6%	2.0%
Dividend yield	—	—	—	—


		Six Months Ended June 30,
		2023		2022
Fair Value:
Weighted-average grant date fair value per share	$	16.98	$	9.28

The weighted-average assumptions used to estimate the fair value of our common stock to be issued under the 2015 ESPP using a Black-Scholes option-pricing model and the resulting weighted-average grant date fair value were as follows:


	Three Months Ended June 30,		Six Months Ended June 30,
	2023	2022	2023	2022
Assumptions:
Expected term (in years)	0.5	0.5	0.5	0.5
Volatility	50.1%	57.1%	50.1%	57.1%
Risk-free interest rate	5.3%	0.0%	5.3%	0.0%
Dividend yield	—	—	—	—


		Six Months Ended June 30,
		2023		2022
Fair Value:
Weighted-average grant date fair value per share	$	6.66	$	4.29

Stock-Based Compensation Expense

Total stock-based compensation expense recognized was as follows (in thousands):


	Three Months Ended June 30,				Six Months Ended June 30,
	2023		2022		2023		2022
Research and development	$	5,125	$	2,355	$	9,451	$	4,540
General and administrative		4,067		2,405		7,651		4,489
Total stock-based compensation expense	$	9,192	$	4,760	$	17,102	$	9,029

Three Months Ended
September 30,

Nine Months Ended
September 30,

2017

2016

2017

2016

Research and development

$
2,118

$
2,257

$
6,711

$
6,226

General and administrative

1,906

1,527

5,299

4,626

Total stock-based compensation expense

$
4,024

$
3,784

$
12,010

$
10,852

In determining the fair value of the stock-based awards, the Company uses the Black-Scholes option-pricing model. The fair value of stock option awards granted to employees was estimated at the date of grant using a Black-Scholes option-pricing model with the following assumptions:

2015 Plan

2015 ESPP

Nine Months Ended September 30,

Nine Months Ended September 30,

2017

2016

2017

2016

Expected term (in years)

5.31 - 6.04

5.31 - 6.05

0.5

0.5

Volatility

73.2 - 74.1%

72.0 - 75.0%

65.4%

73.8%

Risk-free interest rate

1.78 - 2.25%

1.25 - 1.72%

1.02%

0.36%

Dividend yield

—%

—%

—%

—%

~~2015 Employee Stock Purchase Plan~~

In March 2015, the Company’s board of directors adopted and in April 2015 the Company’s stockholders approved the 2015 Employee Stock Purchase Plan, or 2015 ESPP, which became effective upon the IPO. The 2015 ESPP is intended to qualify as an employee stock purchase plan under Section 423 of the Code, and is administered by the Company’s board of directors and the Compensation Committee of the board of directors.

The number of shares of common stock initially reserved for issuance under the 2015 ESPP was 720,000 shares with an automatic annual increase to the shares issuable under the 2015 ESPP to the lower of (i) 1% of the total number of shares of common stock outstanding on December 31 of the preceding calendar year, or (ii) a lower number determined by the board of directors. On January 1, 2017 the shares issuable under the 2015 ESPP increased by 679,182. The Company had 1,838,166 shares available for future issuance under the 2015 ESPP as of September 30, 2017. ~~Under the Aduro Biotech, Inc. Employee Stock Purchase Plan (“ESPP”) employees purchased 58,385 shares for $0.5 million during the nine months ended September 30, 2017.~~

~~10.~~15. Income Taxes

~~Income~~No income tax ~~(benefit)/~~benefit or expense was recorded for the three and six months ended ~~September~~June 30, ~~2017~~2023 and 2016 was approximately $(3.9) million and $11.7 million, respectively, and $(10.4) million and $16.4 million for the nine months ended September 30, 2017 and 2016, respectively. The income tax benefit recorded in the nine months ended September 30, 2017 primarily related to the current benefit of federal income taxes paid in 2016. The income tax expense recorded in 2016, primarily related to federal current and deferred income taxes.

~~The Company accounts for uncertain tax positions in accordance with ASC 740, Accounting for Income Taxes~~. As of September 30, 2017 and December 31, 2016, the total amount of unrecognized tax benefits was $3.1 million and $2.5 million, respectively. As of September 30, 2017 and December 31, 2016, $1.2 million and $1.1 million of unrecognized tax benefits, if recognized, would reduce the Company’s annual2022. Our effective tax rate ~~because~~is lower than the ~~majority~~statutory tax rate of ~~benefits are in the form of deferred tax assets for which~~21% primarily due to us maintaining a full valuation allowance ~~has been recorded.~~

~~The Company’s policy is to recognize interest and penalties related to unrecognized~~against our net deferred tax benefits in income tax expense. As of September 30, 2017 and 2016, the Company accrued no interest and penalties in the statement of financial position. There were no interest and penalties included in the condensed consolidated statements of operations for the three and nine months ended September 30, 2017 and 2016. The Company does not expect the amount of existing unrecognized tax benefits to change significantly within the next 12 months.assets.

~~The~~ Company files income tax returns in the United States and the Netherlands. The federal and state income tax returns are open under the statute of limitations subject to tax examinations for the tax years ended December 31, 2013 through December 31, 2016. To the extent the Company has tax attribute carryforwards, the tax years in which the attribute was generated may still be adjusted upon examination by the IRS or state tax authorities to the extent utilized in a future period. For the Netherlands, the tax administration can impose an additional assessment within five years from the year in which the tax debt originated.

As of September 30, 2017, the Company recorded current income tax receivable of $12.5 million. The current income tax receivable relates to the anticipated 2017 net operating loss. Pursuant to IRC Section 172(f), the Company plans to file a claim to carryback losses from 2017 to 2016. The Company anticipates filing this claim early in 2018 and expects the refund to be received by September 30, 2018.

~~11.~~16. Net Loss per Common Share

~~Since~~The following table sets forth the ~~Company was in a loss position for all periods presented,~~computation of basic and diluted net loss per share attributable to common stockholders, which excludes unvested restricted shares and shares which are legally outstanding, but subject to repurchase by us (in thousands, except per share isamounts):


	Three Months Ended June 30,						Six Months Ended June 30,
	2023			2022			2023			2022
Numerator:
Net loss attributable to common stockholders	$	(66,944	)	$	(37,648	)	$	(127,121	)	$	(69,332	)
Denominator:
Weighted-average shares outstanding		71,592			62,040			71,151			60,244
Less: weighted-average unvested restricted shares and shares subject to repurchase		—			(57	)		(1	)		(69	)
Weighted-average shares used in computing net loss per share attributable to common stockholders, basic and diluted		71,592			61,983			71,150			60,175
Net loss per share attributable to common stockholders, basic and diluted	$	(0.94	)	$	(0.61	)		(1.79	)		(1.15	)

As of June 30, 2023 and 2022, 4.6 million and 3.6 million pre-funded warrants to purchase common stock, respectively, issued in connection with the ~~same as~~November 2021 and May 2022 public offerings, were included in the weighted-average shares outstanding used in the calculation of basic and diluted net loss per share. In the third quarter of 2023, 4.6 million pre-funded warrants were exercised.

The following outstanding shares of potentially dilutive securities were excluded from the computation of diluted net loss per share attributable to common ~~share~~stockholders for ~~all periods~~the period presented ~~as the inclusion of all potential common shares outstanding~~because including them would have been ~~anti-dilutive. Potentially dilutive securities that were not included in the diluted per common share calculations because they would be anti-dilutive were as follows:~~antidilutive (in thousands):

	Three Months Ended September 30,				Nine Months Ended September 30,
	2017		2016		2017		2016		Three Months Ended June 30,				Six Months Ended June 30,
									2023		2022		2023		2022
Unvested RSUs										1,671		1,286		1,671		1,286
Unvested RSAs										—		46		—		46
Unvested PSUs										784		—		784		—
Options to purchase common stock		9,589,282		10,544,907		9,589,282		10,544,907		7,841		6,987		7,841		6,987
Restricted stock units		1,186,575		660,800		1,186,575		660,800
Common stock warrants		66,978		97,740		66,978		97,740
Total		10,842,835		11,303,447		10,842,835		11,303,447		10,296		8,319		10,296		8,319

Item 2. Management’s Discussion and Analysis of Financial Condition and Results of Operations.

You should read the following discussion and analysis of our financial condition and results of operations together with our unaudited condensed consolidated financial statements and related notes included in Part I, Item 1 of this report and with our audited consolidated financial statements and related notes thereto for the year ended December 31, ~~2016,~~2022, included in our Annual Report on Form 10-K filed with the Securities and Exchange ~~Commission.~~ Commission, or the SEC.

This discussion and other parts of this report contain forward-looking statements 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. Forward-looking statements are identified by words such as “believe,” “will,” “may,” “estimate,” “continue,” “anticipate,” “intend,” “should,” “plan,” “expect,” “predict,” “could,” “potentially” or the negative of these terms or similar 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, strategies, objectives, expectations, intentions and financial performance and the assumptions that underlie these statements. 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,”~~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. We caution investors that our business and financial performance are subject to substantial risks and uncertainties.

~~We are an immunotherapy~~Chinook is a clinical-stage biopharmaceutical company focused on discovering, developing and commercializing precision medicines for kidney diseases. Our pipeline is focused on rare, severe chronic kidney diseases with well-defined clinical pathways. Our lead clinical program is atrasentan, a potent and selective endothelin A receptor antagonist. We are currently conducting the ~~discovery,~~phase 3 ALIGN trial of atrasentan for IgA nephropathy, or IgAN, and the phase 2 AFFINITY basket trial for proteinuric glomerular diseases. Our second product candidate, BION-1301, or zigakibart, is an anti-APRIL monoclonal antibody also in phase 3 development ~~and commercialization of therapies that transform~~for patients with IgAN. Our third product candidate is CHK-336, an oral small molecule lactate dehydrogenase, or LDHA inhibitor for the treatment of ~~challenging diseases, including cancer. We believe our three technology platforms are uniquely positioned~~primary and idiopathic hyperoxaluria that is currently in phase 1 development. In May 2023, we announced a collaboration with Ionis Pharmaceuticals, Inc, or Ionis, to ~~recruit and direct the immune system by activating cancer-fighting immune cells and inhibiting immune suppressive cells known to allow tumor growth. Product candidates from our LADD,~~develop an antisense oligonucleotide, or ~~Live, Attenuated, Double-Deleted~~ ~~Listeria monocytogenes~~, STING Pathway Activator, and B-select monoclonal antibody platforms are designed to stimulate and/or regulate innate and adaptive immune responses, either as single agents or in combination with conventional therapies (i.e. chemotherapy and radiation) as well as other novel immunotherapies. Our diverse technology platforms have led to a strong pipeline of clinical and preclinical candidates, which are being developedASO, therapy for a ~~number~~rare, severe chronic kidney disease with significant unmet medical need. In addition, we are conducting research programs in several other rare, severe chronic kidney diseases. In November 2021, we established SanReno Therapeutics, or SanReno, a joint venture to develop, manufacture and commercialize kidney disease therapies in mainland China, Hong Kong, Macau, Taiwan and Singapore.

In June 2023, we entered into an Agreement and Plan of ~~cancer indications. Additionally, our platforms have~~Merger, or the ~~potential~~Merger Agreement, with Novartis AG, or Novartis, a company organized under the laws of Switzerland, and Cherry Merger Sub Inc., a Delaware corporation and an indirect wholly owned subsidiary of Novartis, or Merger Sub. The Merger Agreement provides that, among other things and on the terms and subject to ~~generate product candidates that address other therapeutic areas, such as autoimmune~~the conditions set forth therein, (i) Merger Sub will be merged with and ~~infectious diseases.~~

~~Immuno-oncology is an emerging field of cancer therapy that aims to activate~~into Chinook, or the ~~immune system in~~Merger, with Chinook surviving the tumor microenvironment to create and enhance anti-tumor immune responses, as well as to overcome the immuno-suppressive mechanisms that cancer cells have developed against the immune system. Recent developments in the field of immuno-oncology, including checkpoint inhibitors—therapies which work to remove suppression mechanisms that prevent an immune response against cancer cells—have shown the potential to provide efficacy and extended survival, even in cancers where conventional therapies, such as surgery, chemotherapy and radiotherapy, have failed. The immunotherapy field is rapidly advancing with new immuno-oncology combinations that focus on strengthening therapeutic efficacy in a wide range of cancers. We intend to pursue a broad strategy of combining our technology platforms with conventional and novel immuno-oncology therapies, based on their mechanisms of action, safety profiles and versatility.

~~Our LADD technology platform is based on proprietary attenuated strains of~~ ~~Listeria~~ ~~that have been engineered to express tumor-associated antigens to induce specific and targeted immune responses. This platform is being developed~~Merger as a ~~treatment for multiple indications, including mesothelioma, gastric, ovarian, lung~~wholly owned subsidiary of Novartis, and ~~prostate cancers. Additionally, a personalized form of LADD, or pLADD, is in Phase 1 development utilizing tumor neoantigens that are specific to an individual patient’s tumor.~~

~~Our STING Pathway Activator platform is designed to activate~~(ii) at the intracellular Stimulator of Interferon Genes, or STING receptor, resulting in a potent tumor-specific immune response. ADU-S100 is the first STING Pathway Activator compound to enter the clinic and is currently being evaluated in both a Phase 1 monotherapy study as well as a Phase 1b combination study with an anti-PD1 immune checkpoint inhibitor.

Our B-select monoclonal antibody platform includes a proprietary ultra-selective functional screening process to identify antibodies with unique binding properties against a broad range of targets that can modulate the innate and adaptive armseffective time of the ~~immune system. The B-select platform has delivered a number~~Merger, each outstanding share of ~~immune modulating assets currently in research and preclinical development, including BION-1301, an anti-APRIL antibody.~~

~~We are collaborating with leading global pharmaceutical companies to expand our products and technology platforms.~~

~~We have intellectual property protection on our LADD, STING and B-select technology platforms and each of our product candidates, some of which we believe can~~Company common stock, par value $0.0001 per share, will automatically be ~~maintained~~converted into the ~~2030s.~~

~~Since commencing our operations, our efforts have been focused on research, development~~right to receive (a) $40.00 in cash, without interest and less any applicable withholding taxes, and (b) one contractual contingent value right, or New CVR. At or prior to the advancement of our product candidates into clinical trials. As a result we have incurred significant losses. We have funded our operations primarily through the sale of common stock and convertible preferred stock, the issuance of convertible promissory notes, licensing agreements with pharmaceutical partners and revenue from government grants. We incurred a net loss of $24.5 million and $35.1 millioneffective time for the ~~three months ended September 30, 2017~~Merger, Novartis will also authorize, execute and ~~2016, respectively, and~~deliver the contingent value rights agreement in connection with the New CVR pursuant to the Merger Agreement. On July 31, 2023, the waiting period under Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended expired. On August 2, 2023, our stockholders voted in favor of the adoption of the Merger Agreement. We expect to consummate the Merger on or about August 11, 2023. Following the consummation of the Merger, the Company will cease to be a net loss of $65.7 million and $61.6 million for the nine months ended September 30, 2017 and 2016, respectively. As of September 30, 2017, our cash, cash equivalents and marketable securities totaled $373.5 million and our accumulated deficit was $257.7 million.public traded company.

We have not generated any revenue from product sales. Our revenue to date has been primarily derived from ~~research~~our collaboration and license ~~agreements~~agreements.

In November 2021, we entered into a License Agreement with ~~Janssen,~~SanReno, or the China License Agreement. The China License Agreement includes the transfer of intellectual property rights in the form of a development and commercialization license in the

Territory; manufacturing and supply services; and participation in opt-in global studies with the collaboration party. The terms of the China License Agreement also include potential payments to us for the following: progress-dependent milestone payment; royalties on the net sales of a licensed product and reimbursement for certain expenses incurred. As of June 30, 2023, these potential payments are not considered probable of being achieved and they relate to promised goods or services for which revenue will be recognized upon our satisfaction of the underlying performance obligations.

Prior to the completion of the Aduro Merger, Aduro generated revenue from collaboration and license ~~agreement with Novartis, as well as~~agreements. These collaboration agreements may have included the transfer of intellectual property rights in the form of licenses, promises to provide research and development ~~grants from~~services and promises to participate on certain development committees with the ~~U.S. government. We recognize~~collaboration party. The terms of such agreements included payment to Aduro of one or more of the following: nonrefundable upfront fees, payment for research and development services, development, regulatory and commercial milestone payments, and royalties on net sales of licensed products.

Potential milestone payments related to development, regulatory or commercial milestone payments may be earned in the future under these pre-existing agreements, but all such payments are uncertain and beyond our or our collaborators’ control and would be recorded as revenue ~~from upfront payments under our Janssen and Novartis agreements ratably~~upon receipt or over ~~the term of our estimated~~a period ~~of performance~~following receipt, such as under the ~~agreement. In addition to receiving upfront~~CAPM model, if and when such payments ~~we may also be entitled to milestone and other contingent payments upon achieving predefined objectives. Revenue from milestones, if they~~ are ~~nonrefundable and deemed substantive, are recognized upon successful accomplishment of~~earned. We evaluated the ~~milestones. To the extent that non-substantive milestones are achieved and we have~~ remaining performance obligations ~~milestones are deferred~~under these pre-existing agreements and ~~recognized as~~concluded that we do not expect to recognize material revenue ~~over~~under these pre-existing agreements in the ~~estimated remaining period~~near term.

For additional information, refer to Note 11 “Collaboration and License Agreements” in our unaudited condensed consolidated financial statements in Part I, Item 1 of performance. We recognize revenue related to research and development grants when the related research expenses are incurred and our specific performance obligations under the terms of the respective contracts are satisfied.this Quarterly Report on Form 10-Q.

We expect that any revenue we generate from our research and license agreements with Janssen, Novartis and Merck, government research and development grants, and any future collaboration partners will fluctuate from year to year as a result of the timing and amount of milestones and other payments.

The largest component of our ~~total~~ operating expenses ~~has historically been~~is our investment in research and development activities, including the clinical development of our product ~~candidates. Research~~candidates and ~~development expenses represent costs incurred to conduct research, such as~~ the discovery and development of our product ~~candidates,~~candidates. Research and development costs include employee-related costs; licensing costs; materials and supplies; contracted research and manufacturing; consulting arrangements; allocated costs, such as ~~well as the development of product candidates pursuant~~facility costs; and other expenses incurred to advance our research and ~~license agreements with Janssen, Novartis~~development activities. Employee-related costs consist of salaries, bonuses, severance and ~~Merck.~~benefits. We recognize all research and development costs as they are incurred. Clinical trial costs, contract manufacturing and other development costs incurred by third parties are expensed as the contracted work is performed.

We expect our research and development expenses to increase in the future as we advance our product candidates into and through clinical trials and pursue regulatory approval of our product candidates. The process of conducting the necessary clinical research to obtain regulatory approval is costly and time-consuming. The actual probability of success for our product candidates and technology platforms may be affected by a variety of factors including: the quality of our product candidates, early clinical data, investment in our clinical program, competition, manufacturing capability and commercial viability. We may never succeed in obtaining regulatory approval for any of our product candidates. As a result of the uncertainties discussed above, we are unable to determine the duration and completion costs of our research and development projects or when and to what extent we will generate revenue from the commercialization and sale of our product candidates.

~~The following table summarizes our research and development costs by platform:~~

~~Other research includes sponsored research grants, laboratory supplies and materials, and facility costs. Internal costs include personnel and stock compensation expenses as well as depreciation.~~

General and administrative expenses include ~~personnel~~employee-related costs, expenses for consulting and outside ~~professional~~ services, allocated costs, such as facility costs, and other ~~allocated expenses. Personnel~~costs. Employee-related costs consist of salaries, bonuses, ~~benefits~~severance and ~~stock-based compensation. Outside professional~~benefits. Consulting and outside services consist of legal, accounting and audit services, insurance expenses, investor relations activities, administrative services and other consulting fees. Allocated ~~expenses~~costs consist of rent expense related to our ~~office~~offices and research and development facility.

~~Interest~~Change in Fair Value of Contingent Consideration and Contingent Value Rights Liabilities

At the effective time of the Aduro Merger, we also entered into an agreement, or CVR Agreement, pursuant to which Aduro’s common stockholders of record as of the close of business on October 2, 2020 received one contingent value right, or CVR, for each outstanding share of Aduro common stock held by such stockholder on such date. Each CVR represents the contractual right to receive payments from us upon the receipt of consideration resulting from certain events described in the CVR Agreement, such as milestones and royalties from certain pre-existing agreements and the disposition or licensing of certain of Aduro’s non-renal assets, net of deductions permitted under the CVR Agreement, including taxes and certain other expenses. Change in the fair value of the contingent consideration and CVR liabilities at each reporting period consists of the changes in the values of these contractual rights.

Amortization of intangible assets, excluding goodwill results from the amortization of finite-lived intangible assets acquired in the Merger. Amortization is over periods of 9 to 17 years, with an original weighted average period of 16.7 years.

~~Interest~~Investment and other income (expense), net consists primarily of interest income ~~from our cash equivalents~~ and ~~marketable securities.~~

~~Other loss, net primarily consists of~~expense, foreign currency ~~transaction~~ gains and ~~losses.~~losses, and various income or expense items of a non-recurring nature.

~~We are subject~~Equity method investment gain (loss) represents our share of net loss of the Sairopa investment, which is reported in our unaudited condensed consolidated statements of operations and comprehensive loss on a one quarter lag. Additionally, equity method investment gain (loss) includes gains or losses of our equity method investment due to income taxes in the United States and foreign jurisdictions in which we do business. These foreign jurisdictions have statutory tax rates different from those in the United States. Accordingly, our effective tax rates will vary depending on the relative proportion of foreign to U.S. income, the availability of research and development tax credits, changes in ~~the valuation of~~ our deferred tax assets and liabilities and changes in tax laws. We regularly assess the likelihood of adverse outcomes resulting from the examination of our tax returns by the U.S. Internal Revenue Service, or IRS, and other tax authorities to determine the adequacy of our income tax reserves and expense. Should actual events or results differ from our current expectations, charges or credits to our income tax expense may become necessary.ownership interest, if any.

Comparison of the Three Months Ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022

Total revenue was ~~$3.7~~$1.0 million for the three months ended ~~September~~June 30, ~~2017, a decrease~~2023, an increase of ~~$0.1~~$0.6 million compared to ~~the three months ended September 30, 2016, primarily due to the reimbursement of expenses from our Janssen collaboration in 2016 which did not recur in 2017.~~

~~Grant revenue was $0.1~~$0.4 million for the three months ended ~~September~~June 30, ~~2017,~~2022. The increase was primarily due to ~~additional funding made available for~~higher revenue recognized in the ~~existing grants.~~ second quarter of 2023 related to services provided under our license agreement with SanReno.

The following ~~table summarizes~~tables summarize our research and development expenses by program and by category incurred during the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016:~~2022:

Research and development expenses were ~~$24.5~~$57.9 million for the three months ended ~~September~~June 30, ~~2017,~~2023, an increase of ~~$5.4~~$27.9 million compared to $30.0 million for the three months ended ~~September~~June 30, ~~2016. Contract manufacturing increased by $4.8 million~~2022. The increase in research and development expenses was primarily ~~related to manufacturing cost for our B-select antibodies which was partially offset by a decrease in manufacturing cost in the third quarter of 2016~~ due to ~~reduced GVAX Pancreas~~higher licensing, contract research and manufacturing costs, which included a $10.0 million one-time payment in 2023 associated with a collaboration for a pre-clinical research program; employee-related costs, including stock-based compensation expense; and spending for consulting, outside services, and other costs. These higher costs also primarily resulted from startup activities ~~following completion of~~for additional clinical trials and an increase in hiring to support our ~~ECLIPSE~~ clinical trial. Contract research increased by $2.9 million primarily related to sponsored research grants made to UC Berkeley. Personnel-related costs increased by $1.4 million due to increases in headcount and facility related costs increased by $0.7 million relating to ~~our relocation to a new office and laboratory facility~~ in the third quarter of 2016. Supplies and materials increased by $0.5 million primarily for our B-select antibodies. These expenses were partially offset by a decrease of $5.9 million in licensing fees related to payments for our STING Activator technology in 2016.programs.

The following table summarizes our general and administrative expenses incurred during the three months ended ~~September~~June 30, ~~2017~~2023 and ~~2016:~~2022:

General and administrative expenses were ~~$8.5~~$13.1 million for the three months ended ~~September~~June 30, ~~2017,~~2023, an increase of $4.4 million compared to $8.6 million for the three months ended June 30, 2022. The increase in general and administrative expenses was primarily due to higher employee-related costs, including stock-based compensation expense, which primarily resulted from increased headcount to continue to support our operations, higher consulting and outside services, and other costs. These increases were offset by a decrease in facilities costs, which are allocable from general and administrative to research and development expenses based on headcount.

Change in fair value of ~~$0.1~~contingent consideration and contingent value rights liabilities

Change in fair value of contingent consideration and contingent value rights liabilities expense was $2.2 million for the three months ended June 30, 2023, an increase of $4.2 million compared to a benefit of $2.0 million for the three months ended June 30, 2022. The increase primarily resulted from remeasuring the value of our preferred shares in Sairopa at estimated fair value mainly as a result of Sairopa executing a license agreement for its SIRPa inhibitor ADU-1805 with Exelixis, Inc. in November 2022.

Amortization of intangible assets expense was $0.4 million for both the three months ended June 30, 2023 and 2022 and was related to normal amortization of finite-lived intangible assets acquired in the Aduro Merger.

Equity method investment loss decreased by $3.7 million for the three months ended June 30, 2023 compared to the three months ended ~~September~~June 30, ~~2016. Facility costs decreased by $0.4 million due to a lower allocation~~2022, resulting from our share of ~~costs to general~~net loss of the Sairopa investment, net of any taxes.

Comparison of the Six Months Ended June 30, 2023 and ~~administrative expense. In addition, outside professional services decreased by $0.3 million due to lower consulting services incurred in 2017. The decrease~~2022

Total revenue was ~~partially offset by a $0.6 million increase in compensation and personnel related costs, including stock based compensation, due to headcount increase.~~

~~Interest income, net was $1.0~~$2.8 million for the ~~three~~six months ended ~~September~~June 30, ~~2017, an increase~~2023, a decrease of ~~$0.4~~$0.3 million compared to the three months ended September 30, 2016. Interest income is earned from our funds invested in cash equivalents and marketable securities and the increase for the three months ended September 30, 2017 is primarily due to the favorable interest rate environment.

~~Income tax benefit was $3.9~~$3.1 million for the ~~three~~six months ended ~~September~~June 30, ~~2017, a decrease of $15.5 million compared to the three months ended September 30, 2016.~~2022. The decrease was due to ~~income tax provision recorded~~lower revenue recognized in ~~2016 which arose primarily due to current and deferred federal income taxes.~~

~~Collaboration and license revenue was $13.4 million for the nine~~six months ended ~~September~~June 30, ~~2017, a decrease of $33.4 million compared~~2023 related to ~~the nine months ended September 30, 2016.~~ The decrease in revenue for the nine months ended September 30, 2017 was primarily due to the recognition of a $35.0 million milestone payment in the second quarter of 2016 in connection with the clinical advancement of ADU-S100services provided under our license agreement with ~~Novartis, partially offset by the recognition of $2.0 million in connection with the achievement of a milestone under our agreement with Merck in the second quarter of 2017.~~SanReno.

~~Grant revenue was $0.1 million for the nine months ended September 30, 2017, an increase of $43,000 compared to the nine months ended September 30, 2016, primarily due to~~ ~~additional funding made available for the existing grants.~~

The following ~~table summarizes~~tables summarize our research and development expenses by program and by category incurred during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016:~~2022:

Research and development expenses were ~~$66.5~~$108.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017, a decrease~~2023, an increase of ~~$0.4~~$52.5 million compared to $56.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2022. The ~~decrease was primarily attributed to a $10.1 million decrease~~increase in ~~contract manufacturing~~research and ~~clinical~~ development expenses ~~related to GVAX Pancreas manufacturing activities in early 2016. Licensing fees decreased by $6.1 million~~was primarily due to license payments for our STING Activator technology made in 2016. Outside professional services decreased by $1.2 million due to lower consulting services incurred in 2017. These decreases in expenses were partially offset by an increase of $4.3 million in otherhigher licensing, contract research and ~~development~~manufacturing costs, ~~and $1.5~~which included a $10.0 million one-time payment in ~~supplies and materials, both primarily related to our B-select antibodies. The expenses were also offset by an increase of $5.8 million in personnel-related~~2023 associated with a collaboration for a pre-clinical research program; employee-related costs, including stock-based compensation ~~due to increases in headcount, an increase~~expense; and spending for consulting, outside services, and facilities and other costs. These higher costs also primarily resulted from completing enrollment of ~~$3.8 million in facility related costs following our relocation to a new office and laboratory facility in~~ the ~~third quarter of 2016~~phase 3 ALIGN trial, startup activities for additional clinical trials, and an increase ~~of $1.6 million~~ in ~~contract research primarily related~~hiring to ~~sponsored research grants made to UC Berkeley.~~support our clinical programs.

The following table summarizes our general and administrative expenses incurred during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016:~~2022:

General and administrative expenses were ~~$25.0~~$24.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017, a decrease~~2023, an increase of ~~$1.3~~$8.0 million compared to $16.5 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2022. The ~~decrease~~increase in general and administrative expenses was primarily due to higher employee-related costs, including stock-based compensation expense, which resulted from increased headcount to continue to support our operations, higher consulting and outside services, and other costs. These increases were offset by a ~~$2.1 million~~ decrease in ~~outside professional services partially offset by higher stock-based compensation expense.~~facilities costs, which are allocable from general and administrative to research and development expenses based on headcount.

~~Interest Income, net~~Change in fair value of contingent consideration and contingent value rights liabilities

~~Interest income~~Change in fair value of contingent consideration and contingent value rights liabilities expense was ~~$2.4~~$2.8 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, an increase of ~~$0.9~~$5.8 million compared to a benefit of $3.0 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2022. The increase primarily resulted from remeasuring the value of our preferred shares in ~~interest income earned~~Sairopa at estimated fair value mainly as a result of Sairopa executing a license agreement for its SIRPa inhibitor ADU-1805 with Exelixis, Inc. in ~~2017 is primarily due~~November 2022.

Amortization of intangible assets expense was $0.9 million for both the six months ended June 30, 2023 and 2022 and was related to normal amortization of finite-lived intangible assets acquired in the ~~favorable interest rate environment.~~Aduro Merger.

~~Income tax benefit recorded~~Equity method investment loss decreased by $2.7 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017 was $10.4 million, a decrease of $26.8 million~~2023 compared to the ~~nine~~six months ended ~~September~~June 30, ~~2016. The decrease was due to income tax provision recorded in 2016 which arose primarily due to current and deferred federal income taxes.~~ 2022, resulting from our share of net loss of the Sairopa investment, net of any taxes.

As of ~~September~~June 30, ~~2017,~~2023, we had $299.1 million in cash, ~~and~~ cash equivalents and marketable securities of $373.5 million. We believe that our available cash and cash equivalents and marketable securities and anticipated funding from our collaboration agreements will be sufficient to fund our planned operations into 2020. securities.

We have ~~based~~not generated any revenue from product sales, and we do not know when, or if, we will generate any revenue from product sales. We do not expect to generate any revenue from product sales unless and until we obtain regulatory approval of and commercialize any of our ~~cash sufficiency estimate on assumptions~~product candidates. Accordingly, we anticipate that, if we are unable to complete the Merger, we will need substantial additional funding in connection with our continuing operations. Our operations have been financed primarily through the issuance and sale of our common stock.

In May 2022, we completed an underwritten public offering of 7.6 million shares of our common stock at a price to the public of $14.00 per share, which included the exercise in full of the underwriters’ option to purchase an additional 1.1 million shares of our common stock in June 2022. As part of this offering, we also sold to certain investors pre-funded warrants, or the Pre-Funded Warrants to purchase up to an aggregate of 1.1 million shares of common stock at a purchase price of $13.9999 per pre-funded warrant. The underwritten public offering in May 2022 resulted in gross proceeds to us of $120.7 million, before $7.7 million of underwriting discounts and commissions and estimated offering expenses.

In November 2021, we completed an underwritten public offering of 9.5 million shares of our common stock at a price to the public of $14.00 per share, which included the exercise in full of the underwriters’ option to purchase an additional 1.7 million shares of our common stock. As part of this offering, we also sold to certain investors Pre-Funded Warrants to purchase up to an aggregate of 3.6 million shares of common stock at a purchase price of $13.9999 per pre-funded warrant. The underwritten public offering in November 2021 resulted in gross proceeds to us of $183.5 million, before $11.3 million of underwriting discounts and commissions and estimated offering expenses.

The Pre-Funded Warrants are exercisable at any time after the date of issuance and do not expire. A holder of Pre-Funded Warrants may ~~prove~~not exercise the warrant if the holder, together with its affiliates, would beneficially own more than 4.99% of the number of shares of common stock outstanding immediately after giving effect to ~~be incorrect. If our assumptions prove to be incorrect, we could consume our available capital resources sooner than we currently expect~~such exercise. A holder of Pre-Funded Warrants may increase or decrease this percentage, but not in excess of ~~amounts that~~19.99%, by providing at least 61 days’ prior notice to Chinook.

In April 2021, we ~~currently expect,~~entered into an “at-the-market” sales agreement, or the 2021 Sales Agreement, with Cantor Fitzgerald & Co. and SVB Securities LLC, previously known as SVB Leerink LLC, through which ~~could adversely affect~~we may offer and sell shares of our ~~development activities.~~common stock having an aggregate offering of up to $75.0 million through our sales agents, Cantor Fitzgerald & Co. and SVB Securities LLC. In November 2022, we amended the 2021 Sales Agreement to provide for offerings of up to $150.0 million. We will pay the sales agents a commission of up to 3% of the gross proceeds of sales made through the 2021 Sales Agreement. In the first quarter of 2023, we sold 0.9 million shares for $19.6 million in net proceeds under the 2021 Sales Agreement. As of June 30, 2023, we have $115.6 million remaining under the 2021 Sales Agreement.

Our primary ~~uses~~use of capital are, and we expect will continue to be, compensation and related expenses, clinical development costs including manufacturing and other research and development services, laboratory and related supplies and legal and other professional services. Cash usedcash is to fund operating expenses, ~~is impacted by~~ primarily research and development expenditures. Our future funding requirements will depend on many depend on many factors, including, but not limited to:

As of June 30, 2023, our short and long-term material cash requirements from known contractual and other obligations primarily relate to our contractual obligations related to our operating leases. For additional information on our operating lease commitments,

refer to Note 12 “Commitments and Contingencies” in our ~~outstanding accounts payable~~condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

We do not intend to pursue further funding and, ~~accrued expenses. We expect~~instead, are seeking to ~~incur substantial expenditures in~~complete the ~~foreseeable future for the~~Merger with Novartis, who would fund further development ~~manufacturing~~ and ~~potential~~ commercialization of our product candidates.

~~We plan~~If we are unable to continue to fund our operations and capital funding needs through equity and/or debt financing and potential milestones from existing collaboration agreements. We may also consider entering into additional collaboration arrangements or selectively partnering for clinical development and commercialization. In addition,complete the Merger, we expect to ~~continue to opportunistically seek access to~~finance our future cash needs primarily through the ~~equity capital markets to support our development efforts and operations. The sale~~issuance of additional equity, ~~would result in additional dilution to our stockholders. The incurrence of debt financing would result in debt service obligations~~borrowings and ~~the instruments governing such debt could provide for operating and financing covenants that would restrict our operations.~~strategic alliances with partner companies. To the extent that we raise additional capital through the issuance of additional equity, including through our at-the-market offering program or convertible debt securities, the ownership interest of our stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect the rights of existing stockholders. Debt financing, if available, may involve agreements that include covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. If we raise additional funds through ~~collaboration~~marketing and distribution arrangements or ~~partnering~~other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish valuable rights to our technologies, future revenue streams, research programs or product candidates or grant licenses on terms that may not be favorable to us. If we are unable to raise additional funds through equity or debt financings when needed, we may be required to ~~relinquish some of~~delay, limit, reduce or terminate our product development or commercialization efforts or grant rights to develop and market our ~~technologies or rights~~product candidates to third parties that we would otherwise prefer to develop and market and sell our products in certain geographies, grant licenses on terms that are not favorable to us, or issue equity that may be substantially dilutive to our stockholders. If we are not able to secure adequate additional funding, we may be forced to make reductions in spending, extend payment terms with suppliers, liquidate assets where possible and/or suspend or curtail planned programs. Any of these actions could harm our business, results of operations, financial condition and future prospects.ourselves.

Net cash used in operating activities was ~~$64.6~~$111.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, an increase of $56.5 million compared to ~~net cash used in operating activities of $60.6~~$55.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016. Net cash used in operating activities during 2017~~2022. The increase was primarily ~~related~~due to an increased operating ~~expenses, additional headcount, increased clinical trial activities and other~~loss, primarily resulting from research and ~~development. Net cash used~~development and general and administrative spending, as well as changes in operating activities during 2016 was also primarily related to operating expenses and clinical trial activities which was partially offset by receipt of a milestone from Novartis received in the second quarter of 2016.net working capital usage.

Net cash provided by investing activities was ~~$68.6~~$100.4 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, an increase of $189.8 million compared to net cash used byin investing activities of ~~$29.8~~$89.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2022. The ~~change~~increase was primarily due to ~~lower expenditures for leasehold improvements and timing~~net proceeds from maturities of ~~purchased~~ marketable securities, offset in ~~2017 as compared to 2016.~~part by purchases of property and equipment.

Net cash provided by financing activities was ~~$79.5~~$23.3 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017,~~2023, a decrease of $85.6 million compared to ~~net cash provided by financing activities of $37.9~~$108.9 million for the ~~nine~~six months ended ~~September~~June 30, ~~2016.~~2022. The ~~increase~~decrease was primarily ~~related~~due to ~~higher~~ net ~~cash~~ proceeds of $113.5 million received from the sale of ~~our~~ common stock ~~through~~in the May 2022 underwritten public offering, offset in part by net proceeds of $19.6 million received from the sale of common stock under the 2021 Sales ~~Agreements with Cowen~~Agreement during the ~~nine~~six months ended ~~September~~June 30, ~~2017.~~2023.

Our unaudited condensed consolidated financial statements have been prepared in accordance with generally accepted accounting principles in the United States, or U.S. GAAP. The preparation of these unaudited condensed consolidated financial statements requires us to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, as well as the reported revenue generated and expenses incurred during the reporting periods. Our estimates are based on our historical experience and on various other factors that we believe are

reasonable under the circumstances, the results of which form the basis for making judgments about the carrying value of assets and liabilities that are not readily apparent from other sources. Actual results may differ from these estimates under different assumptions or conditions.

There have been no material changes toin our critical accounting policies during the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023, as compared to ~~the critical accounting policies~~those disclosed in “Management’s Discussion and Analysis of Financial Condition and Results of Operations—Critical Accounting Policies and Significant Judgments and Estimates” in our Annual Report on Form 10-K for the year ended December 31, ~~2016.~~2022.

~~We did not have during~~For information with respect to recently issued accounting standards and the ~~periods presented, and we do not currently have, any off-balance sheet arrangements, as defined under SEC rules.~~impact of these standards on our unaudited condensed consolidated financial statements, refer to Note 2 “Summary of Significant Accounting Policies” in our unaudited condensed consolidated financial statements in Part I, Item 1 of this Quarterly Report on Form 10-Q.

~~The following table summarizes our contractual obligations as of September 30, 2017:~~

Our exposure to market risk for changes in interest rates relates primarily to our investment portfolio. The primary ~~financial risk~~objective of our investment portfolio is to preserve principal and at the ~~Company~~same time maximize the income we receive from our investments without significantly increasing risk. As of June 30, 2023 and December 31, 2022, we had total cash, cash equivalents and short- and long-term investments of $299.1 million and $385.3 million, respectively, which consisted of cash, money market funds, U.S. government and agency securities, corporate debt securities, and commercial paper.

Most of our operating expenses are denominated in U.S. dollars and, as a result, we have not experienced significant foreign currency transaction gains and losses to date. We have limited foreign currency exposure associated with certain of our operating expenses and gains or losses associated with our equity method investment in Sairopa. This is ~~exposed~~primarily limited to isfluctuations in the Canadian Dollar and the Euro. Our operating expenses associated with our wholly-owned subsidiary in Canada are denominated in Canadian Dollars and converted to U.S. dollars. Gains and losses associated with our equity method investment in Sairopa are denominated in Euro and converted to U.S. dollars. We do not anticipate that foreign currency transaction gains or losses will be significant at our current level of operations. However, our operations may become subject to more significant fluctuations in foreign currency exchange ~~as certain~~rates in the future if we continue to contract with vendors outside of the U.S. and expand our operations assets, and liabilities are denominated in foreign currency. Foreign currency exposures arise from transactions denominated in a currency other than the functional currency and from foreign denominated revenue and profit translated into U.S. dollars. The primary foreign currency to which the Company is exposed is the Euro. We manage these risks through normal operating and financing activities and do not currently hedge our exposure to foreign currency exchange rate fluctuations.internationally.

Our management, with the participation of our President and Chief Executive Officer and our Chief ~~Operating Officer and Principal~~ Financial Officer, have evaluated our disclosure controls and procedures (as defined in Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as amended) prior to the filing of this ~~quarterly report.~~Quarterly Report on Form 10-Q. Based on that evaluation, our President and Chief Executive Officer and our Chief ~~Operating Officer and Principal~~ Financial Officer have concluded that, as of the end of the period covered by this ~~quarterly report,~~Quarterly Report on Form 10-Q, our disclosure controls and procedures were ~~in design and operation, effective.~~effective at a reasonable assurance level as of June 30, 2023.

There were no changes in our internal control over financial reporting during the quarter ended ~~September~~June 30, ~~2017~~2023 that have materially affected, or are reasonably likely to materially affect, our internal control over financial reporting.

~~The effectiveness~~Because of ~~any system of~~its inherent limitations, internal control over financial reporting including ours, is subject to inherent limitations, including the exercise of judgment in designing, implementing, operating, and evaluating the controls and procedures, and the inability to eliminate misconduct completely. Accordingly, any system of internal control over financial reporting, including ours, no matter how well designed and operated, can only provide reasonable,may not ~~absolute assurances. In addition,~~prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate. We intend to continue to monitor and upgrade our internal controls as necessary or appropriate for our business, but cannot assure you that such improvements will be sufficient to provide us with effective internal control over financial reporting.

We are party to legal proceedings that arose in connection with our Preliminary Proxy Statement on Schedule 14A (the “Preliminary Proxy Statement”) filed with SEC on June 27, 2023 and our Definitive Proxy Statement on Schedule 14A (the “Definitive Proxy Statement”) filed with the SEC, on July 10, 2023. On July 6, 2023 a purported individual stockholder of Chinook filed a complaint in the United States District Court for the Southern District of New York, captioned O’Dell v. Chinook Therapeutics, Inc., et al., 1:23-cv-05784, naming as defendants the Company and each member of our board of directors as of the date of the Merger Agreement (O’Dell). On July 11, 2023, an additional case was filed by a purported individual stockholder of Chinook in the United States District Court for the Southern District of New York, captioned Wang v. Chinook Therapeutics, Inc., et al., 1:23-cv-05945 (Wang). On July 12, 2023, an additional case was filed by a purported individual stockholder of Chinook in the United States District Court for the Southern District of New York, captioned Casey v. Chinook Therapeutics, Inc., et al., 1:23-cv-05986 (Casey). On July 13, 2023, an additional case was filed by a purported individual stockholder of Chinook in the United States District Court for the District of Delaware, captioned Johnson v. Chinook Therapeutics, Inc., et al., 1:23-cv-00764-UNA (Johnson). The O’Dell, Wang, Casey and Johnson cases, and any similar subsequently filed cases involving us, our board of directors or any committee thereof and/or any of our directors or officers relating directly or indirectly to the Merger Agreement, the Merger or any related transaction, are referred to as the “Merger Litigations.”

The Merger Litigations filed to date generally allege that the Preliminary Proxy Statement or the Definitive Proxy Statement is materially incomplete and misleading by allegedly failing to disclose certain purportedly material information. The Merger Litigations assert violations of Section 14(a) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) and Rule 14a-9 promulgated thereunder against us and our board of directors and violations of Section 20(a) of the Exchange Act against our board of directors. The Merger Litigations seek, among other things: an injunction enjoining consummation of the Merger; rescission of the Merger Agreement, rescission of the Merger if consummated; an accounting of all damages suffered; costs of the action, including attorneys’ fees and experts’ fees and expenses; an order directing the filing of a proxy statement that does not contain any untrue statements of material fact; a declaratory order that the defendants violated Section 14(a) and/or Section 20(a) of the Exchange Act; and any other relief the court may deem just and proper.

We cannot predict the outcome of each Merger Litigation, nor can we predict the amount of time and expense that will be required to resolve each Merger Litigation. We believe that the O’Dell, Wang, Casey and Johnson cases are without merit and that no supplemental disclosures are required under applicable law. We and our directors intend to vigorously defend against each Merger Litigation and any subsequently filed similar actions. It is possible that additional similar complaints could be filed in connection with the Merger. We cannot estimate the possible loss or range of loss from the Merger Litigations. If any additional complaints are filed, absent new or significantly different allegations, we will not necessarily disclose such additional filings.

In addition, twelve purported stockholders of Chinook sent demand letters regarding the Preliminary Proxy Statement and Definitive Proxy Statement (the “Demand Letters”). Based on the same core allegations as the Merger Litigations, the Demand Letters request that the Company disseminate corrective disclosures in an amendment or supplement to the Preliminary Proxy Statement or Definitive Proxy Statement.

While we believe that the disclosures set forth in the Preliminary Proxy Statement and Definitive Proxy Statement comply fully with all applicable law and denies the allegations in the Merger Litigations and the Demand Letters, in order to moot these disclosure claims, avoid nuisance and possible expense and business delays, and provide additional information to our stockholders, we voluntarily supplemented certain disclosures in the Definitive Proxy Statement related to the aforementioned claims with the supplemental disclosures set forth in our definitive additional materials filed with the SEC on July 26, 2023. Nothing in the definitive additional materials shall be deemed an admission of the legal merit, necessity or materiality under applicable laws of any of the disclosures set forth herein. To the contrary, we specifically deny all allegations in the Merger Litigations and the Demand Letters that any additional disclosure was or is required or material.

We are not party to any other material legal proceedings at this time. From time to time, we may become involved in various legal proceedings that arise in the ordinary course of our business.

Investing in our common stock involves a high degree of risk. You should carefully consider the following risks and all of the other information contained in this Quarterly Report on Form 10-Q, including our unaudited condensed consolidated financial statements and related notes and the section “Management’s Discussion and Analysis of Financial Condition and Results of Operations,” before investing in our common stock. While we believe that the risks and uncertainties described below are the material risks currently facing us, additional risks that we do not yet know of or that we currently think are immaterial may also arise and materially affect our business.If any of the following risks materialize, our business, financial condition and results of operations could be materially and adversely affected. In that case, the trading price of our common stock could decline, and you may lose some or all of your investment.

Our business is subject to ~~Our Business~~a number of risks and uncertainties, including those immediately following this summary. Some of these risks are:

The Merger is subject to a number of conditions beyond our control. Failure to complete the Merger within the expected time frame, or at all, could have a material adverse effect on our business, operating results, financial condition and our share price.

On June 11, 2023, we entered into the Merger Agreement, pursuant to which, and on the terms and subject to the conditions set forth therein, (i) Merger Sub will be merged with and into Chinook, or the Merger, with Chinook surviving the Merger and (ii) at the effective time of the Merger, each outstanding share of Company common stock, par value $0.0001 per share, will automatically be converted into the right to receive (A) $40.00 in cash, without interest and less any applicable withholding taxes, and (B) one New CVR.

Consummation of the Merger is subject to certain conditions, including approval by the Company’s stockholders, the absence of any legal restraints restraining, enjoining, preventing, prohibiting or otherwise making illegal the consummation of the Merger, or the Governmental Entity Condition, expiration or termination of the applicable waiting period under the Hart-Scott-Rodino Antitrust Improvements Act of 1976, as amended, with such waiting period having expired on July 31, 2023 and any other specified required regulatory approvals that may be required will have been obtained, and each party’s performance of its obligations in all material respects under the Merger Agreement.

On August 2, 2023, our stockholders voted in favor of the Merger. However, we cannot predict whether and when the other conditions to the Merger will be satisfied. If one or more of these conditions are not satisfied, and as a result, we do not complete the Merger, we would remain liable for significant transaction costs, and the focus of our management would have been diverted from seeking other potential strategic opportunities, in each case without realizing any benefits of the Merger. Certain costs associated with the Merger have already been incurred or may be payable even if the Merger is not consummated. Finally, any disruptions to our business resulting from the announcement and pendency of the Merger, including any adverse changes in our relationships with our partners, suppliers and employees, could continue or accelerate in the event that we fail to consummate the Merger.

Our share price may also fluctuate significantly based on announcements by Novartis, other third parties, or us regarding the Merger or based on market perceptions of the likelihood of the satisfaction of the conditions to the consummation of the Merger. Such announcements may lead to perceptions in the market that the Merger may not be completed, which could cause our share price to fluctuate or decline. Other factors outside of our control, such as a governmental entity enacting legislation that prohibits the Merger, could cause us not to satisfy the governmental entity condition and thus the Merger would not be consummated.

If we do not consummate the Merger, the price of our common stock may decline significantly from the current market price, which may reflect a market assumption that the Merger will be consummated. Any of these events could have a material adverse effect on our business, operating results and financial condition and could cause a decline in the price of our common stock.

Our stockholders may not receive any payment on the New CVRs and the New CVRs may otherwise expire valueless.

If the Merger is completed, the holders of our common stock will be entitled to receive one New CVR per share of common stock, representing the right to receive, subject to the terms and conditions of the New CVR Agreement, up to $4.00 in contingent cash payments from Novartis upon the achievement by specified dates of certain milestones set forth in the New CVR Agreement. The New CVRs will not be transferable, except in the limited circumstances specified in the New CVR Agreement, will not have any voting or dividend rights, and interest will not accrue on any amounts potentially payable on the New CVRs. Accordingly, the right of any of our stockholders to receive any future payment on or derive any value from the New CVRs will be contingent solely upon the achievement of the milestones set forth in the New CVR Agreement, and if these milestones are not achieved for any reason within the time periods specified in the New CVR Agreement, no payments will be made under the New CVRs, and the New CVRs will expire valueless.

Stockholder litigation could prevent or delay the consummation of the Merger or otherwise negatively impact our business, operating results and financial condition.

We may incur additional costs in connection with the defense or settlement of existing and any future stockholder litigation in connection with the Merger. These lawsuits or other future litigation may adversely affect our ability to complete the Merger. We could incur significant costs in connection with any such litigation, including costs associated with the indemnification of our directors and officers. Furthermore, one of the conditions to the consummation of the Merger is the absence of any governmental order or law preventing the consummation of the Merger or making the consummation of the Merger illegal. Consequently, if a plaintiff were to secure injunctive or other relief prohibiting, delaying or otherwise adversely affecting our ability to complete the consummation of the

Offer and Merger, then such injunctive or other relief may prevent the Merger from becoming effective within the expected time frame or at all.

Our executive officers and directors may have interests in the Merger that are different from, or in addition to, those of our stockholders generally.

Our executive officers and directors may have interests in the Merger that are different from, or are in addition to, those of our stockholders generally. These interests include direct or indirect ownership of our common stock and equity awards, the acceleration of equity awards upon consummation of the transactions and other interests. Such interests of our directors and executive officers are set forth in further detail in our definitive proxy statement on Schedule 14A filed by the Company with the SEC on July 10, 2023.

While the Merger is pending, we are subject to business uncertainties and contractual restrictions that could disrupt our business, and the Merger may impair our ability to attract and retain qualified employees or retain and maintain relationships with our suppliers and other business partners.

Whether or not the Merger is consummated, the Merger may disrupt our current plans and operations, which could have an adverse effect on our business and financial results. The pendency of the Merger may also divert management’s attention and our resources from ongoing business and operations and our employees and other key personnel may have uncertainties about the effect of the Merger, and the uncertainties may impact our ability to retain, recruit and hire key personnel while the Merger is pending or if it fails to close. Furthermore, if key personnel depart, e.g., because of such uncertainties, our business and results of operations may be adversely affected. In addition, we cannot predict how our suppliers and other business partners will view or react to the Merger upon consummation. If we are unable to reassure our suppliers and other business partners to continue transacting business with us, our financial condition and results of operations may be adversely affected.

In addition, the Merger Agreement generally requires us to operate in the ordinary course of business consistent with past practice, pending consummation of the Merger, and restricts us from taking certain actions with respect to our business and financial affairs without the consent of Novartis. Such restrictions will be in place until either the Merger is consummated or the Merger Agreement is terminated. These restrictions could restrict our ability to, or prevent us from, pursuing attractive business opportunities (if any) that arise prior to the consummation of the Merger. For these and other reasons, the pendency of the Merger could adversely affect our business, operating results and financial condition.

We have incurred, and will continue to incur, direct and indirect costs as a result of the Merger.

We have incurred, and will continue to incur, significant costs and expenses, including fees for professional services and other transaction costs, in connection with the Merger, including costs that we may not currently expect. We must pay substantially all of these costs and expenses whether or not the transaction is completed. If the Merger Agreement is terminated under specified circumstances, we would be required to pay to Novartis a termination fee equal to $112.0 million. There are a number of factors beyond our control that could affect the total amount or the timing of these costs and expenses.

The U.S. federal income tax treatment of the CVRs is unclear. There is no legal authority directly addressing the U.S. federal income tax treatment of the receipt of, and payments under, the CVRs, and there can be no assurance that the IRS would not assert, or that a court would not sustain, a position that could result in adverse U.S. federal income tax consequences to holders of the CVRs.

For example, Novartis will not report the issuance of the CVRs as a current distribution of property with respect to its common stock, but it is possible that the IRS could assert that CVR recipients are treated as having received a distribution of property equal to the fair market value of the CVRs on the date the CVRs are distributed, which could be taxable to such recipients without the corresponding receipt of cash. In addition, it is possible that the IRS or a court could determine that the issuance of the CVRs (and/or any payments thereon) and the reverse stock split constitute a single “recapitalization” for U.S. federal income tax purposes with the CVRs constituting taxable “boot” received in such recapitalization exchange. In such case, the tax consequences of the CVRs and the

reverse stock split would differ from those described in the Merger proxy statement, including with respect to the timing and character of income.

The following risk factors do not take into account the proposed Merger and assume that we remain a stand-alone company except as otherwise noted.

We have a history of operating losses, and may not achieve or sustain profitability. We anticipate that we will continue to incur losses for the foreseeable future. If we fail to obtain additional funding to conduct our planned research and development efforts, we could be forced to delay, reduce or eliminate our product development programs or commercial development efforts.

We are ~~an immunotherapy~~a clinical-stage biotechnology company with a limited operating history. ~~Investment in biopharmaceutical~~Biotechnology product development is a highly speculative ~~because it entails~~undertaking, and the industry is volatile and involves a substantial ~~upfront capital expenditures and significant risk~~degree of risk. The stock markets in general have experienced substantial volatility that ~~any potential product candidate will fail~~has often been unrelated to ~~demonstrate efficacy or an acceptable safety profile, gain regulatory approval and become commercially viable. We have financed our operations primarily through~~ the ~~sale~~operating performance of ~~equity securities and convertible debt securities. Since our inception, most~~individual companies. These broad market fluctuations may also adversely affect the trading price of our ~~resources~~common stock. In addition, a recession, depression or other sustained adverse market event resulting from deteriorating macroeconomic factors could materially and adversely affect our stock price and ability to raise additional capital. Our operations to date have been ~~dedicated~~limited primarily to organizing and staffing the ~~preclinical~~Company, business planning, raising capital, acquiring and ~~clinical~~developing product and technology rights, manufacturing, and conducting research and development ofactivities for our product candidates. ~~The size of our future net losses will depend, in part, on our future expenses and our ability to generate revenue.~~ We have ~~no products approved for commercial sale and have not~~never generated any revenue from product ~~sales~~sales. We have not obtained regulatory approvals for any of our product candidates and have funded our operations to date through proceeds from sales of preferred stock and ~~we continue to incur significant research and development and other expenses related to~~common stock.

We have incurred net losses in each year since our ~~ongoing operations.~~inception. We ~~reported net loss of $24.5 million and $35.1 million for the three months ended September 30, 2017 and 2016, respectively, and~~incurred a net loss of ~~$65.7 million and $61.6~~$127.1 million for the ~~nine~~six months ended ~~September~~June 30, ~~2017 and 2016, respectively.~~2023. As ~~of September~~June 30, ~~2017,~~2023, we had an accumulated deficit of ~~$257.7~~$546.8 million. Substantially all of our operating losses have resulted from costs incurred in connection with our research and development programs and from general and administrative costs associated with our operations. We expect to continue to incur significant expenses and operating losses over the next several years and for the foreseeable future as we intend to continue to conduct research and development, clinical testing, regulatory compliance activities, manufacturing activities, and, if any of our product candidates are approved, sales and marketing activities that, together with anticipated general and administrative expenses, will likely result in us incurring significant losses for the foreseeable ~~future, and we expect these losses to increase as we continue our research and development of, and seek regulatory approvals for, our product candidates.~~

Even if we succeed in commercializing one or more of our product candidates, we will continue to incur substantial research and development and other expenditures to develop and market additional product candidates. We may encounter unforeseen expenses, difficulties, complications, delays and other unknown factors that may adversely affect our business. The size of our future net losses will depend, in part, on the rate of future growth of our expenses and our ability to generate revenue.future. Our prior losses, ~~and~~combined with expected future losses, have had and will continue to have an adverse effect on our stockholders’ equity and working capital.

We ~~will require substantial~~expect to need to raise additional funding before we become profitable from any potential future sales of atrasentan or our other product candidates. This additional financing ~~to achieve our goals, and a failure~~may not be available on acceptable terms or at all. Failure to obtain this necessary capital when needed ~~could~~may force us to delay, limit ~~reduce~~ or terminate our product development efforts or ~~commercialization efforts.~~other operations.

~~Our operations have consumed~~We will require substantial ~~amounts of~~future capital in order to complete planned and future preclinical and clinical development for atrasentan and other product candidates and potentially commercialize these product candidates. Based upon our current operating plan, we believe that our existing cash, ~~since inception. At September 30, 2017, our cash and~~ cash equivalents, and marketable securities ~~were $373.5 million.~~held as of June 30, 2023 will enable us to fund our operating expenses and capital expenditure requirements into 2025. We expect our spending levels to ~~continue to spend substantial amounts to continue the development~~increase in connection with our preclinical studies and clinical trials of our product candidates. IfIn addition, if we ~~are able to gain regulatory~~obtain marketing approval for any of our product candidates, we expect to incur significant expenses related to commercial launch, product sales, medical affairs, marketing, manufacturing and distribution. Accordingly, we will need to obtain substantial additional funding in connection with our continuing operations before any commercial revenue may occur.

Additional capital might not be available when we need it and our actual cash requirements might be greater than anticipated. If we require additional capital at a time when investment in our industry or in the marketplace in general is limited, we may not be able to raise funding on favorable terms, if at all. If we are not able to obtain financing when needed or on terms favorable to us, we may need to delay, reduce or eliminate certain research and development programs or other operations, sell some or all of our assets or merge with another entity.

Our operations have consumed significant ~~additional~~ amounts of cash in order to launch and commercialize any such product candidates. In addition, other unanticipated costs may arise. Because the design and outcome of our planned and anticipated clinical trials is highly uncertain, we cannot reasonably estimate the actual amounts necessary to successfully complete the development and commercialization of our product candidates.

since inception. Our future capital requirements will depend on many factors, including:

Weproduct candidates that we do not have any committed external source of funds or other support for our development efforts other than our license agreements, including our license agreements with Janssen, which may be terminated by Janssen upon delivery of notice, and our collaboration and license agreement with Novartis, which may be terminated by Novartis at any time after March 19, 2018 upon 180 days’ notice, and our license agreement with Merck, which may be terminated by Merck upon 120 days’ notice. Until we can generate sufficient product and royalty revenue to finance our cash requirements, which we may never do, we expect to ~~finance~~be commercially available for many years, if at all. Accordingly, we will need to continue to rely on additional financing to achieve our future cash needs through a combination of public or private equity offerings, debt financings, collaborations, strategic alliances, licensing arrangements and other marketing or distribution arrangements. Additional financingbusiness objectives, which may not be available to us ~~when we need~~on acceptable terms, or at all.

Our limited operating history may make it difficult for you to evaluate the success of our business to date and to assess our future viability.

We are a clinical-stage biotechnology company and our operations to date have been limited to organizing and staffing the Company, business planning, raising capital, acquiring our technology, identifying potential product candidates, undertaking research and preclinical studies of our product candidates, manufacturing, and establishing licensing arrangements. We have limited experience in conducting clinical trials and have not yet demonstrated the ability to successfully complete clinical trials of our product candidates, obtain marketing approvals, manufacture a commercial scale product or itconduct sales and marketing activities necessary for commercialization. Consequently, any predictions you make about our future success or viability may not be ~~available on favorable terms.~~as accurate as they could be if we had a longer operating history.

~~If we raise additional capital through marketing~~Risks Related to Our Product Development and distribution arrangements or other collaborations, strategic alliances or licensing arrangements with third parties, we may have to relinquish certain valuable rights to our product candidates, technologies, future revenue streams or research programs or grant licenses on terms that may not be favorable to us. If we raise additional capital through public or private equity offerings, the ownership interest of our existing stockholders will be diluted, and the terms of these securities may include liquidation or other preferences that adversely affect our stockholders’ rights. If we raise additional capital through debt financing, we may be subject to covenants limiting or restricting our ability to take specific actions, such as incurring additional debt, making capital expenditures or declaring dividends. Regulatory Approval

If we are unable to ~~obtain adequate financing when needed, we may have to delay, reduce the scope of or suspend one or more of our clinical trials or research and development programs or our commercialization efforts.~~

~~Risks Related to the Development and Commercialization of Our Current and Future Product Candidates~~

~~Our product candidates are based on novel technologies and the development and regulatory approval pathway for such product candidates is unproven and may never lead to marketable products.~~

We do not have any products that have gained regulatory approval. Our immuno-oncology technology platforms are designed to leverage the patient’s immune system to slow the growth and spread of, or eliminate, tumor cells. Any products we develop, may not effectively modulate the immune response to slow the spread of or eliminate cancer cells. The scientific evidence to support the feasibility of immuno-oncology product candidates is preliminary and limited. Our business and future success depend on our ability to obtain regulatory approval offor and ~~then successfully~~ commercialize atrasentan or any other future product candidates, or if we experience significant delays in doing so, our ~~product candidates. Advancing these novel therapies creates significant challenges for us, including, among others:~~business will be materially harmed.

~~All of our~~ product candidates will require ~~additional~~further clinical ~~and non-clinical~~and/or preclinical development, regulatory ~~review and~~ approval in multiple jurisdictions, ~~substantial investment, access to sufficient~~obtaining preclinical, clinical and commercial manufacturing supply, capacity and expertise, building of a commercial organization, substantial investment and significant marketing efforts before we ~~can~~ generate any revenue from product sales. ~~We are not permitted to market~~Atrasentan and our other product candidates must be authorized for marketing by the FDA, the Health Products and Food Branch of Health Canada, or ~~promote~~HPFB, the EMA, and certain other foreign regulatory agencies before we may commercialize any of our product candidates.

The success of atrasentan and our other product candidates ~~before we receive regulatory approval from~~depends on multiple factors, including:

If we do not succeed in one or more of these factors in a timely manner or at all, ~~our business, financial condition and results of operations may be materially adversely affected.~~

~~We may not be successful in our efforts~~then we could experience significant delays or an inability to ~~use and expand our technology platforms to build a pipeline of product candidates.~~

~~A key element of our strategy is to use and expand our technology platforms to build a pipeline of product candidates, combine~~successfully commercialize our product candidates, ~~with existing and novel therapies, and progress these~~which would materially harm our business. If we do not receive regulatory approvals for our product candidates, and combinations through clinical development for the treatment of various diseases. Although our research and development efforts to date have resulted in a pipeline of product candidates directed at various cancers, we may not be able to ~~develop~~continue our operations.

Success in preclinical studies and earlier clinical trials for our product candidates ~~that are safe and effective. Even if we are successful in continuing to build our pipeline, the potential product candidates that we identify~~ may not be ~~suitable for~~indicative of the results that may be obtained in later clinical ~~development,~~trials, including as a result of being shown to have harmful side effects or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance. If we do not continue to successfully develop and begin to commercialize product candidates, we will face difficulty in obtaining product revenues in future periods.

~~Clinical development involves a lengthy and expensive process with uncertain outcomes, and results of earlier studies and trials may not be predictive of future~~our phase 3 clinical trial ~~results. Our clinical trials~~for atrasentan, which may ~~fail to demonstrate adequately the safety and efficacy of one~~delay or ~~more of our product candidates, which would~~ prevent ~~or delay regulatory approval and commercialization.~~

~~Before~~ obtaining regulatory approvals for the commercial sale of our product candidates, we must demonstrate through lengthy, complex and expensive preclinical testing and clinical trials that our product candidates are both safe and effective for use in each target indication. approval.

Clinical ~~testing~~development is expensive and can take many years to complete, and its outcome is inherently uncertain. Failure can occur at any time during the clinical trial process. ~~The results of~~Success in preclinical studies and early clinical trials may not be predictive of results in later-stage clinical trials, and successful results from early or small clinical trials may not be replicated or show as favorable an outcome in later-stage or larger clinical trials, even if successful. We will be required to demonstrate through adequate and well-controlled clinical trials that our product candidates are safe and effective for their intended uses before we can seek regulatory approvals for their commercial sale. The conduct of phase 3 trials and the submission of an NDA, or biologics license application, or BLA, is a complicated process. We have limited experience in conducting clinical trials and preparing, submitting and supporting regulatory filings, and have not previously submitted an NDA or BLA. Consequently, we may be unable to successfully and efficiently execute and complete necessary clinical trials and other requirements in a way that leads to NDA or BLA submission and approval of any product candidate we are developing.

We in-licensed atrasentan from AbbVie. Atrasentan was previously investigated in a phase 3 clinical trial evaluating the effects of atrasentan on progression of kidney disease in patients with DKD, referred to as the SONAR trial. While patients receiving atrasentan in the SONAR trial had a lower rate of primary composite renal events than patients receiving placebo, the trial accrued measurable primary endpoints at a slower rate than expected, and AbbVie decided to close the study early for corporate strategic reasons. We believe the results of the SONAR trial support further evaluation of atrasentan in IgAN. Although the SONAR trial was not terminated due to safety concerns, further safety issues could be discovered in our phase 2 and phase 3 trials. Based on the data from the SONAR trial, we believe that atrasentan, combined with current standard of care, may have benefits compared to treatment with current standard of care. However, we cannot assure that any potential advantages that we believe atrasentan may have for treatment of patients with proteinuric glomerular diseases will be substantiated by our planned clinical trials or included in the product’s labeling should we obtain approval. Without head-to-head data, we will not be able to make comparative claims with respect

to any other treatments. In addition, the patient populations under investigation with atrasentan have many co-morbidities that may cause severe illness or death, which may be attributed to atrasentan in a manner that negatively affects its safety profile. If the results of our clinical trials for atrasentan are inconclusive with respect to efficacy, if we do not meet our clinical endpoints with statistical significance, or if there are unanticipated safety concerns or adverse events that emerge during clinical trials, we may have to conduct further preclinical studies and/or clinical trials before obtaining marketing approval, or we may be prevented from or delayed in obtaining marketing approval.

Though atrasentan has been evaluated by AbbVie in late-stage clinical trials, our other product candidates, such as zigakibart and CHK-336, have only been evaluated in early-stage clinical trials, and we may experience unexpected or negative results in the future as our other product candidates are evaluated in clinical trials. Any positive results we have observed in preclinical animal models may not be predictive of our future clinical trials in humans, as animal models carry inherent limitations relevant to all preclinical studies. Our product candidates may also fail to show the desired safety and efficacy in later stages of clinical development even if they successfully advance through initial clinical trials. Even if our clinical trials demonstrate acceptable safety and efficacy of atrasentan or our other product candidates and such product candidates receive regulatory approval, the labeling we obtain through negotiations with the FDA or foreign regulatory authorities may not include data on secondary endpoints and may not provide us with a competitive advantage over other products approved for the same or similar indications.

Many companies in the biotechnology industry have suffered significant setbacks in late-stage clinical trials after achieving positive results in early-stage development, and there is a high failure rate for product candidates proceeding through clinical trials. In addition, different methodologies, assumptions and applications we utilize to assess particular safety or efficacy parameters may yield different statistical results. Even if we believe the data collected from clinical trials of our product candidates are promising, these data may not be sufficient to support approval by the FDA or foreign regulatory authorities. Preclinical and clinical data can be interpreted in different ways. Accordingly, the FDA or foreign regulatory authorities could interpret these data in different ways from us or our partners, which could delay, limit or prevent regulatory approval. If our study data do not consistently or sufficiently demonstrate the safety or efficacy of any of our product candidates, including atrasentan, to the satisfaction of the FDA or foreign regulatory authorities, then the regulatory approvals for such product candidates could be significantly delayed as we work to meet approval requirements, or, if we are not able to meet these requirements, such approvals could be withheld or withdrawn.

Even if we complete the necessary preclinical studies and clinical trials, we cannot predict when, or if, we will obtain regulatory approval to commercialize a product candidate and the approval may be for a narrower indication than we seek.

Prior to commercialization, atrasentan and our other product candidates must be approved by the FDA pursuant to an NDA or BLA in the United States and pursuant to similar marketing applications by the HPFB, European Medicines Agency, or the EMA, and similar regulatory authorities outside the United States. The process of obtaining marketing approvals, both in the United States and abroad, is expensive and takes many years, if approval is obtained at all, and can vary substantially based upon a variety of factors, including the type, complexity and novelty of the product candidates involved. Failure to obtain marketing approval for a product candidate will prevent us from commercializing the product candidate. We have not received approval to market atrasentan or any of our other product candidates from regulatory authorities in any jurisdiction. We have no experience in submitting and supporting the applications necessary to gain marketing approvals, and, in the event regulatory authorities indicate that we may submit such applications, we may be unable to do so as quickly and efficiently as desired. Securing marketing approval requires the submission of extensive preclinical and clinical data and supporting information to regulatory authorities for each therapeutic indication to establish the product candidate’s safety and efficacy. Securing marketing approval also requires the submission of information about the product manufacturing process to, and inspection of manufacturing facilities by, the regulatory authorities. Our product candidates may not be effective, may be only moderately effective or may prove to have undesirable or unintended side effects, toxicities or other characteristics that may preclude our obtaining marketing approval or prevent or limit commercial use. Regulatory authorities have substantial discretion in the approval process and may refuse to accept or file any application or may decide if our data are insufficient for approval and require additional preclinical, clinical or other studies. In addition, varying interpretations of the data obtained from preclinical and clinical testing could delay, limit or prevent marketing approval of a product candidate.

Approval of atrasentan and our other product candidates may be delayed or refused for many reasons, including:

Even if our ~~Phase 2a metastatic pancreatic cancer study when compared to GVAX Pancreas alone and evaluated in 2~~^nd ~~line or greater; CRS-207 and GVAX Pancreas failed to meet the primary endpoint of an improvement in overall survival for patients with metastatic pancreatic cancer (3~~^rd ~~line and greater) in our Phase 2b ECLIPSE trial when compared to chemotherapy. There is typically an extremely high rate of failure of~~ product candidates ~~proceeding through clinical trials. Product candidates in later stages of clinical trials may fail to show the desired~~meet their pre-specified safety and efficacy ~~profile despite having progressed through preclinical studies and initial clinical trials. A number of companies~~endpoints in ~~the biopharmaceutical industry have suffered significant setbacks in advanced~~ clinical trials, ~~due~~the regulatory authorities may not complete their review processes in a timely manner and may not consider the clinical trial results sufficient to ~~lack of efficacy~~grant, or ~~adverse safety profiles, notwithstanding promising results in earlier trials. We cannot~~we may not be ~~certain that~~able to obtain, regulatory approval. Additional delays may result if an FDA Advisory Committee or other regulatory authority recommends non-approval or restrictions on approval. In addition, we ~~will not face similar setbacks. Most product candidates that commence clinical trials are never approved as commercial products.~~

We may experience delays or rejections based upon additional government regulation from future legislation or administrative action, or changes in ~~our ongoing~~regulatory authority policy during the period of product development, clinical trials and the review process. For example, in response to review of the statistical analysis plan for the ALIGN trial, we ~~do not know whether planned clinical trials will begin on time, need~~received correspondence from the FDA in February 2023 recommending that evaluation of the interim proteinuria endpoint analysis for accelerated approval in the ALIGN trial be delayed from week 24 to week 36. The FDA referenced the likelihood that the later timepoint would allow for a greater amount of eGFR data to be ~~redesigned, enroll patients on~~evaluated at the time of accelerated approval. We plan to engage in discussions with the FDA as soon as possible regarding this advice, but we may not be able to come to agreement regarding the appropriate timing for the primary proteinuria endpoint and/or ~~be completed on schedule, if at all. Clinical trials can be delayed~~may experience additional delays or potential rejection of our application for ~~a variety of reasons, including delays related to:~~

~~We could encounter delays if~~the form of narrow indications, warnings, contraindications or a ~~clinical trial is suspended~~risk evaluation and mitigation strategy, or ~~terminated by us, by the IRBs of the institutions in which such trials are being conducted, by the Data Safety Monitoring Board, or DSMB, for such trial or by the FDA or other~~REMS. These regulatory ~~authorities. Such~~ authorities may ~~impose a~~also grant approval subject to the performance of costly post-marketing clinical hold or suspend or terminate a clinical trial due to a number of factors, including failure to conduct the clinical trial in accordance with regulatory requirements or our clinical protocols, a negative finding from an inspection of the clinical trial operations or trial site by the FDA or othertrials. In addition, regulatory authorities ~~unforeseen safety issues~~may not approve the labeling claims that are necessary or ~~adverse side effects, failure to demonstrate a benefit from using a drug, changes in governmental regulations or administrative actions, lack of adequate funding to continue~~desirable for the ~~clinical trial, or safety concerns raised by other clinical trials of therapies with similar mechanisms of action.~~

Furthermore, we rely on CROs and clinical trial sites to ensure the proper and timely conduct of our clinical trials and while we have agreements governing their committed activities, we have limited influence over their actual performance. If we experience delays in the completion of, or termination of, any clinical trialsuccessful commercialization of our product ~~candidates,~~candidates. Any of the foregoing scenarios could materially harm the commercial prospects offor our product candidates ~~will be harmed,~~ and our ability to generate product revenues from any of these product candidates will be delayed. In addition, any delays in completing our clinical trials will increase our costs, slow down our product candidate development and approval process and jeopardize our ability to commence product sales and generate revenues. Any of these occurrences may harmadversely affect our business, financial condition, results of operations and ~~prospects significantly.~~prospects.

~~In addition, principal investigators for~~Atrasentan and our clinical trials may serve as scientific advisors or consultants to us from time to time and receive cash compensation in connection with such services. We also give grants to investigators’ institutions from time to time. If certain of these relationships exceed specific financial thresholds, they must be reported to the FDA. If these relationships and any related compensation paid results in perceived or actual conflicts of interest, or the FDA concludes that the financial relationship may have affected interpretation of the study, the integrity of the data generated at the applicable clinical trial site may be questioned and the utility of the clinical trial itself may be jeopardized, which could result in the delay in approval, or rejection, of our marketing applications by the FDA. Many of the factors that cause, or lead to, a delay in the commencement or completion of clinical trials may also ultimately lead to the denial of regulatory approval of our product candidates.

In addition, even if the trials are successfully completed, we cannot guarantee that the FDA or foreign regulatory authorities will interpret the results as we do, and we may need to conduct additional trials before we submit applications seeking regulatory approval of our product candidates.

~~Our~~other product candidates ~~alone or in combination with other existing or novel therapies~~ may cause undesirable and/or unforeseen side effects or ~~may have other properties that~~be perceived by the public as unsafe, which could ~~halt~~delay or prevent their advancement into clinical ~~development, prevent their~~trials or regulatory approval, limit ~~their~~the commercial potential ~~if approved,~~ or result in significant negative consequences.

~~Undesirable~~As is the case with pharmaceuticals generally, it is likely that there may be side effects ~~caused by~~and adverse events associated with our product ~~candidates alone or~~candidates’ use. For example, in ~~combination with other existing or novel therapies could cause us or regulatory authorities to interrupt, delay or halt clinical trials~~the phase 3 SONAR trial, the most common adverse events of atrasentan included fluid retention and ~~could result in a more restrictive label or the delay or denial of regulatory approval by the FDA or comparable foreign regulatory authorities.~~anemia. Results of our clinical trials could reveal a high and unacceptable severity and prevalence of side effects or unexpected characteristics.

~~To date, patients treated with our product candidates have experienced drug-related side effects some of which were Grade 3~~ If any such adverse events or AEs, which are considered moderate, and some of which were Grade 4 AEs which are considered severe. Examples of the AEs experienced include among others, fevers, chills, nausea, vomiting, fatigue, headaches, hypotension and listeriosis.

~~If unacceptable side effects arise in the development of our product candidates, we could suspend or terminate~~occur, our clinical trials could be suspended or terminated and the FDA, the HPFB, the European Commission, the EMA or ~~comparable foreign~~other regulatory authorities could order us to cease ~~clinical trials~~further development of, or deny approval of, our product candidates for any or all targeted indications. ~~For example, in October 2016 after receiving notification~~Even if we can demonstrate that ~~a blood culture sample taken from an indwelling port of a metastatic pancreatic cancer patient tested positive for~~ ~~Listeria~~, the FDA placed clinical trials involving our LADD investigational agents on partial clinical hold to pause new patient enrollment. This hold was lifted in November 2016. We cannot provide assurances that there willall future SAEs are not ~~be further adverse events, or that our trials will not be placed on additional clinical holds in the future. Treatment-related side effects~~product-related, such occurrences could ~~also~~ affect patient recruitment or the ability of enrolled patients to complete the ~~trial~~trial. Moreover, if we elect, or ~~result in potential product liability claims. In addition, these side effects may~~are required, to not ~~be appropriately recognized~~initiate, delay, suspend or ~~managed by the treating medical staff. We expect to have to train medical personnel using our product candidates to understand the side effect profiles for our~~terminate any future clinical ~~trials, including any potential side effects from other existing or novel therapies used in our trials, and upon any commercialization~~trial of any of our product ~~candidates. Inadequate training in recognizing or managing~~candidates, the ~~potential side effects~~commercial prospects of ~~our~~such product candidates ~~or combination therapies that include~~may be harmed and our ability to generate product revenues from any of these product candidates ~~could result in patient injury~~may be delayed or ~~death. In addition, if side effects are observed in competing product candidates that are perceived to have similarities to ours, such as competing~~ ~~listeria-based vaccines or other more general approaches to immuno-oncology, regulators or patients may infer that our product candidates could cause similar side effects.~~eliminated. Any of these occurrences may harm our ability to develop other product candidates, and may adversely affect our business, financial condition, results of operations and prospects significantly. Other treatments for kidney diseases that utilize an ETA receptor antagonist or similar mechanism of action could also generate data that could adversely affect the clinical, regulatory or commercial perception of atrasentan and our other product candidates.

Additionally, if ~~one or more~~any of our product candidates receives marketing approval, the FDA could require us to adopt a REMS to ensure that the benefits of the product outweigh its risks, which may include, for example, a Medication Guide outlining the risks of the product for distribution to patients and a communication plan to health care practitioners, or other elements to assure safe use of the product. For example, other approved endothelin A receptor antagonists, or ERAs, have been required to include a REMS for women of child-bearing age regarding the risk of embryo-fetal toxicity and/or hepatotoxicity. Filspari (sparsentan), which was approved in February 2022, has a black box warning on its label for hepatotoxicity and embryo-fetal toxicity and is only available through a restricted distribution program called the Filspari REMS. Furthermore, if we or others later identify undesirable side effects caused by ~~such products, a number of~~our product candidates, several potentially significant negative consequences could result, including:

Any of these ~~events could prevent us from achieving or maintaining market acceptance of the particular product candidate, if approved, and could significantly~~occurrences may harm our business, financial condition, results of operations and ~~prospects.~~prospects significantly.

IfCertain of the diseases we ~~encounter difficulties enrolling~~seek to treat have low prevalence, and it may be difficult to identify patients with these diseases, which may lead to delays in enrollment for our trials or slower commercial revenue growth if atrasentan or our other product candidates are approved.

While chronic kidney diseases represent a large market, primary glomerular kidney diseases, including IgAN, to which our lead product candidate is targeted, have relatively low incidence and prevalence. We estimate that IgAN affects approximately 1.3 per 100,000 individuals per year in the United States. The global incidence of IgAN is approximately 2.5 per 100,000 individuals per year. Variations in disease incidence and prevalence are, in part, due to regional differences in urine screening, referral patterns and indications for biopsy. We estimate that IgAN is associated with progressive loss of kidney function leading to ESKD in approximately 30% to 45% of IgAN patients over 20 to 25 years, representing a significant unmet need for new treatment options. We are also developing CHK-336 for the treatment of primary hyperoxaluria, which is an ultra-orphan disease with an even smaller number of patients. We have received rare pediatric disease designation from the FDA for CHK-336 for the treatment of PH. Small target patient populations could pose obstacles to the timely recruitment and enrollment of a sufficient number of eligible patients in our trials, or limit a product candidate’s commercial potential. Patient enrollment may be affected by other factors including:

Our inability to enroll a sufficient number of patients ~~who remain~~with these diseases for our clinical trials would result in ~~the study until its conclusion. We may experience difficulties in patient enrollment~~significant delays and could cause us to not initiate or abandon one or more clinical trials altogether. Enrollment delays in our clinical trials may result in increased time to potential approval and development costs for ~~a variety of reasons. The enrollment of patients depends on many factors, including:~~

In addition, our clinical trials will compete with other clinical trials for product candidates that are in the same therapeutic areas as our product candidates, and this competition will reduce the number and types of patients available to us, because some patients who might have opted to enroll in our trials may instead opt to enroll in a trial being conducted by one of our competitors. Since the number of qualified clinical investigators is limited, we expect to conduct some of our clinical trials at the same clinical trial sites that some of our competitors use, which will reduce the number of patients who are available for our clinical trials in such clinical trial site. Moreover, because our product candidates represent a departure from more commonly used methods for cancer treatment, potential patients and their doctors may be inclined to use conventional therapies, such as chemotherapy and hematopoietic cell transplantation, rather than enroll patients in any future clinical trial.additional financing.

~~Delays in patient enrollment may result in increased costs or may affect the timing or outcome of the planned clinical trials, which could prevent completion of these trials and adversely affect~~Additionally, our ~~ability to advance the development of our product candidates.~~

~~Clinical trials are expensive, time-consuming and difficult to design and implement.~~

Human clinical trials are expensive and difficult to design and implement, in part because they are subject to rigorous regulatory requirements. Because our product candidates are based on new technologies, we expect that they will require extensive research and development and have substantial manufacturing and processing costs. In addition, costs to treat patients with relapsed/refractory cancer and to treat potential side effects that may result from our product candidates may be significant. Accordingly, our clinical trial costs are likely to be significantly higher than for more conventional therapeutic technologies or drug products.

~~The market opportunities for our product candidates may be limited to those patients who are ineligible for established therapies or for whom prior therapies have failed, and may be small.~~

Cancer therapies are sometimes characterized as first line, second line or third line, and the FDA often approves new therapies initially only for third line use. When cancer is detected early enough, first-line therapy, usually chemotherapy, hormone therapy, surgery, radiotherapy or a combination of these, is sometimes adequate to cure the cancer or prolong life without a cure. Second- and third-line therapies are administered to patients when prior therapy is not effective. We expect to initially seek approval of our product candidates as a therapy for patients who have received one or more prior treatments. Subsequently, for those products that prove to be sufficiently beneficial, if any, we would expect to seek approval potentially as a first-line therapy, but there is no guarantee that our product candidates, even if approved, would be approved for first-line therapy, and, prior to any such approvals, we may have to conduct additional clinical trials.

~~Our~~ projections of both the number of people who have ~~the cancers we are targeting,~~IgAN and other proteinuric glomerular diseases, as well as the ~~subset of~~ people with these ~~cancers who have received one or more prior treatments, and~~diseases who have the potential to benefit from treatment with our product candidates, are based on ~~our beliefs and estimates. These~~ estimates ~~have been~~ derived from a ~~variety of sources, including scientific literature, surveys of clinics, patient foundations, or~~commissioned market research study, which may not accurately identify the size of the market for our product candidates. The total addressable market opportunity for atrasentan and ~~may prove to be incorrect. Further, new studies may change~~our other product candidates will ultimately depend upon, among other things, the ~~estimated incidence or prevalence of these cancers.~~final labeling for our product candidates, if our product candidates are approved for sale in our target indications, acceptance by the medical community and patient access, drug pricing and reimbursement. The number of patients globally may turn out to be lower than ~~expected. Additionally, the potentially addressable patient population for our product candidates may be limited or~~expected, patients may not be otherwise amenable to treatment with our product ~~candidates. Even~~candidates, or new patients may become increasingly difficult to identify or gain access to, all of which would adversely affect our results of operations and our business.

Moreover, in light of the limited number of potential patients impacted by proteinuric glomerular diseases, our per-patient therapy pricing of atrasentan, if ~~we obtain significant market share for~~approved, may need to be high in order to recover our development and manufacturing costs, fund additional research and achieve profitability. We may also need to fund patient support programs upon the marketing of a product candidate, which would negatively affect our product candidates, because the potential target populations are small, we may never achieve profitability without obtaining regulatory approval for additional indications, including to be used as first or second line therapy.

~~We have obtained orphan drug designations from the FDA and European Medicines Agency for CRS-207 for the treatment of mesothelioma.~~revenue. We may be unable to maintain ~~the benefits associated with orphan drug designation, including the potential for market exclusivity.~~

~~Under the Orphan Drug Act, the FDA may grant orphan drug designation to~~or obtain sufficient therapy sales volumes at a drug or biologic intended to treat a rare disease or condition, which is defined as one occurring in a patient population of fewer than 200,000 in the United States, or a patient population greater than 200,000 in the United States where there is no reasonable expectation that the cost of developing the drug or biologic will be recovered from sales in the United States. In the United States, orphan drug designation entitles a party to financial incentives such as opportunities for grant funding towards clinical trial costs, tax advantages and user-fee waivers. In addition, if a product that has orphan drug designation subsequently receives the first FDA approval for the disease for which it has such designation, the product is entitled to orphan drug exclusivity, which means that the FDA may not approve any other applications, including a full Biologics License Application, or BLA, to market the same biologic for the same indication for seven years, except in limited circumstances, such as a showing of clinical superiority to the product with orphan drug exclusivity or where the manufacturer is unable to assure sufficient product quantity.

In the European Union, orphan drug designation may be granted to products that are intended to treat life-threatening or debilitating conditions that affect fewer than 5 out of 10,000 people (or if there is no reasonable expectation that returns on a marketed product justify the expenses required to develop the product) and, if treatment exists, the new product must provide significant benefit over existing therapies; these conditions must be met at the time of a marketing authorization application in order to receive the orphan designation benefits conferred to an approved product. In the European Union, orphan designation entitles a party to financial incentives such as reduction of fees or fee waivers and 10 years of market exclusivity is granted following drug or biological product approval. This period may be reduced to 6 years if the orphan drug designation criteria are no longer met, including where it is shown that the product is sufficiently profitable notprice high enough to justify ~~maintenance of market exclusivity.~~our development efforts and our sales, marketing and manufacturing expenses.

~~Even though we have received orphan drug designation for CRS-207 for the treatment of mesothelioma, in the European Union the conditions under which it was granted~~We may not be ~~applicable at~~successful in our efforts to expand our pipeline of product candidates and develop marketable products.

Because we have limited financial and managerial resources, we focus on research programs and product candidates that we identify for specific indications. Our business depends on our successful development and commercialization of the ~~time~~limited number of

internal product candidates we are researching or have in preclinical development. Even if we are successful in continuing to build our pipeline, development of the potential product candidates that we identify will require substantial investment in additional clinical development, management of clinical, preclinical and manufacturing activities, regulatory approval in multiple jurisdictions, obtaining manufacturing supply capability, building a commercial organization, and significant marketing ~~authorization application~~efforts before we generate any revenue from product sales. Furthermore, such product candidates may not be suitable for clinical development, including as a result of their harmful side effects, limited efficacy or other characteristics that indicate that they are unlikely to be products that will receive marketing approval and achieve market acceptance. If we cannot develop further product candidates, we may not be able to obtain product revenue in future periods, which would adversely affect our business, prospects, financial condition and results of operations.

Although our pipeline includes multiple programs, we are primarily focused on our lead product candidates, atrasentan, zigakibart and CHK-336, and we may forego or delay pursuit of opportunities with other product candidates or for other indications that later prove to have greater commercial potential. Our resource allocation decisions may cause us to fail to capitalize on viable commercial products or profitable market opportunities and our spending on current and future research and development programs and product candidates for specific indications may not yield any commercially viable products. Our understanding and evaluation of biological targets for the ~~first~~discovery and development of new product candidates may fail to identify challenges encountered in subsequent preclinical and clinical development. If we do not accurately evaluate the commercial potential or target market for a particular product candidate, we may relinquish valuable rights to that product candidate through collaboration, licensing or other royalty arrangements in cases in which it would have been more advantageous for us to retain sole development and commercialization rights.

Any product candidate for which we obtain marketing approval ~~of either product candidate for~~will be subject to extensive post-marketing regulatory requirements and could be subject to post-marketing restrictions or withdrawal from the ~~orphan-designated indication due to the uncertainties associated with developing pharmaceutical products. In addition, exclusive marketing rights in the United States~~market, and we may be limited if we seek approval for an indication broader than the orphan-designated indication or may be lost if the FDA later determines that the request for designation was materially defective or if the manufacturer is unable to assure sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Further, even if we obtain orphan drug exclusivity for a product, that exclusivity may not effectively protect the product from competition because different drugs with different active moieties can be approved for the same condition. Even after an orphan product is approved, the FDA can subsequently approve the same drug with the same active moiety for the same condition if the FDA concludes that the later drug is safer, more effective, or makes a major contribution to patient care. Orphan drug designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval process. In addition, while we intend to seek orphan drug designation for other product candidates, we may never receive such designations.

~~We are~~ subject to ~~a multitude of manufacturing, supply chain, storage and distribution risks, any of which could substantially increase our costs and limit the supply of our product candidates.~~

~~The process of manufacturing our product candidates is complex, highly regulated and subject to several risks, including:~~

~~Any adverse developments affecting manufacturing operations for~~international jurisdictions would prevent us from marketing our product candidates ~~and/~~outside the United States.

To market and sell atrasentan and our other product candidates in other jurisdictions, we must obtain separate marketing approvals and comply with numerous and varying regulatory requirements. The approval procedure varies among countries and can involve additional testing. The time and data required to obtain approval may differ substantially from that required to obtain FDA approval. The regulatory approval process outside the United States generally includes all the risks associated with obtaining FDA approval. In addition, in many countries outside the United States, we must secure product reimbursement approvals before regulatory authorities will approve the product for sale in that country. Failure to obtain foreign regulatory approvals or ~~damage that occurs during shipping may~~non-compliance with foreign regulatory requirements could result in significant delays, ~~inventory shortages, lot failures, withdrawals~~difficulties and costs for us and could delay or ~~recalls~~prevent the introduction of our product candidates in certain countries.

If we fail to comply with the regulatory requirements in international markets and receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed and our business will be adversely affected. We may not obtain foreign regulatory approvals on a timely basis, if at all. Our failure to obtain approval of any of our product candidates by regulatory authorities in another country may significantly diminish the commercial prospects of that product candidate and our business prospects could decline.

The commercial success of our product candidates, including atrasentan, will depend upon their degree of market acceptance by providers, patients, patient advocacy groups, third-party payors and the general medical community.

Even with the requisite approvals from the FDA, the HPFB, the EMA and other regulatory authorities internationally, the commercial success of our product candidates will depend, in part, on the acceptance of providers, patients and third-party payors of drugs designed to act as a selective blocker of the ETA receptor in particular for atrasentan, and our product candidates in general, as medically necessary, cost-effective and safe. In addition, we may face challenges in seeking to establish and grow sales of atrasentan or our other product candidates. Any product that we commercialize may not gain acceptance by providers, patients, patient advocacy groups, third-party payors and the general medical community. If these products do not achieve an adequate level of acceptance, we may not generate significant product revenue and may not become profitable. The degree of market acceptance of atrasentan and our other product candidates, if approved for commercial sale, will depend on several factors, including:

Even if a potential product displays a favorable efficacy and safety profile in preclinical studies and clinical trials, market acceptance of the product will not be fully known until after it is launched.

The pricing, insurance coverage and reimbursement status of newly approved products is uncertain. Failure to ~~write off inventory, incur other charges~~obtain or maintain adequate coverage and ~~expenses~~reimbursement for ~~supply of drug product that fails to meet specifications, undertake costly remediation efforts, or seek more costly manufacturing alternatives. Inability to meet the demand for any of~~ our product candidates, if approved, could ~~damage our reputation and the reputation of our products among physicians, healthcare payors, patients or the medical community, which could adversely affect~~limit our ability to ~~operate~~market those products and decrease our ~~business~~ability to generate product revenue.

Our target indications, including IgAN and ~~our results~~other proteinuric glomerular diseases, are indications with relatively small patient populations. For product candidates that are designed to treat smaller patient populations to be commercially viable, the reimbursement for such product candidates must be higher, on a relative basis, to account for the lack of ~~operations.~~

~~We currently have no marketing~~volume. Accordingly, we will need to implement a coverage and ~~sales organization and have no experience in marketing products.~~reimbursement strategy for any approved product candidate that accounts for the smaller potential market size. If we are unable to establish ~~marketing~~or sustain coverage and ~~sales capabilities or enter into agreements with third parties to market and sell~~adequate reimbursement for our product candidates wefrom third-party payors, the adoption of those product candidates and sales revenue will be adversely affected, which, in turn, could adversely affect the ability to market or sell those product candidates, if approved.

We expect that coverage and reimbursement by third-party payors will be essential for most patients to be able to afford these treatments. Accordingly, sales of atrasentan and our other product candidates will depend substantially, both domestically and internationally, on the extent to which the costs of our product candidates will be paid by health maintenance, managed care, pharmacy benefit and similar healthcare management organizations, or will be reimbursed by government authorities, private health coverage insurers and other third-party payors. Even if coverage is provided, the approved reimbursement amount may not be ~~able~~high enough to ~~generate product revenue.~~

We currently have only limited marketing capabilities and no sales or distribution capabilities and have no marketed products. We intend to develop an in-house commercial organization and sales force, which will require significant capital expenditures, management resources and time. We will have to compete with other pharmaceutical and biotechnology companies to recruit, hire, train and retain marketing and sales personnel.

If we are unable or decide not to establish internal sales, marketing and distribution capabilities, we will pursue collaborative arrangements regarding the sales and marketing of our products; however, we cannot assure you that we will be ableallow us to establish or maintain pricing sufficient to realize a sufficient return on our investment.

There is significant uncertainty related to the insurance coverage and reimbursement of newly approved products. In the United States, third-party payors, including private and governmental payors, such ~~collaborative arrangements,~~as the Medicare and Medicaid programs, play an important role in determining the extent to which new drugs will be covered and reimbursed. The Medicare program covers certain individuals aged 65 or ~~if we~~older, disabled or suffering from ESKD. The Medicaid program, which varies from state-to-state, covers certain individuals and families who have limited financial means. The Medicare and Medicaid programs increasingly are ~~able~~used as models for how private payors and other governmental payors develop their coverage and reimbursement policies for drugs. One payor’s determination to ~~do so,~~provide coverage for a drug or biological product, however, does not assure that ~~they~~other payors will ~~have effective sales forces. Any revenue we receive~~also provide coverage for the product. Further, a payor’s decision to provide coverage for a drug or biological product does not imply that an adequate reimbursement rate will ~~depend upon~~be approved.

In addition to government and private payors, professional organizations such as the ~~efforts~~American Medical Association, or the AMA, can influence decisions about coverage and reimbursement for new products by determining standards for care. In addition, many private payors contract with commercial vendors who sell software that provide guidelines that attempt to limit utilization of, ~~such third parties, which~~and therefore reimbursement for, certain products deemed to provide limited benefit to existing alternatives. Such organizations may ~~not be successful. We may have little~~set guidelines that limit reimbursement or no control over the marketing and sales efforts of such third parties and our revenue from product sales may be lower than if we had commercialized our product candidates ourselves. We also face competition in our search for third parties to assist us with the sales and marketing effortsutilization of our product candidates. Even if favorable coverage and reimbursement status is attained for one or more product candidates for which our collaborators receive regulatory approval, less favorable coverage policies and reimbursement rates may be implemented in the future.

~~We cannot assure you that we will be able to develop in-house sales and distribution capabilities or establish or maintain relationships with third-party collaborators to commercialize any product in~~Outside the United States, ~~or elsewhere.~~

~~A variety~~international operations are generally subject to extensive governmental price controls and other market regulations, and we believe the increasing emphasis on cost-containment initiatives in Europe, Canada and other countries has and will continue to put pressure on the pricing and usage of ~~risks associated with marketing~~therapeutics such as our product ~~candidates internationally could materially adversely affect our business.~~candidates. In many countries, particularly the countries of the EU, the prices of medical products are subject to varying price control mechanisms as part of national health systems. In these countries, pricing negotiations with governmental authorities can take considerable time after the receipt of

marketing approval for a product. To obtain reimbursement or pricing approval in some countries, we may be required to ~~seek regulatory approval~~conduct a clinical trial that compares the cost-effectiveness of our product ~~candidates outside~~candidate to other available therapies. In general, the prices of ~~the United States and, accordingly, we expect that we will be subject to additional risks related to operating in foreign countries if we obtain the necessary approvals, including:~~

~~These and other risks associated with our international operations may materially adversely affect our ability to attain or maintain profitable operations.~~

~~We face significant competition from other biotechnology and pharmaceutical companies, and our operating results will suffer if we fail to compete effectively.~~

The biopharmaceutical industry is characterized by intense competition and rapid innovation. Our competitors may be able to develop other compounds or drugs that are able to achieve similar or better results. Many major multinational pharmaceutical companies, established biotechnology companies, specialty pharmaceutical companies and universities and other research institutions continue to invest time and resources in developing novel approaches to immuno-oncology. Promising results have spurred significant competition from major pharmaceutical and biotechnology companies alike. Our competitors in the field of diversified immuno-oncology include: AstraZeneca PLC, Amgen Inc., Bristol-Myers Squibb Company, Celgene Corporation, Eli Lilly and Company, GlaxoSmithKline plc, Incyte Corporation, Janssen Pharmaceuticals, Merck & Co. Inc., Novartis AG, Pfizer Inc., Roche Holding Ltd,

~~and Sanofi SA. Our competitors in~~ ~~listeria-based technology include Advaxis, Inc.; in STING-pathway technology include Merck & Co., Inc.; and in B-select technology (anti-APRIL)include Visterra, Inc.~~Many of our competitors have substantially greater financial, technical and other resources than we do, such as larger research and development staff and experienced marketing, market access and manufacturing organizations and well-established sales forces. Smaller or early-stage companies may also prove to be significant competitors, particularly through collaborative arrangements with large, established companies. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated in our competitors. Competition may increase further as a result of advances in the commercial applicability of technologies and greater availability of capital for investment in these industries. Our competitors, either alone or with collaborative partners, may succeed in developing, acquiring or licensing on an exclusive basis drug or biologic products that are more effective, safer, more easily commercialized or less costly than our product candidates or may develop proprietary technologies or secure patent protection that we may need for the development of our technologies and products. We believe the key competitive factors that will affect the development and commercial success of our product candidates are efficacy, safety, tolerability, reliability, convenience of use, price and reimbursement.

~~Even if we obtain regulatory approval of our product candidates, the availability and price of our competitors’ products could limit the demand and the price~~ we are able to charge for our product candidates. ~~We may not be able to implement our business plan if~~Accordingly, in markets outside the ~~acceptance of our product candidates is inhibited by price competition or~~United States, the reluctance of physicians to switch from existing methods of treatment to our product candidates, or if physicians switch to other new drug or biologic products or choose to reserve our product candidates for use in limited circumstances.

~~We are highly dependent on our key personnel, and if we are not successful in attracting and retaining highly qualified personnel, we may not be able to successfully implement our business strategy.~~

Our ability to compete in the highly competitive biotechnology and pharmaceutical industries depends upon our ability to attract and retain highly qualified managerial, scientific and medical personnel. We are highly dependent on our management, scientific and medical personnel, including our President and Chief Executive Officer, our Chief Scientific Officer, our Chief Medical Officer and our Chief Operating Officer, as well as our executives at Aduro Biotech Europe. The loss of the services of any of our executive officers, other key employees, and other scientific and medical advisors, and our inability to find suitable replacements could result in delays in product development and harm our business. The Northern California region is headquarters to many other biopharmaceutical companies and many academic and research institutions. Competition for skilled personnel in our market is intense and may limit our ability to hire and retain highly qualified personnel on acceptable terms or at all.

Despite our efforts to retain valuable employees, members of our management, scientific and development teams may terminate their employment with us on short notice. Although we have employment agreements with our key employees, these employment agreements provide for at-will employment, which means that any of our employees could leave our employment at any time, with or without notice. We do not maintain “key person” insurance policies on the lives of these individuals or the lives of any of our other employees.

~~We will need to grow the size of our organization, and we may experience difficulties in managing this growth.~~

At September 30, 2017, we had 143 full-time employees, including 106 employees engaged in research and development. As our development and commercialization plans and strategies develop, we expect to need additional managerial, operational, sales, marketing, financial and other personnel. Future growth would impose significant added responsibilities on members of management, including:

Our future financial performance and our ability to commercialize our product candidates will depend, in part, on our ability to effectively manage any future growth, and our management may also have to divert a disproportionate amount of its attention away from day-to-day activities in order to devote a substantial amount of time to managing these growth activities.

We currently rely, and for the foreseeable future will continue to rely, in substantial part on certain independent organizations, advisors and consultants to provide certain services, including substantially all aspects of regulatory approval, clinical management, and manufacturing. We cannot assure you that the services of independent organizations, advisors and consultants will continue to be available to us on a timely basis or reasonable economic terms when needed, or at all. In addition, if we are unable to effectively manage our outsourced activities or if the quality or accuracy of the services provided by consultants is compromised for any reason, our clinical trials may be ~~extended, delayed or terminated,~~reduced compared with the United States and we may ~~not~~ be ~~able~~insufficient to ~~obtain regulatory approval of our product candidates or otherwise advance our business.~~generate commercially reasonable revenues and profits.

~~If we are not able to effectively expand our organization~~Moreover, increasing efforts by ~~hiring new employees~~governmental and expanding our groups of consultants and contractors, we may not succeed in further developing and commercializing our product candidates and, accordingly, may not achieve our research, development and commercialization goals.

~~Our internal computer systems, or those used by our CROs or other contractors or consultants, may fail or suffer security breaches.~~

Despite the implementation of security measures, our internal computer systems and those of our CROs and other contractors and consultants are vulnerable to damage from computer viruses and unauthorized access. While we have not to our knowledge experienced any such material system failure or security breach to date, if such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations. For example, the loss of clinical trial data from completed or future clinical trials could result in delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. Likewise, we rely on third parties for the manufacture of our product candidates and to conduct clinical trials, and similar events relating to their computer systems could also have a material adverse effect on our business. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability and the further development and commercialization of our product candidates could be delayed.

~~Business disruptions could seriously harm our future revenue and financial condition and increase our costs and expenses.~~

Our operations, and those of our CROs and other contractors and consultants, could be subject to earthquakes, power shortages, telecommunications failures, water shortages, floods, hurricanes, typhoons, fires, extreme weather conditions, medical epidemics and other natural or man-made disasters or business interruptions, for which we are predominantly self-insured. The occurrence of any of these business disruptions could seriously harm our operations and financial condition and increase our costs and expenses. We rely on third-party manufacturers to produce and process our product candidates on a patient by patient basis. Our ability to obtain clinical supplies of our product candidates could be disrupted if the operations of these suppliers are affected by a man-made or natural disaster or other business interruption. Our corporate headquarters is in Northern California near major earthquake faults and fire zones. The ultimate impact on us, our significant suppliers and our general infrastructure of being located near major earthquake faults and fire zones and being consolidated in certain geographical areas is unknown, but our operations and financial condition could suffer in the event of a major earthquake, fire or other natural disaster.

Our employees, independent contractors, consultants, commercial partners and vendors may engage in misconduct or other improper activities, including noncompliance with regulatory standards and requirements.

We are exposed to the risk that our employees, independent contractors, consultants, commercial partners and vendors may engage in fraudulent or illegal activity. Misconduct by these parties could include intentional, reckless and/or negligent conduct or disclosure of unauthorized activities to us that violates: (1) the laws of the FDA and other similar foreign regulatory bodies, including those laws requiring the reporting of true, complete and accurate information to such regulators; (2) manufacturing standards; (3) healthcare fraud and abuse lawspayors, in the United States and ~~similar foreign fraudulent misconduct laws;~~internationally, to cap or ~~(4) laws that require~~reduce healthcare costs may cause such organizations to limit both coverage and level of reimbursement for new products approved and, as a result, they may not cover or provide adequate payment for our product candidates. We expect to experience pricing pressures in connection with the ~~true, complete and accurate reporting of financial information or data. If we obtain FDA approval~~sale of any of our product candidates due to the trend toward managed healthcare, the increasing influence of certain third-party payors, such as health maintenance organizations, and ~~begin commercializing those~~additional legislative changes. The downward pressure on healthcare costs in general, particularly prescription drugs and surgical procedures and other treatments, has become very intense. As a result, increasingly high barriers are being erected to the entry of new products into the healthcare market. Recently there have been instances in which third-party payors have refused to reimburse treatments for patients for whom the treatment is indicated in the United States, our potential exposure under such laws will increase significantly, and our costs associated with compliance with such laws are also likely to increase. These laws may impact, among other things, our current activities with principal investigators and research patients, as well as proposed and future sales, marketing and education programs. In particular, the promotion, sales and marketing of healthcare items and services, as well as certain business arrangements in the healthcare industry, are subject to extensive laws designed to prevent fraud, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, structuring and commissions, certain customer incentive programs and other business arrangements generally. Activities subject to these laws also involve the improper use of information obtained in the course of patient recruitment for clinical trials.

We have adopted a code of business conduct and ethics, but it is not always possible to identify and deter misconduct by our employees and other third parties, and the precautions we take to detect and prevent these activities 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 or regulations. If any such actions are instituted against us and we are not successful in defending ourselves or asserting our rights, those actions could result in the imposition of significant fines or other sanctions, including the imposition of civil, criminal and administrative penalties, damages, monetary fines, possible exclusion from participation in Medicare, Medicaid and other federal healthcare programs, contractual damages, reputational harm, diminished profits and future earnings and curtailment of operations, any of which could adversely affect our ability to operate our business and our results of operations. Whether or not we are successful in defending against such actions or investigations, we could incur substantial costs, including legal fees, and divert the attention of management in defending ourselves against any of these claims or investigations.

~~Even if we obtain regulatory approval of our~~FDA-approved product ~~candidates, the products may not gain market acceptance among physicians, patients, hospitals, cancer treatment centers and others in the medical community.~~

The use of LADD, STING Activator or B-select product candidates as potential cancer treatments, even if approved, may not become broadly accepted by physicians, patients, hospitals, cancer treatment centers and others in the medical community. For example, certain of the product candidates that we are developing target a cell surface marker that may be present on non-cancerous cells as well as cancer cells. It is possible that our product candidates may kill these non-cancerous cells, which may result in unacceptable side effects, including death. Additional factors will influence whether our product candidates are accepted in the market, including:

If our product candidates are approved but fail to achieve or maintain market acceptance among physicians, patients, hospitals, cancer treatment centers or others in the medical community, we will not be able to generate significant revenue.

~~If product liability lawsuits are brought against us, we may incur substantial liabilities and may be required to limit commercialization of our product candidates.~~

We face an inherent risk of product liability as a result of the clinical testing of our product candidates alone or in combination with other existing or novel therapies and will face an even greater risk if we commercialize any products. For example, we may be sued if our product candidates cause or are perceived to cause injury or are found to be otherwise unsuitable during clinical testing, manufacturing, marketing or sale. Any such product liability claims may include allegations of defects in manufacturing, defects in design, a failure to warn of dangers inherent in the product, negligence, strict liability or a breach of warranties. Claims could also be asserted under state consumer protection acts. If we cannot successfully defend ourselves against product liability claims, we may incur substantial liabilities or be required to limit commercialization of our product candidates. Even successful defense would require significant financial and management resources. Regardless of the merits or eventual outcome, liability claims may result in:

~~Our insurance coverage may not adequately protect us in the event of a product liability or other claims.~~

We currently hold product liability insurance in amounts that we believe are customary for similarly situated companies and adequate to provide us with insurance coverage for foreseeable risks, but which may not be adequate to cover all liabilities that we may incur. Insurance coverage is increasingly expensive. We may not be able to maintain insurance at a reasonable cost or in an amount adequate to satisfy any liability that may arise, if at all. Our insurance policy contains various exclusions, and we may be subject to a product liability claim for which we have no coverage. We may have to pay any amounts awarded by a court or negotiated in a settlement that exceed our coverage limitations or that are not covered by our insurance, and we may not have, or be able to obtain, sufficient capital to pay such amounts. Even if our agreements with any future corporate collaborators entitle us to indemnification against losses, such indemnification may not be available or adequate should any claim arise. In addition, if we are unable to obtain sufficient product liability insurance at an acceptable cost to protect against potential product liability claims, the commercialization of products we develop, alone or with corporate collaborators could be delayed or inhibited.

We have entered into licensing agreements with third parties for certain product candidates and as a result have placed restrictions on our development of certain product candidates for particular indications. We may elect to enter into additional licensing or collaboration agreements to partner our product candidates in territories we currently retain. Our dependence on such relationships may adversely affect our business.

Because we have limited resources, we may seek to enter into collaboration agreements with other pharmaceutical or biotechnology companies. Any failure by our partners to perform their obligations or any decision by our partners to terminate these agreements could negatively impact our ability to successfully develop, obtain regulatory approvals for and commercialize our product candidates. In the event we grant exclusive rights to such partners, we would be precluded from potential commercialization of our product candidates within the territories in which we have a partner. For example, we have entered into exclusive research and license agreements with Janssen for the development and commercialization of ADU-741, GVAX for prostate cancer and ADU-214. Under these agreements, we have granted Janssen exclusive rights to develop and commercialize LADD product candidates for prostate and lung cancers. In addition, we have granted Janssen exclusive rights to develop and commercialize LADD product candidates with certain antigens and antigen combinations implicated in lung and other cancers for all fields of use. We have also entered into a collaboration and license agreement with Novartis for the development and commercialization of STING Activator product candidates in oncology. Under this agreement, we have granted Novartis a co-exclusive license to develop such products worldwide and an exclusive license to commercialize such products outside of the United States. We have also entered into a worldwide development and commercialization agreement with Merck for the development of an anti-CD27 agonist. In addition, any termination of our collaboration agreements will terminate the funding we may receive under the relevant collaboration agreement and may impair our ability to fund further development efforts and our progress in our development programs.

Our commercialization strategy for our product candidates may depend on our ability to enter into agreements with collaborators to obtain assistance and funding for the development and potential commercialization of our product candidates in the territories in which we seek to partner. Despite our efforts, we may be unable to secure additional collaborative licensing or other arrangements that are necessary for us to further develop and commercialize our product candidates. Supporting diligence activities conducted by potential collaborators and negotiating the financial and other terms of a collaboration agreement are long and complex processes with uncertain results.labeling. Even if we are successful in ~~entering into one~~obtaining FDA approvals to commercialize our product candidates, we cannot guarantee that we will be able to secure reimbursement for all patients for whom treatment with our product candidates is indicated.

If third parties on which we depend to conduct our preclinical studies or ~~more collaboration agreements, collaborations may involve greater uncertainty~~clinical trials, do not perform as contractually required, fail to satisfy regulatory or legal requirements or miss expected deadlines, our development program could be delayed with adverse effects on our business, financial condition, results of operations and prospects.

We rely on third party CROs, CMOs, consultants and others to design, conduct, supervise and monitor key activities relating to, discovery, manufacturing, preclinical studies and clinical trials of our product candidates, and we intend to do the same for ~~us, as~~future activities relating to existing and future programs. Because we rely on third parties and do not have the ability to conduct all required testing, discovery, manufacturing, preclinical studies or clinical trials independently, we have less control over ~~certain~~the timing, quality and other aspects of ~~our collaborative programs~~discovery, manufacturing, preclinical studies and clinical trials than we dowould if we conducted them on our own. These investigators, CROs, CMOs and consultants are not our employees, and we have limited control over the amount of time and resources that they dedicate in our ~~proprietary development and commercialization~~ programs. ~~For example, under our collaboration and license agreement~~These third parties may have contractual relationships with ~~Novartis, we are responsible for a share~~other entities, some of ~~the worldwide joint development costs,~~ which may be ~~significant.~~ our competitors, which may draw time and resources from our programs. The third parties we contract with might not be diligent, careful or timely in conducting our discovery, manufacturing, preclinical studies or clinical trials, resulting in testing, discovery, manufacturing, preclinical studies or clinical trials being delayed or unsuccessful, in whole or in part.

If we elect to reduce our share of development funding as provided for under the agreement, our share in profits would decrease or convert to a royalty. We may determine that continuing a collaboration under the terms provided is not in our best interest, and we may terminate the collaboration. Our potential future collaborators could delay or terminate their agreements, and as a result our product candidates may never be successfully commercialized.

~~Further, our potential future collaborators may develop alternative products or pursue alternative technologies either on their own or in collaboration~~cannot contract with others, including our competitors, and the priorities or focus of our collaborators may shift such that our product candidates receive less attention or resources than we would like, or they may be terminated altogether. We may also enter into agreements with collaborators to share in the burden of conducting clinical trials, manufacturing and marketing our product candidates. Any such actions by our potential future collaborators may adversely affect our business prospects and ability to earn revenues. In addition, we could have disputes with our potential future collaborators, such as the interpretation of terms in our agreements. Any such disagreements could lead to delays in the development or commercialization of our product candidates or could result in time-consuming and expensive litigation or arbitration, which may not be resolved in our favor.

~~We rely and will rely on~~acceptable third parties ~~to conduct our clinical trials. If~~on commercially reasonable terms, or at all, or if these third parties do not ~~successfully~~ carry out their contractual duties, satisfy legal and regulatory requirements for the conduct of preclinical studies or clinical trials or meet expected deadlines, ~~we may not be able to obtain regulatory approval of or commercialize our product candidates.~~

We depend and plan to continue to depend upon independent investigators, other third parties and collaborators, such as universities, medical institutions, CROs and strategic partners, to conduct our preclinical and clinical trials under agreements with us. We have to negotiate budgets and contracts with CROs and study sites, which may result in delays to our development timelines and increased costs. We rely and plan to continue relying heavily on these third parties over the course of our clinical ~~trials,~~development programs could be delayed and ~~we control only certain aspects of their activities. Nevertheless,~~otherwise adversely affected. In all events, we are responsible for ensuring that each of our preclinical studies and clinical trials is conducted in accordance with the general investigational plan and protocols for the trial, as well as in accordance with GLP, GCP and other applicable ~~protocol, legal, regulatory~~laws, regulations and ~~scientific standards, and our~~standards. Our reliance on third parties that we do not control does not relieve us of ~~our regulatory responsibilities. We~~these responsibilities and ~~these third parties are required to comply with good clinical practices, or GCPs, which are regulations and guidelines enforced by the~~requirements. The FDA and ~~comparable foreign~~other regulatory authorities ~~for product candidates in clinical development. Regulatory authorities~~ enforce ~~these~~ GCPs through periodic inspections of trial sponsors, principal investigators and trial sites. If wethe Company or any of these third parties ~~fail~~fails to comply with applicable ~~GCP regulations,~~GCPs, the clinical data generated in our clinical trials may be deemed unreliable and the FDA or comparable foreign regulatory authorities may require us to perform additional clinical trials before approving our marketing applications. We cannot assure you that upon inspection by a given regulatory authority, such regulatory ~~authorities~~authority will determine that any of our clinical trials ~~comply~~have complied with ~~the GCP regulations.~~GCPs. In addition, our clinical trials must be conducted with ~~biologic~~ product produced ~~under cGMPs regulations and will require a large number of test patients.~~in accordance with cGMPs. Our failure ~~or any failure by these third parties~~ to comply with these regulations ~~or to recruit a sufficient number of patients~~ may require us to repeat clinical trials, which ~~would~~could delay or prevent the receipt of regulatory ~~approval process. Moreover,~~approvals. Any such event could have an adverse effect on our business, financial condition, results of operations and prospects.

We expect some of the product candidates we develop will be regulated as biological products, or biologics, and therefore they may be ~~implicated~~subject to competition sooner than anticipated.

The Biologics Price Competition and Innovation Act, or BPCIA, was enacted as part of the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or the ACA, to establish an abbreviated pathway for the approval of biosimilar and interchangeable biological products. The 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 approved biologic. Under the BPCIA, an application for a biosimilar product cannot be approved by the FDA until 12 years after the reference product was approved under a BLA. The law is complex and is still being interpreted and implemented by the

FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement the BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our product candidates.

We believe that if any of ~~these third parties violates federal~~our product candidates is approved as a biological product under a BLA, such as zigakibart, it should qualify for the 12-year period of exclusivity. However, there is a risk that the FDA will not consider any of our product candidates to be reference products for competing products, potentially creating the opportunity for biosimilar competition sooner than anticipated. Additionally, this period of regulatory exclusivity does not apply to companies pursuing regulatory approval via their own traditional BLA, rather than via the abbreviated pathway. Moreover, the extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing. There has been public discussion of efforts to incentivize and increase biosimilar drug development including by potentially decreasing the period of exclusivity from the current 12 years. In September 2021, the Biden administration released its prescription drug pricing reform plans, which included proposals to reassess exclusivity periods, streamline biosimilar licensure, force disclosure of inactive ingredients, and other measures to increase biosimilar drug development. If such changes and reforms were to be enacted, our product candidates, if approved, could have a shorter period of exclusivity than anticipated or ~~state fraud~~face increased competition from biosimilar drug products. We continue to evaluate executive, legislative and ~~abuse~~judicial efforts to modify aspects of the law, and the extent to which any such changes may impact our business or ~~false claims laws~~financial condition.

We face significant competition in an environment of rapid technological change and ~~regulations~~it is possible that our competitors may achieve regulatory approval before us or ~~healthcare privacy~~develop therapies that are more advanced or effective than ours, which may harm our business, financial condition and ~~security laws.~~our ability to successfully market or commercialize atrasentan and our other product candidates.

~~Any third parties conducting~~The biotechnology and pharmaceutical industries are characterized by rapidly changing technologies, competition and a strong emphasis on intellectual property. We are aware of several companies focused on developing proteinuric glomerular disease treatments in various indications as well as several companies addressing other treatments for rare, severe chronic kidney diseases. We may also face competition from large and specialty pharmaceutical and biotechnology companies, academic research institutions, government agencies and public and private research institutions that conduct research, seek patent protection, and establish collaborative arrangements for research, development, manufacturing and commercialization.

Although several companies are focused on developing treatments on IgAN and other proteinuric glomerular diseases, there are currently limited treatment options for proteinuric glomerular diseases. To our knowledge, there are only two FDA-approved drugs for IgAN, Tarpeyo (budesonide) from Calliditas Therapeutics AB and Filspari (sparsentan) from Travere Therapeutics, Inc. In addition, there are a variety of additional treatments utilized that include RASis, steroids, chemotherapy drugs and immunomodulatory approaches. In addition, there are a number of competitors in clinical development for the treatment of IgAN at a similar stage of development or more advanced than us, including Alnylam Pharmaceuticals, Inc., AstraZeneca PLC, Ionis Pharmaceuticals, Inc., F. Hoffman-La Roche Ltd., Novartis AG, Omeros Corporation, Vera Therapeutics, Inc., RemeGen, Alpine Immune Sciences, Inc., and Otsuka Pharmaceutical Co., Ltd.

Many of our potential competitors, alone or with their strategic partners, may have substantially greater financial, technical and other resources than we do, such as larger research and development, clinical, marketing and manufacturing organizations. Mergers and acquisitions in the biotechnology and pharmaceutical industries may result in even more resources being concentrated among a smaller number of competitors. Our commercial opportunity could be reduced or eliminated if competitors develop and commercialize products that are safer, more effective, have fewer or less severe side effects, are more convenient or are less expensive than any product candidates that we may develop. 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, if ever. Additionally, new or advanced technologies developed by our competitors may render our current or future product candidates uneconomical or obsolete, and we may not be successful in marketing our product candidates against competitors.

To become and remain profitable, we must develop and eventually commercialize product candidates with significant market potential, which will require us to be successful in a range of challenging activities. These activities include, among other things, completing preclinical studies and initiating and completing clinical trials of our product candidates, obtaining marketing approval for these product candidates, manufacturing, marketing and selling those products that are ~~not our employees~~approved and ~~except for remedies available~~satisfying any post marketing requirements. We may never succeed in any or all of these activities and, even if we do, we may never generate revenues that are significant or large enough to ~~us under our agreements with such third parties,~~achieve profitability. If we cannot control whether or not they devote sufficient time and resources to our ongoing preclinical, clinical and nonclinical programs. These third parties may also have relationships with other commercial entities, including our competitors, for whom they may also be conducting clinical studies or other drug development activities, which could affect their performance on our behalf. If these third parties do not successfully carry out their contractual duties or obligations or meet expected deadlines, if they need to be replaced or if the quality or accuracy of the clinical data they obtain is compromised due to the failure to adhere to our clinical protocols or regulatory requirements or for other reasons, our clinical trials may be extended, delayed or terminated andachieve profitability, we may not be able to ~~complete development~~sustain or increase profitability on a quarterly or annual basis. Our failure to become and remain profitable would decrease the value of ~~obtain regulatory approval of or successfully commercialize our product candidates. As a result, our financial results~~the company and ~~the commercial prospects for our product candidates would be harmed, our costs~~ could ~~increase and~~impair our ability to ~~generate revenue could be delayed.~~

~~Switching~~raise capital, maintain our research and development efforts, expand our business or adding third parties to conduct our clinical trials involves substantial cost and requires extensive management time and focus. In addition, there is a natural transition period when a new third party commences work. As a result, delays occur, which can materially impact our ability to meet our desired clinical development timelines. Though we carefully manage our relationships with third parties conducting our clinical trials, we cannot assure you that we will not encounter similar challenges or delayscontinue operations. A decline in the ~~future or that these delays or challenges will not have a material adverse impact on our business, financial condition and prospects.~~

We rely and expect to continue to rely on third parties to manufacture our clinical product supplies, and we intend to rely on third parties to produce and process our product candidates, if approved, and our commercialization of any of our product candidates could be stopped, delayed or made less profitable if those third parties fail to obtain approval of government regulators, fail to provide us with sufficient quantities of drug product or fail to do so at acceptable quality levels or prices.

We do not currently have nor do we plan to acquire the infrastructure or capability internally to manufacture our clinical supplies for use in the conduct of our clinical trials, and we lack the resources and the capability to manufacture any of our product candidates on a clinical or commercial scale. We currently rely on outside vendors to manufacture our clinical supplies of our product candidates and plan to continue relying on third parties to manufacture our product candidates on a commercial scale, if approved.

The facilities used by our contract manufacturers to manufacture our product candidates must be approved by the FDA pursuant to inspections that will be conducted after we submit our marketing applications to the FDA. We do not control the manufacturing process of, and are completely dependent on, our contract manufacturing partners for compliance with the regulatory requirements, known as cGMPs, for manufacture of our product candidates. If our contract manufacturers cannot successfully manufacture material that conforms to our specifications and the strict regulatory requirementsvalue of the ~~FDA~~Company also could cause you to lose all or ~~others, they will not be able to secure and/or maintain regulatory approval for their manufacturing facilities. In addition, we have no control over the ability~~part of our contract manufacturers to maintain adequate quality control, quality assurance and qualified personnel. If the FDA or a comparable foreign regulatory authority does not approve these facilities for the manufacture of our product candidates or if it withdraws any such approval in the future, we may need to find alternative manufacturing facilities, which would significantly impact our ability to develop, obtain regulatory approval for or market our product candidates, if approved.your investment.

We do not yet have sufficient information to reliably estimate the cost of the commercial manufacturing of our product candidates, and the actual cost to manufacture our product candidates could materially and adversely affect the commercial viability of our product candidates. As a result, we may never be able to develop a commercially viable product.45

~~In addition, our reliance on third-party manufacturers exposes us to the following additional risks:~~

Each of these risks could delay our clinical trials, the approval, if any of our product candidates by the FDA or the commercialization of our product candidates or result in higher costs or deprive us of potential product revenue. In addition, we rely on third parties to perform release testing on our product candidates prior to delivery to patients. If these tests are not appropriately conducted and test data are not reliable, patients could be put at risk of serious harm and could result in product liability suits.

The manufacture of ~~medical~~pharmaceutical products is complex, and ~~requires significant expertise and capital investment, including the development of advanced manufacturing techniques and process controls. Manufacturers of biologic products often~~our third-party manufacturers may encounter difficulties in ~~production, particularly in scaling up and validating initial production and absence~~production. If any of ~~contamination. These problems include~~our third-party manufacturers encounter such difficulties, ~~with production costs and yields, quality control, including stability~~our ability to provide supply of ~~the~~atrasentan or our other product quality assurance testing, operator error, shortages of qualified personnel, as well as compliance with strictly enforced federal, state and foreign regulations. Furthermore, if contaminants are discovered incandidates for clinical trials, our ability to obtain marketing approval, or our ability to provide supply of our product candidates for patients, if approved, could be delayed or stopped.

We have and intend to continue to establish manufacturing relationships with a limited number of suppliers to manufacture raw materials, the drug substance and finished product of any product candidate for which we are responsible for preclinical or clinical development. Pursuant to our license agreement with AbbVie, we received a substantial amount of drug product and drug substance to support initiation of our clinical trials of atrasentan; however, we do not yet have a long-term commercial manufacturing agreement for atrasentan with AbbVie or any other CMO. We will need to establish manufacturing relationships for the production of sufficient atrasentan for any potential commercialization. Each supplier may require licenses to manufacture such components if such processes are not owned by the supplier or in the public domain. As part of any marketing approval, a manufacturer and our processes are required to be qualified by the FDA prior to regulatory approval. If supply from the approved vendor is interrupted, there could be a significant disruption in commercial supply. An alternative vendor would need to be qualified through an NDA or BLA supplement which could result in further delay. The FDA or other regulatory agencies outside of the United States may also require additional studies if a new supplier is relied upon for commercial production. Switching vendors may involve substantial costs and is likely to result in a delay in our desired clinical and commercial timelines.

The process of manufacturing pharmaceutical products is complex, highly-regulated and subject to multiple risks. The manufacture of drugs and biologics is highly susceptible to product loss due to contamination, equipment failure, improper installation or operation of equipment, vendor or operator error, inconsistency in yields, variability in product characteristics and difficulties in scaling the production process. Even minor deviations from normal manufacturing processes could result in reduced production yields, product defects and other supply disruptions. If microbial, viral or other contaminations are discovered at the facilities of our manufacturers, such ~~manufacturing~~ facilities may need to be closed for an extended period of time to investigate and remedy the ~~contamination. We cannot assure you~~contamination, which could delay clinical trials and adversely harm our business. Moreover, if the FDA determines that ~~any~~our CMOs are not in compliance with FDA laws and regulations, including those governing cGMPs, the FDA may deny regulatory approval until the deficiencies are corrected or we replace the manufacturer in our regulatory approvals with a manufacturer that is in compliance. In addition, approved products and the facilities at which they are manufactured are required to maintain ongoing compliance with extensive FDA requirements and the requirements of other similar agencies, including ensuring that quality control and manufacturing procedures conform to cGMP requirements. As such, our CMOs are subject to continual review and periodic inspections to assess compliance with cGMPs. Furthermore, although we do not have day-to-day control over the operations of our CMOs, we are responsible for ensuring compliance with applicable laws and regulations, including cGMPs.

In addition, there are risks associated with large scale manufacturing for clinical trials or commercial scale including, among others, cost overruns, potential problems with process scale-up, process reproducibility, stability ~~or other~~ issues, ~~relating to the manufacture~~compliance with good manufacturing practices, lot consistency and timely availability of raw materials. Even if our collaborators obtain regulatory approval for any of our product candidates, there is no assurance that manufacturers will ~~not occur~~be able to manufacture the approved product to specifications acceptable to the FDA or other regulatory authorities, to produce it in sufficient quantities to meet the ~~future. Additionally, our manufacturers may experience manufacturing difficulties due~~requirements for the potential launch of the product or to ~~resource constraints or as a result of labor disputes or unstable political environments.~~meet potential future demand. If our manufacturers ~~were~~are unable to ~~encounter~~produce sufficient quantities for clinical trials or meet potential future demand. If our manufacturers are unable to produce sufficient quantities for clinical trials or for commercialization, commercialization efforts would be impaired, which would have an adverse effect on our business, financial condition, results of operations and prospects.

We believe that we will rely upon a limited number of manufacturers for our product candidates, including atrasentan, for which we have identified single-source suppliers for the various steps of manufacture. This reliance on a limited number of manufacturers and the complexity of drug manufacturing and the difficulty of scaling up a manufacturing process could cause the delay of clinical trials, regulatory submissions, required approvals or commercialization of our product candidates, cause us to incur higher costs and prevent us from commercializing our product candidates successfully. Furthermore, if our suppliers fail to deliver the required commercial quantities of materials on a timely basis and at commercially reasonable prices, and we are unable to secure one or more replacement suppliers capable of production in a timely manner at a substantially equivalent cost, our clinical trials may be delayed or we could lose potential revenue.

If we are unable to establish sales and marketing capabilities or enter into agreements with third parties to market and sell atrasentan and our other product candidates, we may be unable to generate any revenues.

We currently do not have an organization for the sales, marketing and distribution of atrasentan, zigakibart, CHK-336 and our other product candidates, and the expense of establishing and maintaining such an organization may exceed the cost-effectiveness of doing so. To market any products that may be approved, we must build our sales, marketing, managerial and other non-technical capabilities or make arrangements with third parties to perform these services. With respect to certain of our current programs as well

as future programs, we may rely completely on an alliance partner for sales and marketing. In addition, although we intend to establish a sales organization if we are able to obtain approval to market any product candidates, we may enter into strategic alliances with third parties to develop and commercialize atrasentan and other product candidates, including in markets outside of the United States or for other large markets that are beyond our resources, such as the joint venture, SanReno Therapeutics, we formed for the development and commercialization of atrasentan and zigakibart in China and certain other East-Asian countries. This will reduce the revenue generated from the sales of these ~~difficulties,~~products.

Any future strategic alliance partners may not dedicate sufficient resources to the commercialization of our product candidates or may otherwise fail in their commercialization due to ~~comply with their contractual obligations,~~factors beyond our ~~ability~~control. If we are unable to ~~provide~~establish effective alliances to enable the sale of our product candidates to ~~patients~~healthcare professionals and in ~~clinical trials would~~geographical regions, including the United States, that will not be ~~jeopardized. Any delay~~covered by our marketing and sales force, or ~~interruption in~~if our potential future strategic alliance partners do not successfully commercialize the ~~supply of clinical trial supplies could delay the completion of clinical trials, increase the costs associated~~product candidates, our ability to generate revenues from product sales will be adversely affected.

If we are unable to establish adequate sales, marketing and distribution capabilities, whether independently or with ~~maintaining clinical trial programs and, depending upon the period of delay, require us to commence new clinical trials at additional expense or terminate clinical trials completely.~~

~~We may form or seek strategic alliances or enter into additional licensing arrangements in the future, and~~third parties, we may not ~~realize~~be able to generate sufficient product revenue and may not become profitable. We will be competing with many companies that currently have extensive and well-funded marketing and sales operations. Without an internal team or the ~~benefits~~support of ~~such alliances or licensing arrangements.~~a third party to perform marketing and sales functions, we may be unable to compete successfully against these more established companies.

We may ~~form or seek~~not be successful in finding strategic ~~alliances, create joint ventures or collaborations or enter into additional licensing arrangements with third parties that we believe will complement or augment~~collaborators for continuing development of certain of our ~~development and commercialization efforts with respect to our product candidates and any~~ future product candidates or successfully commercializing or competing in the market for certain indications.

In the future, we may decide to collaborate with non-profit organizations, universities and pharmaceutical and biotechnology companies for the development and potential commercialization of existing and new product candidates such as our research collaboration and option license agreement with Ionis Pharmaceuticals, Inc. that we ~~may develop. Any of these relationships may require us to incur non-~~

~~recurring and other charges, increase our near and long-term expenditures, issue securities that dilute our existing stockholders or disrupt our management and business. In addition, we~~entered into in May 2023. We face significant competition in seeking appropriate ~~strategic partners~~collaborators. Whether we reach a definitive agreement for a collaboration will depend, among other things, upon our assessment of the collaborator’s resources and expertise, the terms and conditions of the proposed collaboration and the ~~negotiation process~~proposed collaborator’s evaluation of a number of factors. Those factors may include the design or results of clinical trials, the likelihood of approval by the FDA or similar regulatory authorities outside the United States, the potential market for the subject product candidate, the costs and complexities of manufacturing and delivering such product candidate to patients, the potential of competing drugs, the existence of uncertainty with respect to our ownership of technology, which can exist if there is ~~time-consuming~~a challenge to such ownership without regard to the merits of the challenge and ~~complex. Moreover,~~industry and market conditions generally. The collaborator may also consider alternative product candidates or technologies for similar indications that may be available to collaborate on and whether such a collaboration could be more attractive than the one with us for our product candidate. The terms of any additional collaborations or other arrangements that we may establish may not be ~~successful~~favorable to us. Collaborations are complex and time-consuming to negotiate and document. In addition, there have been a significant number of recent business combinations among large pharmaceutical companies that have resulted in a reduced number of potential future collaborators.

We may not be able to negotiate collaborations on a timely basis, on acceptable terms, or at all. If we are unable to do so, we may have to curtail the development of the product candidate for which we are seeking to collaborate, reduce or delay our ~~efforts~~development program or one or more of our other development programs, delay our potential commercialization or reduce the scope of any sales or marketing activities, or increase our expenditures and undertake development or commercialization activities at our expense. If we elect to ~~establish a strategic partnership~~increase our expenditures to fund development or ~~other alternative arrangements for~~commercialization activities on our product candidates, ~~because they~~we may ~~be deemed~~need to ~~be at too early of a stage of development for collaborative effort and third parties~~obtain additional capital, which may not ~~view our product candidates as having the requisite potential~~be available to ~~demonstrate safety and efficacy.~~us on acceptable terms or at all. If we ~~license products or businesses,~~do not have sufficient funds, we may not be able to realize the benefit of such transactions if we are unable to successfully integrate them with our existing operations and company culture. We cannot be certain that, following a strategic transaction or license, we will achieve the revenue or specific net income that justifies such transaction. Any delays in entering into new strategic partnership agreements related tofurther develop our product candidates ~~could delay~~or bring them to market and generate product revenue.

The success of any potential collaboration arrangements will depend heavily on the efforts and activities of our collaborators. Collaborators generally have significant discretion in determining the efforts and resources that they will apply to these collaborations. Disagreements between parties to a collaboration arrangement regarding clinical development and commercialization matters can lead to delays in the development process or commercializing the applicable product candidate and, in some cases, termination of ~~our product candidates in certain geographies for certain indications, which would harm our business prospects, financial condition and results~~such collaboration arrangements. These disagreements can be difficult to resolve if neither of ~~operations.~~

~~We may not realize~~ the ~~benefits of acquisitions, including our acquisition of Aduro Biotech Europe,~~parties has final decision-making authority. Collaborations with pharmaceutical or ~~other strategic transactions.~~

We acquired Aduro Biotech Europe in October 2015, and may acquire other businesses, products or technologies, as well as pursue strategic alliances, joint ventures or investments in complementary businesses. The success of acquisitions, including our acquisition of Aduro Biotech Europe, and any future strategic transactions, depends on a number of risks and uncertainties, including:

If any of these risks or uncertainties occur, we may not realize the anticipated benefit of any acquisition or strategic transaction. For example, Aduro Biotech Europe’s B-select antibody platform may fail to identify product candidates that are safe and effective, or at all. Additionally, foreign acquisitions, including our acquisition of Aduro Biotech Europe are subject to additional risks, including those related to integration of operations across different cultures and languages, currency risks, potentially adverse tax consequences of overseas operations and the particular economic, political and regulatory risks associated with specific countries.

~~If our third-party manufacturers use hazardous and biological materials in a manner that causes injury or violates applicable law, we may be liable for damages.~~

Our research and development activities involve the controlled use of potentially hazardous substances, including chemical and biological materials, by our third-party manufacturers. Our manufacturers are subject to federal, state and local laws and regulations governing the use, manufacture, storage, handling and disposal of medical and hazardous materials. Although we believe that our manufacturers’ procedures for using, handling, storing and disposing of these materials comply with legally prescribed standards, we cannot completely eliminate the risk of contamination or injury resulting from medical or hazardous materials. As a result of any such contamination or injury, we may incur liability or local, city, state or federal authorities may curtail the use of these materials and interrupt our business operations. In the event of an accident, we could be held liable for damages or penalized with fines, and the liability could exceed our resources. We do not have any insurance for liabilities arising from medical or hazardous materials. Compliance with applicable environmental laws and regulations is expensive, and current or future environmental regulations may impair our research, development and production efforts, which could harm our business ~~prospects, financial condition or results of operations.~~reputation.

~~The FDA regulatory approval process is lengthy and time-consuming, and we may experience significant delays in the clinical development and regulatory approval of our product candidates.~~

~~The time required to obtain approval~~A Fast Track Designation by the FDA, and comparable foreign authorities is unpredictable but typically takes many years following the commencement of clinical trials and depends upon numerous factors, including the substantial discretion of the regulatory authorities. In addition, approval policies, regulations or the type and amount of clinical data necessary to gain approval may change during the course of a product candidate’s clinical development and may vary among jurisdictions. We have not previously submitted a BLA or NDA to the FDA, or similar marketing applications filings to comparable foreign authorities. A BLA

~~or NDA must include extensive preclinical and clinical data and supporting information to establish the product candidate’s safety, purity and potency, or safety and effectiveness~~even if granted for each desired indication. The BLA or NDA must also include significant information regarding the chemistry, manufacturing and controls for the product. We expect the novel nature of our product candidates and the fact that our product candidates are being evaluated in combination with other existing and novel therapies to create further challenges in obtaining regulatory approval. For example, the FDA has limited experience with commercial development of immunotherapies for cancer. We also intend to obtain regulatory approval of future product candidates regardless of cancer type or origin, which the FDA may have difficulty accepting if our clinical trials only involved cancers of certain origins. Accordingly, the regulatory approval pathway for our product candidates may be uncertain, complex, expensive and lengthy, and approval may not be obtained.

~~Our product candidates could fail to receive regulatory approval for many reasons, including the following:~~

~~This lengthy approval process as well as the unpredictability of future clinical trial results may result in our failing~~competitor is able to obtain ~~regulatory approval~~orphan drug exclusivity prior to ~~market~~us for a product that constitutes the same active moiety and treats the same indications as our product candidates, ~~which would significantly harm~~we may not be able to obtain approval of our ~~business, results~~drug by the applicable regulatory authority for a significant period of ~~operations~~time unless we are able to show that our drug is clinically superior to the approved drug. The applicable period is seven years in the United States and ~~prospects.~~ten years in the EU. The EU exclusivity period can be reduced to six years if a drug no longer meets the criteria for Orphan Drug Designation or if the drug is sufficiently profitable so that market exclusivity is no longer justified.

~~In addition,~~We have obtained Orphan Drug Designation for atrasentan and zigakibart for IgAN in the EU and may seek Orphan Drug Designation for these product candidates for this indication in the United States and other countries. However, we may not obtain Orphan Drug Designation and even if we ~~were~~do, Orphan Drug Designation does not guarantee future orphan drug marketing exclusivity.

Even after an orphan drug is approved, the FDA can also subsequently approve a later application for the same drug for the same condition if the FDA concludes that the later drug is clinically superior in that it is shown to ~~obtain~~be safer in a substantial portion of the target populations, more effective or makes a major contribution to patient care. In addition, a designated orphan drug may not receive orphan drug exclusivity if it is approved for a use that is broader than the indication for which it received orphan designation. Moreover, orphan drug exclusive marketing rights in the United States may be lost if the FDA later determines that the request for designation was materially defective or if we are unable to manufacture sufficient quantities of the product to meet the needs of patients with the rare disease or condition. Orphan Drug Designation neither shortens the development time or regulatory review time of a drug nor gives the drug any advantage in the regulatory review or approval ~~regulatory authorities~~process.

We may ~~approve any of~~be unsuccessful in obtaining Rare Pediatric Disease Designation for our product candidates or for future product candidates, and, even if we obtain such designation, we may be unable to maintain the benefits associated with such designation, including the potential for use or sale of a future priority review voucher.

The Rare Pediatric Disease Voucher Program is intended to encourage development of new drug and biological products for prevention and treatment of certain rare pediatric diseases. Although there are existing incentive programs to encourage the development and study of drugs and biologics for rare diseases, pediatric populations, and unmet medical needs, this program provides an additional incentive for the development of drugs and biologics for rare pediatric diseases, which may be used alone or in combination with other incentive programs. A rare pediatric disease is defined as a disease that is a serious or life-threatening disease in which the serious or life-threatening manifestations primarily affect individuals aged from birth to 18 years, including age groups often called neonates, infants, children, and adolescents; and is a rare disease or condition as defined in the FD&C Act, which includes

diseases and conditions that affect fewer than 200,000 persons in the United States and diseases and conditions that affect a larger number of persons and for which there is no reasonable expectation that the costs of developing and making available the product in the United States can be recovered from sales of the product in the United States.

The sponsor of an application for a rare pediatric disease drug product may be eligible for a voucher that can be used or ~~more limited indications than~~sold to obtain a priority review for a subsequent application submitted under section 505(b)(1) of the FD&C Act or section 351 of the PHS Act after the date of approval of the rare pediatric disease drug product. The rare pediatric disease priority review voucher program was most recently re-authorized by Congress, extending the rare pediatric disease program through September 30, 2024, with the potential for priority review vouchers to be granted through September 30, 2026. Although we ~~request,~~have obtained designation of CHK-336 for the treatment of PH as a rare pediatric disease, we may not ~~approve~~meet the ~~price~~eligibility requirements for a priority voucher at the time we ~~intend~~seek approval of CHK-336 or we may not meet the current deadline for receiving a priority review voucher, in which case we would not be able to ~~charge~~use priority review for ~~our products, may grant approval contingent on~~a subsequent product of ours or be able to sell such voucher to a third party, unless Congress further reauthorizes the ~~performance~~program. Additionally, designation of ~~costly post-marketing clinical trials or may approve~~ a ~~product candidate with~~drug for a ~~label that~~rare pediatric disease does not ~~include~~guarantee that a drug will meet the ~~labeling claims necessary~~other eligibility criteria for a rare pediatric disease priority review voucher at the time the application is approved. Finally, a rare pediatric disease designation does not necessarily lead to faster development or ~~desirable for the successful commercialization of that product candidate. Any~~regulatory review of the ~~foregoing scenarios could materially harm~~product or increase the ~~commercial prospects~~likelihood that it will receive marketing approval.

Enacted and future legislation may increase the difficulty and cost for ~~our product candidates.~~

~~Obtaining~~us to commercialize and ~~maintaining regulatory~~obtain marketing approval of our product candidates ~~in one jurisdiction does not mean that we will be successful in obtaining regulatory approval of our product candidates in other jurisdictions.~~

~~Obtaining~~ and maintaining regulatory approval of our product candidates in one jurisdiction does not guarantee that we will be able to obtain or maintain regulatory approval in any other jurisdiction, while a failure or delay in obtaining regulatory approval in one jurisdiction may ~~have a negative effect on~~affect the regulatory approval process in others. For example, even if the FDA grants marketing approval of a product candidate, comparable regulatory authorities in foreign jurisdictions must also approve the manufacturing, marketing and promotion of the product candidate in those countries. Approval procedures vary among jurisdictions and can involve requirements and administrative review periods different from, and greater than, those in the United States, including additional preclinical studies or clinical trials as clinical studies conducted in one jurisdiction may not be accepted by regulatory authorities in other jurisdictions. In many jurisdictions outside the United States, a product candidate must be approved for reimbursement before it can be approved for sale in that jurisdiction. In some cases, the price that we intend to charge for our products is also subject to approval.

We may also submit marketing applications in other countries. Regulatory authorities in jurisdictions outside of the United States have requirements for approval of product candidates with which we must comply prior to marketing in those jurisdictions. Obtaining foreign regulatory approvals and compliance with foreign regulatory requirements could result in significant delays, difficulties and costs for us and could delay or prevent the introduction of our products in certain countries. If we fail to comply with the regulatory requirements in international markets and/or receive applicable marketing approvals, our target market will be reduced and our ability to realize the full market potential of our product candidates will be harmed.

Even if we receive regulatory approval of our product candidates, we will be subject to ongoing regulatory obligations and continued regulatory review, which may result in significant additional expense andprices we may ~~be subject to penalties if we fail to comply with~~set.

Existing regulatory ~~requirements or experience unanticipated problems with our product candidates.~~

Any regulatory approvals that we receive for our product candidates may be subject to limitations on the approved indicated uses for which the product may be marketed or the conditions of approval, or contain requirements for potentially costly post-market testing and surveillance to monitor the safety and efficacy of the product candidate. The FDA may also require a REMS as a condition of approval of our product candidates, which could include requirements for a medication guide, physician communication plans or additional elements to ensure safe use, such as restricted distribution methods, patient registries and other risk minimization tools. In addition, if the FDA or a comparable foreign regulatory authority approves our product candidates, the manufacturing processes, labeling, packaging, distribution, adverse event reporting, storage, advertising, promotion, import, export and recordkeeping for our product candidates will be subject to extensive and ongoing regulatory requirements. These requirements include submissions of safety and other post-marketing information and reports, registration, as well as continued compliance with cGMPs and GCPs for any clinical trials that we conduct post-approval. Later discovery of previously unknown problems with our product candidates, including adverse events of unanticipated severity or frequency, or with our third-party manufacturers or manufacturing processes, or failure to comply with regulatory requirements, may result in, among other things:

~~The FDA’s and other regulatory authorities’~~ policies may change, and additional government regulations may be enacted that could prevent, limit or delay regulatory approval of our product candidates. We cannot predict the likelihood, nature or extent of government regulation that may arise from future legislation or administrative action, either in the United States or abroad. If we are slow or unable to adapt to changes in existing requirements or the adoption of new requirements or policies, or if we are not able to maintain regulatory compliance, we may lose any marketing approval that we may have obtained, and we may not achieve or sustain profitability.

~~Coverage and reimbursement may be limited or unavailable in certain market segments for our product candidates, which could make it difficult for us to sell our product candidates profitably.~~

Successful sales of our product candidates, if approved, depend, in part, on the availability of adequate coverage and reimbursement from third-party payors. In addition, because our product candidates represent new approaches to the treatment of cancer, we cannot accurately estimate the potential revenue from our product candidates.

Patients who are provided medical treatment for their conditions generally rely on third-party payors to reimburse all or part of the costs associated with their treatment. Adequate coverage and reimbursement from governmental healthcare programs, such as Medicare and Medicaid, and commercial payors is critical to new product acceptance.

Government authorities and third-party payors, such as private health insurers and health maintenance organizations, decide which drugs and treatments they will cover and the amount of reimbursement. Reimbursement by a third-party payor may depend upon a number of factors, including, but not limited to, the third-party payor’s determination that use of a product is:

Obtaining coverage and reimbursement approval of a product from a government or other third-party payor is a time-consuming and costly process that could require us to provide to the payor supporting scientific, clinical and cost-effectiveness data for the use of our products. Even if we obtain coverage for a given product, the resulting reimbursement payment rates might not be adequate for us to achieve or sustain profitability or may require co-payments that patients find unacceptably high. Further, we plan to develop our product candidates for use in combination with other products, which may make them cost prohibitive or less likely to be covered by third-party payors. Patients are unlikely to use our product candidates unless coverage is provided and reimbursement is adequate to cover a significant portion of the cost of our product candidates.

In the United States, no uniform policy of coverage and reimbursement for products exists among third-party payors. Therefore, coverage and reimbursement for products can differ significantly from payor to payor. As a result, the coverage determination process is often a time-consuming and costly process that will require us to provide scientific, clinical and cost-effectiveness data and support for the use of our product candidates to each payor separately, with no assurance that coverage and adequate reimbursement will be obtained. We intend to seek approval to market our product candidates in both the United States and in selected foreign jurisdictions. If we obtain approval in one or more foreign jurisdictions for our product candidates, we will be subject to rules and regulations in those jurisdictions. In some foreign countries, particularly those in the EU, the pricing of biologics is subject to governmental control. In these countries, pricing negotiations with governmental authorities can take considerable time after obtaining marketing approval of a product candidate.

~~Recently enacted and future legislation may increase the difficulty and cost for us to obtain marketing approval of and commercialize our product candidates and affect the prices we may obtain.~~

Third-party payors, whether domestic or foreign, or governmental or commercial, are developing increasingly sophisticated methods of controlling healthcare costs. In both the United States and certain foreign jurisdictions, there have been a number of legislative and regulatory changes to health care systems that could impact our ability to sell our products profitably. In particular, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act, collectively, the Affordable Care Act, was enacted. The Affordable Care Act and its implementing regulations, among other things, subjected biologic products to potential competition by lower-cost biosimilars, addressed a new methodology by which rebates owed by manufacturers under the Medicaid Drug Rebate Program are calculated for certain drugs and biologics, including our product candidates, that are inhaled, infused, instilled, implanted or injected, increased the minimum Medicaid rebates owed by manufacturers under the Medicaid Drug Rebate Program, extended the Medicaid Drug Rebate Program to utilization of prescriptions of individuals enrolled in Medicaid managed care organizations, subjected manufacturers to new annual fees and taxes for certain branded prescription drugs, provided incentives to programs that increase the federal government’s comparative effectiveness research and established a new Medicare Part D coverage gap discount program, in which manufacturers must agree to offer 50% point-of-sale discounts off negotiated prices of applicable brand drugs to eligible beneficiaries during their coverage gap period, as a condition for the manufacturer’s outpatient drugs to be covered under Medicare Part D.

Other legislative changes have been proposed and adopted in the United States since the Affordable Care Act was enacted. In August 2011, the Budget Control Act of 2011, among other things, created measures for spending reductions by Congress. A Joint Select Committee on Deficit Reduction, tasked with recommending a targeted deficit reduction of at least $1.2 trillion for the years 2013 through 2021, was unable to reach required goals, thereby triggering the legislation’s automatic reduction to several government programs. This includes aggregate reductions of Medicare payments to providers of 2% per fiscal year, which went into effect in April 2013, and will remain in effect through 2025 unless additional Congressional action is taken. In January 2013, President Obama signed into law the American Taxpayer Relief Act of 2012, or the ATRA, which, among other things, further reduced Medicare payments to several providers, including hospitals and cancer treatment centers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years.

There have been, and likely will continue to be, legislative and regulatory proposals at the foreign, federal and state levels directed at broadening the availability of healthcare and containing or lowering the cost of healthcare. We cannot predict the initiatives that may be adopted in the future. The continuing efforts of the government, insurance companies, managed care organizations and other payors of healthcare services to contain or reduce costs of healthcare and/or impose price controls may adversely affect:

~~Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors, which may adversely affect our future profitability.~~

Some of the provisions of the Affordable Care Act have yet to be fully implemented, and since its enactment, there have been judicial and Congressional challenges to numerous provisions of the Affordable Care Act, as well as recent efforts by the Trump administration to repeal or replace certain aspects of the Affordable Care Act. Since January 2017, President Trump has signed two Executive Orders designed to delay the implementation of any certain provisions of the Affordable Care Act or otherwise circumvent some of the requirements for health insurance mandated by the Affordable Care Act. The Trump administration has also announced that it will discontinue the payment of cost-sharing reduction, or CSR, payments to insurance companies until Congress approves the appropriation of funds for the CSR payments. The loss of the CSR payments is expected to increase premiums on certain policies issued by qualified health plans under the Affordable Care Act. ~~A bipartisan bill to appropriate funds for CSR payments has been introduced in the Senate, but the future of that bill is uncertain.~~ Further, each chamber of Congress has put forth multiple bills designed to repeal or repeal and replace portions of the Affordable Care Act. Although none of these measures has been enacted by Congress to date, Congress may consider other legislation to repeal and replace elements of the Affordable Care Act. Any repeal and replace legislation, may have the effect of limiting the amounts that government agencies will pay for healthcare products and services. Policy changes, including potential modification or repeal of all or parts of the Affordable Care Act or the implementation of new health care legislation could result in significant changes to the health care system, which may prevent us from being able to generate revenue, attain profitability or commercialize our drugs.

Legislative and regulatory proposals have been made to expand post-approval requirements and restrict sales and promotional activities for pharmaceutical products. We cannot be sure whether additional legislative changes will be enacted, or whether FDA regulations, guidance or interpretations will be changed, or what the impact of such changes on the ~~regulatory~~marketing approvals of our product candidates, if any, may be. For example, the FDA may require additional trials in indications for which similar products to ours were previously approved based on smaller clinical trials or less stringent clinical outcome requirements. In addition, increased scrutiny by the U.S. Congress of the FDA’s approval process may significantly delay or prevent ~~regulatory~~marketing approval, as well as subject us to more stringent product labeling and post-marketing testing and other requirements.

With regard to the healthcare and pharmaceutical pricing, in March 2010, the Patient Protection and Affordable Care Act, as amended by the Health Care and Education Reconciliation Act of 2010, or collectively the Affordable Care Act, or ACA, was enacted to broaden access to health insurance, reduce or constrain the growth of healthcare spending, enhance remedies against fraud and abuse, add new transparency requirements for health care and health insurance industries, impose new taxes and fees on the health industry and impose additional health policy reforms. The law appears likely to continue the downward pressure on pharmaceutical pricing, especially under the Medicare program, and may also increase our regulatory burdens and operating costs.

There have been executive, legislative and judicial efforts to modify, repeal or otherwise invalidate all or certain aspects of the ACA. By way of example, the Tax Cuts and Jobs Act, or the TCJA, was enacted and included, among other things, effective January 1, 2019, a provision repealing the tax-based shared responsibility payment imposed by the ACA on certain individuals who fail to maintain qualifying health coverage for all or part of a year that is commonly referred to as the “individual mandate.” In June 2021, the ~~United States,~~U.S. Supreme Court held that plaintiffs did not have standing to challenge constitutionality of the ~~European Union~~individual mandate. Thus, the ACA remains in effect in its current form. It is unclear whether there may be other judicial or congressional efforts to challenge, repeal or replace the ACA. We are continuing to monitor any changes to the ACA that, in turn, may potentially impact our business in the future. In addition, other legislative changes have been proposed and adopted since the ACA was enacted to reduce healthcare expenditures, including aggregate reductions to Medicare payments to providers of 2 percent per fiscal year, which went into effect April 1, 2013 and, due to subsequent legislative amendments to the statute, will remain in effect through 2031. The Medicare reductions phased back in starting with a 1% reduction in effect from April 1, 2022 to June 30, 2022 before increasing to the full 2% reduction. In addition, the American Taxpayer Relief Act of 2012, among other things, reduced Medicare payments to several providers, and increased the statute of limitations period for the government to recover overpayments to providers from three to five years. These new laws may result in additional reductions in Medicare and other ~~potentially significant markets~~healthcare funding, which could have a material adverse effect on customers for our ~~product candidates, government authorities~~drugs, if approved, and ~~third-party payors are increasingly attempting to limit or regulate~~accordingly, our financial operations.

Recently there has been heightened governmental scrutiny over the ~~price of medical~~manner in which manufacturers set prices for their marketed products, ~~and services, particularly for new and innovative products and therapies,~~ which has resulted in ~~lower average selling prices. For example, in the United States, there have been~~ several ~~recent~~presidential executive orders, Congressional inquiries, and proposed ~~bills~~and enacted federal and

state legislation designed to, among other things, bring more transparency to ~~drug~~product pricing, review the relationship between pricing and manufacturer patient programs, reduce the costs of drugs under Medicare, and reform government program reimbursement methodologies for ~~drugs. Furthermore,~~drug products.

On September 9, 2021, the ~~increased emphasis on managed healthcare~~Biden administration published a wide-ranging list of policy proposals, most of which would need to be carried out by Congress, to reduce drug prices and drug payment. The U.S. Department of Health and Human Services, or HHS, plan includes, among other reform measures, proposals to lower prescription drug prices, including by allowing Medicare to negotiate prices and disincentivizing price increases, and to support market changes that strengthen supply chains, promote biosimilars and generic drugs, and increase price transparency. These initiatives recently culminated in the ~~United States~~enactment of the Inflation Reduction Act, or IRA, in August 2022, which will, among other things, allow HHS to negotiate the selling price of certain drugs and ~~on country~~biologics that CMS reimburses under Medicare Part B and ~~regional~~Part D, although only high-expenditure single-source drugs that have been approved for at least 7 years (11 years for biologics) can be selected by CMS for negotiation. Because the negotiated price takes effect two years after the selection year, no drug or biologic will be subject to a negotiated price prior to 9 or 13 years after approval, respectively. The negotiated prices, which will first become effective in 2026, will be capped at a statutory ceiling price. Beginning in October 2023, the IRA will also penalize drug manufacturers that increase prices of Medicare Part B and Part D drugs at a rate greater than the rate of inflation. The IRA permits the Secretary of HHS to implement many of these provisions through guidance, as opposed to regulation, for the initial years. Manufacturers that fail to comply with the IRA may be subject to various penalties, including civil monetary penalties. The IRA also extends enhanced subsidies for individuals purchasing health insurance coverage in ACA marketplaces through plan year 2025. These provisions will take effect progressively starting in 2023, although they may be subject to legal challenges. The full economic impact of the IRA is unknown at this time, but the law’s passage may affect the pricing of our products and ~~reimbursement~~product candidates. The adoption of restrictive price controls in new jurisdictions, more restrictive controls in existing jurisdictions or the ~~European Union~~failure to obtain or maintain timely or adequate pricing could also adversely impact revenue. We expect pricing pressures will ~~put~~continue globally.

At the state level, legislatures are increasingly passing legislation and implementing regulations designed to control pharmaceutical and biological product pricing, including price or patient reimbursement constraints, discounts, restrictions on certain product access and marketing cost disclosure and transparency measures, and, in some cases, designed to encourage importation from other countries and bulk purchasing. We expect that additional state and federal healthcare reform measures will be adopted in the future, any of which could limit the amounts that federal and state governments will pay for healthcare products and services, which could result in reduced demand for our product candidates or companion diagnostics or additional pricing pressures.

We expect that the ACA and IRA, as well as other healthcare reform measures that may be adopted in the future, may result in more rigorous coverage criteria and in additional downward pressure on the price that we receive for any approved product. Any reduction in reimbursement from Medicare or other government programs may result in a similar reduction in payments from private payors. The implementation of cost containment measures or other healthcare reforms may prevent us from being able to generate revenue, attain profitability, or commercialize our product ~~pricing, reimbursement~~candidates.

Additionally, on May 30, 2018, the Trickett Wendler, Frank Mongiello, Jordan McLinn and ~~usage,~~Matthew Bellina Right to Try Act of 2017 was signed into law. The law, among other things, provides a federal framework for certain patients to access certain investigational new drug products that have completed a phase I clinical trial and that are undergoing investigation for FDA approval. Under certain circumstances, eligible patients can seek treatment without enrolling in clinical trials and without obtaining FDA authorization under an FDA expanded access program; however, manufacturers are not obligated to provide investigational new drug products under the current federal right to try law. We may choose to seek an expanded access program for our product candidates, or to utilize comparable rules in other countries that allow the use of a drug, on a named patient basis or under a compassionate use program.

The FDA’s ability to review and approve new products may be hindered by a variety of factors, including budget and funding levels, ability to hire and retain key personnel, statutory, regulatory and policy changes and global health concerns.

The ability of the FDA to review and approve new products can be affected by a variety of factors, including government budget and funding levels, statutory, regulatory and policy changes, the FDA’s ability to hire and retain key personnel and accept the payment of user fees, and other events that may otherwise affect the FDA’s ability to perform routine functions. In addition, government funding of other government agencies that fund research and development activities is subject to the political process, which is inherently fluid and unpredictable. Disruptions at the FDA and other agencies may also slow the time necessary for new drugs to be reviewed and/or approved by necessary government agencies, which would adversely affect our ~~future product sales~~business. For example, over the last several years, including for 35 days beginning on December 22, 2018, the U.S. government has shut down several times and ~~results~~certain regulatory agencies, such as the FDA, have had to furlough critical employees and stop critical activities.

The ability of ~~operations. These pressures can arise from rules~~the FDA and ~~practices~~other government agencies to properly administer their functions is highly dependent on the levels of ~~managed care groups, judicial decisions~~government funding and ~~governmental laws~~the ability to fill key leadership appointments, among various factors. Delays in filling or replacing key positions could significantly impact the ability of the FDA and ~~regulations related~~other agencies to ~~Medicare, Medicaid~~fulfill their functions and could greatly impact healthcare ~~reform,~~and the pharmaceutical ~~reimbursement policies~~industry.

~~Our current and future~~ relationships with future customers, providers and third-party payors ~~in the United States and elsewhere may~~will be subject ~~directly or indirectly,~~ to applicable anti-kickback, fraud and abuse ~~false claims, transparency, health information privacy and security~~ and other healthcare laws and regulations, which could expose us to penalties including criminal sanctions, civil penalties, contractual damages, reputational harm ~~administrative burdens~~ and diminished profits and future earnings.

Healthcare providers ~~physicians~~ and third-party payors ~~in the United States and elsewhere~~ will play a primary role in the recommendation and prescription of any product candidates for which we obtain marketing approval. Our future arrangements with providers, third-party payors and customers ~~may expose~~will subject us to broadly applicable fraud and abuse and other healthcare laws and regulations ~~including, without limitation, the federal Anti-Kickback Statute and the federal False Claims Act, which~~that may constrain the business or financial arrangements and relationships through which we market, sell ~~market~~ and distribute any ~~drugs~~product candidates for which we obtain marketing approval. ~~In addition, we may be subject to transparency laws and patient privacy regulation by the~~

Restrictions under applicable U.S. federal and state ~~governments and by governments in foreign jurisdictions in which we conduct our business. The applicable federal, state and foreign~~ healthcare laws and regulations ~~that~~include the following:

•

the federal Anti-Kickback Statute prohibits, among other things, persons and entities from knowingly and willfully soliciting, offering, receiving or providing remuneration, directly or indirectly, in cash or in kind, to induce or reward either the referral of an individual for, or the purchase, order or recommendation of, any good or service, for which payment may ~~affect our ability~~be made under federal healthcare programs such as Medicare and Medicaid. A person or entity does not need to ~~operate include:~~

•

the federal Anti-Kickback Statute, which prohibits, among other things, knowingly and willfully soliciting, receiving, offering or paying any remuneration (including any kickback, bribe, or rebate), directly or indirectly, overtly or covertly, in cash or in kind, to induce, or in return for, either the referral of an individual, or the purchase, lease, order or

have actual knowledge of the federal Anti-Kickback Statute or specific intent to violate it in order to have committed a violation;

•

~~recommendation of any good, facility, item or service for which payment may be made, in whole or in part, under a~~ federal healthcare program, such as the Medicare and Medicaid programs. A person or entity can be found guilty of violating the statute without actual knowledge of the statute or specific intent to violate it. In addition, the government may assert that 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 federal False Claims Act;

~~federal civil and criminal~~ false claims laws, including the federal False Claims Act, imposes criminal and civil ~~monetary penalty laws, which prohibit, among other things,~~penalties, including through civil whistleblower or qui tam actions, against individuals or entities ~~from~~for knowingly presenting, or causing to be presented, to the federal government, claims for payment ~~or approval from Medicare, Medicaid, or other third-party payors~~ that are false or fraudulent or ~~knowingly~~ making a false statement to ~~improperly~~ avoid, decrease or conceal an obligation to pay money to the federal ~~government;~~

government. In addition, the government may assert that a claim including items or services resulting from a violation of the U.S. federal Anti-Kickback Statute constitutes a false or fraudulent claim for purposes of the civil False Claims Act;

•

the federal Health Insurance Portability and Accountability Act of 1996, or HIPAA, ~~which created federal~~imposes criminal ~~statutes that prohibit~~and civil liability for, among other things, knowingly and willfully executing or attempting to execute a scheme to defraud any healthcare benefit program or ~~obtain, by means of~~making false or fraudulent pretenses, representations, or promises, any of the money or property owned by, or under the custody or control of, any healthcare benefit program, regardless of the payor (e.g., public or private) and knowingly and willfully falsifying, concealing or covering up by any trick or device a material fact or making any materially false statements ~~in connection with the delivery of, or payment for, healthcare benefits, items or services~~ relating to healthcare matters. Similar to the federal Anti-Kickback Statute, a person or entity ~~can be found guilty of violating these statutes without~~does not need to have actual knowledge of the ~~statutes~~statute or specific intent to violate ~~them;~~

it in order to have committed a violation;

•

HIPAA, as amended by the Health Information Technology for Economic and Clinical Health Act of 2009, or HITECH, and their respective implementing regulations, which impose requirements on certain covered healthcare providers, health plans and healthcare clearinghouses as well as their respective business associates that perform services for them that involve the use, or disclosure of, individually identifiable health information, relating to the privacy, security and transmission of individually identifiable health information without appropriate authorization;

the federal Physician Payment Sunshine Act ~~created under the Affordable Care Act, and its implementing regulations, which require~~requires applicable manufacturers of covered drugs, devices, ~~biologicals~~biologics, and medical supplies for which payment is available under Medicare, Medicaid, or the Children’s Health Insurance Program, ~~(with certain exceptions)~~with specific exceptions, to report ~~annually to the United States Department of Health~~payments and ~~Human Services, or HHS, information related to payments or~~ other transfers of value ~~made~~provided during the previous year to physicians, ~~(defined to include doctors, dentists, optometrists, podiatrists and chiropractors)~~as defined by such law, physician assistants, certain types of advance practice nurses, and teaching hospitals, as well as certain ownership and investment interests held by such physicians and their immediate family, ~~members~~which includes annual data collection and ~~payments or other “transfers of value” made to such physician owners;~~

reporting obligations;

•

~~federal consumer protection and unfair competition laws, which broadly regulate marketplace activities and activities that potentially harm consumers; and~~

analogous state and foreign laws and regulations, such as state anti-kickback and false claims laws, ~~which~~ may apply to sales or marketing arrangements and claims involving healthcare items or services reimbursed by non-governmental third-party payors, including private insurers; and some state ~~and foreign~~ laws ~~that~~ require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and the relevant compliance guidance promulgated by the federal government ~~or otherwise restrict payments that~~and may ~~be made to healthcare providers; state and foreign laws that~~ require drug manufacturers to report information related to payments and other transfers of value to physicians and other healthcare providers or marketing expenditures; and

•

some state laws require pharmaceutical companies to comply with the pharmaceutical industry’s voluntary compliance guidelines and ~~foreign laws governing~~ the ~~privacy~~relevant compliance guidance promulgated by the federal government and ~~security~~may require drug manufacturers to report information related to payments and other transfers of ~~health information in certain circumstances, many of which differ from each~~value to physicians and other ~~in significant ways and often are not preempted by HIPAA, thus complicating compliance efforts.~~

healthcare providers or marketing expenditures.

~~Because of the breadth of these~~Efforts to ensure that our business arrangements with third parties will comply with applicable healthcare laws and ~~the narrowness of the statutory exceptions and regulatory safe harbors available under such laws, it~~regulations will involve substantial costs. It is possible that ~~some of~~governmental authorities will conclude that our business ~~activities could be subject to challenge under one~~practices may not comply with current or ~~more of such laws. The scope~~future statutes, regulations or case law involving applicable fraud and ~~enforcement of each of these~~abuse or other healthcare laws ~~is uncertain and subject to rapid change in the current environment of healthcare reform, especially in light of the lack of applicable precedent~~ and regulations. Federal and state enforcement bodies have recently increased their scrutiny of interactions between healthcare companies and healthcare providers, which has led to a number of investigations, prosecutions, convictions and settlements in the healthcare industry. Responding to investigations can be time-and resource-consuming and can divert management’s attention from the business. Additionally, as a result of these investigations, healthcare providers and entities may have to agree to additional onerous compliance and reporting requirements as part of a consent decree or corporate integrity agreement. Any such investigation or settlement could increase our costs or otherwise have an adverse effect on our business.

If our operations are found to be in violation of any of ~~the~~these laws ~~described above~~ or any other ~~government~~governmental regulations that may apply to us, we may be subject to ~~penalties, including~~significant civil, criminal and ~~criminal~~administrative penalties, damages, fines, ~~disgorgement, individual~~ imprisonment, ~~additional reporting obligations and oversight if we become subject to a corporate integrity agreement or other agreement to resolve~~

~~allegations~~exclusion of ~~non-compliance with these laws, exclusion~~product candidates from ~~participation in federal and state~~government-funded healthcare programs, such as Medicare and Medicaid, disgorgement, contractual damages, reputational harm,

diminished profits and future earnings, and the curtailment or ~~restricting~~restructuring of our ~~operations,~~operations. If any of ~~which could harm our ability~~the physicians or other healthcare providers or entities with whom we expect to ~~operate our~~do business ~~and our financial results. In addition, the approval and commercialization of any of our product candidates outside the United States will also likely~~is found to be not in compliance with applicable laws, they may be subject us to ~~foreign equivalents of the~~criminal, civil or administrative sanctions, including exclusions from government-funded healthcare ~~laws mentioned above, among other foreign laws.~~programs.

Risks Related to Our Intellectual Property

~~If we are unable to protect our intellectual property rights or if our intellectual property rights are inadequate for our technology and product candidates, our competitive position could be harmed.~~

Our ~~commercial~~ success ~~will depend~~depends in part on our ability to obtain, maintain and ~~maintain~~protect our intellectual property. It is difficult and costly to protect our proprietary rights and technology, and we may not be able to ensure their protection.

Our commercial success will depend in large part on obtaining and maintaining patent, trademark, trade secret and other intellectual property protection in the United States and other countries with respect to our proprietary technology and products. We rely on trade secret, patent, copyright and trademark laws, and confidentiality, licensing and other agreements with employees and third parties, all of which offer only limited protection. We seek to protect our proprietary position by filing and prosecuting patent applications in the United States and abroad related to our novel technologies and products that are important to our business.

The patent positions of biotechnology and pharmaceutical companies generally are highly uncertain, involve complex legal and factual questions and have in recent years been the subject of much litigation. As a result, the issuance, scope, validity, enforceability and commercial value of our patents, including those patent rights licensed to us by third parties, are highly uncertain. The steps we or our licensors have taken to protect our proprietary rights may not be adequate to preclude misappropriation of our proprietary ~~information or infringement~~technologies and product candidates, which include atrasentan and the other product candidates we have in development, their respective components, formulations, combination therapies, methods used to manufacture them and methods of treatment, as well as successfully defending our patents and other intellectual property rights ~~both inside~~against third-party challenges. Our ability to stop unauthorized third parties from making, using, selling, offering to sell, importing or otherwise commercializing our product candidates is dependent upon the extent to which we have rights under valid and outside of the United States. Further, the examination process may require us or our licensors to narrow the claims for our pending patent applications, which may limit the scope of patent protection that may be obtained if these applications issue. The rights already granted under any of our currently issuedenforceable patents or ~~those licensed to us and those~~trade secrets that ~~may be granted under future issued patents may not provide us with the proprietary protection or competitive advantages we are seeking.~~cover these activities. If we ~~or our licensors~~ are unable to ~~obtain~~secure and maintain patent protection for ~~our~~any product or technology ~~and products,~~we develop, or if the scope of the patent protection ~~obtained~~secured is not ~~sufficient,~~sufficiently broad, our competitors could develop and commercialize ~~technology~~products and ~~products~~technology similar or ~~superior~~identical to ours, and our ability to ~~successfully~~ commercialize ~~our technology and products~~any product candidates we may develop may be adversely affected.

The patenting process is expensive and time-consuming, and we may not be able to file and prosecute all necessary or desirable patent applications at a reasonable cost or in a timely manner. In addition, we may not pursue or obtain patent protection in all relevant markets. It is also possible that we ~~or our licensors~~ will fail to identify patentable aspects of ~~inventions made in the course of~~ our ~~development~~research and ~~commercialization~~development activities before it is too late to obtain patent protection. Moreover, in some circumstances, we may not have the right to control the preparation, filing and prosecution of patent applications, or to maintain the patents, covering technology that we license from or license to third parties and may be reliant on our licensors or licensees to do so. Our pending and future patent applications may not result in issued patents. Even if patent applications we license or own currently or in the future issue as patents, they may not issue in a form that will provide us with any meaningful protection, ~~on them.~~

~~With respect to patent rights,~~prevent competitors or other third parties from competing with us, or otherwise provide us with any competitive advantage. Any patents that we hold or in-license may be challenged, narrowed, circumvented or invalidated by third parties. Consequently, we do not know whether any of ~~the pending patent applications for~~our platform advances and product candidates will be protectable or remain protected by valid and enforceable patents. In addition, our existing patents and any ~~of our compounds or biologic products will result in the issuance of~~future patents ~~that effectively protect~~we obtain may not be sufficiently broad to prevent others from using our technology or from developing competing products and technologies.

We depend on intellectual property licensed from third parties, and our licensors may not always act in our best interest. If we fail to comply with our obligations under our intellectual property licenses, if the licenses are terminated, or if disputes regarding these licenses arise, we could lose significant rights that are important to our business.

We are dependent on patents, know-how and proprietary technology licensed from others. Our licenses to such patents, know-how and proprietary technology may not provide exclusive rights in all relevant fields of use and in all territories in which we may wish to develop or commercialize our products in the future. The agreements under which we license patents, know-how and proprietary technology from others are complex, and certain provisions in such agreements may be susceptible to multiple interpretations.

For example, we are a party to a license agreement with AbbVie, pursuant to which we in-license worldwide, exclusive rights to atrasentan, including responsibility for our development and commercialization. This agreement imposes various diligence, milestone payment, royalty, insurance and other obligations on us. If we, or our sublicensees, fail to comply with these obligations, AbbVie may have the right to terminate our license, in which event we would not be able to develop or market atrasentan or any other technology or product candidates covered by the intellectual property licensed under this agreement. In addition, we may need to obtain additional licenses from our existing licensors and others to advance our research or allow commercialization of product candidates we may develop. It is possible that we may be unable to obtain any additional licenses at a reasonable cost or on reasonable terms, if at all. In either event, we may be required to expend significant time and resources to redesign our technology, product candidates, or the methods for manufacturing them or to develop or license replacement technology, all of which may not be feasible on a technical or commercial basis. If we are unable to do so, we may be unable to develop or commercialize the affected technology or product candidates.

If our licensors fail to adequately protect our licensed intellectual property, our ability to commercialize product candidates could suffer. We do not have complete control over the maintenance, prosecution and litigation of our ~~issued~~in-licensed patents or if any of our or our licensors’ issued patents will effectively prevent others from commercializing competitive technologies and products. Publications of discoveries in the scientific literature often lag behind the actual discoveries, and patent applications ~~in the United States~~ and ~~other jurisdictions are typically not published until 18 months after filing or in some cases not at all, until they are issued as a patent. Therefore,~~may have limited control over future intellectual property that may be in-licensed. For example, we cannot be certain that ~~we or~~activities such as the maintenance and prosecution by our licensors ~~were~~have been or will be conducted in compliance with applicable

laws and regulations or will result in valid and enforceable patents and other intellectual property rights. It is possible that our licensors’ infringement proceedings or defense activities may be less vigorous than had we conducted them ourselves or may not be conducted in accordance with our best interests.

In addition, the ~~first~~resolution of any contract interpretation disagreement that may arise could narrow what we believe to ~~make~~be the scope of our rights to the relevant patents, know-how and proprietary technology, or increase what we believe to be our financial or other obligations under the relevant agreement. Disputes that may arise between us and our licensors regarding intellectual property subject to a license agreement could include disputes regarding:

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the scope of rights granted under the license agreement and other interpretation-related issues;

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whether and the extent to which our technology and processes infringe on intellectual property of the licensor that is not subject to the licensing agreement;

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our right to sublicense patent and other rights to third parties under collaborative development relationships;

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our diligence obligations with respect to the use of the licensed technology in relation to our development and commercialization of our product candidates and what activities satisfy those diligence obligations;

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royalty, milestone or other payment obligations that may result from the advancement or commercial sale of any of our product candidates; and

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the ownership of inventions ~~claimed~~and know-how resulting from the joint creation or use of intellectual property by our licensors and us.

If disputes over intellectual property that we have licensed prevent or impair our ability to maintain our current licensing arrangements on acceptable terms, we may be unable to successfully develop and commercialize the affected technology or product candidates.

Our owned and in-licensed patents and patent applications may not provide sufficient protection of our atrasentan product candidate and our other product candidates or result in any competitive advantage.

We have in-licensed issued U.S. patents and foreign patent applications that cover formulations and methods of use related directly to atrasentan from AbbVie and own an issued U.S. patent related to methods of use of atrasentan. We have filed patent applications intended to specifically cover additional methods of use and combinations of atrasentan with other therapies in kidney disease. We cannot be certain that any of these patent applications will issue as patents, and if they do, that such patents will cover or adequately protect atrasentan or that such patents will not be challenged, narrowed, circumvented, invalidated or held unenforceable.

In addition to claims directed toward the technology underlying atrasentan, our owned ~~or licensed~~and in-licensed patents ~~or pending~~and patent applications contain claims directed to compositions of matter on the active pharmaceutical ingredients, or ~~that we or~~APIs, in zigakibart, CHK-336 and our ~~licensors were~~other product candidates, as well as methods-of-use directed to the ~~first to file for patent protection~~use of such ~~inventions.~~

~~Our pending applications cannot~~APIs for a specified treatment. Composition-of-matter patents on the API in prescription drug products provide protection without regard to any particular method of use of the API used. Method-of-use patents do not prevent a competitor or other third party from developing or marketing an identical product for an indication that is outside the scope of the patented method. Patents covering methods-of-use are not available in certain foreign countries, in which case we may not be ~~enforced against~~able to prevent competitors or third parties ~~practicing~~from marketing our product candidates in those countries. Moreover, with respect to method-of-use patents, even if competitors or other third parties do not actively promote their product for our targeted indications or uses for which we may obtain patents, providers may recommend that patients use these products off-label, or patients may do so themselves. Although off-label use may infringe or contribute to the ~~technology claimed~~infringement of method-of-use patents, the practice is common, and this type of infringement is difficult to prevent or prosecute.

The strength of patents in ~~such~~the biotechnology and pharmaceutical field involves complex legal and scientific questions and can be uncertain. The patent applications ~~unless and until a patent issues from such applications. Because the issuance of a patent is not conclusive as to its inventorship, scope, validity or enforceability, issued patents~~ that we own or ~~have licensed from third parties~~in-license may ~~be challenged~~fail to result in ~~the courts~~issued patents with claims that cover our product candidates or ~~patent offices~~uses thereof in the United States or in other foreign countries. For example, while our patent applications are pending, we may be subject to a third party preissuance submission of prior art to the United States Patent and ~~abroad. Such challenges~~Trademark Office, or USPTO, or become involved in interference or derivation proceedings, or equivalent proceedings in foreign jurisdictions. Even if patents do successfully issue, third parties may challenge their inventorship, validity, enforceability or scope, including through opposition, revocation, reexamination, post-grant and inter partes review proceedings. An adverse determination in any such submission, proceeding or litigation may result in ~~the~~ loss of patent ~~protection, the narrowing~~rights, loss of exclusivity, or in patent claims ~~in such patents~~being narrowed, invalidated or ~~the invalidity or unenforceability of such patents,~~held unenforceable, which could limit our ability to stop others from using or commercializing similar or identical technology and products, or limit the duration of the patent protection ~~for~~of our technology and ~~products. Protecting against the unauthorized use~~product candidates. Furthermore, even if they are unchallenged, our patents and patent applications may not adequately protect our intellectual property or prevent others from designing around our claims. Moreover, some of our owned and in-licensed patents and patent applications may be co-owned with

third parties. If we are unable to obtain an exclusive license to any such third-party co-owners’ interest in such patents or patent applications, such co-owners may be able to license their rights to other third parties, including our competitors, and our competitors could market competing products and technology. In addition, we may need the cooperation of any such co-owners of our patents in order to enforce such patents against third parties, and such cooperation may not be provided to us. If the breadth or strength of protection provided by the patent applications we hold with respect to our product candidates is threatened, it could dissuade companies from collaborating with us to develop, and threaten our ability to commercialize, our product candidates. Further, if we encounter delays in development, testing, and regulatory review of new product candidates, the period of time during which we could market our product candidates under patent protection would be reduced or eliminated.

Since patent applications in the United States and other countries are confidential for a period of time after filing, at any moment in time, we cannot be certain that we were in the past or will be in the future the first to file any patent application related to our product candidates. In addition, some patent applications in the United States may be maintained in secrecy until the patents are issued. As a result, there may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim, and we may be subject to priority disputes. We may be required to disclaim part or all of the term of certain patents or all of the term of certain patent applications. There may be prior art of which we are not aware that may affect the validity or enforceability of a patent claim. There also may be prior art of which we are aware, but which we do not believe affects the validity or enforceability of a claim, which may, nonetheless, ultimately be found to affect the validity or enforceability of a claim. No assurance can be given that, if challenged, our patents would be declared by a court, patent office or other governmental authority to be valid or enforceable or that even if found valid and enforceable, a competitor’s technology or product would be found by a court to infringe our patents. We may analyze patents or patent applications of our competitors that we believe are relevant in our activities, and consider that we are free to operate in relation to our product candidates, but our competitors may achieve issued claims, including in patents we consider to be unrelated, that block our efforts or potentially result in our product candidates or our ~~licensor’s patented~~activities infringing such claims. It is possible that our competitors may have filed, and may in the future file, patent applications covering our products or technology ~~trademarks~~similar to our own products or technology. Those patent applications may have priority over our owned and in-licensed patent applications or patents, which could require us to obtain rights to issued patents covering such technologies. The possibility also exists that others will develop products that have the same effect as our product candidates on an independent basis that do not infringe our patents or other intellectual property rights, or will design around the claims of patents that we have had issued that cover our product candidates or their use.

Likewise, our currently owned and in-licensed patents and patent applications, if issued as patents, directed to our proprietary technologies and our product candidates are expected to expire from 2028 through 2041, without taking into account any possible patent term adjustments or extensions. Our earliest in-licensed patents may expire before, or soon after, our first product achieves marketing approval in the United States or foreign jurisdictions. Additionally, we cannot be assured that the USPTO or relevant foreign patent offices will grant any of the pending patent applications we own or in-license currently or in the future. Upon the expiration of our current patents, we may lose the right to exclude others from practicing these inventions. The expiration of these patents could also have a similar material adverse effect on our business, financial condition, results of operations and prospects.

The degree of future protection for our proprietary rights is ~~expensive, difficult~~uncertain because legal means afford only limited protection and may not adequately protect our rights or permit us to gain or keep our competitive advantage. For example:

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others may be able to make or use compounds that are similar to the active compositions of our product candidates but that are not covered by the claims of our patents;

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the APIs in ~~some cases~~our current product candidates will eventually become commercially available in generic drug products, and no patent protection may be available with regard to formulation or method of use;

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our licensors, as the case may be, may fail to meet our obligations to the U.S. government regarding any in-licensed patents and patent applications funded by U.S. government grants, leading to the loss or unenforceability of patent rights;

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our licensors, as the case may be, might not have been the first to file patent applications for certain inventions;

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others may independently develop similar or alternative technologies or duplicate any of our technologies;

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it is possible that our currently pending or future patent applications will not result in issued patents;

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it is possible that there are prior public disclosures that could invalidate our owned or in-licensed patents, as the case may be, or parts of our owned or in-licensed patents;

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it is possible that others may circumvent our owned or in-licensed patents;

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it is possible that there are unpublished patent applications or patent applications maintained in secrecy that may later issue with claims covering our product candidates or technology similar to ours;

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the laws of foreign countries may not protect our or our licensors’, as the case may be, proprietary rights to the same extent as the laws of the United States;

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the claims of our owned or in-licensed issued patents or patent applications, if and when issued, may not adequately cover our product candidates;

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our owned or in-licensed issued patents may not provide us with any competitive advantages, may be narrowed in scope, or be held invalid or unenforceable as a result of legal challenges by third parties;

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the inventors of our owned or in-licensed patents or patent applications may become involved with competitors, develop products or processes that design around our patents, or become hostile to the Company or the patents or patent applications on which they are named as inventors;

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it is possible that our owned or in-licensed patents or patent applications omit individual(s) that should be listed as inventor(s) or include individual(s) that should not be ~~possible. In some cases,~~ listed as inventor(s), which may cause these patents or patents issuing from these patent applications to be held invalid or unenforceable or such omitted individuals may grant licenses to third parties;

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we have engaged in scientific collaborations in the past and will continue to do so in the future and our collaborators may develop adjacent or competing products that are outside the scope of our patent claims;

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we may not develop additional proprietary technologies for which we can obtain patent protection;

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it is possible that product candidates or diagnostic tests we develop may be ~~difficult~~covered by third parties’ patents or ~~impossible~~other exclusive rights; or

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the patents of others may have an adverse effect on our business.

Any of the foregoing could have a material adverse effect on our business, financial conditions, results of operations and prospects.

Our strategy of obtaining rights to ~~detect~~key technologies through in-licenses may not be successful.

The future growth of our business will depend in part on our ability to in-license or otherwise acquire the rights to additional product candidates and technologies. Although we have succeeded in licensing technology from AbbVie and others in the past, we cannot assure you that we will be able to in-license or acquire the rights to any product candidates or technologies from third parties on acceptable terms or at all.

For example, our agreements with certain of our third-party ~~infringement~~research partners provide that improvements developed in the course of our relationship may be owned solely by either us or ~~misappropriation~~our third-party research partner, or jointly between us and the third party. If we determine that exclusive rights to such improvements owned solely by a research partner or other third party with whom we collaborate are necessary to commercialize our product candidates or maintain our competitive advantage, we may need to obtain an exclusive license from such third party in order to use the improvements and continue developing, manufacturing or marketing our product candidates. We may not be able to obtain such a license on an exclusive basis, on commercially reasonable terms, or at all, which could prevent us from commercializing our product candidates or allow our competitors or others the opportunity to access technology that is important in our business. We also may need the cooperation of any co-owners of our intellectual property in order to enforce such intellectual property against third parties, and such cooperation may not be provided to us.

In addition, in-licensing and acquisition of these technologies is a highly competitive area, and a number of more established companies are also pursuing strategies to license or acquire product candidates or technologies that we may consider attractive. These established companies may have a competitive advantage over the Company due to their size, cash resources and greater clinical development and commercialization capabilities. In addition, companies that perceive the Company to be a competitor may be unwilling to license rights ~~even~~to the Company. Furthermore, we may be unable to identify suitable product candidates or technologies within our area of focus. If we are unable to successfully obtain rights to suitable product candidates or technologies, our business and prospects could be materially and adversely affected.

If we are unable to protect the confidentiality of our trade secrets, our business and competitive position would be harmed.

In addition to patent protection, we rely upon know-how and trade secret protection, as well as non-disclosure agreements and invention assignment agreements with our employees, consultants and third parties, to protect our confidential and proprietary information, especially where we do not believe patent protection is appropriate or obtainable.

It is our policy to require our employees, consultants, outside scientific collaborators, sponsored researchers and other advisors to execute confidentiality agreements upon the commencement of employment or consulting relationships with the Company. These agreements provide that all confidential information concerning our research and development, business, or financial affairs developed or made known to the individual or entity during the course of the party’s relationship with Chinook Therapeutics are to be kept confidential and not disclosed to third parties, except in ~~relation~~certain specified circumstances. In the case of employees, the agreements provide that all inventions conceived by the individual, and that are related in our current or planned business or research and development or made during normal working hours, on our premises or using our equipment or proprietary information (or as otherwise permitted by applicable law), are our exclusive property. In the case of consultants and other third parties, the agreements provide that all inventions conceived in connection with the services provided are our exclusive property. However, we cannot guarantee that we have entered into such agreements with each party that may have or have had access to ~~issued patent~~our trade secrets or proprietary technology and processes. We have also adopted policies and conduct training that provides guidance on our expectations, and our advice for best practices, in protecting our secrets. 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.

In addition to contractual measures, we try to protect the confidential nature of our proprietary information through other appropriate precautions, such as physical and technological security measures. However, trade secrets and know-how can be difficult to protect. These measures may not, for example, in the case of misappropriation of a trade secret by an employee or third party with authorized access, provide adequate protection for our proprietary information. Our security measures may not prevent an employee or consultant from misappropriating our trade secrets and providing them to a competitor, and any recourse we might take against this type of misconduct may not provide an adequate remedy to protect our interests fully. Enforcing a claim that a party illegally disclosed or misappropriated a trade secret can be difficult, expensive, and time-consuming, and the outcome is unpredictable. In addition, trade secrets may be independently developed by others in a manner that could prevent us from receiving legal recourse. If any of our confidential or proprietary information, such as the Company’s trade secrets, were to be disclosed or misappropriated, such as through a data breach, or if any of that information was independently developed by a competitor, our competitive position could be harmed. Additionally, certain trade secrets and proprietary information may be required to be disclosed in submissions to regulatory authorities. If such authorities do not maintain the confidential basis of such information or disclose it as part of the basis of regulatory approval, our competitive position could be adversely affected.

In addition, courts outside the United States are sometimes less willing to protect trade secrets. If we choose to go to court to stop a third party from using any of our trade secrets, we may incur substantial costs. Even if we are successful, these types of lawsuits may consume our time and other resources. Although we take steps to protect our proprietary information and trade secrets, third parties may independently develop substantially equivalent proprietary information and techniques or otherwise gain access to our trade secrets or disclose our technology, through legal or illegal means. As a result, we may not be able to meaningfully protect the Company’s trade secrets. Any of the foregoing could have a material adverse effect on our business, financial condition, results of operations and prospects.

Third-party claims ~~and proving any such~~of intellectual property infringement may ~~be even more difficult. For example, two of~~prevent, delay or otherwise interfere with our ~~patents, U.S. Patent Nos. 7,842,289~~product discovery and ~~7,935,804, have previously been subject to reexamination proceedings in the U.S. Patent and Trademark office at the request of a third party.~~development efforts.

~~Third parties may initiate legal proceedings alleging that we are infringing their intellectual property rights, the outcome of which would be uncertain and could harm our business.~~

Our commercial success depends ~~upon~~in part on our ability to develop, manufacture, market and sell our product candidates and to use our ~~related~~ proprietary technologies without infringing, misappropriating or otherwise violating the intellectual property or other proprietary rights of third parties. There is a substantial amount of litigation involving patents and other intellectual property rights in the biotechnology and pharmaceutical industries, as well as administrative proceedings for challenging patents, including interference, derivation, inter partes review, post grant review, and reexamination proceedings before the USPTO or oppositions and other comparable proceedings in foreign jurisdictions. We may ~~become party~~be exposed to, or threatened with, future ~~adversarial proceedings~~litigation by third parties having patent or ~~litigation regarding~~other intellectual property rights ~~with respect to~~alleging that our product candidates and/or proprietary technologies infringe, misappropriate or otherwise violate their intellectual property rights. Numerous U.S. and foreign issued patents and pending patent applications that are owned by third parties exist in the fields in which we are developing our product candidates. As the biotechnology and pharmaceutical industries expand and more patents are issued, the risk increases that our product candidates may give rise to claims of infringement of the patent rights of others. Moreover, it is not always clear to industry participants, including ~~interference~~us, which patents cover various types of drugs, products or ~~derivation proceedings before~~their methods of use or manufacture. Thus, because of the ~~U.S. Patent~~large number of patents issued and ~~Trademark Office, or USPTO. Third~~patent applications filed in our field, third parties may ~~assert infringement claims against us based on existing patents~~allege they have patent rights encompassing our product candidates, technologies or ~~patents that may be granted in the future.~~ methods.

If ~~we are found to~~

~~infringe~~ a third ~~party’s~~party claims that we infringe, misappropriate or otherwise violate our intellectual property rights, we may face a number of issues, including, but not limited to:

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infringement and other intellectual property claims that, regardless of merit, may be expensive and time-consuming to litigate and may divert our management’s attention from our core business;

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substantial damages for infringement, which we may have to pay if a court decides that the product candidate or technology at issue infringes on or violates the third party’s rights, and, if the court finds that the infringement was willful, we could be ordered to pay treble damages plus the patent owner’s attorneys’ fees;

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a court prohibiting us from developing, manufacturing, marketing or selling our product candidates, or from using our proprietary technologies, unless the third-party licenses its product rights or proprietary technology to us, which it is not required to ~~obtain a license from such third party to continue commercializing our product candidates. However, we may not be able to obtain any required license~~do, on commercially reasonable terms or at ~~all. Under certain circumstances,~~all;

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if a license is available from a third party, we ~~could be forced, including by court order,~~may have to ~~cease commercializing~~pay substantial royalties, upfront fees and other amounts, and/or grant cross-licenses to intellectual property rights for our product ~~candidates. In addition, in any such proceeding or litigation,~~candidates;

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the requirement that we ~~could also be found liable for monetary damages. A finding of infringement could prevent us from commercializing~~redesign our product candidates or ~~force us~~processes so they do not infringe, which may not be possible or may require substantial monetary expenditures and time; and

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there could be public announcements of the results of hearings, motions, or other interim proceedings or developments, and if securities analysts or investors perceive these results to ~~cease some of our business operations, which could materially harm our business. Any claims by third parties that we have misappropriated their confidential information or trade secrets~~be negative, it could have a ~~similar negative impact~~substantial adverse effect on the price of our common stock.

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. In addition, any uncertainties resulting from the initiation and continuation of any litigation could have a material adverse effect on our ~~business.~~ability to raise the funds necessary to continue our operations or could otherwise have a material adverse effect on our business, financial condition, results of operations and prospects.

While our product candidates are in preclinical studies and clinical trials, we believe that their use in these preclinical studies and clinical trials falls within the scope of the exemptions provided by 35 U.S.C. Section 271(e) in the United States, which generally exempts from patent infringement liability activities reasonably related to the development and submission of information to the FDA. As our product candidates progress toward commercialization, the possibility of a patent infringement claim against us increases. We attempt to ensure that our product candidates and the methods we employ to manufacture them, as well as the methods for their use that we intend to promote, do not infringe other parties’ patents and other proprietary rights. We cannot assure you they do not, however, and competitors or otherThird parties may assert that we ~~infringe~~are employing their proprietary ~~rights~~technology without authorization, including by enforcing its patents against us by filing a patent infringement lawsuit against the Company. In this regard, patents issued in ~~any event.~~the United States by law enjoy a presumption of validity that can be rebutted only with evidence that is “clear and convincing,” a heightened standard of proof.

~~In addition,~~There may be third-party patents of which we are ~~testing~~currently unaware with claims to materials, formulations, methods of manufacture or methods for treatment related to the use or manufacture of our product candidates. Because patent applications can take many years to issue, there may be currently pending patent applications that may later result in issued patents that our product candidates ~~administered with other~~may infringe. In addition, third parties may obtain patents in the future and claim that use of our technologies infringes upon these patents.

If any third-party patents were held by a court of competent jurisdiction to cover the manufacturing process of our product candidates, or ~~products that~~materials used in or formed during the manufacturing process, or any final product itself, the holders of those patents may be able to block our ability to commercialize our product candidate unless we obtain a license under the applicable patents, or until those patents were to expire or those patents are ~~covered by patents~~finally determined to be invalid or unenforceable. Similarly, if any third-party patent were held by ~~other companies~~a court of competent jurisdiction to cover aspects of our formulations, processes for manufacture or ~~institutions. In~~methods of use, including combination therapy or patient selection methods, the ~~event~~holders of that ~~a labeling instruction is required in product packaging recommending that combination, we could~~patent may be ~~accused of, or held liable for, infringement of the third-party patents covering~~able to block our ability to develop and commercialize the product candidate ~~or product recommended for administration with our product candidates. In such a case,~~unless we ~~could be required to~~ obtain a license ~~from the other company~~ or ~~institution~~until such patent expires or is finally determined to ~~use the required~~be invalid or ~~desired package labeling, which~~unenforceable. In either case, a license may not be available on commercially reasonable terms, or at ~~all.~~

Weall, particularly if such patent is owned or controlled by one of our primary competitors. If we are ~~aware of certain U.S. and foreign patents owned by~~unable to obtain a ~~certain third party with claims that are broadly directed~~necessary license to a ~~Listeria~~ ~~vaccine strain that contains certain proteins, some~~third-party patent on commercially reasonable terms, or at all, our ability to commercialize our product candidates may be impaired or delayed, which could significantly harm our business. Even if we obtain a license, it may be non-exclusive, thereby giving our competitors access to the same technologies licensed to the Company. In addition, if the breadth or strength of protection provided by our patents and patent applications is threatened, it could dissuade companies from collaborating with us to license, develop or commercialize current or future product candidates.

Parties making claims against us may seek and obtain injunctive or other equitable relief, which could effectively block our ability to further develop and commercialize our product candidates. Defense of these ~~patents expire as late as 2021. These patents could~~claims, regardless of their merit, would involve substantial litigation expense and would be ~~construed~~a substantial diversion of employee time and resources from our business. In the event of a successful claim of infringement against the Company, we may have to ~~cover CRS-207. In addition, we are aware of certain U.S.~~pay substantial damages, including treble damages and ~~foreign patents owned by a certain~~attorneys’ fees for willful infringement, obtain one or more licenses from third ~~party with claims that are broadly directed at methods of using~~ ~~Listeria-based vaccines to treat certain cancers,~~parties, pay royalties or redesign our infringing products, which ~~patents expire in 2017. The patents expiring in 2017~~ may be ~~construed~~impossible or require substantial time and monetary expenditure. We cannot predict whether any license of

this nature would be available at all or whether it would be available on commercially reasonable terms. Furthermore, even in the absence of litigation, we may need to ~~cover~~obtain licenses from third parties to advance our ~~LADD product candidate, CRS-207, as well as the~~research or allow commercialization of our product candidates ~~licensed~~and we may fail to ~~Janssen, ADU-214~~obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. In that event, we would be unable to further develop and ~~ADU-741. Notwithstanding, we do not currently expect a~~commercialize our product ~~launch of an Aduro product prior~~candidates, which could significantly harm our business.

We may be involved in lawsuits to ~~expiration of the above~~protect or enforce our patents ~~and, therefore, the patents would not appear relevant to our commercialization plans unless our approval was accelerated~~ or the patents ~~somehow~~of our licensors, which could be expensive, time-consuming and unsuccessful and could result in a finding that such patents are unenforceable or invalid.

Competitors may infringe our patents or the patents of our licensors. To counter infringement or unauthorized use, we may be required to file infringement claims, which can be expensive and time-consuming. In addition, in an infringement proceeding, a court may decide that one or more of our patents is not valid or is unenforceable, or may refuse to stop the other party from using the technology at issue on the grounds that our patents do not cover the technology in question.

In patent litigation in the United States, defendant counterclaims alleging invalidity and/or unenforceability are commonplace, and there are numerous grounds upon which a third party can assert invalidity or unenforceability of a patent. Third parties may also raise similar claims before administrative bodies in the United States or abroad, even outside the context of litigation. These types of mechanisms include re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings). These types of proceedings could result in revocation or amendment to our patents such that they no longer cover our product candidates. The outcome for any particular patent following legal assertions of invalidity and unenforceability is unpredictable. With respect to the validity question, for example, we cannot be certain that there is no invalidating prior art, of which we, our patent counsel and the patent examiner were ~~extended.~~ unaware during prosecution. If a defendant were to prevail on a legal assertion of invalidity and/or unenforceability, or if we are otherwise unable to adequately protect our rights, we would lose at least part, and perhaps all, of the patent protection on our product candidates. Defense of these types of claims, regardless of their merit, would involve substantial litigation expense and would be a substantial diversion of employee resources from our business.

Conversely, we may choose to challenge the patentability of claims in a third party’s U.S. patent by requesting that the USPTO review the patent claims in re-examination, post-grant review, inter partes review, interference proceedings, derivation proceedings, and equivalent proceedings in foreign jurisdictions (e.g., opposition proceedings), or we may choose to challenge a third party’s patent in patent opposition proceedings in the Canadian Intellectual Property Office, or CIPO, the European Patent Office, or EPO, or another foreign patent office. Even if successful, the costs of these opposition proceedings could be substantial, and may consume our time or other resources. If we ~~breach any~~fail to obtain a favorable result at the USPTO, CIPO, EPO or other patent office then we may be exposed to litigation by a third party alleging that the patent may be infringed by our product candidates or proprietary technologies.

Furthermore, because of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our ~~license agreements, it~~confidential information could be compromised by disclosure during this type of litigation. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments. If securities analysts or investors perceive these results to be negative, that perception could have a substantial adverse effect on the price of our common stock. Any of the foregoing could have a material adverse effect on our ~~commercialization efforts for our product candidates.~~business financial condition, results of operations and prospects.

Our commercial success depends on our ability, and the ability of our licensors and collaborators, to develop, manufacture, market and sell our product candidates and use our licensors’ or collaborators’ proprietary technologies without infringing the property rights of third parties. For example, we have entered into license agreements with the Regents of the University of California related to our LADD product candidates, and license agreements with Karagen Pharmaceuticals, Inc. and the Regents of the University of California and ~~a consortium of universities led by Memorial Sloan Kettering~~ related to STING Activators, and we expect to enter into additional licenses in the future. If we fail to comply with the obligations under these agreements, including payment and diligence terms, our licensors may have the right to terminate these agreements, in which event we may not be able to develop, manufacture, market or sell any product that is covered by these agreements or may face other penalties under the agreements. Such an occurrence could materially adversely affect the value of the product candidate being developed under any such agreement. Termination of these agreements or reduction or elimination of our rights under these agreements may result in our having to negotiate new or reinstated agreements, which may not be available to us on equally favorable terms, or at all, or cause us to lose our rights under these agreements, including our rights to intellectual property or technology important to our development programs.

We have granted our partners rights to control certain matters related to our intellectual rights for licensed products. Our inability to control the filing, prosecution, maintenance and enforcement of such patents could materially harm our business.

As part of the license agreements with Janssen related to ADU-214 or ADU-741, we have granted Janssen the initial right and responsibility to file, prosecute, maintain and enforce any patents and patent applications that contain pending or issued claims that are specifically directed to the antigens contained in ADU-214 or ADU-741. As part of the license agreement with Merck related to CD27, we have granted Merck the first rights to prosecute certain patent rights and we are required to consult with Merck with respect to infringement matters related to certain licensed patents. Our inability to control theselimited foreign intellectual property rights could materially harm our business. For example, if a third party is infringing one of the antigen-specific patents by marketing a product that is identical or similar to ADU-214 for the treatment of lung cancer (such as a biosimilar of ADU-214), Janssen would have the initial right to enforce the antigen-specific patents against the third party and ~~may make decisions with which we may not agree.~~

We have granted Janssen and Merck rights to determine patent term extension strategy for specific patents that relate to ADU-214 and ADU-741 and CD27, respectively. Our inability to control the patent term extension strategy could materially harm our business.

As part of the license agreements with Janssen related to ADU-214 and ADU-741 and Merck related to CD27, we have granted Janssen and Merck, respectively, the right and responsibility to determine the strategy to apply for the extension of the term of certain licensed patents. These partners may decide not to apply for extension of any term of a licensed patent that may otherwise be eligible for extension, which could decrease the royalties for the sale of products relating to such patents. Further, if one of our partners applies for an extension of a licensed patent that may also be relevant to another product candidates that we may be developing and commercializing, we could be prevented from seeking extension of the same patent for our product. If we do not have the ability to control the strategy for patent term extension of any of our licensed patents, our business may be materially harmed.

We may not be able to protect our intellectual property rights throughout the world.

We currently have limited intellectual property rights outside the United States. Filing, prosecuting and defending patents on ~~all of our~~ product candidates in all countries throughout the world would be prohibitively expensive, and our ~~or our licensors’~~ intellectual property rights in some countries outside the United States can be less extensive than those in the United States. In addition, the laws ~~and practices~~ of some foreign countries do not protect intellectual property rights to the same extent as federal and state laws in the United States. For example, patents covering methods-of-use are not available in certain foreign countries. Consequently, we ~~and our licensors~~ may not be able to prevent third parties from practicing our ~~and our licensors’~~ inventions in all countries outside the United States, or from selling or importing products made using our ~~and our licensors’~~ inventions in and into the United States or other jurisdictions. Competitors may use our technologies in jurisdictions where we do not have or have not obtained patent protection to develop their own products and, further, may export otherwise infringing products to territories where we ~~or our licensors~~ have patent protection but where enforcement is not as strong as that in the United States. These products may compete with our ~~products~~product candidates in jurisdictions where we do not have any issued patents and our patent claims or other intellectual property rights may not be effective or sufficient to prevent them from so competing.

Many companies have encountered significant problems in protecting and defending intellectual property rights in ~~certain~~ foreign jurisdictions. The legal systems of certain countries, particularly certain developing countries, do not favor the enforcement of patents, trade secrets and other intellectual property protection, particularly those relating to ~~biopharmaceuticals,~~biopharmaceutical products, which could make it

difficult for us to stop the infringement of our ~~or our licensor’s~~ patents or marketing of competing products against third parties in violation of our proprietary rights ~~generally~~generally. The initiation of proceedings by third parties to challenge the scope or validity of our patent rights in ~~those countries.~~foreign jurisdictions could result in substantial costs and divert our efforts and attention from other aspects of our business. Proceedings to enforce our patent rights in foreign jurisdictions could result in substantial ~~cost~~costs and divert our efforts and attention from other aspects of our business, could put our ~~and our licensors’~~ patents at risk of being invalidated or interpreted narrowly and our ~~and our licensors’~~ patent applications at risk of not issuing and could provoke third parties to assert claims against ~~us or our licensors.~~us. We ~~or our licensors~~ may not prevail in any lawsuits that we ~~or our licensors~~ initiate, and the damages or other remedies awarded, if any, may not be commercially meaningful.

The laws of certain foreign countries may not protect our rights to the same extent as the laws of the United States, and these foreign laws may also be subject to change. For example, methods of treatment and manufacturing processes may not be patentable in certain jurisdictions, and the requirements for patentability may differ in certain countries, particularly developing countries. Furthermore, generic and/or biosimilar product manufacturers or other competitors may challenge the scope, validity or enforceability of our or our licensors’ patents, requiring us or our licensors to engage in complex, lengthy and costly litigation or other proceedings.

Generic or biosimilar product manufacturers may develop, seek approval for, and launch biosimilar versions or generic versions, respectively, of our products. The FDA has published four draft guidance documents on biosimilar product development. For the FDA to approve a biosimilar product as interchangeable with a reference product, the agency must find that the biosimilar product can be expected to produce the same clinical results as the reference product and, for products administered multiple times, the biosimilar and the reference biologic may be switched after one has been previously administered without increasing safety risks or risks of diminished efficacy relative to exclusive use of the reference biologic. However, complexities associated with the larger, and often more complex, structures of biological products, as well as the process by which such products are manufactured, pose significant hurdles to implementation, which are still being worked out by the FDA. To date, no biosimilar or interchangeable biologic has been licensed under the Biologics Price Competition and Innovation Act of 2009, or BPCIA, framework, although such approvals have occurred in Europe, and it is anticipated that the FDA will approve a biosimilar in the relatively near future. If any of our product candidates are approved by the FDA, the approval of a biologic product biosimilar to one of our products could have a material impact on our business. In particular, a biosimilar could be significantly less costly to bring to market and priced significantly lower than our products, if approved by the FDA.

Some jurisdictions may require us to grant licenses to third parties. Such compulsory licenses could be extended to include some of our product candidates, which may limit our potential revenue opportunities.

Many countries, including European Union countries, have compulsory licensing laws under which a patent owner may be compelled under certain circumstances to grant licenses to third parties. In those countries, we and our licensors may have limited remedies if patents are infringed or if we or our licensors are compelled to grant a license to a third party, which could materially diminish the value of those patents. This could limit our potential revenue opportunities. Accordingly, our ~~and our licensors’~~ efforts to enforce our intellectual property rights around the world may be inadequate to obtain a significant commercial advantage from the intellectual property that we ~~own~~develop or license.

~~Patent terms~~Third parties may assert that our employees or consultants have wrongfully used or disclosed confidential information or misappropriated trade secrets.

As is common in the biotechnology and pharmaceutical industries, we employ individuals who were previously employed at universities or other biopharmaceutical or pharmaceutical companies, including our competitors or potential competitors. Although we try to ensure that our employees and consultants do not use the proprietary information or know-how of others in their work for us, we may be inadequate to protect our competitive position on our products for an adequate amount of time, and our product candidates for which we intend to seek approval as biologic products may face competition sooner than anticipated.

Given the amount of time required for the development, testing and regulatory review of new product candidates, such as our product candidates, patents protecting such candidates might expire before or shortly after such candidates are commercialized. Currently, we own or license patent families that cover our LADD technology platform, which expire between 2022 and 2027, subject to claims that our employees, consultants or independent contractors have inadvertently or otherwise used or disclosed intellectual property, including trade secrets or other proprietary information, of a former employer or other third parties. We may then have to pursue litigation to defend against these claims. If we fail in defending any ~~extensions,~~claims of this nature, in addition to paying monetary damages, we may lose valuable intellectual property rights or personnel. Even if we are successful in defending against these types of claims, litigation or other legal proceedings relating to intellectual property claims may cause us to incur significant expenses and could distract our technical and management personnel from their normal responsibilities. In addition, there could be public announcements of the results of hearings, motions or other interim proceedings or developments, and, if securities analysts or investors perceive these results to be negative, that perception could have a substantial adverse effect on the price of our common stock. This type of litigation or proceeding could substantially increase our operating losses and reduce our resources available for development activities, and we ~~own or license patent families that cover~~ ~~Listeria~~ strains engineered to express, or improve the expression of, particular antigens, which, if issued, expire between 2031 and 2037, subject to any extensions. We also own or license patent families that cover STING Activators, which, if issued, expire between 2025 and 2038, subject to any extensions. We expect to seek extensions of patent terms in the United States and, if available, in other countries where we are prosecuting patents. In the United States, the Drug Price Competition and Patent Term Restoration Act of 1984 permits a patent term extension of up to five years beyond the normal expiration of the patent, which is limited to the approved indication (or any additional indications approved during the period of extension). However, the applicable authorities, including the FDA and the USPTO in the United States, and any equivalent regulatory authority in other countries, may not ~~agree with our assessment~~have sufficient financial or other resources to adequately conduct this type of ~~whether such extensions are available, and may refuse to grant extensions to our patents,~~litigation or ~~may grant more limited extensions than we request. If this occurs,~~proceeding. For example, some of our competitors may be able to ~~take advantage~~sustain the costs of ~~our investment in development~~this type of litigation or proceeding more effectively than we can because of their substantially greater financial resources. In any case, uncertainties resulting from the initiation and ~~clinical trials by referencing our clinical and preclinical data and launch their product earlier than might otherwise be the case.~~

~~The BPCIA established legal authority for the FDA to review and approve biosimilar biologics, including the possible designation~~continuation 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 approved by the FDA until 12 years after the original branded product was approved under a BLA. The law is complex and is still being interpreted and implemented by the FDA. As a result, its ultimate impact, implementation, and meaning are subject to uncertainty. While it is uncertain when such processes intended to implement BPCIA may be fully adopted by the FDA, any such processes could have a material adverse effect on the future commercial prospects for our biological products.

We anticipate being awarded market exclusivity for each of our biological product candidates that is subject to its own BLA for 12 years in the United States, 10 years in Europe and significant durations in other markets. However, the term of the patents that cover such product candidates may not extend beyond the applicable market exclusivity awarded by a particular country. For example, in the United States, if all of the patents that cover our particular biologic product expire before the 12-year market exclusivity expires, a third party could submit a marketing application for a biosimilar product four years after approval of our biologic product, and the FDA could immediately review the application and approve the biosimilar product for marketing 12 years after approval of our biologic. Alternatively, a third party could submit a BLA for a similar or identical product any time after approval of our biologic product, and the FDA could immediately review and approve the similar or identical product for marketing and the third party could begin marketing the similar or identical product upon expiry of all of the patents that cover our particular biologic product.

Additionally, there is a risk that this exclusivity could be shortened due to congressional action or otherwise, or that the FDA will not consider our product candidates to be reference products for competing products, potentially creating the opportunity for generic competition sooner than anticipated. The extent to which a biosimilar, once approved, will be substituted for any one of our reference products in a way that is similar to traditional generic substitution for non-biological products is not yet clear, and will depend on a number of marketplace and regulatory factors that are still developing.

Changes in patent law, including recent patent reform legislation, could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

~~As is the case with other pharmaceutical companies, our success is heavily dependent on~~ intellectual property particularly patents. Obtaining and enforcing patents in the pharmaceutical industry involve technological and legal complexity, and obtaining and enforcing pharmaceutical patents is costly, time-consuming, and inherently uncertain. Changes in either the patent lawslitigation or ~~interpretation of the patent laws in the United States and~~ other countries may diminish the value of our patents or narrow the scope of our patent protection. For example, the U.S. Supreme Court has ruled on several patent cases in recent years, either narrowing the

scope of patent protection available in certain circumstances or weakening the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our and our licensors’ ability to obtain patents in the future, this combination of events has created uncertainty with respect to the value of patents, once obtained. Depending on decisions by Congress, the federal courts, and the USPTO, the laws and regulations governing patents could change in unpredictable ways that would weaken our and our licensors’ ability to obtain new patents or to enforce existing patents and patents we and our licensors may obtain in the future. Recent patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our and our licensors’ patent applications and the enforcement or defense of our or our licensors’ issued patents.

In September 2011, the Leahy-Smith America Invents Act, or the Leahy-Smith Act, was signed into law. The Leahy-Smith Act includes a number of significant changes to U.S. patent law. These include provisions that affect the way patent applications will be prosecuted and may also affect patent litigation. In particular, under the Leahy-Smith Act, the United States transitioned in March 2013 to a “first to file” system in which the first inventor to file a patent application will be entitled to the patent. Third parties are allowed to submit prior art before the issuance of a patent by the USPTO and may become involved in opposition, derivation, reexamination, inter-partes review or interferenceintellectual property related proceedings challenging our patent rights or the patent rights of our licensors. An adverse determination in any such submission, proceeding or litigation could reduce the scope of, or invalidate, our or our licensors’ patent rights, which could adversely affect our ~~competitive position.~~ability to compete in the marketplace.

We may not be successful in obtaining or maintaining necessary rights to product components and processes for our development pipeline through acquisitions and in-licenses.

The ~~USPTO is currently developing regulations~~growth of our business may depend in part on our ability to acquire, in-license or use third-party proprietary rights. For example, our product candidates may require specific formulations to work effectively and ~~procedures~~efficiently, we may develop product candidates containing pre-existing pharmaceutical compounds, or we may be required by the FDA or comparable foreign regulatory authorities to ~~govern administration~~provide a companion diagnostic test or tests with our product candidates, any of which could require us to obtain rights to use intellectual property held by third parties. In addition, with respect to any patents we may co-own with third parties, we may require licenses to such co-owners’ interest in such patents. We may be unable to acquire or in-license any compositions, methods of use, processes or other third-party intellectual property rights from third parties we identify as necessary or important in our business operations. In addition, we may fail to obtain any of these licenses at a reasonable cost or on reasonable terms, if at all. Were that to happen, we may need to cease use of the ~~Leahy-Smith Act,~~compositions or methods covered by those third-party intellectual property rights, and ~~many~~may need to seek to develop alternative approaches that do not infringe on those intellectual property rights, which may entail additional costs and development delays, even if we were able to develop such alternatives, which may not be feasible. Even if we are able to obtain a license, it may be non-exclusive, which means our competitors may also receive access to the same technologies licensed to us. In that event, we may be required to expend significant time and resources to develop or license replacement technology.

Additionally, we sometimes collaborate with academic institutions to accelerate our preclinical research or development under written agreements with these institutions. In certain cases, these institutions provide us with an option to negotiate a license to any of the ~~substantive changes~~institution’s rights in technology resulting from the collaboration. Even if we hold such an option, we may be unable to ~~patent law associated with~~negotiate a license from the ~~Leahy-Smith Act,~~institution within the specified timeframe or under terms that are acceptable to us. If we are unable to do so, the institution may offer the intellectual property rights to others, potentially blocking our ability to pursue our program.

The licensing and acquisition of third-party intellectual property rights is a competitive area, and companies that may be more established or have greater resources than we do may also be pursuing strategies to license or acquire third-party intellectual property rights that we may consider necessary or attractive in ~~particular,~~order to commercialize our product candidates. More established companies may have a competitive advantage over us due to their size, cash resources and greater clinical development and commercialization capabilities. In addition, companies that perceive us to be a competitor may be unwilling to assign or license rights to us. There can be

no assurance that we will be able to successfully complete these types of negotiations and ultimately acquire the ~~first~~rights to ~~file provisions, did not become effective until March 16, 2013. Accordingly, it is not clear what, if any, impact~~ the ~~Leahy-Smith Act will have on the operation of our business. However, the Leahy-Smith Act and its implementation could increase the uncertainties and costs~~intellectual property surrounding the ~~prosecution~~additional product candidates that we may seek to develop or market. If we are unable to successfully obtain rights to required third-party intellectual property or to maintain the existing intellectual property rights we have, we may have to abandon development of certain programs and our ~~patent applications~~business financial condition, results of operations and ~~the enforcement or defense of our issued patents and those licensed to us.~~prospects could suffer.

Obtaining and maintaining our patent protection depends on compliance with various procedural, document ~~submissions,~~submission, fee payment and other requirements imposed by governmental patent agencies, and our patent protection could be reduced or eliminated for ~~noncompliance~~non-compliance with these requirements.

Periodic maintenance fees on any issued patent are due to be paid to the USPTO and foreign patent agencies in several stages over the lifetime of the patent. The USPTO and various foreign ~~governmental~~ patent agencies also require compliance with a number of procedural, documentary, fee payment and other ~~similar~~ provisions during the patent application ~~process.~~process and following the issuance of a patent. While an inadvertent lapse can in many cases be cured by payment of a late fee or by other means in accordance with the applicable laws and rules, there are situations in which noncompliance can result in abandonment or lapse of the patent or patent application, resulting in partial or complete loss of patent rights in the relevant jurisdiction. Noncompliance events that could result in abandonment or lapse of a patent or patent application include, but are not limited to, failure to respond to official actions within prescribed time limits, non-payment of fees and failure to properly legalize and submit formal documents. ~~If we or~~Were a noncompliance event to occur, our ~~licensors fail~~competitors might be able to ~~maintain~~enter the ~~patents and patent applications covering our product candidates, our competitive position~~market, which would ~~be adversely affected.~~

~~We may become involved in lawsuits to protect or enforce our intellectual property, which could be expensive, time consuming and unsuccessful and~~ have a material adverse effect on our business financial condition, results of operations and prospects.

Changes in patent law in the United States and in non-U.S. jurisdictions could diminish the value of patents in general, thereby impairing our ability to protect our product candidates.

As is the case with other biopharmaceutical companies, our success is heavily dependent on intellectual property, particularly patents. Obtaining and enforcing patents in the biopharmaceutical industry involve both technological and legal complexity, and is therefore costly, time-consuming and inherently uncertain.

Past or future patent reform legislation could increase the uncertainties and costs surrounding the prosecution of our ~~business.~~patent applications and the enforcement or defense of our issued patents. For example, in March 2013, under the Leahy-Smith America Invents Act, or America Invents Act, the United States moved from a “first to invent” to a “first-to-file” patent system. Under a “first-to-file” system, assuming the other requirements for patentability are met, the first inventor to file a patent application generally will be entitled to a patent on the invention regardless of whether another inventor had made the invention earlier. The America Invents Act includes a number of other significant changes to U.S. patent law, including provisions that affect the way patent applications are prosecuted, redefine prior art and establish a new post-grant review system. The effects of these changes continue to evolve as the USPTO continues to promulgate new regulations and procedures in connection with the America Invents Act and many of the substantive changes to patent law, including the “first-to-file” provisions, only became effective in March 2013. In addition, the courts have yet to address many of these provisions and the applicability of the act and new regulations on the specific patents discussed in this filing have not been determined and would need to be reviewed. Moreover, the America Invents Act and its implementation could increase the uncertainties and costs surrounding the prosecution of our patent applications and the enforcement or defense of our issued patents.

~~Competitors may infringe~~Additionally, recent U.S. Supreme Court rulings have narrowed the scope of patent protection available in certain circumstances and weakened the rights of patent owners in certain situations. In addition to increasing uncertainty with regard to our ability to obtain patents ~~or misappropriate or otherwise violate our intellectual property rights. To counter infringement or unauthorized use, litigation may be necessary~~ in the future, this combination of events has created 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 that we might obtain in the future. For example, in the case, Assoc. for Molecular Pathology v. Myriad Genetics, Inc., the U.S. Supreme Court held that certain claims to DNA molecules are not patent-eligible.

Similarly, other cases by the U.S. Supreme Court have held that certain methods of treatment or ~~defend~~diagnosis are not patent-eligible. U.S. law regarding patent-eligibility continues to evolve. While we do not believe that any of our ~~intellectual property rights,~~owned or in-licensed patents will be found invalid based on these changes to U.S. patent law, we cannot predict how future decisions by the courts, the U.S. Congress or the USPTO may impact the value of our patents. Any similar adverse changes in the patent laws of other jurisdictions could also have a material adverse effect on our business, financial condition, results of operations and prospects.

Patent terms may be inadequate to protect our ~~trade secrets~~competitive position on our product candidates for an adequate amount of time.

Patents have a limited lifespan. In the United States, if all maintenance fees are timely paid, the natural expiration of a patent is generally 20 years from its earliest U.S. non-provisional filing date. Various extensions may be available, but the life of a patent, and the protection it affords, is limited. Even if patents covering our product candidates are obtained, once the patent life has expired, we may be open to competition from competitive products, including generics. Given the amount of time required for the development, testing and regulatory review of new product candidates, patents protecting our product candidates might expire before or shortly after we or our partners commercialize those candidates. As a result, our owned and licensed patent portfolio may not provide us with sufficient rights to exclude others from commercializing products similar or identical to our products.

If we do not obtain patent term extension for any product candidates we may develop, our business may be materially harmed.

Depending upon the timing, duration and specifics of any FDA marketing approval of any product candidates we may develop, one or more of our U.S. patents may be eligible for limited patent term extension under the Drug Price Competition and Patent Term Restoration Act of 1984, or the Hatch-Waxman Amendments. The Hatch-Waxman Amendments permit a patent extension term of up to five years as compensation for patent term lost during clinical trials and the FDA regulatory review process. A patent term extension cannot extend the remaining term of a patent beyond a total of 14 years from the date of product approval, only one patent per product may be extended and only those claims covering the approved drug, a method for using it, or a method for manufacturing it may be extended. U.S. and ex-U.S. law concerning patent term extensions and foreign equivalents continue to evolve. Even if we were to seek a patent term extension, it may not be granted because of, for example, the failure to exercise due diligence during the testing phase or regulatory review process, the failure to apply within applicable deadlines, the failure to apply prior to expiration of relevant patents, or any other failure to satisfy applicable requirements. Moreover, the applicable time period of extension or the scope of patent protection afforded could be less than we request. If we are unable to obtain patent term extension or the term of any such extension is less than it requests, our competitors may obtain approval of competing products following our patent expiration sooner than expected, and our business, financial condition, results of operations and prospects could be materially harmed.

Some intellectual property that we have in-licensed may have been discovered through government funded programs and thus may be subject to federal regulations such as “march-in” rights, certain reporting requirements and a preference for U.S.-based companies. Compliance with such regulations may limit our exclusive rights, and limit our ability to contract with non-U.S. manufacturers.

Inventions contained within some of our in-licensed patents and patent applications may have been made using U.S. government funding or other non-governmental funding. As a result, the U.S. government may have certain rights to intellectual property embodied in our current or future product candidates pursuant to the Bayh-Dole Act of 1980, or Bayh-Dole Act, and implementing regulations. We rely on our licensors to ensure compliance with applicable obligations arising from such funding, such as timely reporting, an obligation associated with in-licensed patents and patent applications. The failure of our licensors to meet their obligations may lead to a loss of rights or the unenforceability of relevant patents. For example, the government could have certain rights in such in-licensed patents, including a non-exclusive license authorizing the government to use the invention or to ~~determine~~have others use the ~~validity~~invention on its behalf for non-commercial purposes. In addition, our rights in such in-licensed government-funded inventions may be subject to certain requirements to manufacture products embodying such inventions in the United States. Any of the foregoing could harm our business, financial condition, results of operations and prospects significantly.

Risks Related to Employee Matters, Managing Growth and Other Risks Related to Our Business

We expect to expand our development and regulatory capabilities, and as a result, we may encounter difficulties in managing our growth, which could disrupt our operations.

We expect to experience significant growth in the number of our employees and the scope of our ~~own intellectual property rights~~operations, particularly in the areas of product candidate development, growing our capability to conduct clinical trials, and, if approved, through commercialization of our product candidates. To manage our anticipated future growth, we must continue to implement and improve our managerial, operational and financial systems, expand our facilities and continue to recruit and train additional qualified personnel, or ~~the proprietary rights of others. Also,~~contract with third parties ~~may initiate legal proceedings against us or~~to provide these capabilities for us. Due to our ~~licensors to challenge~~limited financial resources and the ~~validity or scope of intellectual property rights we own or control. These proceedings can be expensive and time consuming. Many~~limited experience of our ~~current and potential competitors have the ability to dedicate substantially greater resources to defend their intellectual property rights than we can. Accordingly, despite our efforts,~~management team in managing a company with such anticipated growth, we may not be able to ~~prevent~~effectively manage the expansion of our operations or recruit and train additional qualified personnel. The expansion of our operations may lead to significant costs and may divert our management and business development resources. Any inability to manage growth could delay the execution of our business plans or disrupt our operations.

Future acquisitions or strategic alliances could disrupt our business and harm our financial condition and results of operations.

We may acquire additional businesses or drugs, form strategic alliances or create joint ventures with third parties that we believe will complement or augment our existing business. If we acquire businesses with promising markets or technologies, we may not be able to realize the benefit of acquiring such businesses if we are unable to successfully integrate them with our existing operations and company culture. We may encounter numerous difficulties in developing, manufacturing and marketing any new drugs resulting from ~~infringing upon~~a strategic alliance or ~~misappropriating~~acquisition that delay or prevent us from realizing their expected benefits or enhancing our ~~intellectual property. Litigation could result~~business. We cannot assure you that, following any such acquisition, we will achieve the expected synergies to justify the transaction. The risks we face in ~~substantial costs and~~ connection with acquisitions, include:

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diversion of management ~~resources,~~time and focus from operating our business to addressing acquisition integration challenges;

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coordination of research and development efforts;

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retention of key employees from the acquired company;

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changes in relationships with strategic partners as a result of product acquisitions or strategic positioning resulting from the acquisition;

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cultural challenges associated with integrating employees from the acquired company into our organization;

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the need to implement or improve controls, procedures and policies at a business that prior to the acquisition may have lacked sufficiently effective controls, procedures and policies;

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liability for activities of the acquired company before the acquisition, including intellectual property infringement claims, violation of laws, commercial disputes, tax liabilities and other known liabilities;

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unanticipated write-offs or charges; and

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litigation or other claims in connection with the acquired company, including claims from terminated employees, customers, former stockholders or other third parties.

Our failure to address these risks or other problems encountered in connection with our past or future acquisitions or strategic alliances could cause us to fail to realize the anticipated benefits of these transactions, cause us to incur unanticipated liabilities and harm the business generally. There is also a risk that future acquisitions will result in the incurrence of debt, contingent liabilities, amortization expenses or incremental operating expenses, any of which could harm our financial condition or results of operations.

Our employees, principal investigators, CROs, CMOs and consultants may engage in misconduct or other improper activities, including non-compliance with regulatory standards and requirements and insider trading.

We are exposed to the risk of fraud or other misconduct by our employees, principal investigators, consultants and commercial partners. Misconduct by these parties could include intentional failures to comply with the regulations of FDA and non-U.S. regulators, provide accurate information to the FDA and non-U.S. regulators, comply with healthcare fraud and abuse laws and regulations in the United States and abroad, report financial information or data accurately or disclose unauthorized activities to us. In particular, sales, marketing and business arrangements in the healthcare industry are subject to extensive laws and ~~financial results. In addition,~~regulations intended to prevent fraud, misconduct, kickbacks, self-dealing and other abusive practices. These laws and regulations may restrict or prohibit a wide range of pricing, discounting, marketing and promotion, sales commission, customer incentive programs and other business arrangements. Such misconduct could also involve the improper use of information obtained in ~~an infringement proceeding, a court may decide that a patent owned by or licensed to us is invalid or unenforceable, or may refuse to stop~~ the ~~other party from using the technology at issue on the grounds that our patents do not cover the technology in question. An adverse~~course of clinical studies, which could result in regulatory sanctions and cause serious harm to our reputation. 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 comply with these laws or regulations. If any ~~litigation proceeding~~such actions are instituted against us, and we are not successful in defending or asserting our rights, those actions could ~~put one~~have a significant impact on our business, including the imposition of significant fines or ~~more~~other sanctions.

Our business entails a significant risk of product liability and our ability to obtain sufficient insurance coverage could have a material and adverse effect on our business, financial condition, results of operations and prospects.

We will face an inherent risk of product liability exposure related to the testing of atrasentan and our other product candidates in clinical trials and will face an even greater risk if we commercialize any of our ~~patents at risk~~product candidates. Any such product liability claims may include allegations of ~~being invalidated, held unenforceable~~defects in manufacturing, defects in design, a failure to warn of dangers inherent in a product, negligence, strict liability or ~~interpreted narrowly. Furthermore, because~~breach of the substantial amount of discovery required in connection with intellectual property litigation, there is a risk that some of our confidential information could be compromised by disclosure during this type of litigation. Therewarranty. Claims could also be ~~public announcements~~asserted under U.S. state consumer protection acts. If we cannot

successfully defend ourselves against claims of our product candidates caused injuries, then we could incur substantial liabilities. Regardless of merit or eventual outcome, liability claims may result in:

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decreased demand for any product candidates that we may develop;

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injury to our reputation and significant negative media attention;

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withdrawal of clinical trial participants;

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significant time and costs to defend the related litigation;

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substantial monetary awards to trial participants or patients;

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loss of revenue;

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termination of our collaboration relationships or disputes with our collaborators;

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voluntary product recalls, withdrawals or labeling restrictions; and

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the inability to commercialize any product candidates that we may develop.

While we currently have insurance that we believe is appropriate for our stage of development, we may need to obtain higher levels prior to clinical development or marketing atrasentan or any of our future product 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 that could have a material and adverse effect on our business, financial condition, results of operations and prospects.

Our ability to utilize our net operating loss carryforwards may be subject to limitations.

To the extent our taxable income exceeds any current year operating losses, we plan to use our net operating loss carryforwards to offset income that would otherwise be taxable. Under Section 382 of the ~~results~~Code, changes in a company’s ownership may limit the amount of ~~hearings, motions~~net operating loss carryforwards and tax credit carryforwards that could be utilized annually to offset its future taxable income, if any. This limitation generally applies in the event of a cumulative change in ownership of more than 50 percent within a three-year period. Aduro experienced and Private Chinook likely experienced an ownership change under Section 382 as a result of the Aduro Merger. Any such limitation may significantly reduce our ability to utilize net operating loss carryforwards and tax credit carryforwards before they expire. Consequently, even if we achieve profitability, we may not be able to utilize a material portion of Private Chinook’s or Aduro’s net operating loss carryforwards and other ~~interim proceedings or developments in any such proceedings. If securities analysts or investors perceive these results to be negative, it~~tax attributes, which could have a material adverse effect on our cash flow and results of operations. There is also a risk that due to regulatory changes, such as suspensions on the ~~price~~use of ~~shares of our common stock.~~

~~We may be subject to claims by third parties asserting that our licensors, employees~~net operating losses, or ~~we have misappropriated their intellectual property, or claiming ownership of what we regard as our own intellectual property.~~

Many of our employees and our licensors’ employees, including our senior management, were previously employed at universities or at other biotechnology or pharmaceutical companies, including our competitors or potential competitors. Some of these employees, including each member of our senior management, executed proprietary rights, non-disclosure and non-competition agreements, or similar agreements, in connection with such previous employment. Although we try to ensure that our employees do not use the proprietary information or know-how of others in their work for us, we may be subject to claims that we or these employees have used or disclosed intellectual property, including trade secretsNOLs, or other ~~proprietary information,~~unforeseen reasons, our existing NOLs could expire or otherwise be unavailable to offset future income tax liabilities.

Under the TCJA, as modified by the CARES Act, NOLs and other carryforwards generated in tax years that began after December 31, 2017 may offset no more than 80 percent of ~~any such third party. Litigation may be necessary to defend against such claims. If~~current taxable income annually for taxable years beginning after December 31, 2020. Accordingly, we, ~~fail in defending any such claims, in addition to paying monetary damages, we may lose valuable intellectual property rights~~Private Chinook or ~~personnel~~Aduro, as applicable, generated or ~~sustain damages. Such intellectual property rights could be awarded to a third party,~~will generate NOLs after the tax year ended December 31, 2017, and we ~~could be required~~might have to ~~obtain~~pay more federal income taxes in a license from such third party to commercialize our technology or products. Such a license may not be available on commercially reasonable terms or at all. Even if we are successful in defending against such claims, litigation could result in substantial costs and be a distraction to management.

~~Intellectual property rights do not necessarily address all potential threats to our competitive advantage.~~

The degree of future protection afforded by our intellectual property rights is uncertain because intellectual property rights have limitations, and may not adequately protect our business, or permit us to maintain our competitive advantage. The following examples are illustrative:

Others may be able to make compounds or biologics that are the same as or similar to our product candidates but that are not covered by the claims of the patents that we own or have exclusively licensed.

We or our licensors or any strategic partners might not have been the first to make the inventions covered by the issued patents or pending patent applications that we own or have exclusively licensed.

~~We or our licensors might not have been the first to file patent applications covering certain of our inventions.~~

~~Others may independently develop similar or alternative technologies or duplicate any of our technologies without infringing our intellectual property rights.~~

~~It is possible that our pending patent applications will not lead to issued patents.~~

~~Issued patents that we own or have licensed may not provide us with any competitive advantages, or may be held invalid or unenforceable~~subsequent year as a result of ~~legal challenges.~~the 80 percent taxable income limitation than we would have had to pay under the law in effect before the Tax Act as modified by the CARES Act.

Risks Related to the Aduro CVRs

Our ~~competitors might conduct research and development activities~~outstanding CVRs may expire valueless.

The right of the holders of our contingent value rights issued prior to the closing of the Aduro Merger, or the Aduro CVRs, will be contingent solely upon the occurrence of certain events described in the ~~United States~~CVR Agreement and the consideration received being greater than the amounts that could be deducted by us under the CVR Agreement. In 2022, we paid $7.5 million to Aduro CVR holders following receipt of a development milestone under our license agreement with Merck for MK-5890. In April 2021, prior to the disposition period set forth in the CVR Agreement, we entered into an agreement with Sairopa, a private company created by Van Herk Royalty B.V. and D.S. Chahal to acquire certain of our non-renal assets in exchange for stock in Sairopa. We will hold our equity interests in Sairopa until there is a liquidity event, upon which 50% of any proceeds, net of deductions permitted under the CVR Agreement, including taxes and certain other ~~countries~~expenses, will be distributed to Aduro CVR holders, provided such liquidity event occurs during the 10-year Aduro CVR period. If no additional events described within the CVR Agreement occur within the 10-year Aduro CVR period specified in the CVR Agreement or the consideration received is not greater than the amounts that ~~provide a safe harbor from patent infringement claims for certain research~~could be deducted by us, no additional payments will be made under the CVR Agreement, and ~~development activities, as well as in countries where we~~the Aduro CVRs will expire valueless.

We do not have ~~patent rights and then use the information learned from such activities~~any obligation to develop ~~competitive products for sale~~the non-renal assets, or to expend any effort or resources to divest or otherwise monetize the non-renal assets. Furthermore, the Aduro CVRs are unsecured obligations of us and all payments under the Aduro CVRs, all other obligations under the CVR Agreement and the Aduro CVRs and any rights or claims relating thereto may be subordinated in ~~our major commercial markets.~~right of payment to the prior payment in full of all current or future senior obligations of us.

~~We may~~The tax treatment of the Aduro CVRs is unclear.

The U.S. federal income tax treatment of the Aduro CVRs is unclear. There is no legal authority directly addressing the U.S. federal income tax treatment of the receipt of, and payments under, the Aduro CVRs, and there can be no assurance that the IRS would not ~~develop additional proprietary technologies~~assert, or that a court would not sustain, a position that could result in adverse U.S. federal income tax consequences to holders of the Aduro CVRs.

For example, Aduro did not report the issuance of the Aduro CVRs as a current distribution of property with respect to its common stock, but it is possible that the IRS could assert that Aduro CVR recipients are ~~patentable.~~

~~The patents~~treated as having received a distribution of ~~others may have an adverse effect on our business.~~

~~If we are unable~~property equal to ~~protect~~ the ~~confidentiality of our proprietary information and know-how, the~~fair market value of ~~our technology and products~~the Aduro CVRs on the date the CVRs are distributed, which could be ~~adversely affected.~~

taxable to such recipients without the corresponding receipt of cash. In addition, ~~to patent protection, we also rely on other proprietary rights,~~it is possible that the IRS or a court could determine that the issuance of the Aduro CVRs (and/or any payments thereon) and the reverse stock split constitute a single “recapitalization” for U.S. federal income tax purposes with the Aduro CVRs constituting taxable “boot” received in such recapitalization exchange. In such case, the tax consequences of the Aduro CVRs and the reverse stock split would differ from those described in the Aduro Merger proxy statement, including protection of trade secrets, know-how and confidential and proprietary information. To maintain the confidentiality of trade secrets and proprietary information, we enter into confidentiality agreements with ~~our employees, consultants and collaborators upon the commencement of their relationships with us. These agreements require that all confidential information developed by the individual or made known~~respect to the ~~individual by us during the course~~timing and character of the individual’s relationship with us be kept confidential and not disclosed to third parties. Our agreements with employees also provide that any inventions conceived by the individual in the course of rendering services to us shall be our exclusive property. However, we may not obtain these agreements in all circumstances, and individuals with whom we have these agreements may not comply with their terms. In the event of unauthorized use or disclosure of our trade secrets or proprietary information, these agreements, even if obtained, may not provide meaningful protection, particularly for our trade secrets or other confidential information. To the extent that our employees, consultants or contractors use technology or know-how owned by third parties in their work for us, disputes may arise between us and those third parties as to the rights in related inventions.

Adequate remedies may not exist in the event of unauthorized use or disclosure of our confidential information. The disclosure of our trade secrets would impair our competitive position and may materially harm our business, financial condition and results of operations.income.

Risks Related to our ~~Financial Results~~Common Stock

~~Our operating results~~The market price of our common stock is expected to be volatile, and the market price of the common stock may ~~fluctuate significantly, which makes our future operating results difficult to predict and could cause our operating results to fall below expectations or our guidance.~~

~~Our quarterly and annual operating results may fluctuate significantly~~drop in the future, which makes it difficult for us to predict our future operating results. From time to time, in addition to existing agreements with Janssen, Novartis and Merck, we may enter into license or collaboration agreements with other companies that include development funding and significant upfront and milestone payments and/or royalties, which may become an important sourcefuture.

The market price of our ~~revenue. Accordingly, our revenue~~common stock is subject to significant fluctuations. Some of the factors that may ~~depend on development funding and~~cause the ~~achievement of development and clinical milestones under current and any potential future license and collaboration agreements and sales~~market price of our ~~products, if approved. These upfront and milestone payments may vary significantly from period~~common stock to ~~period and any such variance could cause a significant fluctuation in our operating~~ fluctuate include:

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results ~~from one period to the next.~~

~~In addition, we measure compensation cost for stock-based awards made to employees at the grant date~~ of the award, based on the fair value of the award as approved by the compensation committee and sub-committees, and recognize the cost as an expense over the employee’s requisite service period. As the variables that we use as a basis for valuing these awards change over time,clinical trials, including our ~~underlying stock price~~ALIGN trial for atrasentan, and ~~stock price volatility, the magnitude~~preclinical studies of ~~the expense that we must recognize may vary significantly.~~

~~Furthermore, our operating results may fluctuate due to a variety of other factors, many of which are outside of our control and may be difficult to predict, including the following:~~

~~the timing and cost of, and level of investment in, research and development activities relating to our current and any future product candidates, which will change from time to time;~~

~~our ability to enroll patients in clinical trials and the timing of enrollment;~~

the cost of manufacturing our current and any future product candidates, which may vary depending on FDA guidelines and requirements, the quantity of production and the terms of our agreements with manufacturers;

~~expenditures that we will or may incur to acquire or develop additional product candidates and technologies;~~

~~the timing and outcomes of clinical studies for~~ our product candidates, or ~~competing product candidates;~~

~~competition from existing and potential future drugs that compete with our product candidates, and changes in the competitive landscape~~those of ~~our industry, including consolidation among~~ our competitors or ~~partners;~~

our existing or future collaborators;

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~~any delays in regulatory review or approval of our product candidates;~~

~~the level of demand for our product candidates, if approved, which may fluctuate significantly and be difficult to predict;~~

~~the risk/benefit profile, cost and reimbursement policies with respect to our products candidates, if approved, and existing and potential future drugs that compete with our product candidates;~~

~~our ability to commercialize our product candidates, if approved, inside and outside of the United States, either independently or working with third parties;~~

~~our ability to establish and maintain collaborations, licensing or other arrangements;~~

~~our ability to adequately support future growth;~~

~~potential unforeseen business disruptions that increase our costs or expenses;~~

~~future accounting pronouncements or changes in our accounting policies; and~~

~~the changing and volatile global economic environment.~~

The cumulative effect of these factors could result in large fluctuations and unpredictability in our quarterly and annual operating results. As a result, comparing our operating results on a period-to-period basis may not be meaningful. Investors should not rely on our past results as an indication of our future performance. This variability and unpredictability could also result in our failingfailure to meet ~~the expectations of industry~~ or exceed financial ~~analysts or investors for any period. If our revenue or operating results fall below the expectations of analysts or investors or below any forecasts~~and development projections we may provide to the ~~market,~~public;

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failure to meet or ifexceed the ~~forecasts we provide to the market~~

are below the expectations of analysts or investors, the price of our common stock could decline substantially. Such a stock price decline could occur even when we have met any previously publicly stated revenue and/or earnings guidance we may provide.

~~Our ability to use net operating loss carryforwards to offset future taxable income,~~financial and ~~our ability to use tax credit carryforwards, may be subject to certain limitations.~~

Our ability to use our federal and state net operating losses to offset potential future taxable income and related income taxes that would otherwise be due is dependent upon our generation of future taxable income before the expiration datesdevelopment projections of the ~~net operating losses, and we cannot predict with certainty when,~~investment community;

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announcements of significant acquisitions, strategic collaborations, joint ventures or whether, we will generate sufficient taxable income to use all of our net operating losses. In addition, a corporation that undergoes an “ownership change” under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, is subject to limitations on its ability to utilize its pre-change net operating loss carryforwards, or NOLs, to offset future taxable income and its ability to utilize tax credit carryforwards. As of December 31, 2016, we reported U.S. federal, state and foreign NOLs of approximately $30.5 million, $3.6 million and $13.3 million, respectively.

Under Section 382 of the Internal Revenue Code of 1986, as amended, or the Code, our ability to utilize NOL carryforwards or other tax attributes, such as federal tax credits, in any taxable year may be limited if we have experienced an “ownership change.” Generally, a Section 382 ownership change occurs if one or more stockholders or groups of stockholders who owns at least 5% of a corporation’s stock increases its ownership by more than 50 percentage points over its lowest ownership percentage within a specified testing period. Similar rules may apply under state tax laws. We have experienced an ownership change that we believe under Section 382 of the Code will result in limitations in our ability to utilize net operating losses and credits. In addition, we may experience future ownership changes as a result of future offerings or other changes in ownership of our stock. As a result, the amount of the NOLs and tax credit carryforwards presented in our financial statements could be limited and may expire unutilized.

~~Risks Related to Ownership of our Common Stock~~

~~The price of our stock may be volatile, and you could lose all or part of your investment.~~

The trading price of our common stock has been, and is likely to continue to be highly volatile and could be subject to wide fluctuations in response to various factors, some of which are beyond our control, including limited trading volume and as a result of the factors discussed in this “Risk Factors” section and elsewhere in this Quarterly Report on Form 10-Q among others. These factors include:

the commencement, enrollment or results of the planned clinical trials of our product candidates or any future clinical trials we may conduct, or changes in the development status of our product candidates;

any delay in our regulatory filings for our product candidates and any adverse development or perceived adverse development with respect to the applicable regulatory authority’s review of such filings, including without limitation the FDA’s issuance of a “refusal to file” letter or a request for additional information;

~~adverse results or delays in clinical trials;~~

~~our decision to initiate a clinical trial, not to initiate a clinical trial or to terminate an existing clinical trial;~~

~~adverse regulatory decisions, including a clinical hold or a failure to receive regulatory approval of our product candidates;~~

~~changes in laws or regulations applicable to our products, including but not limited to clinical trial requirements for approvals;~~

~~adverse developments concerning our manufacturers;~~

~~our inability to obtain adequate product supply for any approved product or inability to do so at acceptable prices;~~

~~our inability to establish collaborations if needed;~~

~~our failure to commercialize our product candidates;~~

~~additions or departures of key scientific or management personnel;~~

~~unanticipated serious safety concerns related to the use of our product candidates;~~

~~side effects or results reported for competing products or product candidates, such as competing~~ ~~listeria-based vaccines or other more general approaches to immuno-oncology, that are perceived to have similarities to ours;~~

~~introduction of new products or services offered~~capital commitments by us or our competitors;

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~~announcements of significant acquisitions, strategic partnerships, joint ventures or capital commitments by us or our competitors;~~

actions taken by regulatory agencies with respect to our ~~ability to effectively manage our growth;~~

product candidates, clinical studies, manufacturing process or sales and marketing terms;

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~~the size and growth of our initial cancer target markets;~~

~~our ability to successfully treat additional types of cancers or at different stages;~~

~~actual or anticipated variations in quarterly operating results;~~

~~our cash position;~~

~~our failure to meet the estimates and projections of the investment community or that we may otherwise provide to the public;~~

~~publication of research reports about us or our industry, or immuno-oncology in particular, or positive or negative recommendations or withdrawal of research coverage by securities analysts;~~

~~changes in the market valuations of similar companies;~~

~~overall performance of the equity markets;~~

~~sales of our common stock by us or our stockholders in the future;~~

~~trading volume of our common stock;~~

~~changes in accounting practices;~~

~~ineffectiveness of our internal controls;~~

disputes or other developments relating to proprietary rights, including patents, litigation matters, and our ability to obtain patent protection for our technologies;

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additions or departures of key personnel;

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significant lawsuits, including patent or stockholder litigation;

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~~general political~~if securities or industry analysts do not publish research or reports about the combined business, or if they issue adverse or misleading opinions regarding our business and ~~economic conditions; and~~

common stock;

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~~other events~~changes in the market valuations of similar companies;

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general market or ~~factors, many~~macroeconomic conditions or market conditions in the pharmaceutical and biotechnology sectors, including rising interest rates and inflation;

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sales of ~~which are beyond~~securities by us or our ~~control.~~

security holders in the future;

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if we fail to raise an adequate amount of capital to fund our operations and continued development of our product candidates;

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trading volume of our common stock;

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announcements by competitors of new commercial products, clinical progress or lack thereof, significant contracts, commercial relationships or capital commitments;

~~In addition,~~65

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adverse publicity relating to precision medicine product candidates, including with respect to other products in such markets;

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the introduction of technological innovations or new therapies that compete with our potential products; and

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period-to-period fluctuations in our financial results.

Moreover, the stock ~~market~~markets in general ~~and the NASDAQ Global Select Market and biopharmaceutical companies in particular,~~ have experienced ~~extreme price and volume fluctuations~~substantial volatility that ~~have~~has often been unrelated ~~or disproportionate~~ to the operating performance of ~~these~~individual companies. ~~Broad~~These broad market ~~and industry factors~~fluctuations may ~~negatively~~also adversely affect the trading price of our common stock. In addition, a recession, depression or other sustained adverse market event resulting from the spread of COVID-19 or otherwise could materially and adversely affect our business and the value of our common stock. Furthermore, the trading price of our common stock ~~regardless~~may be adversely affected by third parties trying to drive down the market price. Short sellers and others, some of whom post anonymously on social media, may be positioned to profit if our ~~actual operating performance.~~stock declines and their activities can negatively affect our stock price. In the past, ~~securities class action litigation has often been instituted against companies~~ following periods of volatility in the market price of a company’s ~~securities. This type~~securities, stockholders have often instituted class action securities litigation against such companies. Furthermore, market volatility may lead to increased shareholder activism if we have a market valuation that activists believe is not reflective of ~~litigation, if instituted,~~our intrinsic value. Activist campaigns that contest or conflict with our strategic direction or seek changes in the composition of our board of directors could ~~result in substantial~~have an adverse effect on our operating results and financial condition.

We will incur additional costs and increased demands upon management as a ~~diversion~~result of ~~management’s attention~~complying with the laws and ~~resources, which would~~regulations affecting public companies.

We will incur significant legal, accounting and other expenses as a public company that we did not incur as a private company, including costs associated with public company reporting obligations under the Securities Exchange Act of 1934, as amended, or the Exchange Act. Our management team consists, among others, of the executive officers of Private Chinook prior to the Aduro Merger, some of whom have not previously managed and operated a public company. These executive officers and other personnel will need to devote substantial time to gaining expertise related to public company reporting requirements and compliance with applicable laws and regulations to ensure that we comply with all of these requirements. Any changes we make to comply with these obligations may not be sufficient to allow us to satisfy our obligations as a public company on a timely basis, or at all. These reporting requirements, rules and regulations, coupled with the increase in potential litigation exposure associated with being a public company, could also make it more difficult for us to attract and retain qualified persons to serve on the board of directors or on board committees or to serve as executive officers, or to obtain certain types of insurance, including directors’ and officers’ insurance, on acceptable terms.

We are no longer a smaller reporting company, and are subject to additional laws and regulations affecting public companies that may increase our costs and the demands on management and could harm our operating results.

We are subject to the reporting requirements of the Exchange Act, which requires, among other things, that we file with the SEC, annual, quarterly and current reports with respect to our business ~~operating results~~and financial condition as well as other disclosure and corporate governance requirements. For 2023 we are no longer a smaller reporting company nor qualify for certain exemptions from disclosure requirements applicable to smaller reporting companies and non-accelerated filers. As a result, we are required to comply with certain additional legal and regulatory requirements applicable to public companies and may incur significant legal, accounting and other expenses to do so. If we are not able to comply with the requirements in a timely manner or at all, our financial ~~condition.~~

~~An active trading~~condition or the market ~~for~~price of our common stock may ~~not~~ be ~~maintained.~~

~~Our common stock is currently traded on the NASDAQ Global Select Market, but~~harmed. For example, if we ~~can provide no assurance~~or our independent auditor identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, we ~~will be able~~could face additional costs to maintain an active trading market for our shares on the NASDAQ Global Select Market or any other exchange in the future. If there is no active market for our common stock, it may be difficult for our stockholders to sell shares without depressingremedy those deficiencies, the market price of our stock could decline or we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources.

Provisions in our charter documents and under Delaware law could make an acquisition more difficult and may discourage any takeover attempts the company stockholders may consider favorable, and may lead to entrenchment of management.

Provisions of our amended and restated certificate of incorporation and amended and restated bylaws could delay or prevent changes in control or changes in management without the consent of the board of directors. These provisions include the following:

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a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board will be elected at one time;

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no cumulative voting in the election of directors, which limits the ability of minority stockholders to elect director candidates;

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a prohibition on stockholder action by written consent, which means that all stockholder action must be taken at an annual or special meeting of the stockholders;

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a requirement that special meetings of stockholders be called only by the chairman of the board of directors, the Chief Executive Officer or by a majority of the total number of authorized directors;

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advance notice requirements for stockholder proposals and nominations for election to the board of directors;

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a requirement that no member of the board of directors may be removed from office by stockholders except for cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds of all outstanding shares of voting stock then entitled to vote in the election of directors;

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a requirement of approval of not less than two-thirds of all outstanding shares of voting stock to amend any bylaws by stockholder action or to amend specific provisions of the certificate of incorporation; and

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the authority of the board of directors to issue preferred stock on terms determined by the board of directors without stockholder approval and which preferred stock may include rights superior to the rights of the holders of common stock.

In addition, these provisions would apply even if we were to receive an offer that some stockholders may consider beneficial.

We are also subject to the anti-takeover provisions contained in Section 203 of the DGCL, or Section 203. Under Section 203, a corporation may not, in general, engage in a business combination with any holder of 15 percent or more of its capital stock unless the holder has held the stock for three years or, among other exceptions, the board of directors has approved the transaction.

Our certificate of incorporation and bylaws provides that the Court of Chancery of the State of Delaware is the exclusive forum for substantially all disputes between us and our stockholders, and that federal district court is the exclusive forum for any actions arising under the Exchange Act, which could limit your ability to obtain a favorable judicial forum for disputes with us or our directors, officers or other employees.

Our certificate of incorporation and bylaws provides that the Court of Chancery of the State of Delaware is the sole and exclusive forum for any derivative action or proceeding brought on the Company’s behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against it arising pursuant to any provisions of the DGCL, its certificate of incorporation or its bylaws, or any action asserting a claim against it that is governed by the internal affairs doctrine. The exclusive forum provision does not apply to actions arising under the Exchange Act. The amended and restated bylaws will also provide that the federal district courts of the United States of America will be the exclusive forum for the ~~shares~~resolution of any complaint asserting a cause of action under the Securities Act. The provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with the Company or ~~at all.~~

~~Unstable market~~its directors, officers or other employees, which may discourage such lawsuits against the Company and ~~economic conditions~~its directors, officers and other employees. Alternatively, if a court were to find the choice of forum provision contained in the certificate of incorporation and bylaws to be inapplicable or unenforceable in an action, we may ~~have serious adverse consequences on~~incur additional costs associated with resolving such action in other jurisdictions, which could materially and adversely affect our business, financial condition and results of operations.

We do not expect to pay any cash dividends in the foreseeable future.

Our current expectation is that we will retain future earnings, if any, to fund the growth of our business as opposed to paying dividends. As a result, capital appreciation, if any, of our common stock ~~price.~~will be your sole source of gain, if any, for the foreseeable future.

Our executive officers, directors and principal stockholders have the ability to control or significantly influence all matters submitted to the Company’s stockholders for approval.

Our executive officers, directors and principal stockholders, in the aggregate, beneficially own a significant portion of our outstanding shares of common stock. As ~~widely reported,~~a result, if these stockholders were to choose to act together, they would be able to control or significantly influence all matters submitted to our stockholders for approval, as well as our management and affairs. For example, these persons, if they choose to act together, would control or significantly influence the election of directors and approval of any merger, consolidation or sale of all or substantially all of our assets. This concentration of voting power could delay or prevent an acquisition of us on terms that other stockholders may desire.

General Risk Factors

Unfavorable global ~~credit~~economic conditions could adversely affect our business, financial condition, stock price and results of operations.

Our results of operations could be adversely affected by general conditions in the global economy and in the global financial ~~markets have experienced~~markets. For example, a global economic downturn, whether due to terrorism, armed conflict (such as the current conflict between Russia and Ukraine), natural disasters or health crises (such as COVID-19) could cause extreme volatility and disruptions in the ~~past several years, including periods of severely diminished liquidity~~capital and credit ~~availability, declines in consumer confidence, declines in economic growth, increases in unemployment~~markets, as well as rising interest rates and uncertainty about economic stability. We cannot assure you that future deterioration in credit and financial markets and confidence in economic conditions will not occur. Our general business strategy may be adversely affected by any suchinflation. A severe or prolonged economic downturn ~~volatile~~could result in a variety of risks to our business, ~~environment~~including weakened demand for our product candidates and our ability to raise additional capital when needed on acceptable terms, if at all. A weak or ~~continued unpredictable and unstable market conditions.~~declining economy could also strain our suppliers, possibly resulting in supply disruption, or cause our customers to delay making payments for our services. If the current equity and credit markets deteriorate, ~~or do not improve,~~ it may make any necessary debt or equity financing more difficult, more costly, and more dilutive. Failure to secure any necessary financing in a timely manner and on favorable terms could have a material adverse effect on our growth strategy, financial performance and stock price and could require us to delay or

abandon clinical development plans. In addition, there is a risk that one or more of our current service providers, manufacturers and other partners may not survive ~~these~~such difficult economic times, which could directly affect our ability to attain our operating goals on schedule and on budget.

As Any of ~~September 30, 2017, we had $373.5 million of cash, cash equivalents~~the foregoing could harm our business and marketable securities. While we are not aware of any downgrades, material losses, or other significant deterioration in the fair value of our cash equivalents and marketable securities since September 30, 2017, we cannot ~~assure you that future deterioration~~anticipate all of the ~~global credit~~ways in which the current economic climate and financial ~~markets would not negatively~~market conditions could adversely impact our ~~current portfolio of cash equivalents or our ability to meet our financing objectives.~~business. Furthermore, our stock price may decline due in part to the volatility of the stock market and ~~the~~any general economic downturn.

If we fail to comply with environmental, health, and safety laws and regulations, we could become subject to fines or penalties or incur costs that could harm our business.

We are subject to numerous environmental, health, and safety laws and regulations, including those governing laboratory procedures and the handling, use, storage, treatment and disposal of hazardous materials and wastes. Our operations involve the use of hazardous and flammable materials, including chemicals and biological materials. Our operations also may produce hazardous waste products. We generally anticipate contracting with third parties for the disposal of these materials and wastes. We will not be able to eliminate the risk of contamination or injury from these materials. In the event of contamination or injury resulting from any use by us of hazardous materials, we could be held liable for any resulting damages, and any liability could exceed our resources. We also could incur significant costs associated with civil or criminal fines and penalties for failure to comply with such laws and regulations.

Although we maintain workers’ compensation insurance to cover us for costs and expenses we may incur due to injuries to our employees resulting from the use of hazardous materials, this insurance may not provide adequate coverage against potential liabilities.

In addition, we may incur substantial costs in order to comply with current or future environmental, health, and safety laws and regulations. These current or future laws and regulations may impair our research, development or production efforts. Our failure to comply with these laws and regulations also may result in substantial fines, penalties or other sanctions.

We or the third parties upon whom we depend may be adversely affected by natural disasters and other calamities, including pandemics, such as the global outbreak of COVID-19, and our business continuity and disaster recovery plans may not adequately protect us from a serious disaster.

Natural disasters could severely disrupt our operations and have a material adverse effect on our business, results of operations, financial condition and prospects. If a natural disaster, fire, hurricane, power outage or other event occurred that prevented us from using all or a significant portion of our headquarters or other offices, that damaged critical infrastructure, such as our suppliers’ manufacturing facilities, or that otherwise disrupted operations, such as data storage, it may be difficult or, in certain cases, impossible for us to continue our business for a substantial period of time.

Occurrences of epidemics or pandemics, depending on their scale, may cause different degrees of damage to the national and local economies within our geographic focus. Global economic conditions may be disrupted by widespread outbreaks of infectious or contagious diseases, and such disruption may adversely affect clinical development plans. For example, pandemics, such as the COVID-19 pandemic, could have an adverse effect on the coordination of research and development, our capital raising efforts, and the financial condition of our business, as well as the ability of us to retain key personnel and continue to expand product candidate development and conduct clinical trials.

The disaster recovery and business continuity plans we have in place may prove inadequate in the event of a serious disaster or similar event. We may incur substantial expenses as a result of the limited nature of our disaster recovery and business continuity plans, which could have a material adverse effect on our business. For example, as a result of a pandemic, similar to that experienced

during the outbreak of COVID-19, we may experience reduction in research and development, clinical testing, regulatory compliance activities, and manufacturing activities, and are unable at this time to estimate the extent of the effect of any such future pandemic on our business. Further, the extent and duration of the current economic slowdown or other adverse effects potentially attributable to natural disasters or future pandemics remain uncertain at this time. A continued significant economic slowdown could have a substantial adverse effect on our financial condition, liquidity, and results of operations. If these conditions persist for an extended term, it could have a material adverse effect on our future revenue and sales.

We have broad discretion in the use of our cash and cash equivalents and may invest or spend the proceeds in ways with which you do not ~~intend to pay dividends on our common stock so any returns will be limited to~~agree and in ways that may not increase the value of your investment.

We have broad discretion over the use of our ~~stock.~~cash and cash equivalents. You may not agree with our decisions, and our use of the proceeds may not yield any return on your investment. Our failure to apply these resources effectively could compromise our ability to pursue our growth strategy and we might not be able to yield a significant return, if any, on our investment of these net proceeds. You may not have the opportunity to influence our decisions on how to use our cash resources.

We ~~currently anticipate~~must attract and retain highly skilled employees to succeed.

To succeed, we must recruit, retain, manage and motivate qualified clinical, scientific, technical and management personnel, and we face significant competition for experienced personnel. If we do not succeed in attracting and retaining qualified personnel, particularly at the management level, it could adversely affect our ability to execute our business plan, harm our results of operations and increase our capabilities to successfully commercialize atrasentan and other product candidates. In particular, we believe that our future success is highly dependent upon the contributions of our senior management, particularly our President and Chief Executive Officer, Eric Dobmeier. The loss of services of Mr. Dobmeier or any of our senior management could delay or prevent the successful development of our product pipeline, completion of our clinical trials or the commercialization of our product candidates, if approved. The competition for qualified personnel in the biotechnology field is intense and as a result, we ~~will~~may be unable to continue to attract and retain ~~future earnings~~qualified personnel necessary for the development ~~operation and expansion~~ of our business or to recruit suitable replacement personnel.

Many of the other biotechnology companies that we compete against for qualified personnel have greater financial and other resources, different risk profiles and a longer history in the industry than we do. They also may provide more diverse opportunities and better chances for career advancement. Some of these characteristics may be more appealing to high-quality candidates than what we have to offer. If we are unable to continue to attract and retain high-quality personnel, the rate and success at which we can discover and develop product candidates and our business will be limited.

If equity research analysts do not ~~anticipate declaring~~publish research or ~~paying any cash dividends for~~reports, or publish unfavorable research or reports, about the ~~foreseeable future. Any return to stockholders will therefore be limited to the appreciation of their stock.~~Company, its business or its market, its stock price and trading volume could decline.

~~Our principal stockholders and management own a significant percentage of our stock and will be able to exert significant control over matters subject to stockholder approval.~~

Our executive officers, directors, and 5% stockholders together beneficially own a significant percentage of our voting stock. These stockholders may be able to determine the outcome of matters requiring stockholder approval. For example, these stockholders may be able to control elections of directors, amendments of our organizational documents, or approval of any merger, sale of assets, or other major corporate transaction. This may prevent or discourage unsolicited acquisition proposals or offers for our common stock that you may feel are in your best interest as one of our stockholders.

~~We are an emerging growth company and are taking advantage of reduced disclosure and governance applicable to emerging growth companies, which could make our common stock less attractive to investors.~~

We are an emerging growth company, as defined in the JOBS Act, and we are taking advantage of certain exemptions from various reporting requirements that are applicable to other public companies that are not emerging growth companies, including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act, reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements and exemptions from the requirements of holding nonbinding advisory votes on executive compensation and stockholder approval of any golden parachute payments not previously approved. We will remain an emerging growth company until the earliest of (1) December 31, 2020, (2) the last day of the fiscal year (a) in which we have total annual gross revenue of at least $1.07 billion or (b) in which we are deemed to be a large accelerated filer, which requires the market value of our common stock that is held by non-affiliates to exceed $700.0 million as of the prior June 30th, and (3) the date on which we have issued more than $1.0 billion in non-convertible debt during the prior three-year period.

Even after we no longer qualify as an emerging growth company, we may still qualify as a “smaller reporting company” which would allow us to take advantage of many of the same exemptions from disclosure requirements including not being required to comply with the auditor attestation requirements of Section 404 of the Sarbanes-Oxley Act and reduced disclosure obligations regarding executive compensation in our periodic reports and proxy statements. We cannot predict if investors will find our common stock less attractive because we may rely on these exemptions. If some investors find our common stock less attractive as a result, there may be a less activeThe trading market for our common stock will be influenced by the research and reports that equity research analysts publish about us and our business. Equity research analysts may elect not to provide research coverage of our common stock, and such lack of research coverage may adversely affect the market price of our common stock. In the event we do have equity research analyst coverage, we will not have any control over the analysts or the content and opinions included in their reports. The price of our common stock could decline if one or more equity research analysts downgrade our stock or issue other unfavorable commentary or research. If one or more equity research analysts ceases coverage of us or fails to publish reports on it regularly, demand for our common stock could decrease, which in turn could cause its stock price or trading volume to decline.

Our internal computer and information systems, or those used by our CROs, CMOs or other contractors or consultants, may fail or suffer security incidents (e.g., cyber-attacks), which could result in a material disruption of our development programs and may result in extensive and costly legal compliance requirements.

Despite the implementation of appropriate security measures, our internal computer and information systems and those of our current and any future CROs, CMOs and other contractors or consultants may become vulnerable to damage from security incidents (such as data breaches, viruses or other malicious code, coordinated attacks, data loss, phishing attacks, ransomware, denial of service attacks, or other security or information technology incidents caused by threat actors, technological vulnerabilities or human error), unauthorized access, natural disasters, terrorism, war and telecommunication and electrical failures. If such an event were to occur and cause interruptions in our operations, it could result in a material disruption of our development programs and our business operations, whether due to a loss of our trade secrets or other proprietary information or other similar disruptions. For example, the loss of data from completed or future preclinical studies or clinical trials could result in significant delays in our regulatory approval efforts and significantly increase our costs to recover or reproduce the data. To the extent that any disruption or security breach were to result in a loss of, or damage to, our data or applications, or inappropriate disclosure of confidential or proprietary information, we could incur liability, our competitive position could be ~~more volatile.~~harmed and the further development and commercialization of our product candidates

~~Under~~69

could be significantly delayed. System failures or outages, including any potential disruptions due to significantly increased global demand on certain cloud-based systems during the ~~JOBS Act, emerging growth companies~~COVID-19 pandemic, could compromise our ability to perform our day-to-day operations, which could harm our ability to conduct business or delay our financial reporting. Such failures could materially adversely affect our operating results and financial condition.

Although we devote resources designed to protect our information systems, we realize that cyberattacks resulting in a security incident are a threat, and there can ~~also delay adopting new~~be no assurance of our efforts will prevent information security breaches that would result in business, legal, financial, or revised accounting standards until such time as those standards apply to private companies. We have irrevocably elected not to avail ourselves of this exemption from new or revised accounting standards and, therefore, will be subjectreputational harm to the ~~same new~~Company, or revised accounting standards as other public companies that are not emerging growth companies. As a result, changes in rules of U.S. generally accepted accounting principles or their interpretation, the adoption of new guidance or the application of existing guidance to changes in our business could significantly affect our financial position and results of operations.

~~Our reported financial results may be adversely affected by changes in accounting principles generally accepted in the U.S.~~

We prepare our financial statements in conformity with accounting principles generally accepted in the U.S. These accounting principles are subject to interpretation by the Financial Accounting Standards Board, or FASB, and the Securities and Exchange Commission. A change in these policies or interpretations couldwould have a ~~significant~~material adverse effect on our ~~reported~~results of operations and financial ~~results, may retroactively affect previously reported results,~~condition. A successful cyberattack could cause ~~unexpected~~serious negative consequences for us, including, without limitation, the disruption of operations, the misappropriation of confidential business information, including personal and financial ~~reporting fluctuations,~~information, trade secrets, financial loss and the disclosure of corporate strategic plans. The COVID-19 pandemic is generally increasing the attack surface available to criminals, as more companies and individuals work online and work remotely, and as such, the risk of a cybersecurity incident potentially occurring, and our investment in risk mitigations against such an incident, is increasing.

Federal, state, and foreign laws and government requirements include obligations of companies to notify regulators and/or individuals, in certain circumstances, of security breaches involving personally identifiable information, which could result from breaches experienced by us or by our vendors, contractors, or organizations with which we have formed strategic relationships. Even though we may ~~require~~have contractual protections with such vendors, contractors, or other organizations, notifications and follow-up actions related to a security breach could impact our reputation and cause us to ~~make~~

~~costly changes~~incur significant costs. Any failure to our operational processes and accounting systems. In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic 606), which supersedes nearly all existing U.S. GAAP revenue recognition guidance. The new standard will become effective for us on January 1, 2018. Early application is permittedprevent or mitigate security breaches or improper access to, ~~the original effective date of January 1, 2017. Although we are continuing to assess all potential impacts of the standard on our financial statements~~use, disclosure or ~~disclosures, it could change the way we account for certain~~other misappropriation of our ~~revenue transactions, including revenue generated~~data or consumers’ personal data could result in significant contractual and legal liability, such as under ~~our existing collaboration agreements. Adoption of the standard could have a significant impact on our financial statements~~state breach notification laws, federal law (including HIPAA/Health Information Technology for Economic and ~~may retroactively affect the accounting treatment of transactions completed before adoption. See~~ ~~Note 2. Recent Accounting Pronouncements~~ ~~included herein for additional discussion of the accounting changes.~~

~~Complying~~Clinical Health Act, or HITECH), and international law (e.g., GDPR). Compliance with ~~the~~these and any other applicable privacy and data security laws and regulations ~~affecting public companies has increased~~is a rigorous, expensive and ~~will increase~~time-intensive process, and we may be required to put in place additional mechanisms ensuring compliance with the new data protection rules and possible government oversight. Our failure to comply with such laws or to adequately secure the information we hold could result in significant liability and/or reputational harm and, in turn, a material adverse effect on our ~~costs~~future client base, member base and ~~the demands on management and could harm our operating results.~~revenue.

~~As a public company, we have incurred and will continue to incur significant legal, accounting and other expenses.~~ We are subject to a variety of privacy and data security laws, and our failure to comply with them could harm our business.

We maintain a large quantity of sensitive information, including confidential business and patient health information in connection with our preclinical and clinical studies, and are subject to laws and regulations governing the ~~reporting requirements~~privacy and security of ~~the Securities Exchange Act~~such information. Privacy laws, rules and regulations evolve frequently, and their scope may continually change through new legislation, amendments to existing legislation, and changes in enforcement, and may be inconsistent from one jurisdiction to another. The interpretation and application of ~~1934, as amended, which requires, among other things, that we file with the Securities~~consumer, health-related and ~~Exchange Commission, or the SEC, annual, quarterly and current reports~~data protection laws, especially with respect to ~~our business~~genetic samples and ~~financial condition. In addition,~~data, in the ~~Sarbanes-Oxley Act, as well as rules subsequently adopted by~~United States, the ~~SEC~~European Union and ~~the NASDAQ Global Select Market to implement provisions of the Sarbanes-Oxley Act, impose significant requirements on public companies, including requiring establishment~~elsewhere, are often uncertain, contradictory and ~~maintenance of effective disclosure and financial controls and changes~~ in ~~corporate governance practices. Further, pursuant~~flux. We cannot provide assurance that current or future legislation will not prevent us from generating or maintaining personal data or that patients will consent to the ~~Dodd-Frank Wall Street Reform~~use of their personal data (as necessary); either of these circumstances may prevent us from undertaking or publishing essential research and ~~Consumer Protection Act of 2010, the SEC has adopted~~development, manufacturing, and ~~will adopt additional rules and regulations, such as mandatory “say on pay” voting requirements, that will apply to us when we cease to be an emerging growth company.~~

We expect the rules and regulations applicable to public companies to substantially increase our legal and financial compliance costs and to make some activities more time-consuming and costly. To the extent these requirements divert the attention of our management and personnel from other business concerns, theycommercialization, which could have a material adverse effect on our business, results of operations, financial condition and results of operations. The increased costs will decrease our net income or increase our net loss, and may require us to reduce costs in other areas of our business or increase the prices of our products or services. For example, we expectprospects. Complying with these ~~rules~~various laws and regulations ~~to make it more difficult and more expensive for~~could cause us ~~to obtain director and officer liability insurance and we may be required~~ to incur substantial costs or require us to ~~maintain the same or similar coverage. The impact~~change our business practices, systems, and compliance procedures in a manner adverse to our business. Any violations of these ~~requirements~~rules by us could ~~also make it more difficult for~~subject us to ~~attract~~civil and ~~retain qualified persons~~criminal penalties and adverse publicity and could harm our ability to ~~serve~~initiate and complete clinical trials.

In the United States, there are numerous federal and state privacy and data security laws and regulations governing the collection, use, disclosure and protection of personal information, including health information privacy laws, security breach notification laws, and consumer protection laws. We may obtain health information from third parties (including research institutions from which we obtain clinical trial data), that are subject to privacy and security requirements under HIPAA/HITECH. Entities that are found to be in violation of HIPAA/HITECH as the result of a breach of unsecured protected health information, a complaint about privacy practices or an audit by HHS, may be subject to significant civil, criminal, and administrative fines and penalties and/or additional reporting and oversight obligations if required to enter into a resolution agreement and corrective action plan with HHS to settle allegations of HIPAA non-compliance. Further, entities that knowingly obtain, use, or disclose individually identifiable health information maintained by a HIPAA covered entity in a manner that is not authorized or permitted by HIPAA may be subject to criminal penalties. Additionally, governmental agencies like the FTC have adopted, or are considering adopting, laws and regulations concerning personal data and data security. The FTC may also take action against companies for unfair acts or practices for failing to keep promises made in public statements, such as privacy policies. We make public statements about our use and disclosure of personal data through our privacy policy, information described on our ~~board~~website, and in press statements. Although we endeavor to ensure that our public statements are complete and accurate, any failure (real or perceived) by us to comply with our privacy and security commitments could be considered an “unfair and deceptive” act by the FTC resulting in an FTC consent decree that may

include fines and sustained government-mandated audits for a period of ~~directors, our board committees~~20 years. State Attorneys General may enforce comparable state law statutes covering unfair and deceptive practices with similar resulting consequences.

Certain states have also adopted comparable privacy and security laws and regulations, some of which may be more stringent than HIPAA. California recently enacted legislation, the California Privacy Rights Act, or ~~as executive officers.~~

~~In the future, we may not be exempt from various reporting requirements. For example, the Sarbanes-Oxley Act requires us,~~CPRA, which went into effect January 1, 2023. The CPRA, among other things, creates new data privacy obligations for covered companies and provides new privacy rights to ~~assess~~California residents, including the ~~effectiveness of our internal control over financial reporting annually and~~right to ~~assess the effectiveness of our disclosure controls and procedures quarterly. Section 404~~opt out of the ~~Sarbanes-Oxley Act (“Section 404”) would require us~~sale and disclosure of their information and receive detailed information about how their personal information is used. The CPRA provides for civil penalties for violations, as well as a private right of action for data breaches, in certain circumstances, that is expected to ~~perform system~~increase data breach litigation. The CPRA may increase our compliance costs and ~~process evaluation~~potential liability. The CPRA also creates a new state agency that will be vested with authority to implement and ~~testing of~~enforce the CPRA. Potential uncertainty surrounding the CPRA may increase our ~~internal control over financial reporting to allow management to report on,~~compliance costs and our independent registered public accounting firm potentially to attest to, the effectiveness of our internal control over financial reporting. Our compliance with applicable provisions of Section 404 will require that we incur substantial accounting expense and expend significant management time on compliance-related issues as we implement additional corporate governance practices and comply with reporting requirements. Moreover, if we are not able to comply with the requirements of Section 404 applicable to us in a timely manner, or if we or our independent registered public accounting firm identifies deficiencies in our internal control over financial reporting that are deemed to be material weaknesses, the market price of our stock could decline and we could be subject to sanctions or investigations by the SEC or other regulatory authorities, which would require additional financial and management resources. Furthermore, investor perceptions of our company may suffer if deficiencies are found, and this could cause a declinepotential liability, particularly in the ~~market price~~event of ~~our stock. Irrespective of compliance with Section 404, any failure of our internal control over financial reporting~~a data breach, and could have a material adverse effect on our ~~stated~~business. Other states have followed California’s lead. The Virginia Consumer Data Protection Act, or VCDPA, which went into effect on January 1, 2023, gives new data protection rights to Virginia residents and imposes additional obligations on controllers and processors of personal data. Colorado, Utah and Connecticut have passed similar laws which will go into effect in 2023. As of March 2023, four states have active consumer privacy legislation under review, which if enacted would add additional costs and expense of resources to maintain compliance.

In Canada, the Personal Information Protection and Electronic Documents Act, or PIPEDA, and similar provincial laws may impose obligations with respect to processing personal information, including health-related information. PIPEDA requires companies to obtain an individual’s consent when collecting, using, or disclosing that individual’s personal information. Individuals have the right to access and challenge the accuracy of their personal information held by an organization, and personal information may only be used for the purposes for which it was collected. If an organization intends to use personal information for another purpose, it must again obtain that individual’s consent. Failure to comply with PIPEDA could result in significant fines and penalties.

In May 2018, the General Data Protection Regulation, or the GDPR, took effect in the European Economic Area, the EEA. The GDPR governs the collection, use, disclosure, transfer, or other processing of personal data of natural persons. Among other things, the GDPR imposes strict obligations on the ability to process health-related and other personal data of data subjects in the EEA, including in relation to use, collection, analysis, and transfer (including cross-border transfer) of such personal data. The GDPR includes requirements relating to the consent of the individuals to whom the personal data relates, including detailed notices for clinical trial subjects and investigators. The GDPR also includes certain requirements regarding the security of personal data and notification of data processing obligations or security incidents to appropriate data protection authorities or data subjects as well as requirements for establishing a lawful basis on which personal data can be processed and a right to lodge a complaint with the government.

The GDPR, as well as law in the United Kingdom, or the UK, and Switzerland, also prohibits the international transfer of personal data from the EEA/UK/Switzerland to countries outside of those jurisdictions unless made to a country deemed to have adequate data privacy laws by the European Commission or where a data transfer mechanism has been put in place. We rely on Standard Contracts Clauses, or SCCs, to transfer personal data to countries outside of the EEA, Switzerland, and the UK, including to the United States and are continuing to evaluate the guidance and mechanisms required to establish adequate safeguards for personal data. In July 2020 the Court of Justice of the European Union, or CJEU, declared the Privacy Shield to be invalid; however, the Biden administration recently announced the United States has agreed to new terms for protecting EU residents’ data which may potentially result in the revised EU Privacy Shield being resurrected as an adequate method of transferring data to the US. The CJEU upheld the validity of the SCCs as a legal mechanism to transfer personal data but companies relying on SCCs will continually be subject to guidance from regulators in the EEA and need to evaluate and implement supplementary measures that provide privacy protections additional to those provided under SCCs. In turn, the findings of the CJEU will have significant implications for cross-border data flows. On June 4, 2021, the European Commission adopted new SCCs to apply to international transfers of data. We had until December 27, 2022 to update any existing agreements, or any new agreements executed before September 27, 2021, that rely on the former SCCs. If we are otherwise unable to transfer personal data between and among countries and regions in which we operate, it could affect the manner in which we conduct our operations, and we may find it necessary to establish systems in the EEA, Switzerland, and the UK to maintain personal data originating from the EEA and the UK, which may involve substantial expense and distraction from other aspects of our business. As supervisory authorities continue to issue further guidance on personal data export mechanisms, including circumstances where the SCCs cannot be used and/or what safeguards must be implemented, or start taking enforcement action, there will be uncertainty as to how we comply with EEA, Switzerland, and UK privacy and security laws and we could suffer additional costs, complaints, or regulatory investigations or fines. For example, German and Irish supervisory authorities have indicated that the SCCs alone provide inadequate protection for EU-U.S. data transfers. Use of the data transfer mechanisms must now be assessed on a case-by-case basis, taking into account the legal regime applicable in the destination country, in particular applicable surveillance laws and rights of individuals. We may need to implement additional safeguards to further enhance the security of data transferred out of the EEA/Switzerland/UK, conduct data transfer impact assessments, and review existing agreements which could increase our compliance costs, expose us to further regulatory scrutiny and liability, and adversely affect our business.

Further, the GDPR provides that countries in the EEA may establish their own laws and regulations further restricting the processing of certain personal data, including genetic data, biometric data, and health data.

Companies that must comply with the GDPR face increased compliance obligations and risk, including more robust regulatory enforcement of data protection requirements and potential fines for noncompliance of up to €20 million or 4 percent of the annual global revenues of the noncompliant company, whichever is greater. Additionally, following the UK’s withdrawal from the EU and the EEA, companies must comply with the GDPR and the GDPR as incorporated into UK national law, the latter regime having the ability to separately fine up to the greater of £17.5 million or 4 percent of global turnover. Companies that violate the GDPR in the EEA and UK can also face prohibitions on data processing and other corrective action, such as class action lawsuits brought by classes of data subjects or by consumer protection organizations authorized at law to represent their interests.

Further, as a consequence of the UK’s departure from the EU, the UK is free to diverge from EU data privacy laws. The UK’s Data Reform Bill, containing proposals for the UK GDPR to diverge from the EU GDPR is currently paused while ministers consider how to replace EU GDPR. We may, in the future, be subject to separate and additional data protection obligations to those that we are already subject to. This may result in substantial costs and may necessitate changes to our business practices, which in turn may adversely affect our business, reputation, legal exposures, and financial condition.

Some countries (including some outside the EEA), also are considering or have passed legislation requiring local storage and processing of data, or similar requirements, which could increase the cost and complexity of delivering our products and services if we were to operate in those countries. If we are required to implement additional measures to transfer data from the EEA, this could increase our compliance costs, and could adversely affect our business, financial condition and results of operations.

We create contractual obligations with third parties with whom we depend in relation to the operation of our business, a number of which process personal data on our behalf. With each such provider we attempt to mitigate the associated risks of using third parties by performing security assessments and detailed due diligence, entering into contractual arrangements to ensure that providers only process personal data according to our instructions, and that they have sufficient technical and organizational security measures in place. Where we transfer personal data outside the EEA, the UK, or Switzerland to such third parties, we do so while considering the relevant data export requirements, as described above. There is no assurance that these contractual measures and our own privacy and security-related safeguards will protect us from the risks associated with the third-party processing, storage, and transmission of such information. Any violation of data or security laws by our third-party processors could have a material adverse effect on our business and result in the fines and penalties outlined above.

If our operations are found to be in violation of any of the privacy and data protection laws described above or any other laws that apply to us, we may be subject to penalties, including, but not limited to, criminal, civil and administrative penalties, damages, fines, disgorgement, individual imprisonment, possible exclusion from participation in government healthcare programs, injunctions, private qui tam actions brought by individual whistleblowers in the name of the government, class action litigation and the curtailment or restructuring of our operations, as well as additional reporting obligations and oversight if we become subject to a corrective action plan or other agreement to resolve allegations of non-compliance with these laws, any of which could adversely affect our ability to operate our business and our results of operations. When such events occur (or even alleged), our reputation may be harmed, we may lose current and potential users and the competitive positions of our brand might be diminished, any or all of which could materially adversely affect our business, reputation, operating results, and ~~harm our reputation. If we are unable to implement these requirements effectively~~financial condition.

U.S. federal income tax reform and changes in other tax laws could adversely affect us.

Changes in U.S. (federal or ~~efficiently, it could harm our operations, financial reporting,~~state) or ~~financial results~~foreign tax laws and regulations, or their interpretation and application, including those with retroactive effect, could result in ~~an adverse opinion~~increases in our tax expense and affect future cash flows. For example, in December 2017, the TCJA, was signed into law, significantly reforming the Code. The TCJA, among other things, includes changes to U.S. federal tax rates, imposes significant additional limitations on the deductibility of business interest, allows for the expensing of capital expenditures, puts into effect the migration from a “worldwide” system of taxation to a partial “territorial” system, and modifies or repeals many business deductions and credits. Beginning in 2022, the TCJA also eliminated the option to deduct research and development expenditures immediately in the year incurred and requires taxpayers to amortize such expenditures over five years for tax purposes.

In addition, new legislation or regulation which could affect our tax burden could be enacted by any governmental authority. We cannot predict the timing or extent of such tax-related developments which could have a negative impact on our ~~internal control over~~ financial ~~reporting~~results. Additionally, we use our best judgment in attempting to quantify and reserve for these tax obligations. However, a challenge by a taxing authority, our ability to utilize tax benefits such as carryforwards or tax credits, or a deviation from other tax-related assumptions could have a material adverse effect on our ~~independent registered public accounting firm.~~business, results of operations or financial condition.

Item 2. Unregistered Sales of Equity Securities and Use of Proceeds.

None.

Item 3. Defaults Upon Senior Securities.

None.

Item 4. Mine Safety Disclosures.

Not applicable.

Item 5. Other Information.

Termination of Written Stock Selling Plan

On June 6, 2023, Michelle Griffin, a ~~substantial number~~director on the Company’s board of ~~shares of our common~~directors, terminated a pre-arranged written stock ~~by our existing stockholders~~sale plan previously adopted on March 8, 2023 in ~~the public market could cause our stock price to fall.~~

~~Sales of a substantial number of shares of our common stock in the public market could occur at any time. These sales,~~accordance with Rule 10b5-1, or the ~~perception~~Griffin Rule 10b5-1 Plan, under the Exchange Act for the sale of up to 40% of net vested common shares from an RSU vesting as May 26, 2023. The Griffin Rule 10b5-1 Plan was entered into during an open trading window in accordance with our insider trading policy and was intended to satisfy the ~~market that~~affirmative defense of Rule 10b5-1(c) under the ~~holders~~Exchange Act.

On June 5, 2023, Eric Bjerkholt, our Chief Financial Officer, terminated a pre-arranged written stock sale plan previously adopted on January 4, 2023 in accordance with Rule 10b5-1, or the Bjerkholt Rule 10b5-1 Plan, under the Exchange Act for the sale of ~~a large number of shares intend~~up to sell shares, could reduce the market price of our common stock. Moreover, holders of certain shares of our common stock have rights, subject to certain conditions, to require us to file registration statements covering their shares or to include their shares in registration statements that we may file for ourselves or other stockholders. For example, we filed a registration statement on Form S-3 to register for resale shares held by Morningside Venture (IV) Investments Limited and Ultimate Keen Limited, which together hold 14,908,03110,000 shares of our common stock. ~~We have registered all currently reserved shares~~The Bjerkholt Rule 10b5-1 Plan was entered into during an open trading window in accordance with our insider trading policy and was intended to satisfy the affirmative defense of ~~common~~Rule 10b5-1(c) under the Exchange Act.

On June 5, 2023, Andrew King, our Chief Scientific Officer, terminated a pre-arranged written stock ~~that we may issue~~ sale plan previously adopted on December 2, 2022 in accordance with Rule 10b5-1, or the King Rule 10b5-1 Plan, under ~~our equity compensation plans and intend~~the Exchange Act for the sale of up to register in the future any additional reserved or issued shares of common stock. These registered shares can be freely sold in the public market upon issuance, subject to volume limitations applicable to affiliates.

Future sales and issuances of our common stock or rights to purchase common stock, including pursuant to our 2015 Plan or 2015 ESPP, could result in additional dilution of the percentage ownership of our stockholders and could cause our stock price to fall.

We expect that significant additional capital may be needed in the future to continue our planned operations, including conducting clinical trials, commercialization efforts, expanded research and development activities and costs associated with operating a public company. To raise capital, we may sell common stock, convertible securities or other equity securities in one or more transactions at prices and in a manner we determine from time to time. If we sell common stock, convertible securities or other equity securities, investors may be materially diluted by subsequent sales. Such sales may also result in material dilution to our existing stockholders, and new investors could gain rights, preferences and privileges senior to the holders of our common stock.

Pursuant to our equity incentive plans, our compensation committee is authorized to grant equity-based incentive awards to our employees, non-employee directors and consultants. Pursuant to the 2015 ESPP, our compensation committee is also authorized to issue shares to our employees at a discount from the fair market value of our common stock at the time of purchase. Future grants of restricted stock units, options and other equity awards and issuances of common stock under our equity incentive plans and 2015 ESPP will result in dilution and may have an adverse effect on the market price of our common stock.

~~Additionally, the number of~~25,000 shares of our common ~~stock reserved for issuance~~stock. The King Rule 10b5-1 Plan was entered into during an open trading window in accordance with our insider trading policy and was intended to satisfy the affirmative defense of Rule 10b5-1(c) under ~~our 2015 Plan and 2015 ESPP will automatically increase on January 1 of each year, through and including January 1, 2025, by 4% with respect to~~ the 2015 Plan or 1% with respect to the 2015 ESPP of the total number of shares of our capital stock outstanding on December 31 of the preceding calendar year, or in each case a lesser number of shares determined by our board of directors. Unless our board of directors elects not to increase the number of shares available for future grant each year, our stockholders may experience additional dilution, which could cause our stock price to fall.

Anti-takeover provisions under our charter documents and Delaware law could delay or prevent a change of control which could limit the market price of our common stock and may prevent or frustrate attempts by our stockholders to replace or remove our current management.

Our amended and restated certificate of incorporation and amended and restated bylaws contain provisions that could delay or prevent a change of control of our company or changes in our board of directors that our stockholders might consider favorable. Some of these provisions include:

~~a board of directors divided into three classes serving staggered three-year terms, such that not all members of the board will be elected at one time;~~Exchange Act.

~~a prohibition on stockholder action through written consent, which requires that all stockholder actions be taken at a meeting of our stockholders;~~

~~a requirement that special meetings of stockholders be called only by the chairman of the board of directors, the chief executive officer, or by a majority of the total number of authorized directors;~~

~~advance notice requirements for stockholder proposals and nominations for election to our board of directors;~~

a requirement that no member of our board of directors may be removed from office by our stockholders except for cause and, in addition to any other vote required by law, upon the approval of not less than two-thirds of all outstanding shares of our voting stock then entitled to vote in the election of directors;

a requirement of approval of not less than two-thirds of all outstanding shares of our voting stock to amend any bylaws by stockholder action or to amend specific provisions of our certificate of incorporation; and

In addition, because we are incorporated in Delaware, we are governed by the provisions of Section 203 of the Delaware General Corporate Law, which may prohibit certain business combinations with stockholders owning 15% or more of our outstanding voting stock. These anti-takeover provisions and other provisions in our amended and restated certificate of incorporation and amended and restated bylaws could make it more difficult for stockholders or potential acquirers to obtain control of our board of directors or initiate actions that are opposed by the then-current board of directors and could also delay or impede a merger, tender offer or proxy contest involving our company. These provisions could also discourage proxy contests and make it more difficult for you and other stockholders to elect directors of your choosing or cause us to take other corporate actions you desire. Any delay or prevention of a change of control transaction or changes in our board of directors could cause the market price of our common stock to decline.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware will be the exclusive forum for substantially all disputes between us and our stockholders, which could limit our stockholders’ ability to obtain a favorable judicial forum for disputes with us or our directors, officers or employees.

Our certificate of incorporation provides that the Court of Chancery of the State of Delaware is the exclusive forum for any derivative action or proceeding brought on our behalf, any action asserting a breach of fiduciary duty, any action asserting a claim against us arising pursuant to the Delaware General Corporation Law, our certificate of incorporation or our bylaws, or any action asserting a claim against us that is governed by the internal affairs doctrine. This provision may limit a stockholder’s ability to bring a claim in a judicial forum that it finds favorable for disputes with us or our directors, officers or other employees, which may discourage such lawsuits against us and our directors, officers and other employees. Alternatively, if a court were to find this provision in our certificate of incorporation to be inapplicable or unenforceable in an action, we may incur additional costs associated with resolving such action in other jurisdictions, which could adversely affect our business and financial condition.

~~If securities or industry analysts publish inaccurate or unfavorable research about our business, our stock price and trading volume could decline.~~

The trading market for our common stock will depend in part on the research and reports that securities or industry analysts publish about us or our business. If one or more of the analysts who covers us downgrades our stock or publishes inaccurate or unfavorable research about our business, our stock price may decline. If one or more of these analysts ceases coverage of our company or fails to publish reports on us regularly, demand for our stock could decrease, which might cause our stock price and trading volume to decline.

~~Item 2. Recent Sales of Unregistered Securities and Use of Proceeds~~

~~None.~~

~~Item 3. Defaults Upon Senior Securities.~~

~~None.~~

~~Item 4. Mine Safety Disclosures.~~

~~Not applicable.~~

~~Item 5. Other Information.~~

~~None.~~

Item 6. ~~Exhibits~~Exhibits.

~~The exhibits listed in the accompanying Exhibit Index are incorporated by reference as part of this Quarterly Report.~~73

~~EXHIBIT~~ ~~INDEX~~

EXHIBIT INDEX

Exhibit No

Description of Exhibit

Incorporated by Reference

Form

File No.

Exhibit

Filing Date

Filed
Herewith

    3.1

Restated Certificate of Incorporation of Aduro Biotech, Inc.

8-K

001-37345

3.1

04/20/2015

    3.2

Amended and Restated Bylaws of Aduro Biotech, Inc.

S-1/A

333-202667

3.5

04/06/2015

    4.1

Form of common stock certificate.

S-1/A

333-202667

4.1

04/06/2015

    4.2

Amended and Restated Investor Rights Agreement, by and among Aduro Biotech, Inc. and the stockholders named therein, dated December 19, 2014.

S-1

333-202667

4.2

03/11/2015

  10.1

Common Stock Sales Agreement between Aduro Biotech, Inc. and Cowen and Company, LLC, dated August 2, 2017

10-Q

001-37345

10.1

8/2/2017

  31.1

Certification of Principal Executive Officer pursuant to rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.

X

  31.2

Certification of Principal Financial Officer pursuant to rules 13a-14(a) and 15d-14(a) under the Securities Exchange Act of 1934, as amended.

X

  32.1*

Certification of Principal Executive Officer and Principal Financial Officer, as required by rules 13a-14(a) and 15d-14(a) and Section 1350 of Chapter 63 of Title 18 of the United States Code (18 U.S.C. 1350).

X

101.INS

XBRL Instance Document

X

101.SCH

XBRL Taxonomy Extension Schema Document

X

101.CAL

XBRL Taxonomy Extension Calculation Linkbase Document

X

101.DEF

XBRL Taxonomy Extension Definition Linkbase Document

X

101.LAB

XBRL Taxonomy Extension Label Linkbase Document

X

101.PRE

XBRL Taxonomy Extension Presentation Linkbase Document

X

*Exhibit No

~~The~~ ~~certifications attached~~

Description of Exhibit

Incorporated by Reference

Form

File No.

Exhibit

Filing Date

Filed

Herewith

2.1*

Agreement and Plan of Merger, dated as ~~Exhibit 32.1 accompany this Quarterly Report on Form 10-Q pursuant~~of June 11, 2023, by and among Chonook Therapeutics, Inc., Novartis AG and Cherry Merger Sub Inc.

8-K

001-37345

2.1

6/12/2023

3.1

Certificate of Amendment to the Amended and Restated Certificate of Incorporation of the Registrant, dated June 14, 2023

10.1

Amended and Restated 2015 Equity Incentive Plan

31.1

Certification of the Chief Executive Officer Pursuant to Securities Exchange Act Rules 13A-14(A) and 15D-14(A).

31.2

Certification of the Chief Financial Officer Pursuant to Securities Exchange Act Rules 13A-14(A) and 15D-14(A).

32.1**

Certification Pursuant to 18 U.S.C. Section 1350, ~~as adopted pursuant~~As Adopted Pursuant to Section 906 of the Sarbanes-Oxley Act of ~~2002,~~2002.

101.INS

Inline XBRL Instance Document – the instance document does not appear in the Interactive Data File because its XBRL tags are embedded within the Inline XBRL document.

101.SCH

Inline XBRL Taxonomy Extension Schema Document

101.CAL

Inline XBRL Taxonomy Extension Calculation Linkbase Document

101.DEF

Inline XBRL Taxonomy Extension Definition Linkbase Document

101.LAB

Inline XBRL Taxonomy Extension Label Linkbase Document

101.PRE

Inline XBRL Taxonomy Extension Presentation Linkbase Document

104

Cover Page Interactive Data File (formatted as inline XBRL and ~~shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.~~contained in Exhibit 101.INS)

~~SIGNATURES~~

* Certain schedules and exhibits have been omitted pursuant to Item 601(a)(5) of Regulation S-K. The Company will furnish to the SEC copies of any such schedules upon request.

** The certifications attached as Exhibit 32.1 accompany this Quarterly Report on Form 10-Q pursuant to 18 U.S.C. Section 1350, as adopted pursuant to Section 906 of the Sarbanes-Oxley Act of 2002, and shall not be deemed “filed” by the Registrant for purposes of Section 18 of the Securities Exchange Act of 1934, as amended.

SIGNATURES

Pursuant to the requirements of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized.


	~~Aduro Biotech,~~Chinook Therapeutics, Inc.
Date: ~~October 31, 2017~~August 7, 2023	By:	/s/ ~~Stephen T. Isaacs~~Eric L. Dobmeier
		~~Stephen T. Isaacs~~Eric L. Dobmeier
		~~Chairman,~~ President and Chief Executive Officer
		(~~Principal Executive Officer)~~principal executive officer)

	~~Aduro Biotech,~~Chinook Therapeutics, Inc.
Date: ~~October 31, 2017~~August 7, 2023	By:	/s/ ~~Gregory W. Schafer~~Eric H. Bjerkholt
		~~Gregory W. Schafer~~Eric H. Bjerkholt
		Chief ~~Operating~~Financial Officer
		(~~Principal Financial Officer)~~principal financial and accounting officer)


Large accelerated filer	☐☒	~~Accelerated filer~~	Accelerated filer	☒	☐

Non-accelerated filer	☐ ~~(Do not check if a small reporting company)~~	~~Small~~	Smaller reporting company		☐

			Emerging growth company		☒	☐


		Page
	PART I—FINANCIAL INFORMATION
Item 1.	Condensed Consolidated Financial Statements (unaudited)	3
	Condensed Consolidated Balance Sheets as of ~~September~~June 30, ~~2017~~2023 and December 31, ~~2016~~2022	3
	Condensed Consolidated Statements of Operations ~~for the three~~ and ~~nine months ended September 30, 2017 and 2016~~	4
	~~Condensed Consolidated Statements of~~ Comprehensive Loss for the three and ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022	54
	Condensed Consolidated Statements of Stockholders’ Equity for the three and six months ended June 30, 2023 and 2022	5
	Condensed Consolidated Statements of Cash Flows for the ~~nine~~six months ended ~~September~~June 30, ~~2017~~2023 and ~~2016~~2022	6
	Notes to the Condensed Consolidated Financial Statements	7
Item 2.	Management’s Discussion and Analysis of Financial Condition and Results of Operations	21
Item 3.	Quantitative and Qualitative Disclosures About Market Risk	2930
Item 4.	Controls and Procedures	2930

	PART II—OTHER INFORMATION
Item 1.	Legal Proceedings	3031
Item 1A.	Risk Factors	3032
Item 2.	Unregistered Sales of Equity Securities and Use of Proceeds	6273
Item 3.	Defaults Upon Senior Securities	6273
Item 4.	Mine Safety Disclosures	6273
Item 5.	Other Information	6273
Item 6.	Exhibits	6273
EXHIBIT INDEX		6374
SIGNATURES		6475


	June 30,			December 31,
	2023			2022
Assets
Current assets:
Cash and cash equivalents	$	127,149		$	115,438
Marketable securities		170,016			262,887
Accounts receivable		3,102			1,091
Prepaid expenses and other current assets		5,150			6,176
Total current assets		305,417			385,592
Marketable securities		1,972			6,989
Property and equipment, net		16,235			16,908
Restricted cash		2,074			2,074
Operating lease right-of-use assets		42,874			48,970
Investment in equity securities		41,200			41,200
Equity method investment		4,784			4,071
Intangible assets, net		23,421			24,287
In-process research & development		36,550			36,550
Goodwill		117			117
Other assets		14,167			7,326
Total assets	$	488,811		$	574,084
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable		16,362			9,751
Accrued and other current liabilities		29,342			33,636
Operating lease liabilities		4,268			4,948
Contingent value rights liability		2,500			2,500
Total current liabilities		52,472			50,835
Contingent value rights liability - non-current		40,217			37,318
Contingent consideration liability		4,290			4,420
Deferred tax liabilities		5,076			5,076
Operating lease liabilities, net of current maturities		29,717			34,494
Total liabilities		131,772			132,143
Commitments and contingencies (Note 12)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000 shares authorized as of June 30, 2023 and December 31, 2022; no shares issued and outstanding at June 30, 2023 and December 31, 2022		—			—
Common stock, $0.0001 par value; 300,000 shares authorized as of June 30, 2023 and December 31, 2022; 67,079 and 65,471 shares issued and outstanding at June 30, 2023 and December 31, 2022		7			7
Additional paid-in capital		905,109			864,729
Accumulated deficit		(546,752	)		(419,631	)
Accumulated other comprehensive loss		(1,325	)		(3,164	)
Total stockholders’ equity		357,039			441,941
Total liabilities and stockholders’ equity	$	488,811		$	574,084

	September 30,			December 31,
	2017			2016
Assets
Current assets:
Cash and cash equivalents	$	159,040		$	74,932
Short-term marketable securities		186,467			272,500
Accounts receivable		1,348			1,138
Income tax receivable		12,509			—
Prepaid expenses and other current assets		4,597			6,194
Total current assets		363,961			354,764
Long-term marketable securities		27,999			14,474
Property and equipment, net		28,280			26,384
Goodwill		8,602			7,658
Intangible assets, net		30,822			27,827
Restricted cash		468			468
Deferred tax assets		4,283			6,319
Other assets		716			717
Total assets	$	465,131		$	438,611
Liabilities and Stockholders’ Equity
Current liabilities:
Accounts payable	$	1,479		$	2,206
Accrued clinical trial and manufacturing expenses		6,616			4,777
Accrued expenses and other liabilities		11,249			8,597
Deferred revenue		14,945			15,052
Total current liabilities		34,289			30,632
Deferred rent		8,471			6,786
Contingent consideration		6,250			4,032
Deferred revenue		151,852			162,963
Deferred tax liabilities		6,481			5,869
Other long-term liabilities		1,374			1,109
Total liabilities		208,717			211,391
Commitments and contingencies (Note 7)
Stockholders’ equity:
Preferred stock, $0.0001 par value; 10,000,000 shares authorized at September 30, 2017 and December 31, 2016; and zero shares issued and outstanding at September 30, 2017 and December 31, 2016		—			—
Common stock, $0.0001 par value; 300,000,000 shares authorized September 30, 2017 and December 31, 2016; and 76,953,192 and 67,918,246 shares issued and outstanding at September 30, 2017 and December 31, 2016		8			7
Additional paid-in capital		512,436			420,897
Accumulated other comprehensive income (loss)		1,701			(1,684	)
Accumulated deficit		(257,731	)		(192,000	)
Total stockholders’ equity		256,414			227,220
Total liabilities and stockholders’ equity	$	465,131		$	438,611

	Three Months Ended September 30,						Nine Months Ended September 30,
	2017			2016			2017			2016
Revenue:
Collaboration and license revenue	$	3,704		$	3,794		$	13,352		$	46,715
Grant revenue		90			—			131			88
Total revenue		3,794			3,794			13,483			46,803
Operating expenses:
Research and development		24,454			19,046			66,464			66,855
General and administrative		8,458			8,556			24,982			26,255
Amortization of intangible assets		145			138			413			415
Total operating expenses		33,057			27,740			91,859			93,525
Loss from operations		(29,263	)		(23,946	)		(78,376	)		(46,722	)
Interest income		998			566			2,428			1,540
Other loss, net		(129	)		(1	)		(197	)		(32	)
Loss before income tax		(28,394	)		(23,381	)		(76,145	)		(45,214	)
Income tax (benefit) provision		(3,874	)		11,670			(10,414	)		16,368
Net loss	$	(24,520	)	$	(35,051	)	$	(65,731	)	$	(61,582	)
Net loss per common share, basic and diluted	$	(0.33	)	$	(0.54	)	$	(0.92	)	$	(0.96	)
Shares used in computing net loss per common share, basic and diluted		75,167,334			65,134,102			71,529,043			64,472,947


☒	QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


☐	TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934


	Common Stock				Additional Paid-In		Accumulated			Accumulated Other Comprehensive			Total Stockholders’
	Shares		Amount		Capital		Deficit			Income (Loss)			Equity
Balance at December 31, 2022		65,471	$	7	$	864,729	$	(419,631	)	$	(3,164	)		441,941
Issuance of common stock upon exercise of stock options and vesting of restricted stock units		432		—		1,666		—			—			1,666
Issuance of common stock under the at-the-market sales agreement, net of issuance costs		919				19,600								19,600
Stock-based compensation expense		—		—		7,910		—			—			7,910
Other comprehensive loss		—		—		—		—			1,453			1,453
Net loss		—		—		—		(60,177	)		—			(60,177	)
Balance at March 31, 2023		66,822	$	7	$	893,905	$	(479,808	)	$	(1,711	)	$	412,393
Issuance of common stock upon exercise of stock options, issuance of common stock under Employee Stock Purchase Plan, and vesting of restricted stock units		257		—		2,012		—			—			2,012
Stock-based compensation		—		—		9,192		—			—			9,192
Other comprehensive income		—		—		—		—			386			386
Net loss		—		—		—		(66,944	)		—			(66,944	)
Balance at June 30, 2023		67,079	$	7	$	905,109	$	(546,752	)	$	(1,325	)	$	357,039

	September 30, 2017
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	58,946	$	—	$	—	$	58,946
U.S. government and agency securities		—		124,344		—		124,344
Corporate debt securities		—		77,535		—		77,535
Commercial paper		—		91,892		—		91,892
Total	$	58,946	$	293,771	$	—	$	352,717
Financial Liabilities:
Contingent consideration related to acquisition	$	—	$	—	$	6,250	$	6,250
Total	$	—	$	—	$	6,250	$	6,250

	December 31, 2016
	Level 1		Level 2		Level 3		Total
Financial Assets:
Money market funds	$	54,318	$	—	$	—	$	54,318
U.S. government and agency securities		—		166,800		—		166,800
Corporate debt securities		—		77,880		—		77,880
Commercial paper		—		49,643		—		49,643
Total	$	54,318	$	294,323	$	—	$	348,641
Financial Liabilities:
Contingent consideration related to acquisition	$	—	$	—	$	4,032	$	4,032
Total	$	—	$	—	$	4,032	$	4,032

	Contingent Consideration
Balance at December 31, 2016	$	4,032
Net change in fair value upon remeasurement		1,622
Foreign currency impact on contingent consideration		596
Balance at September 30, 2017	$	6,250

	Amortized cost		Estimated Fair Value
Mature in one year or less	$	186,534	$	186,467
Mature after one year through two years		28,035		27,999
Total available-for-sale marketable securities	$	214,569	$	214,466


	Contingent Value Rights Liability		Contingent Consideration Liability
Balance at December 31, 2022	$	39,818	$	4,420
Net change in fair value upon remeasurement		2,899		(130	)
Balance at June 30, 2023	$	42,717	$	4,290

Balance at December 31, 2016	$	7,658
Foreign currency translation adjustment		944
Balance at September 30, 2017	$	8,602

Year Ending December 31,	Estimated Amortization Expense
2017 (remaining three months)	$	146
2018		584
2019		584
2020		584
2021		584
2022		584

	Options Outstanding
	Shares Available for Grant				Number of Options			Weighted- Average Exercise Price		Aggregate Intrinsic Value
										(In thousands)
Balance—December 31, 2016		5,011,459				10,690,156		$	6.65	$	74,984
Authorized		2,716,729				—
RSUs granted, net		(679,225	)			—
Granted		(955,863	)			955,863			10.78
Exercised		—				(1,553,442	)		1.19
Canceled		257,525		⁽¹⁾		(503,295	)		9.56
Balance—September 30, 2017		6,350,625				9,589,282		$	7.80	$	52,935
Options exercisable—September 30, 2017						5,823,358		$	5.78	$	41,785
Options vested and expected to vest—September 30, 2017						9,419,275		$	7.72	$	52,669

	RSUs Outstanding
	Number of Restricted Stock Units			Weighted- Average Grant Date Fair Value Per Share
Balance—December 31, 2016		657,200		$	14.29
Granted		742,650			11.11
Vested		(149,850	)		14.29
Canceled/forfeited		(63,425	)		14.08
Balance—September 30, 2017		1,186,575		$	12.31

	2015 Plan		2015 ESPP
	Nine Months Ended September 30,		Nine Months Ended September 30,
	2017	2016	2017		2016
Expected term (in years)	5.31 - 6.04	5.31 - 6.05	0.5		0.5
Volatility	73.2 - 74.1%	72.0 - 75.0%		65.4%		73.8%
Risk-free interest rate	1.78 - 2.25%	1.25 - 1.72%		1.02%		0.36%
Dividend yield	—%	—%	—%		—%

	Payments due by period
	Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years		Total
	(in thousands)
Operating leases	$	997	$	9,562	$	9,762	$	43,673	$	63,994
Total contractual obligations	$	997	$	9,562	$	9,762	$	43,673	$	63,994